A unit of French insurer Axa SA sued an ING Groep NV subsidiary over alleged misrepresentations in ING’s $1.5 billion sale of a Mexican insurance company to Axa.
Axa Mediterranean Holding discovered after the 2008 deal closed that ING Insurance International had made false representations and warranties about the financial statements and condition of the Mexican company and its subsidiaries, according to the complaint in New York state Supreme Court. Axa said it has suffered “tens (if not hundreds) of millions of dollars in damages.”
The suit focuses on a bond company, ING Fianzas SA, that was included in the sale. That company, renamed Axa Fianzas SA, was a unit of the Mexican insurance company, Seguros ING SA de CV, acquired by Axa.
“ING falsely represented and warranted that the bond company had sufficient collateral and/or reserves (as required under Mexican law) for the bonds it had issued,” Axa said in the complaint filed Nov. 26. “For many of the relevant bonds, collateral was either completely non-existent or otherwise insufficient.”
From the July 2008 acquisition of the bond company until May 2010, when Axa sold it to a third party, Axa paid millions of dollars on bonds that it couldn’t recover because the bond company lacked the collateral or reserves that ING had said it had, according to the complaint. As of Sept. 30, 2007, the bond company had $2.2 million in collateral to cover $65.4 million owed on tax obligation bonds, Axa said in the complaint.
Overpayment
Axa also overpaid ING for the bond company, according to the complaint. Axa said that ING gave it a third-party valuation in 2007 that the company was worth $118 million to $162 million. Eighteen months later, Axa agreed to sell the company to an affiliate of Afianzadora Sofimex SA, another Mexican bond company, for $2.74 million.
Raymond Vermeulen, a spokesman for Amsterdam-based ING Groep, said in a phone interview that the company’s policy was not to comment “on legal matters like this.”
Axa also alleges in its complaint that Seguros ING had inadequate reserves for potential losses in lawsuits filed by policyholders over denied coverage.
The case is Axa Mediterranean Holdings SA v ING Insurance International BV, 652110/2010, New York State Supreme Court, New York County (Manhattan).
Source : Bloomberg
