Apr
22
Bupa Announces New Acquisitions to Grow its International Teams
Filed Under Acquisition, BUPA, Health Insurance | Leave a Comment
Internationally renowned health insurance group, Bupa, has been expanding its teams of people and forming new acquisitions that will help to increase the company’s international presence.
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Nov
16
Globalsurance predicts little value for clients after Cigna re-branding Van Breda
Filed Under Acquisition, CIGNA, Health Insurance, Vanbreda | Leave a Comment
High increases are expected in 2013 across the Cigna Global Expat plus plan recently acquired from Van Breda. Currently undergoing a re-branding under the Cigna name, these latest increases will undoubtedly dissapoint policyholders and leave them questioning their faith in Cigna.
Numerous providers (Bupa International, Aetna Global Benefits, AXA PPP) have released their annual increases and have been performing well under the trend of the past 5 years. Policyholders attached to a Cigna Global Expat plus plan however, can expect to see an increase of 29% on their premium for all renewals in 2013 and it is understood by Globalsurance that increases could reach up to 50% in certain markets (Singapore, China, Hong Kong).
Globalsurance analysts are not considering these increases to be related to medical insurance inflation, but rather adjusting to the pricing in the market. This drastic increase may cause customers to wonder whether these increases would have occurred if Van Breda was not now a part of Cigna and may blame Cigna’s own ‘economic model and costs’ plan as the cause of the increase in premiums.
Jul
12
German insurance company Talanx Heading Towards Bright Future
Filed Under Acquisition, Europe, Insurance Company, Uncategorized | Leave a Comment
German insurance company Talanx has recently scaled Poland’s insurer rankings to sit comfortably as the second largest German insurance company.
Within the past month, Talanx has made several core acquisitions that helped it expand in size and quality. After cooperating with Japanese insurer Meiji Yasuda to acquire Wroclaw-based Europa Group, Talanx went on to complete the acquisition of Belgium-based KBC Bank subsidiary, TUiR Warta, no more than a few weeks later, securing its position among Poland’s top insurers.
Talanx has a history of providing comprehensive insurance services in Poland with its two subsidiaries, HDI-Gerling Zycie and HDI-Asekuracja.
The Europa Group experienced a solid 2011 business year, with a a net profit of EURO42 million (USD51.5 million) from premiums totaling EURO173 million (USD212.2 million).
Also, the acquisition of Warta contributed an additional Zloty649 million (USD194.4 milion) of non-life premiums, and Zloty599 million (USD175.14 million) of life premiums to Talanx during quarter one 2012, amounting to an overall premium increase of 8% at EURO7.6 billion (USD9.32 billion). Meiji-Yasuda Life is set to by 30 percent of Warta’s shares from Talanx.
Compared to last year, Talanx almost tripled its first quarter results, earning a net profit of EURO211 million (USD268.3 million), as opposed to only EURO77 million (USD85.87 million) for the first quarter of 2011.
Currently, Talanx is the 11th largest insurance group in Europe. It is already moving several of its insurance lines and retail to the international market. Therefore, judging from the successful year Talanx has had so far, it should come as no surprise that the insurance group is close to having its initial public offering (IPO).
Originally, its IPO was unofficially due for June or at the latest, early July. Though this date has been postponed because of the European debt crisis and stock market developments, everything is in place for the big change.
Talanx has already confirmed Citigroup, JP Morgan Chase, and Deutsche Bank as bookrunners, switched to quarterly reporting, and formed an investor relations department.
The German insurance giant apparently worries about receving a low valuation at its IPO, as the majority of German insurance companies are currently being traded at 20 percent less than book value.
Although Talanx is fully owned by mutual HDI-V.a.G., which is intent on maintaining a majority of the firm, plans to go public will not change as the extra financing is crucial to the Talanx’s international expansion. During the past year, the group already made 5 global acquisitions.
Talanx plans to offer no more than 25 percent of its capital to the stock exchange at first, valuing roughly EURO1.4 billion. Meiji-Yasuda, which has partnered with Talanx before, already bought EURO300 million in convertible bonds for the German insurer.
In addition to its own IPO, one of Talanx’s subsidiaries, Hannover Re, had its IPO in 1994, which was the largest insurance IPO in Germany to date. At the moment,Talanx holds 50.2 percent of Hannover Re, and is also restructuring its entire reinsurance service.
By solely using HDI Reinsurance (Ireland) as a major internal reinsurer, Talanx is attempting to bring up its retention rates, a part of its new strategy to improve profitability. However, Hannover Re, Talanx’s largest reinsurer, will not supply retrocession to HDI Reinsurance (Ireland).
Overall, significantly improved results so far this year are partly because of the good claims development, which suffered greatly last year. Additionally, Talanx managed to increase its investment income to EURO961 million (USD1.18 billion), a 15 percent jump. This was largely due to sales of assets.
Herbert K. Haas, CEO of Talanx, said that the group was able to come out of the year 2011 in good health, and is only continuing the positive progress it began last year. Haas ended with confirmation that Talanx’s premium growth in the global market is a clear signal that their strategy is working well.
German Insurance Companies Mentioned
Meiji Yasuda Life
Established in 1881, Meiji Yasuda Life Insurance was the first life insurance company established in Japan. Headquartered in Tokyo, Meiji Yasuda Life now has over 40,000 employees in Japan, as well as 81 regional offices, 22 group marketing offices and over 1,000 agency offices. The company also has 8 subsidiaries or representative offices oveseas.
Europa Insurance Group
Based in Poland, the Europa Insurance Group is a leading provider of bancassurance and all finance related insurance products. For nearly 17 years, Europa has been actively influencing the Polish financial market, and creating innovative products to adapt to the needs of each customer.
Talanx Group
Talanx Group and all of its subsidiaries are managed by the financial and management holding company Talanx AG, based in Hannover, Germany. Talanx Group is a multi-brand provider in many prominent lines of insurance and in the financial services industry. In the year 2011, Talanx Group earned over EUR23 billion in premium.
TUiR WARTA
With history as far back as 1920, WARTA guarantees stability and experience in its services. WARTA Group provides motor, property, personal, and life insurance, and has been the recipient of many prestigious awards in theinsurance sector.
HDI-Gerling
HDI-Gerling is one of the largest German property & casualty insurers, serving private customers to commercial and industrial clients. HDI-Gerling offers tailor-made insurance and retirement plans.
HDI-Asekuracja
HDI-Asekuracja has operated in the Polish property & casualty market for over 20 years. HDI-Asekuracja TU SA, Poland is wholly owned by the management group Talanx AG based in Hannover, Germany.
Hannover Re
Hannover Re is the third-largest reinsurer in the world, with a gross premium of EUR 12 billion. It has branches on all continents in the world, supporting roughly 2,200 staff. Hannover Re maintains very strong financial strength ratings (S&P “AA-” and A.M. Best “A”).
Jul
12
Moody’s Strengthens Japan’s P&C Outlook
Filed Under Acquisition, Asia, Insurance Company, Uncategorized | Leave a Comment
Moody’s Japan K.K., a Japanese based ratings agency, recently upped the outlook of Japan’s property & casualty insurance industry from negative to stable.
The established ratings company predicts that ongoing restructurings within the industry will lead to increased earnings within the next year or two.
Last year, according to Swiss Re sigma data, Japanese non-life insurers earned a 2.8 percent growth in premiums at USD131 billion, while life insurers earned a 6.5 percent increase in premiums at USD525 billion.
See the full article here .
Jun
26
ING’s India Operations Up For Sale
Filed Under Acquisition, general insurance, Insurance Company, Joint venture, merger | 1 Comment
As ING Group continues to sell off its overall Asian insurance operations in order to repay part of the USD $7 billion in bailout funds that it received from the European Union in 2008, the Dutch company is also getting ready to offload its separate ventures in India.
The news comes as no surprise to many as the sale is part of ING’s global restructuring plan. The plan entails that by 2013, ING will cut its balance sheet by approximately USD $751 billion by selling off many of its businesses outside of Europe, including those in Asia and America. Thus far, ING have been looking to sell a number of its Asian insurance businesses (not including those in India), such as those in South Korea and South East Asia, as a single unit.
A number of factors, including the fact that the firm deals with local Indian players, means that ING has decided to sell its Indian businesses separately. This means that the imminent sale of its three Indian companies will take a while longer as ING are reportedly focusing all its efforts towards getting rid of its other Asian insurance business which are valued between $6 and $7 billion US dollars.
The creation of ING Vysya Bank, one of the three ING companies, was the first merger between an Indian bank (in this case Vysya Bank) and a foreign group. ING currently holds 44% stake in ING Vysya bank, with other shareholders including Aberdeen Asset Management, Morgan Stanley and Citigroup. ING also have an investment management company in the country that is also up for grabs. The company, ING Investment Management India, has a number of interested bidders including Pramerica, and South Korean company, Mirae.
ING Life India is ING’s third company in India. Due to Indian laws that state that a foreign owner can only own 26% stake in any Indian insurance firm, ING are not the majority shareholders. It does however have management control of ING Life India. The majority share holder in the insurance company, formed in 2002, was initially GMR Industries. GMR then sold its stake to Indian battery manufacturer, Exide Industries who now hold a 50% stake in the company, making it the majority shareholder.
While the life insurance company did report increases in its premium three months in a row from January to March, at the start of the new fiscal year in April it saw its premium collection take a huge plunge and drop to Rs14.09 crore (US$4.05 million).
What is even more worrying for ING Life India is that Exide Industries, the major shareholder, is also reportedly looking to sell their stake in the venture. This was almost the case a year ago, but Exide opted to stay on. However, following the recent news of ING’s decision to sell, it seems that Exide have now followed suit. With both sides looking to sell, the future looks uncertain for the company as it will have to look for a new foreign and domestic partner or opt for a merger.
A number of insurance companies have expressed an interest in buying up ING’s 26% stake. They include insurers like Samsung Life, Manulife and Japanese company, Sumitomo. However, as none of the interested companies currently have a presence in India, before purchasing the stake they have to find an Indian partner to enter the market with.
ING Life India operates two distribution channels, Tied Agency and Alternate Channel. The Tied Agency channel has over 30,000 life insurance advisors, while the Alternate Channel contains the company’s bancassurance (BIM) partnership with banks such as ING Vysya Bank.
ING are not the only company selling its Asian operations. Struggling British firm, Aviva have also announced plans to sell its Malaysian operations as the economic crisis’ aftermath continues to affect insurance companies.
Insurance Companies Mentioned
ING
Formed in 1991, Dutch institution, ING, is a group that specializes in a number of financial services including insurance. It currently has a presence in more than 45 countries with a client base of approximately 85 million individuals.
Jun
15
Indonesia and Singapore: hot spots for latest insurance developments
Filed Under Acquisition, Aetna, Health Insurance, Uncategorized | Leave a Comment
The Asian insurance markets continue to witness positive changes in the insurance industry in the form of Swiss giants Ace finalizing agreements for an Indonesian acquisition and the Aetna group expanding its products within the Singaporean market.
Zurich based Ace Group was established in 1985 when it was created by its policyholders to provide excess liability and directors and officers coverage. It has constantly evolved and expanded since then and now offers global public insurance to all corners of the globe.
Read the rest of the Indonesia and Singapore: hot spots for latest health insurance developments article.Jun
6
Sun Life and Zurich Making Moves
Filed Under Acquisition, Asia, general insurance, Insurance Company, Life Insurance, Middle East | 1 Comment
Sun Life Assurance has formed a joint venture with PVI holdings in Vietnam, while Zurich Insurance Group is eyeing an entry into the highly profitable Saudi Arabia insurance market.
Zurich Insurance Group has had a stellar start to the year. The group has posted Q1 2012 net income at US$1.14 billion, significantly improved from the US$640 million that Zurich reported as net income in Q1 2011. Zurich’s business operating profit is also sharply up from the first quarter of 2011, where the organization reported US$854 million, reaching US$ 1.38 billion so far in 2012.
The company has attributed its accomplishments to the success which it has experienced in executing a globally based strategy; accessing developing economies and relatively underserved markets in order to capitalize on the opportunities these places represent. For example, Zurich has recently entered into a 10 year distribution partnership with HSBC in Gulf Cooperative Council (GCC) Countries, has obtained the relevant licenses for life insurance distribution and underwriting in Singapore, and acquired the life insurance arm of Latin American banking giant Santander.
However, keen to keep the momentum going, Zurich is also preparing to enter into talks with the Saudi Monetary Authority (SMA) in an attempt to enter the Kingdom’s life insurance sector.
The SMA, which approves licenses and takeovers for foreign companies to enter the Saudi insurance market, is not currently issuing licenses to new insurers. This means that Zurich would likely have to purchase an existing local provider and that provider’s existing Saudi insurance license. Whilst this may seem like a straight forward case of identifying, and then acquiring a company with the capability to significantly add value to the Zurich Group, a potential stumbling block exists in the fact that the SMA must approve all foreign company takeovers in the local market.
This is not deterring Zurich, which has been in talks for the last 18 months to identify a suitable candidate. Zurich’s interest in the country is understandable considering that the International Monetary Fund (IMF) expects the Saudi GDP to increase by an estimated 6 percent this year – primarily due to the rising prices of crude oil.
Geoff Riddell, Zurich Chairman for APAC and MENA, commented on the attractiveness of Saudi Arabia from the company’s perspective in the Gulf Times, stating “it’s wealthy, it’s got a huge population, there’s a massive planned infrastructure spend to try and create new cities and work for that large population… There’s zero penetration and there’s a huge upside.”
It seems as if the Middle East is going through something of a renaissance in the insurance market at the moment, with a number of GCC and MENA countries posting strong indications of growth for the coming year. In light of the uncertain economic conditions in the USA and Europe, the decision by Zurich to further attempt an entry into Saudi Arabia makes a large amount of sense.
On the other side of the world, Sun Life Financial Inc. subsidiary, Sun Life Assurance Co. of Canada, has signed a Joint Venture agreement with PVI Holdings in Vietnam to form PVI Sun Life Insurance Co. Ltd., or PVI Sun Life.
PVI Holdings is a Hanoi listed subsidiary of Petrovietnam, the state controlled Gas and Oil titan. PVI Holdings is the largest non-life insurer in Vietnam and generated a 25 percent increase in gross written premiums during 2011 for total premium revenues of US$ 202 million. The company currently holds 21.3 percent of the Vietnamese non-life market, positioning PVI to become a valuable partner to Sun Life in the country for many years down the road.
Because Sun Life deals with life insurance and PVI is a non-life insurer the decision by the two organizations to form a JV opens up significant avenues for both. In-line with PVI’s domestic development goals and expanding the Sun Life footprint in South East Asia, PVI Sun Life will be primarily focused on life insurance distribution in Vietnam.
Sun Life Assurance Co of Canada will own 49 percent of the new organization, with PVI Holdings owning a majority 51 percent. By utilizing PVI’s exceptional local knowledge and existing sales and distribution channels and leveraging Sun Life’s 150 year history of life insurance underwriting PVI Sun Life will be in a prime position to lead the market in one of Asia’s most undervalued yet vibrant economies; at present only 5 percent of the Vietnamese population holds some form of life insurance protection, a figure which PVI Sun Life will be keen to increase.
Sun Life has been present in the nearby Philippines since 1892, and will use its experience in that country to further the goals of the newly created organization. Similar to the Vietnamese market, Filipino Life Insurance products tend to be far more flexible than similar products available in countries like the USA or United Kingdom, and are priced to be more competitive in a region where the average monthly income is only US$ 185.
Sun Life Phillipines CEO, Rizalina Mantaring, was extremely bullish towards the partnership and the ability of the Filipino arm of Sun Life to have an impact on Vietnamese operations. Ms. Mantaring said “we are truly excited about this new partnership. The Philippine operations has been highly successful over its 117 years in the country, and we look forward to providing support to PVI Sun Life through the sharing of our experiences, capabilities, and know how with our counterparts.”
With both Zurich and Sun Life choosing to seek ever more countries in which to expand their respective operations this could be an indication that more major providers in the international market will follow close behind. With the levels of economic uncertainty currently being seen across the globe, specifically in “developed” countries, the less developed “developing” markets are starting to hold significant potential for insurers looking to boost their bottom line.
May
21
Zurich international business expands
Filed Under Acquisition, general insurance, Insurance Company, International Healthcare | Leave a Comment
Swiss global insurance giant, Zurich, is on a profitable track this year, with positive results coming in from the First Quarter reports.
The group reported a total business operating profit of US$ 1.4 billion for the First Quarter of 2012 with an operating profit increase in the General Insurance sector of US$ 567 million to US$ 856 million.
It appears that Zurich may be overcoming difficulties in the European markets by focusing on forming new alliances and acquisitions internationally.
The international markets division contributed US$ 1.3 billion of Zurich’s first-quarter gross written premiums resulting in an increase of USD $240 million when compared to the results from this same time last year.
The Asia-Pacific region alone witnessed 16 percent growth partly due to the renaming of the Malaysian MAA to the Zurich brand towards the end of 2011. Also to be taken into consideration is the fact that, as of last month, Zurich is now the provider of wealth insurance products to HSBC clients in the Bahrain, Qatar and the United Arab Emirates after signing a 10 year exclusive distribution agreement; additionally, the company now has license to access their target market segments for life insurance products in Singapore as well.
Zurich’s most notable area of growth however, lies in the markets of Latin America. The group recently acquired Banco Santander’s insurance business and has witnessed a positive impact since then as an overall growth of 50 percent was reported.
The life insurance sector of Zurich contributes one-third of the groups’ total global business, and Banco Santander continues to boost performance in this area as Brazilian sales of individual protection policies enabled a 16 percent year-on-year increase in life gross written premiums. Gross written premiums in non life have also witnessed noticeable improvements and increased from US$ 370 million to US$ 10.5 billion. However, such growth has, of course, been counterbalanced by the continuing decline of European markets.
As the Debt crisis continues in Europe, Zurich is considering how else it can expand and is now looking towards making more progress in Asia. Indonesia in particular is experiencing a flurry of activity, and Chief Executive Kevin Hogan believes the country’s increasing income and resulting capability to pay for individual protection offers a “tremendous opportunity for growth”.
In 2011, Indonesia’s economy experienced the fastest growth it has had since 1996 and grew 6.5 percent. It would seem therefore, that the population is becoming wealthier and has more to protect as a result.
Zurich noted this 3 years ago and made a head start when it took on Mayapada Life; Zurich presently controls 80 percent of the now renamed Zurich Topas Life company. Up until recently, the company could only offer coverage for car and home insurance but now that they have been granted a license to add life insurance to their services, Zurich Topas life will no doubt continue to expand and interest more of the Indonesian market.
Although there are already well established insurers in Indonesia, Zurich hopes its personal strategies will give it the edge it needs to stand out and continue to make improvements. Zurich Topas Life has previously collaborated with Bank Mayapada International but is looking to explore more opportunities to join forces with other Indonesian banks so as to further distribute their products.
As the European climate continues to remain unstable, it would seem Zurich has the right idea by looking towards international possibilities for growth and expansion. The impact of the global developments that the group has made so far are clearly bringing in positive results for the company and it will be interesting to see what directions they choose to take in the future.
Oct
7
Multinational insurance companies have found themselves in an acquisitive mood in the past month as firms look to tap into emerging markets to offset the limited growth prospects in their home countries.
On Wednesday, Zurich Financial Services Group, Switzerland’s biggest insurer, expanded its presence in the promising South America market with the acquisition of a 51 percent stake in the life insurance, general insurance and pension operations of Banco Santander in Brazil and Argentina. The deal comes as part of a long-term distribution arrangement between Zurich and the Spanish banking giant in Latin America, which was agreed to earlier this year.
Read the rest of the Zurich, Manulife International Operations on the Rise article.Aug
23
QBE Revises Margins Outlook Despite 1H Profits
Filed Under Acquisition, general insurance, Uncategorized | Leave a Comment
Australian insurance giant QBE has reported a significant rise in half-year profits, but have, at the same time, also been quick to downplay their full-year margin expectations due to the unprecedented string of heavy catastrophe claims incurred in 2011.
In a statement released to the Australian Stock Exchange, QBE posted a 53 percent rise in net profit for the six months of 2011 to June 30, up to US$673 million from the US$440 million reported a year earlier. The increase in QBE’s half-year profits was primarily attributed to a substantial rise in investment income, which rose from US$116 million in 2010 to US$657 million, as the insurance group expanded its portfolio of corporate bonds. Premium revenue from recent acquisitions completed over the past year also exceeded expectations, and have been able to bolster the bottom line at a critical time to largely offset the sharp influx of severe natural catastrophe claims. QBE acquisitions so far this year have included including the American crop insurers, NAU Country and Renaissance Re, the Balboa insurance business, the Europe-based insurer Secura NV and CUNA Mutual from Australia. According to QBE, over the past six years over 90 percent of the insurer’s growth in premium income has been achieved through its acquisitions. QBE’s gross written premiums were up 30 percent to US$8.9 billion, while the insurance group’s net earned premium also increased 29 percent to US$6.78 billion. The Australian insurer’s balance sheet has remained strong with excess capital of US$3.3 billion, 1.7 times the minimum requirement, leaving considerable flexibility to fund further acquisitions in the future.
QBE Chief Executive Frank O’Halloran asserted in the statement that the company would continue to look towards acquisitions to increase revenue and diversify its risk profile. “QBE’s strategy to build product diversification and geographic spread by acquisition continues to be successful. We are particularly pleased with our recent US acquisitions which contributed strongly to the significant increase in profits from our US operations in the first half.”
While QBE has been able to successfully expand and generate revenue from its overseas operations, the insurer’s profit margin for the first half of the year fell from 15.8 per cent to 11.2 per cent, due to a record number of natural disaster claims that added 6.6 percent to the large individual risk and catastrophe claims ratio for the half year. The largest catastrophe and individual risk claims that have affected QBE relate to Cyclone Yasi and subsequent flooding in Australia, the New Zealand Christchurch earthquake, Japan’s earthquake and tsunami, and half a dozen major tornadoes that struck the United States in the spring. Total insured losses went up US$250 million in June and already amount to US$1.08 billion for the year, matching 2010’s total in half the time. The company has been forced to downgrade its insurance profit margin expectations to between 11 and 14 per cent for the rest of the year, down from a 15-18 percent forecast in June.
“The record level of catastrophes experienced by the worldwide insurance industry during the first half and the recent fall in risk-free interest rates necessitates that we lower our insurance profit range for the full year,” QBE Chief Executive Frank O’Halloran explained.
The lower than expected insurance margin affected QBE share price in trading, dropping to a low of US$12.25 before the stock bounced to close down 5.6 percent at US$12.98. Indeed, the insurer’s underwriting profit for the first six months of 2011 dipped by a remarkable 46 percent to US$291 million from a year earlier. Australia’s largest insurance company would have suffered US$217 million in further costs from claims and reinstatement premiums this year if it had it not renegotiated its prime reinsurance protection contracts last year. Under their current reinsurance deal, seventy percent of all costs incurred will be fixed to the growth in premium income, with the only the remaining 30 percent being variable to inflation. Due to the current claims environment, QBE has taken out an additional US$150 million worth of reinsurance to cover for any further large risk and catastrophe claims over US$675 million.
The Sydney-based global insurer is confident that these extra costs can be absorbed by greater demand and more beneficial policy terms and premium rates for its own business, particularly in catastrophe affected areas. A close sequence of natural disasters can often become an earnings event for insurers as it ultimately makes more people aware of the importance of proper coverage. “We believe the pricing increases that we will get in the door will more than offset any price increases that we expect on the buying of that 30 per cent of reinsurance,” Mr O’Halloran told analysts, adding in the statement that “our philosophy has always been that our reinsurers are entitled to a positive return on their commitment to QBE over time.”
QBE, of course, have not been the only prominent property/casualty insurer to suffer through two quarters of sizeable catastrophe losses. Several multinational insurance companies, including Allstate and MetLife, have been forward with their concerns about the effects these increasingly prevalent natural catastrophes, not to mention the impending Solvency II requirements in Europe, will have on the international insurance industry. Reinsurance companies have already begun lifting rates on insurers to recoup their sizeable losses and it is yet to be determined if these extra expenses can be passed on entirely to policyholders.
Insurance Companies Mentioned
QBE
QBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide. Headquartered in Sydney, Australia, QBE operates out of 49 countries around the globe, with a presence in every key insurance market. The Americas Division, headquartered in New York, conducts business through various property and casualty insurance subsidiaries in eight countries.
Jul
26
ING Leaving Latin America
Filed Under Acquisition | Leave a Comment
Dutch financial services company ING Groep NV reached an agreement this week to sell off most of its insurance businesses in Latin America to Colombian conglomerate Grupo de Inversiones Suramericana SA for a reported €2.6 billion (US$3.7 billion). The deal, expected to close by year’s end, is part of ING’s attempt to divest assets and repay the Dutch state and could also instigate a slew of activity from other multinational insurers in the region.
Grupo de Inversiones Suramericana, also known as Grupo Sura, will pay ING about €2.62 billion (US$3.7 billion) in cash and assume some €65 million (US$93.4 million) in debt held within the insurance operations, according to a statement released today. The deal includes ING’s pensions, investment management and life insurance businesses in Chile, Colombia, Mexico and Uruguay as well as two stakes in Peruvian insurers. This transaction is the largest ever foreign acquisition by a Colombian company and will establish Grupo Sura as a major player in Latin America’s insurance and pensions industry, a market primed for growth due to the region’s youth leaning demographics and promising economic forecast. According to ING, once the deal is completed Grupo Sura’s combined business will include over 25 million customers and US$120 billion worth of assets across Colombia, Chile, El Salvador, Mexico, Panama, Peru, the Dominican Republic and Uruguay.
The deal, subject to regulatory approval, values ING’s Latin American insurance assets at around six times its cumulative forecast 2011 earnings and at 1.8 times its estimated €1.5 billion (US$2.16 billion) book value, based on International Financial Reporting Standards. Included in the deal were the operations ING acquired from Banco Santander in 2008 for US$1.3 billion. The unit has over 10 million clients and €49 billion worth of assets under management in countries such as, Chile, Columbia, Peru and Mexico. Grupo Sura reportedly beat out rival bids from Chile’s Alvaro Saieh, Mexico’s Grupo Financiero Banorte SAB and Metlife, to acquire these businesses. Among the notable pension funds and insurance groups Grupo Sura also now controls are Integra of Peru and ING Fondos. The transaction hasn’t however included ING’s 36 percent stake in Brazilian insurance company Sul America SA, which will be sold separately at a later date.
Grupo Sura, with holdings in Colombia’s largest bank and pension fund, has been a dominant business force in its home country and has embarked on an aggressive expansion strategy in recent years, diversifying into cement and food production earlier this year. David Bojanini, chief executive of Grupo Sura, explained in a statement that their latest acquisition would enable them to take a leadership position in regional pension and insurance markets. “This acquisition expands Grupo Sura’s presence in the region and continues our growth and internationalization strategy. ING’s operating strength and experience will complement our existing platform and will drive value for our current and future investors”, he said.
Grupo Sura will look to add significant value to its portfolio through this transaction, with an expected US$172 million in additional dividends from its investments by 2012. David Bojanini added that recent acquisitions, once integrated, will maintain Grupo Sura commitment to growth and strong corporate governance. “The similarities between the ING business model and the pension operations of Grupo Sura create an opportunity to increase the value of services for our clients. This acquisition strengthens our participation in the market and confirms our commitment to a variety of Latin American countries,” he said in a statement.
ING meanwhile expect to make a €1 billion (US$1.44 billion) profit from the sale of its Latin American operations. The proceeds will be used to further reduce leverage on the company’s insurance unit by approximately €2.8 billion (US$4 billion). The price ING managed to sell for has been considered a success by market analysts given the circumstances. The Netherlands’ biggest financial services company began selling its worldwide insurance operations earlier this year in preparation for a European Union mandated split and subsequent sale of its insurance operations. ING must divest its entire insurance division and become a pure banking business, to meet the conditions of the €10 billion (US$14.38 billion) bailout package it received from the Dutch government during the 2008 global financial crisis. ING still owes some €3 billion (US$4.3 billion) on its bailout, plus another €1.5 billion (US$2.16 billion) in penalties, and plans to fully pay back the government by May 2012.
The deal marks the latest in a series of disposals by ING as it attempts to repay the Dutch state. Earlier this month the company sold off its European auto leasing division to BMW for €637 million (US$916 million). In June, ING sold its American online banking service, ING Direct USA, to Capital One Financial for around US$9 billion in cash and stock. ING is planning initial public offerings to divest its remaining insurance and investment management businesses in the US, Europe and Asia, worth between €18-19 billion (US$26-27.5 billion), but have yet to set a date.
While ING is probably loathe to be parting with its valuable presence in Latin America, the company is making noted progress with its mandated divestments. ING released a statement that heralded the sale of its assets to Grupo Sura as “the first major step in the divestment of ING’s insurance and investment management activities.”
Jan Hommen, CEO of ING Group, was proud of the work his company had done in the region and was sure Grupo Sura would continue to develop the Latin American region into a first rate business environment for insurance. “Over the years we have built a first rate Latin American franchise with a terrific management team and leading market positions in most countries we operate in. I am pleased that we have found in Grupo Sura a very solid and complementary owner with the ambition to further build on the success of this leading Latin American pensions and insurance provider, in the interests of both our customers and our employees,” he said in a statement.
Insurance Companies Mentioned
ING
ING provides banking, investments, life insurance and retirement services and operates in more than 50 countries. It serves more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia.
GrupoSura
Grupo de Inversiones Suramericana is a Medellin-based conglomerate that either directly or through its subsidiaries holds stakes in over 100 companies belonging to the insurance, energy, food and finance sectors amongst many others. With over 60 years experience, its financial businesses enjoy leading positions, including the number one player in insurance and pensions in Colombia.
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