Resolution Close to $4 Billion AXA Deal

June 14, 2010

Resolution said it was close to buying AXA’s British life insurance arm, kick-starting its plan to consolidate the UK life market and freeing the French insurer up to focus on high-growth Asia.

Resolution, set up in 2008 to buy and profitably merge slow-growing British life companies, said on Monday it hoped to complete the £2.75 billion ($4.03 billion) takeover by the end of June.

The deal, to be part-funded by a £2 billion [$2.93 billion] cash call, would be Resolution’s second takeover after its purchase of British life insurer Friends Provident last year, easing concerns about the slow pace of its consolidation project to date.

“This move will take some pressure off Resolution’s management, who having targeted two or three acquisitions this year have so far not announced any,” Oriel Securities analyst Marcus Barnard wrote in a note.

The British disposal will give AXA more flexibility to finance takeovers in Asia, where the French insurer has been striving to increase its presence by buying out minority investors in its local subsidiary, AXA Asia Pacific Holdings.

“It leaves them well-placed to take advantage of assets as and when they come up for sale,” said James Shuck, an analyst at stockbroker Jefferies.

“It gives them more room for maneuver. They’ve got scope to do a €1 to €3 billion [$1.226 to $3.678 billion] acquisition with no extra financing involved.

AXA is one of the largest foreign insurers in Asia, and is seen as a potential bidder for assets that could be sold by regional rivals AIA and ING to repay government support advanced at the height of the crisis.

AXA, Europe’s second-biggest insurer, just behind Germany’s Allianz, said the British disposal would result in a €1.4 billion [$1.72 billion] one-off write-down in 2010, but would generate net cash proceeds of €1.7 billion [$2.08 billion] while also boosting its capital strength.

AXA shares were up 2.9 percent at €13.5 ($16.55) by 0935 GMT. The stock is still down 18 percent since the beginning of the year, partly reflecting investor concerns over the company’s capital reserves.

Under the deal, AXA would sell its British protection, annuities and group pensions business to Resolution, but would keep its wealth management and direct protection operations in the UK.

Resolution shares were suspended pending the outcome of the deal talks as the purchase of AXA’s UK units would be classified as a reverse takeover under stock market rules.

The company, founded by insurance tycoon Clive Cowdery, has set itself a target of buying and merging at least three life insurers or asset managers before selling or floating the enlarged group in 2012.

(Reporting by Myles Neligan and James Regan; Editing by Mike Nesbit)

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