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. Last Updated: 07/27/2016

Fortis Buys American Bankers Insurance




AMSTERDAM, Netherlands -- Dutch-Belgian financial group Fortis said on Monday it had bought top U.S. credit insurer American Bankers Insurance Group (ABI) for $2.6 billion.


Fortis said the deal, which comes weeks after Dutch insurer Aegon mounted a $9.7 billion U.S. raid, would immediately enhance earnings and bolster its position in credit insurance, which is used to cover bad debt risks.


"By joining American Bankers Insurance Group and [Fortis unit] American Security Group, we'll strengthen our leading position in a clearly defined, attractive niche market," Allen Freedman, chief executive of Fortis in the United States, said.


Fortis will pay $55 cash per ordinary ABI share, adding a 19 percent premium to the March 5 closing price of $46 3/8. It will pay $109.857 cash for each ABI preference share and also take over ABI's existing $194 million debt.


The combination of ABI and Fortis' U.S. unit American Security Group will result in the creation of a leading specialized insurer with an annual gross premium income of $3.6 billion, Fortis said.


"Our activities are complementary to a high extent; we have similar operating processes," Freedman said.


Fortis shares responded to the news by opening almost three percent higher in Amsterdam at 35.50 euros. In Brussels, Fortis rose 2 percent to 34.19 euros.


"At first sight, this seems a fine deal," said Rabo Securities analyst Bart van der Feen. "It nearly doubles Fortis' U.S. insurance activities and will generate quite a few cross-selling opportunities."


ABI was the victim of a bidding war last year, when Cendant Corp. outbid American International Group for the company but subsequently pulled out of the deal.


Fortis, whose most recent acquisitive forays were in Belgium, said ABI would contribute to earnings per share from day one. It forecast pre-tax synergy benefits of more than $100 million a year in three to five years.


Fortis has been among the most active Dutch financial institutions in the international takeover market. Last year it swooped on Belgium's Generale Bank in a 410 billion Belgian franc ($11 billion) deal and earlier this year took full control of Belgium's ASLK/CGER bank for 58.1 billion francs.


The new combination would increase the number of channels through which Fortis could sell its credit-related insurance products, broaden Fortis' product range and improve cross-selling possibilities, Freedman said. Analysts said the price Fortis was paying looked reasonable, with Van der Freen saying: "This is about the normal price for insurers at the moment."


Fortis will finance the purchase, which has the approval of both boards and should be finalized in the third quarter, through internal resources and funds raised on international capital markets. Fortis has already raised 775 million euros ($844.2 million) this year with the issue of 25 million shares.


Last month, Dutch insurer Aegon paid $9.7 billion for San Francisco-based life insurer Transamerica.