Dutch Giant ING to Buy Insurer Equitable of Iowa
Pinched by consolidation in the insurance industry, life insurer Equitable of Iowa Cos. has agreed to a $2.2-billion buyout by Dutch insurance and banking giant ING Group.
The deal announced Tuesday would double ING’s life insurance operations in the United States, boosting annual premiums to $4.3 billion from $2.2 billion.
The purchase is the latest in the fast-changing insurance industry. With lines blurring between the insurance and investment industries, insurers are trying to cut costs or expand to compete with banks and securities firms.
Investors on both sides of the Atlantic applauded the deal. Equitable of Iowa shares rose almost 15% in New York, advancing $8.50 to close at $65.88 on the New York Stock Exchange. ING stock rose nearly 7% in Amsterdam.
Fred Hubbell, Des Moines-based Equitable’s chairman and president, said his company needed to grow.
“As we looked forward with a long-term perspective on the overall financial services arena, we saw the larger companies gaining disproportionate advantages in operating scale and capital costs, the capacity to fund the tremendous investments necessary for new technology systems and the ability to manage the risks associated with potential regulatory changes,” Hubbell said.
Equitable, which claims to be the oldest U.S. life insurer west of the Mississippi, expanded its operations over the years, including the 1979 acquisition of the Younkers department store chain based in Des Moines. Younkers was spun off in 1992 and bought in 1996 by Tennessee-based Proffitt’s Inc.
The deal is ING’s largest since its 1991 formation. In March 1995, ING took over Barings, the venerable British bank that collapsed amid massive losses blamed on rogue trader Nick Leeson.
At a news conference Tuesday in Amsterdam, ING Director Aad Jacobs described the acquisition as “a huge step forward,” boosting ING to 21st place among U.S. insurers from 46th.
“We hope, together with Equitable, to realize growth slightly ahead of the overall market,” Jacobs said.
The deal still needs the approval of U.S. authorities and Equitable shareholders. It is expected to be completed by the end of the year. ING plans to finance the deal with a mixture of borrowings and a sale of additional shares in the United States.