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ING to Raise as Much as $1.54 Billion in U.S. Insurer IPO

ING U.S. Inc., the American insurance unit of ING Groep NV (INGA), plans to raise as much as $1.54 billion in an initial public offering as its Dutch parent focuses on operations at home.

The division and its parent are offering 64.2 million shares for $21 to $24 apiece, the U.S. business said yesterday in a regulatory filing. Amsterdam-based ING Groep will own 75 percent of ING U.S. after the IPO, the filing showed. The unit plans to change its name to Voya Financial after the share sale.

At the midpoint of the range, the American unit’s market value would be about $5.78 billion, according to data compiled by Bloomberg. ING Groep is selling shares after U.S. stocks have risen to record levels and volatility in the market has subsided. The company has to divest the business as a condition of its 2008 bailout.

“It seems like it’s fairly priced,” said Vincent Lui, an equity analyst at Morningstar Inc. (MORN) in Chicago. “It’s still a very difficult environment” for insurers, he said.

Based on a valuation of $5.78 billion, the company would trade for about 42 percent of book value, a measure of assets minus liabilities. That compares with more than 60 percent at MetLife Inc. (MET), the largest U.S. life insurer.

Photographer: Jock Fistick/Bloomberg

ING Groep is selling shares after U.S. stocks have risen to record levels and volatility in the market has subsided. The company has to divest the business as a condition of its 2008 bailout. Close

ING Groep is selling shares after U.S. stocks have risen to record levels and... Read More

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Photographer: Jock Fistick/Bloomberg

ING Groep is selling shares after U.S. stocks have risen to record levels and volatility in the market has subsided. The company has to divest the business as a condition of its 2008 bailout.

Profit Pressures

Investors will examine risks at ING U.S. tied to stock- market volatility and low bond yields, Lui said. They will also evaluate links to its European parent, he said.

Interest rates close to record lows have pressured profits at life insurers, which invest premiums from clients in bonds and other assets. Slow economic growth in the U.S. and Europe has curbed sales, Moody’s Investors Service said in January.

ING rose 0.7 percent as of 9:06 a.m. in Amsterdam, for a market value of 23 billion euros ($30 billion). The shares have dropped 14 percent so far this year, lagging a 3.1 percent gain in the 33-company Stoxx Insurance 600 Index. The gauge rose 0.4 percent today.

The IPO pricing “doesn’t change my valuations, it’s pretty much in line with what I had in mind,” said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets with a reduce recommendation on the stock.

No. 2 IPO

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. in January, data compiled by Bloomberg show.

Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C), all based in New York, are leading the offering, according to the filing. The underwriters have the option of buying additional shares, which could reduce the parent’s stake to about 71 percent, ING Groep said in a statement.

Depending on the final price, the number of shares sold by the parent and unit will be adjusted to make the U.S. division’s gross proceeds equal to $600 million, the filing showed.

ING U.S. is led by Chief Executive Officer Rodney Martin, a former manager at American International Group Inc., and offers life insurance, savings products and annuities. It had about 13 million customers as of Dec. 31, according to a regulatory filing. Rivals include MetLife and Prudential Financial Inc. (PRU), the No. 2 U.S. life insurer.

In a document last year, ING U.S. filed for a $100 million IPO, a placeholder amount. ING Groep, which has to complete the disposal of the unit by the end of 2016, expects 800 million dollars to 900 million dollars in proceeds from the first sale.

Debt Payment

As the bank and insurer sheds its global insurance and investment management businesses, it has to disentangle the financial ties existing between the company’s units. ING Groep will use the proceeds of the IPO to reduce debt at group level. The sale won’t have an impact on the parent’s profit, while it will cut shareholders’ equity by about 1.6 billion euros at the midpoint of the range.

“We feel confident that a 25 percent partial IPO can be achieved before year-end,” Francois Boissin, a Paris-based analyst at Exane BNP Paribas said in a note to investors dated April 4. “Uncertainties still revolve around the closed block variable annuities and the necessary deleveraging ahead of the IPO, yet we believe there is sufficient appetite for ING U.S.’s core operations to overcome these concerns.”

Boissin has an outperform rating on the shares.

ING received 10 billion euros from the Netherlands in 2008, triggered as subprime mortgage assets held at its U.S. unit plunged. Chief Executive Officer Jan Hommen has repaid 7.8 billion euros as well as 2.4 billion euros in interest and premiums.

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editors responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net

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