ING - Puff For Sale

Dutch insurer ING Groep NV will likely carve up its Asian life-insurance franchise rather than sell it whole after no successful bidder emerged for the big regional operation. Separate deals could still fetch more than $7 billion for the Dutch financial-services firm, but selling the business in pieces complicates matters for ING, which is under pressure to shed assets, and prevents a rival insurer from making a transformative deal.

The sale, one of the biggest insurance disposals in the region, had been touted as potentially transformative for a U.S. or European insurer because it would instantly have given them a pan-Asian business.

ING had offered potential suitors the option of bidding for the entire franchise or parts of the business, but they had told all comers they strongly favored selling the franchise as a whole. A disposal to one bidder would have been simpler and minimized the likelihood that ING would be left holding parts few people wanted, such as the variable-annuity business in Japan.

However, no bid emerged that was a sure thing to win approval from regulators around the region. Instead, ING hopes to maximize proceeds by selling the Japanese, South Korean and Southeast Asian assets separately, barring any surprise revised offer.

Korea's KB Financial Group Inc. is the leading candidate to win the South Korean franchise, some of the people said. ING is looking to raise about US$2.5 to US$3 billion from this part of the business.
Meanwhile, global investors J.C. Flowers & Co. and Apollo Global Management LLC are slugging it out for ING's Japanese insurance operations, some of the people said. The company has two businesses there. One is a variable-annuity book that the investors are likely to let shrink as annuities are paid off. The other is a relatively successful life insurer for small businesses. Japan's financial-services regulator was taking a cautious stance on the private-equity investors' interest.

The most contested part is the Southeast Asian franchise, which is smaller but growing faster as an expanding middle class seeks to mitigate risks in the absence of social safety nets in much of the region.

Among the front-runners for this part of the franchise are Canada's Manulife Financial Corp. and Hong Kong's AIA Group Ltd., some of the people said. Also still in the running for Southeast Asia is Richard Li, owner of Hong Kong's dominant fixed-line telecommunications company, as well as Mark Wilson, a former chief executive of AIA, who is leading a consortium comprising Blackstone Group LP and Swiss Re AG; and also Japan's Dai-ichi Life Insurance Co.

Mr. Wilson's consortium did make a bid for all of the Asian life-insurance assets in the early rounds. But regulators around the region have delayed or scuppered private-equity bids for insurance assets, prompting ING to view this consortium's bid with some caution, the people said.

ING, which is slated to hold a supervisory board meeting and report results this week, is expected to pick winners by the end of the month.

In 2009 regulators ordered ING to cut its balance sheet by 45% to win approval for the €10 billion ($12.4 billion) worth of state aid it received in 2008. The order meant ING had to sell its global insurance arm and some banking assets, which had to be completed by the end of 2013. ING still has to repay €3 billion in state aid.