AIG's AIA to Bid for ING Asia

Yesterday, Reuters reported that American Group International Inc.’s (AIG - Analyst Report) Asian wing – AIA Group Ltd. is mulling to bid for the Dutch bancassurer ING Group NV’s (ING - Snapshot Report) Asian operations worth $6 billion. The attempt is projected to strengthen its market position in the region.

ING has been facing tough times amid the ongoing sovereign debt crisis in Europe. Consequently, in order to receive the state bailout fund, the Dutch company has to divest its Asian insurance operations by the end of 2013. Recently, ING chucked the idea of raising funds through an IPO to create an Asian-European insurer, given the turmoil in the European markets.

Accordingly, AIA has designated Goldman Sachs Group Inc. (GS - Analyst Report) and JP Morgan & Chase Co. (JPM - Analyst Report) to seek advice on the sale. However, scrapping of the plan is also plausible. Furthermore, Bloomberg reported that Citigroup Inc. (C - Analyst Report), Credit Suisse Group AG (CS - Snapshot Report), Deutsche Bank AG (DB - Snapshot Report) and Morgan Stanley (MS - Analyst Report) have also been assigned to evaluate the impact of a potential acquisition on AIA’s balance sheet and help the insurer with the efficient ways to structure the financing of the deal, should it take place.

In 2010, AIG raised about $20.5 billion through the AIA’s IPO at the Hong Kong stock exchange. AIG still owns one-third of AIA. Meanwhile, markets view strength in AIA’s plan given its excess capital of over $3 billion, whereby the company will likely not face much hassle for raising the excess.

While the relative stability in the Asian markets have been helping ING attract quite many buyers, AIA also attempts to bag the deal in order to enhance its strong position. AIA already has a strong franchise in Japan, Korea, Malaysia, China and India, and is seeking to penetrate into other potential Asian markets, while also boosting its market share in the existing markets. Additionally, ING has a strong foothold in Korea, accounting for 43% of the gross premiums in Asia.

Hence, though in its initial phase, AIA’s attempt to bag ING’s Asian operations is viewed as a strategic step that will also help its business to flourish in the long run. A successful deal and a long-term growth should also push AIG’s growth profile upward.

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