By Alison Tudor
OF THE WALL STREET JOURNAL
HONG KONG (MarketWatch) -- Some of the world's largest insurance companies are gearing up to compete for ING Groep NV's (ING, INGA.AE) Asian life-insurance arm, potentially creating a bidding war that could reach $6 billion for what is considered a good franchise in the world's fastest-growing insurance market.
MetLife Inc. /zigman2/quotes/206319319/composite MET -1.27% and Prudential Financial Inc. /zigman2/quotes/203750923/composite PRU -1.38% , the two biggest U.S. life insurers are hiring Credit Suisse AG (CS) and Bank of America Corp.'s (BAC) Merrill Lynch unit, respectively, to advise them on possible bids, said people familiar with the matter.
Canadian-listed Manulife Financial Corp. (MFC, MFC.T) has hired Citigroup Inc. (C) said some of the people. Sun Life Financial Inc. (SLF, SLF.T), Canada's third-largest life insurer by assets, has already said it may bid but declined to say whether it had hired an adviser.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com).
Asian demand for insurance products is expected to grow rapidly as an expanding middle class buys life, health and savings products. Penetration of insurance products in countries such as Indonesia is a fraction of where it is in western countries.
The combination of ING's good franchise and desire by western insurers to expand in Asia could push up the value of the deal to $6 billion, bankers say.
At Sun Life's recent investor-day meeting, chief executive Dean Connor said, "Asia is critically important to our future."
Tom McKinnon, a financial analyst at BMO Capital Markets, said that, given long-term growth potential from Asia, investors probably wouldn't complain if their stakes in western insurers were diluted to do the deal.
For instance, he said, ING would increase Manulife's core Asian earnings, including Japan, by 50%, as well as add market presence in South Korea and India.
ING has put the Asian business on the block to comply with the European Commission's order that it sell its global insurance arm in return for the state aid received during the 2008 financial crisis.
"In Asia, some of the valuation multiples on deals that we have seen in the last year or so have been pretty high...So if you are going to pay a high multiple, you have to have a high sense of conviction about...how to add value," Connor said.
Other insurers on the block in Asia are smaller. Thailand's Thanachart Bank is auctioning its life-insurance business in a deal for around US$500 million and a private-equity fund is selling it controlling stake in South Korea's Tong Yang Life Insurance Co. Ltd. (082640.SE).
It is rare that a pan-Asian platform comes up for sale, which is also stimulating competition. With headquarters in Hong Kong, ING's insurance operations consist of eight wholly owned or joint-venture businesses doing business in China, Hong Kong, India, Japan, Malaysia, South Korea and Thailand. Its joint ventures will be sold separately, according to people familiar with the matter.
Not all the competitors want ING's entire Asian platform. Its two biggest operations in the region by sales are in the mature economies of South Korea and Japan.
Japan is particularly seen as unattractive due to its variable-annuity business, which contains guaranteed returns to investors, the people said. But the sizable businesses in Malaysia is seen as very attractive.