AXA SA And AMP Sweeten AXA APH Bid
Australian wealth manager, AMP and its partner French insurance giant AXA SA have sweetened their joint acquisition bid for AXA Asia Pacific Holdings to $12.85 billion from an original bid of $11.7 billion.
Analysts expect that the revised bid should be enough to seal a deal, whilst APH’s independent directors who rejected the initial proposal said they would consider the new bid.
The joint bidders increased the cash component of their bid by 54 cents a share, increasing the overall acquisition price by 10 per cent. The bidders also intensified the pressure for the target to make a quick decision by setting a 7 day deadline for a deal and declaring the revised bid as final offer.
“The independent board committee will take the appropriate time to carefully consider the revised proposal and we will update our shareholders and the market when this assessment has been completed,” said AXa APH chairman Rick Allert in a statement.
A successful transaction would transform AMP into Australia’s largest asset manager and allow AXA SA to break free from the bondage of regulation as it seeks to expand its Asian presence.
Under the terms of AXA SA’s acquisition of AXA APH’s previous incarnation National Mutual Life, AXA APH agreed to the Australian government’s demand to use it as the vehicle for all future Asian expansion.
The current bid is the second time the French insurance giant has tried to acquire the Asia assets of its subsidiary. The first unsuccessful attempt was back in 2004, when APH rejected a $6.9 billion buyout.
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AXA APH Talks Up Business Prospects In Effort To Fend Off AMP Bid
Regional insurer AXA Asia Pacific Holdings (APH) says its future is excellent as it seeks to talk up its prospects in an effort to fend off an $11.7 billion joint takeover bid from Australian wealth manager AMP and its French parent AXA SA.
Andrew Penn chief executive of AXA APH says his company was well positioned to benefit from Asian growth.
Without offering an specific guidance for APH’s future performance, Mr. Penn says that earnings from Asian markets now constitute two-thirds of the group’s earnings.
“In the immediate term, our priorities in Asia are to restore and sustain organic growth in Hong Kong, capitalise on the scale that we have achieved in South-east Asia and position our businesses in India and China to reflect the significant opportunities that these markets present, on the one hand, but also the risks that exist for foreign players on the other,” Mr. Penn said.
Under the terms of the takeover bid AMP would acquire all of AXA APH for a consideration of $11.7 billion, and sell the Asian businesses of the group to AXA SA for $7.7 billion leaving AMP with APH’s Australian business at a cost of $4 billion.
APH has categorically rejected the bid saying it significantly undervalues the company.
APH says it would like to more than double the enterprise value of its Asian businesses by 2012. Mr. Penn says the company is experiencing robust growth in China, Indonesia, Singapore and Thailand, but that growth in Hong Kong had stalled.
India and China, he said, had grown 41 per cent on a combined basis over the previous year.
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AXA SA Hopes To Acquire AXA APH “One Day”
Global insurance giant AXA SA, the largest insurer in France, says it hopes that ”one day” it will complete a takeover of AXA Asia Pacific Holdings (APH) as it seeks to increase the footprint and market share of its life insurance business across eight emerging markets.
”We hope to be in the position to complete one day or the other. We want to change gear by increasing our footprint in emerging markets.” Chief Executive Officer Henri de Castries told investors in Paris.
If AXA SA’s bid for APH is to be successful, it needs to win the support of Melbourne based APH’s independent board members, which would seal Asia’s biggest takeover this year.
APH has so far rejected the $11 billion unsolicited joint bid launched by AXA SA and Australian wealth manager AMP. The bid includes a proposal for the sale of AXA SA’s majority stake in APH to AMP, whilst at the same time it would buy back APH’s Asian business for $7.7 billion.
This is the second time AXA SA has tried to acquire APH in the last five years. The company is keen on consolidating market share in emerging markets such as India, Indonesia and China as it seeks to embark on a strategy of tripling the share of earnings that come from emerging markets to 15 per cent within three to five years.
AXA SA’s larger German rival Allianz obtained a contribution of nearly 12 per cent of its main insurance units’ operating profits from emerging markets during the first half of the year.
AXA SA extended its November 19th bid for APH, after the target rejected the bid, saying it undervalued the life insurance business and that it would seek the support of key investors.
Since the bid was rejected, AMP’s stock price has surged, which AMP says means the value of its bid has risen, and that APH’s independent directors are obliged to review their decision.
AMP and AXA SA must win the support of both minority shareholders and independent directors in order for the bid to ultimately be successful.
A successful acquisition would mean that AMP would double the number of financial advisers in Australia and New Zealand and increase its assets under management by 37 per cent to $142 billion. Whilst AXA SA would be better able to target customers in Asia, a region of rapidly rising wealth.
APH runs AXA SA’s life insurance and wealth management business in Hong Kong, Singapore, China, Indonesia, Thailand, Malaysia, Australia, New Zealand and the Philippines.
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ANZ To Seek Further Acquisition Opportunities
Australian banking major ANZ may raise a further $2 billion in capital, bulking up its war chest as it seeks further acquisitions which take advantage of opportunities that have arisen from European lenders that are distressed as a result of the global financial crisis.
According to a report in The Australian, ANZ intends to raise as much $2 billion from the market, which, when leveraged could be used to fund acquisition opportunities that cost as much as $5 billion.
Last week ANZ announced that it would be buying out its life insurance and wealth management joint venture partner ING in a transaction worth $1.8 billion.
ANZ chief Mike Smith in China to open its first regional branch in that country, making ANZ one of the few international lenders with a wholly owned Chinese operation, said that he favoured foreign investment banks and insurance companies as the most likely targets.
“We have raised $9bn over the past two years in a very systematic way. People haven’t really realised we have been doing it, because it’s been quite a softly, softly approach. People thought we were last out of the blocks, but really we were first in terms of adding quite an additional bit more capital than we needed. We could go into the market with quite a big hybrid offer, and even after this deal we are still looking very strong.” Mr. Smith told The Australian.
Mr. Smith said he believes that the Dutch government put enormous pressure on ING to divest some of its international assets, after the financial services firm was forced to seek government support in order to weather the financial crisis.
“It was the global financial crisis that allowed us to do it — we were locked in. In fact, we had a look at the Aviva deal but we couldn’t move unless ING were prepared to move.” Mr. Smith said.
In June, NAB acquired British insurer Aviva PLC’s Australian insurance and wealth management businesses for $925 million, outbidding AMP.
The transaction was similar to the ING deal, in the sense that the financial crisis allowed both NAB and ANZ to behave predatory, and acquire businesses that ordinarily would not have been put up for sale, and at relatively low valuations.
“We have seen the opportunities and moved on them, so fortune favours the brave, doesn’t it? This is the time to do it. You might as well have your powder dry, it gives us an opportunity to grow. We have positioned the balance sheet to do this sort of stuff and I think there is a couple more that we can do.” Mr. Smith said.
Mr. Smith is keen for ANZ to scale up its Asian wealth management business, believing the market to be nascent. “I want to be up there with the best of them, and I want to take that knowledge into Asia.”
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ANZ To Acquire Joint Venture Stake From ING For $1.9 Billion
Australian banking major Australia & New Zealand Banking Corporation (ANZ) will buy out its wealth management and life insurance joint venture partner ING in a transaction worth $1.9 billion.
According to a report in The Australian, ANZ requested a suspension of trading in its shares on Friday, pending a statement to the securities exchange.
The move was lauded by analysts, who feel that historically ANZ has not had enough scale in those businesses. It also frees up CEO Mike Smith’s ability to make further acquisitions in wealth management and life insurance, which under the terms of the original joint venture he was unable to pursue.
Dutch financial services firm ING later on Friday confirmed that it had agreed to sell its 51 per cent joint venture stake to ANZ for €1.1 billion ($1.9 billion) in cash, with the stake sale producing a profit of €300 million.
ANZ chief Smith in a statement said “Moving to full ownership of the wealth management and life insurance joint ventures significantly strengthens our position in wealth management with a business we know well. The transaction is consistent with our strategy.”
ANZ will pay from the acquisition with capital it already holds, after raising a significant war chest during the last year. The lenders closely watched tier one capital ratio will decline to 9.5 per cent after its purchase.
“Similar to the recent RBS Asia acquisition, ANZ has been able to take advantage of the global financial crisis and ANZ’s strong balance sheet to advance our strategy. The value proposition is also compelling with an attractive purchase price combined with significant revenue opportunities and selected cost synergies.” Mr. Smith said.
The Melbourne based lender said that the acquisition would contribute to earnings as early as next year, even before it had wrung out significant cost synergies.
In 2002 ING and ANZ merged their life insurance and wealth management operations, creating a joint venture which employs 2200 people in Australia and 500 people in New Zealand.
ANZ said the joint venture was the number three player in life insurance in Australia and ranked number five in retail fund management in Australia.
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Suncorp Sees Large Drop in Full Year Profits
Bancassurance group Suncorp-Metway recorded a 40 per cent drop in full year profits, with the result coming in at the lower end of its guidance.
Net profit for the year ending June 30th dropped to $348 million, down from $583 million in the previous year. Profits at the bancassurance group where weighed down by the impact of unstable financial markets and in particular the credit markets, storm claims, increased credit impairment and higher bad debt charges.
Earlier in the month, Suncorp had provided guidance, warning that full year net profit would decline to between $340 million to $360 million.
“The 2009 financial year coincided with the most volatile period in Australian financial services history and, although underlying performance remained solid, each of our businesses was impacted by unfavourable operating environments,” chairman John Story said.
Suncorp said its final dividend would be 20 cents per share down from 55 cents a share in the previous year and in line with guidance.
The group said it would pay a final dividend of 20 cents per share, in line with guidance and down from 55 cents a share a year ago.
Suncorp’s new Chief Executive Patrick Snowball, is set to take up the position on September 1st and analysts expect Mr. Snowball, a former insurance executive, to outline a strategy of converting the company into a pure play insurer and jettisoning the group’s banking business.
Earlier in the year Suncorp made significant changes to its banking business such as phasing out non-core lending , the company said pre-tax earnings at its banking arm fell to $117m, from $633m a year ago, feeling the drag of an increase in bad debts.
Full year credit impairment charges increased tenfold and stood at $710 million, compared with $71 million in the previous year
“The difficult economic conditions adversely impacted bad debt expenses for the year,” Suncorp said.
The bancassurance group said it would continue with the strategy of winding down its non-core loan portfolio.
Suncorp’s total loan portfolio declined 1.1 per cent, whilst deposits grew by 13.2 per cent to 21.4 billion.
The group’s insurance business recorded pre-tax earnings of $573 million, up from $307 million in the previous yea, with gross written premium growth of 6 per cent.
Suncorp Life recorded net earnings of $115m, up from $111m a year ago, but excluding items such as annuities market adjustments, underlying earnings fell 16.4 per cent to $122m.
Suncorp’s tier-one capital ratio at the end of the financial year, a closely watched indicator of financial health, was a robust 11.31 per cent, after the groups raised more than $1 billion in capital during the year.
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12 Basic Life Insurance Questions Part Two
We follow up with the second part of our two part series on 12 Basic Life Insurance Questions. For Part One See here
7. How Much Will The Insurance Cost?
Insurance costs depend on a number of factors that insurers use to determine the amount of risk associated with the insured.
- Age, sex and medical history
- Whether the person seeking cover is a smoker or not
- Type of policy and the amount coverage that is being sought
- The term or duration of the policy or cover.
A rough guide to the cost would be a level term insurance policy which provides $100,000 in cover would cost under $7 for a non smoking female 35 year old, and under $8 for a male of the same age who was also a non smoker.
Obtaining a quote on the cost of premiums from either an insurance broker or the insurer directly is an easy thing to do.
8. Are Joint Policies A Good Idea?
Joint policies do not provide the cost effectiveness that one would imagine and are usually only a little less cheaper than having two separate policies in place. Two separate policies provides double the cover for only a fractionally higher cost.
Under a joint policy, the insurer will only make one payout in the event of a single death for a single life.
9. What Would Stop A Policy From Paying Out?
Non disclosure is the most common reason for life insurance policies not paying out. When buying insurance and filling out the form, the individual should be careful to make sure that all the details provided are accurate; any inaccuracy may result in the whole policy being invalidated.
A lot of policies come with exclusions which the policy will not pay out on, so before buying cover the individual should make sure they read the terms and conditions and are aware of the exclusions
10. What Should Individuals Do If Circumstances Change?
When a person changes their circumstances or enters into different stages of their life, they should update their life insurance policies. Reasons for doing so or buying more can be anything from having a new child to buying a new home, but when circumstances change then life insurance needs to reflect the changed circumstance.
11. Should The Policy Be Written In Trust?
Writing life insurance policies in trust can help families avoid inheritance tax on the death of the insured family member. Most term insurance policies have forms attached which allow the insured individual to name the beneficiary, and thereby allows the insured’s family to avoid what can be quite a hefty tax on the individuals estate.
12. What Should Be Done If The Policy Is No Longer Required?
The simple answer is to cancel the policy. The individual should endeavor to make sure that the policy is really no longer required however.
12 Basic Life Insurance Questions Part One
Purchasing a life insurance policy can be confusing, there are a lot of products on offer and sometimes the options can make a buyer confused. Asking basic questions and finding out their answers can go a long way to clearing up the confusion. In this two part post we ask and provide general answers to the first six of twelve key questions, which should be answered before committing to a policy.
1. When Does One Need Life Insurance?
The short answer is if one has dependants, especially children, then they need life insurance. Another point in time where life insurance becomes critical is if one purchases a home using a mortgage and has a partner that is liable for the debt in the event of their death, then one should have some life insurance cover to mitigate the amount owed should the primary income or joint income earner pass away.
2. Where Or From Whom Is It Best To Buy The Cover From?
A lot of companies offer life insurance policies; the internet is a great tool for comparing different providers, the cost of the premium and the extent of the cover. For people who are confused about the type of insurance they should buy, since there are many types, they should look to an insurance broker, who will be able to clearly explain the different types and which would be best.
3. When Is It Best To Apply For Cover?
The earlier the better, the younger the person buying life cover, the cheaper the premium is, largely because the probability of death increases the older one gets. Insurance companies are acutely aware of this fact, so they charge more to insure people the older they get.
4. How Much Cover Does One need?
For those looking to ensure their partners are not saddled with debt such as mortgage’s they will need to purchase enough insurance cover to equal the outstanding debt. There may be other debts beyond mortgages that may also require cover. If the goal of the insurance cover is to act as a replacement for the income lost for the insured’s family, then some calculations will need to be made as to exactly how much cover will be needed. Most insurance company websites offer a calculator which allows you to obtain rough estimates of how much you need based on some basic inputs.
5. How Long Should One Be Covered For?
The answer to this depends on the what the cover is being used for. If it is to pay off a mortgage for example, then cover should be take for the duration of the loan, which typically lasts 25 years. If the cover is being obtained to protect dependants such as children, then cover should last until they have left home or completed their education.
6. What Kind Of Policy Is Best?
This again is dependent on what the individual is looking to have covered. For those who want to ensure their debt obligations such as mortgages are paid, a cost effective insurance policy would be a decreasing term insurance, one whose payout falls in line with the outstanding owed on a mortgage as it gets paid off. Again the most important thing governing what type of policy one should obtain is what exactly the individual is planning the cover should be used for.
For a more detailed discussion on the types of policy and what situations they should be used in see the article Five Different Types Of Life Insurance Policies And What They Mean For Individuals
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AMP Says It Is Not Interested In Suncorp
Australian insurance and wealth management major AMP has said it is not interested in acquiring the insurance and wealth management assets of bancassurance group Suncorp Metway.
AMP’s chief executive Craig Dunn had previously indicated that the company would like to be actively involved in the consolidation of the Australian financial services sector. Mr. Dunn did however say there would be other opportunities and M&A as international companies with Australian operations, sell those units in order to better concentrate on key domestic markets.
Last month AMP lost out to National Australia Bank for the Australian life insurance and wealth management operations of global insurance major Aviva. NAB paid $925 million for those assets two weeks ago.
There has been much market speculation that Suncorp would split its business into two, either spinning off and selling its banking division, or doing the same with its insurance and wealth management business.
The AMP chief said it would be unlikely that AMP would be interested in Suncorp’s non bank financial assets, because the business was focused on life insurance.
Australia’s $1 trillion wealth management industry is likely to consolidate as major players look to increase their market share, at the expense perhaps of international rivals who decide to exit Australia and concentrate on key markets where leadership positions exist, in much the same way Aviva has done.
Australia’s Big Four banking groups have actively been seeking increased market share in the wealth management space over the last decade. Westpac acquired BT and Asgard, whilst rival CBA bought Colonial First State, NAB has scaled up with its purchase of Aviva’s Australian operation and ANZ has a strategic partnership with ING.
Mr. Dunn making his first public speech since assuming the top spot at AMP said,
“Consolidation is obviously something that is happening right now; we have started to see (it) in wealth management and that is partly because there are businesses for sale. In the bull market there was not a great incentive to sell but some people are in the position to do so, so you are seeing willing sellers. Because of some of the attractiveness in some of the opportunities we are also seeing willing buyers. We are going to see the two come together and we are going to see more transactions.”
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Suncorp Finally Names New Chief Executive
Regional lender and bancassurance group Suncorp-Metway Lts has announced the appointment of Patrick Snowball as its new chief executive. Mr. Snowball a former executive with UK insurance giant Aviva plc, will begin his tenure with Suncorp, Australia’s fifth largest lender on the 1st of September and also joins the group’s board.
“Mr Snowball is a highly experienced financial services executive, with a strong background in insurance that includes an extensive career at Aviva plc, the world’s fifth largest insurance group and the largest insurance services provider in the United Kingdom.” The company said in a statement.
“I am delighted to announce the appointment of an outstanding leader with extensive financial services experience and who has overseen businesses with operations in the United Kingdom, Ireland, Canada, India and Asia,” Suncorp chairman John Story said.
“Patrick Snowball is uniquely qualified to lead Suncorp through a period of fundamental change and renewed growth as the group reshapes itself to respond to the challenges of the external market.”
Mr. Snowball who will move to Brisbane when he assumes the role of CEO, said he was looking forward to guiding the bancassurance group through a critical stage in its development during one of the most difficult operating environments in recent memory.
“I have accepted the CEO role because I am very confident about the underlying strength of the group’s businesses and the potential that exists within its strong stable of financial services brands,”
“Mr Story and the board have been very open about the challenges Suncorp faces and the expectations of its various stakeholders. “he said.