ING Sale of Latin American Insurance Unit Sets Stage for Others

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Dutch bancassurer ING is to sell most of its Latin American operation to Colombia’s GrupoSura for 2.6 billion euros ($3.7 bln) in a deal resulting from its state rescue in 2008.

ING agreed to split its bank and insurance operations in return for European Commission approval for 10 billion euros of state aid it received in the financial crisis in 2008. It has said that it plans to repay the Dutch state in full by May 2012 following various asset sales.

The sale of the Latin American insurance and investment management business, which ING flagged earlier this year, now paves the way for the sale of its U.S., European and Asian operations, which are worth about 18-19 billion euros.

ING had said it planned to sell the U.S., European and Asian businesses through two separate initial public offerings.

Some analysts, however, said it might fetch a higher price for its remaining insurance assets through trade sales rather than IPOs.

“This is a great deal (for ING), particularly the price. They’re making quite a book profit on it,” said Tom Muller, analyst at Theodoor Gilissen.

“ING could also decide to sell other insurance and investment management operations, in particular those in Asia, to a rival instead of listing them. We know several parties want to expand in Asia,” Muller said.

BASE CASE

The sale announced on Monday involves ING’s insurance, pension, savings and investment management operations in Chile, Colombia, Mexico, Uruguay, and Peru for 2.6 billion euros in cash. GrupoSura will also take on 65 million euros of debt.

“We continue to prepare our remaining insurance and investment management businesses for our base case of two IPOs – one for the U.S. businesses and one for the European and Asian businesses – so that we will be ready to proceed when markets are favourable,” ING CEO Jan Hommen said in the statement.

ING shares traded down 0.1 percent at 8.08 euros by 0832 GMT, outperforming a 1 percent fall of the STOXX Europe 600 insurance index .

GrupoSura, or Grupo de Inversiones Suramericana, is a financial holding company listed on the Colombian stock exchange and has investments in Colombia’s biggest insurer and bank.

ING said the deal would create a Latin American savings and investments group with about $120 billion in assets under management and operations in eight countries.

The businesses to be sold have assets under management of 49 billion euros and earned 192 million euros in net income in 2010, on roughly 670 million euros in revenues on an IFRS basis.

The deal is valued at 16 times estimated 2011 earnings, ING said, and at 1.8 times book value on an IFRS basis. It said it will make a 1 billion euro profit on the deal, which is expected to close by year-end.

It excludes ING’s 36 percent stake in Brazilian insurer Sul America SA , which ING will seek to divest separately.

(Editing by Sara Webb and Andrew Callus) ($1 = 0.696 Euros)