Dutch bancassurer ING Groep must sell its global insurance unit by the end of 2013, the consequence of its 10 billion euro ($15 billion) bailout from the government last year.
Chief Executive Jan Hommen said on Wednesday it will lay the groundwork for an initial public offering (IPO) of the world’s sixth-largest insurer and consider other options later.
Here are routes ING could take:
IPO
Hommen has made little secret of his preference for an IPO. When ING announced the split on Oct. 26, he praised the insurance business and said he would like to see it stay together as one company.
On Wednesday he said the “normal path” in a situation like this would be to prepare a public offering and then, before launching it, compare it with other options. Royal Bank of Scotland has also looked at an IPO for its insurance unit.
“The separation of the bank and insurance company is proceeding as planned (completion could take 12 months), and an IPO appears (as we had expected) the most likely option,” Evolution Securities analyst Jaap Meijer said in a research note on ING on Thursday.
Analysts say the IPO could be conducted in stages, with a float of about 10 percent to start, then as much as 39 percent more, and then an ultimate sale of the rest. Such a multi-step sale would let ING get toward its disposal goal while enjoying ownership of the business as long as possible. The question of where such an IPO might be conducted remains unanswered, especially as the European market for flotations is recovering more slowly than the United States and Asia.
Whole sale
Hommen drew laughs on a conference call when he said he had to count on “hands and feet” the number of potential buyers who have contacted him since ING announced its plans to split on Oct. 26. He was clear, though, that no discussions were taking place and that all expressions of interest were being “duly noted” for the future.
A number of companies have said they would like to take a look at ING’s insurance business, including Britain’s Aviva, Spain’s Mapfre and Poland’s PZU.
A buyer for the worldwide business would need substantial firepower, though. RBS analyst Thomas Nagtegaal said in a note Wednesday his proceeds estimate of 18 billion euros for the disposal is “not aggressive”.
Breakup
If ING decides to break up the insurance unit to facilitate a sale, the biggest interest is expected to be in its Americas and Asian operations.
In the third quarter almost half of the value of new business in the insurance unit came from the Americas, while the Asia unit saw the strongest growth in underlying profits.
RBS has estimated about 60 percent of ING’s insurance business is “attractive,” including central and eastern Europe, Asia and parts of the U.S. business. Other analysts have agreed that the opportunities the sale presents are rare.
“It is not often that Top 5 life insurance (Australia, New Zeland, South Korea, Malaysia) and asset management positions (New Zealand, Philippines, Taiwan, Thailand) in certain Asian [markets] become available,” Bank of America Merrill Lynch analysts said in a late-October note.
With Reuters
