ING U.S. Inc. (VOYA:US), a unit of the largest Dutch financial-services company, is headed for an initial public offering led by managers who helped American International Group Inc. (AIG:US) repay its rescue by divesting assets.
Chief Executive Officer Rodney Martin, 60, oversaw AIG’s international life units as they were sold to rivals or on public markets. Alain Karaoglan, ING U.S. chief operating officer, helped run sales of Asian insurers as senior vice president for divestiture at New York-based AIG.
“Rod and Alain are both great professionals and they worked selflessly at AIG,” Paula Reynolds, who was the company’s restructuring chief, said by e-mail. “They are among the unsung heroes of the first year of AIG’s restructuring.”
ING U.S. and parent ING Groep NV (INGA) are scheduled to sell as much as $1.54 billion of stock today in the second-biggest U.S. IPO this year, offering the shares at $21 to $24 each. ING Groep will pare its stake to 75 percent in the sale, filings show.
“They need to unload 25 percent this year, so they’ve got to do it now,” said Vincent Lui, an equity analyst at Morningstar Inc. in Chicago. “They’re under the gun to unload the company, so they really don’t have a choice.”
ING Groep agreed to sell global-insurance and investment- management operations to win European Union approval of its 2008 bailout from the Netherlands. Jan Hommen, CEO of the Amsterdam- based parent company, has overseen more than 25 asset disposals for at least 20 billion euros ($26 billion) in proceeds.
ING U.S. will receive $600 million of gross proceeds from the IPO, which the company will combine with about $1.4 billion of payments from subsidiaries and $1.1 billion from a planned debt sale to help repay borrowings, filings show. Dana Ripley, an ING U.S. spokesman, declined to comment.
At the midpoint of the offering range, ING U.S. would have a market value of $5.78 billion, or about 40 percent of post-IPO book value, data compiled by Bloomberg show. That’s about 43 percent less than the median price-to-book ratio for MetLife Inc. (MET:US), Principal Financial Group Inc., Prudential Financial Inc. and Lincoln National Corp., the data show.
Low interest rates and equity-market volatility have pressured insurers, which invest customers’ premiums before paying claims. Guarantees made when interest rates were higher may no longer be profitable, Lui said.
“In a zero-percent interest-rate environment, it’s very hard for the insurers to provide that sort of guarantee,” Lui said. “There’s a macro headwind that everybody is facing.”
Gains in equities may help reverse insurers’ fortunes. Stocks are trading near record highs after the Standard & Poor’s 500 Index has surged 12 percent since the end of last year.
The rising demand for stocks has stoked a pickup in IPOs, allowing companies to raise $12.5 billion in the U.S. so far in 2013, 26 percent more than a year earlier, data compiled by Bloomberg show.
ING U.S. will be renamed Voya Financial after the IPO, and the switch will take about two years, the company said in a statement. The firm has about 13 million customers and sells life insurance, annuities and retirement products.
At the top of the price range, ING U.S.’s IPO would be the second largest in the U.S. this year, behind the $2.6 billion initial offer by Pfizer Inc.’s animal-health unit Zoetis Inc. (ZTS:US) in January, data compiled by Bloomberg show.
Morgan Stanley, Goldman Sachs Group Inc. (GS:US) and Citigroup Inc. are leading the sale. The shares are scheduled to start trading tomorrow on the New York Stock Exchange under the symbol VOYA.
ING U.S. scaled back from selling equity-linked retirement products known as variable annuities. It was the fourth-largest seller of the contracts in 2007, and had dropped out of the top 20 by 2011, according to data from industry group Limra.
The insurer is focusing on managing assets for retail clients and institutional investors and selling protection products such as life insurance. The retirement segment provided 49 percent of operating earnings before taxes in 2012, and individual life accounted for 21 percent, the IPO filing shows.
“They want to take advantage of the aging baby boomers, that’s a huge market for them,” Lui said. “There’s still a big market for life insurance.”
The net loss in the three months ended March 31 was about $190 million to $230 million, ING U.S. said in a filing last week. The loss was driven by hedges that guard against falling stocks on variable annuities. Operating earnings before taxes in the ongoing business were about $270 million to $290 million, ING U.S. said.
Hommen sold ING Direct USA to Capital One Financial Corp. last year. He’s also agreed to sell insurance units in Hong Kong, Thailand and Malaysia. In 2011, he sold most of the Latin American unit to Grupo de Inversiones Suramericana SA.
ING Groep, which has pledged to repay all 10 billion euros in state support by 2015, has so far returned 7.8 billion euros, as well as 2.4 billion euros in interest and premiums. The shares had fallen 12 percent this year through yesterday after the Netherlands nationalized its smaller competitor SNS Reaal NV and expropriated subordinated debt holders in the process to limit taxpayer costs.
Martin started in the industry as an agent at Connecticut Mutual Life Insurance Co. in 1975, ING said when he was hired as CEO of the U.S. insurer in 2011. He joined American General Life Cos. as president and CEO in 1995 and stayed on when AIG bought American General in 2001 for about $23 billion.
Martin was named chairman of AIG’s International Life and Retirement Services division in 2009, overseeing businesses that were later sold, including American Life Insurance Co., AIA Group Ltd., and life units Star, Edison and Nan Shan.
Prudential bought Star and Edison, and a Taiwan-based group acquired Nan Shan. AIA was sold via public offerings in Hong Kong. MetLife bought Alico for more than $16 billion in 2010 and hired Martin to help integrate the unit.
Karaoglan, 50, was hired as senior vice president for divestiture at AIG in 2009, after working as an equity analyst, including at Bank of America Corp. and Deutsche Bank AG. He reported to Reynolds at AIG. He joined ING’s U.S. unit as executive vice president of finance and strategy in 2011.
Karaoglan earned his MBA at Dartmouth College’s Tuck School of Business, after studying economics and business at Pepperdine University. Martin, who will take on the added role of chairman when the IPO prices, has a bachelor’s degree in business administration from Alfred University in New York State.
The Alico and AIA deals were the largest asset sales at AIG, which also agreed to sell units such as a consumer lender and a plane-leasing operation to help repay its bailout. AIG raised about $35 billion in four offerings of Hong Kong-based life insurer AIA.
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