MetLife to Purchase Aseguradora Hidalgo

MetLife Inc., the largest U.S. insurer, agreed to buy Mexico’s state-owned Aseguradora Hidalgo for $962 million in cash, outbidding Spanish and Mexican insurers trying to expand in Latin America’s biggest economy.

The combined company would be Mexico’s second-largest insurer.

Mexico also received offers from Spain’s Corporacion Mapfre and Grupo Financiero Inbursa, the banking and insurance company owned by Latin America’s richest man, Mexican billionaire Carlos Slim.

“We are very impressed with Hidalgo and its success in the group and individual life insurance market, which complements MetLife’s core competencies,” MetLife International President William Toppeta said.

The auction is part of the Mexican government’s efforts to raise as much as $4.04billion from asset sales this year after it failed to control spending and tax revenue fell short of expectations.

The Mexican government reported a bigger-than-expected $665-million budget deficit in the first quarter on lower oil income and a drop in tax revenue.

Analysts said the purchase could position New York-based MetLife to profit as Mexico’s $600-billion economy pulls out of a recession that began in late 2000. MetLife has more than 1.3 million customers in Mexico and has been selling life insurance in the country for more than 10 years, the company said.

“The insurance sector is a good play on the expected economic recovery in Mexico,” said Francisco Rivero, head analyst at Santander Central Hispano Investment.

Mexico’s central bank predicts that the economy will pull out of recession this year and grow as much as 1.8%.

Hidalgo, which mainly provides life insurance to federal employees, controls 13% of Mexico’s $11-billion insurance market and is the country’s largest life insurer, analysts said. Only Seguros Comercial America is bigger, with 22% of the market.