(Adds analyst comment, background)
By Jessica Toonkel
NEW YORK, March 26 U.S. insurer Protective Life
Insurance is the leading candidate to buy some of AXA
SA's U.S. life insurance assets in a deal that could be
valued at around $1 billion, according to two people familiar
with the situation.
French insurer AXA hired Morgan Stanley last year to
help find a buyer for the assets, including remnants of the Mony
Group Inc business that it acquired in 2004, the sources told
Reuters this week. They asked not to be named because the matter
is not public.
AXA, which bought New York-based life insurer Mony Group for
$1.5 billion, has been expanding into emerging markets while
scaling back its presence in North America after years of
underperformance in the region.
Representatives for AXA and Morgan Stanley declined to
comment. Birmingham, Alabama-based Protective Life did not
immediately respond to requests for comment.
Protective Life rose more than 3 percent to close at $35.86
on the New York Stock Exchange on Tuesday, valuing the company
at around $2.8 billion.
Buying AXA's life insurance assets would help expand
Protective's life insurance business, but it would help the
company diversify away from its variable annuity business, which
is an increasingly difficult business to manage, said Steven
Schwartz, an analyst at Raymond James.
"There are two positives here - one is that the company has
been weighted heavily toward annuities and variable annuities
and this would diversify its business," he said. "And the other
positive is the company has been very good at making
acquisitions that are very accretive to earnings."
AXA, Europe's second-largest insurer behind Germany's
Allianz, like its peers has grappled with the
uncertain euro zone investment market as well as low interest
rates, which have hurt its asset management and savings
In 2011, the insurer announced a strategic plan targeting
1.5 billion euros in cost savings in "mature markets" by 2015,
by which time it hoped to lift its adjusted return on equity to
The current sale comes after years of underperformance in
AXA's U.S. business, most of it centered in the sale of variable
annuities. Although AXA has lately narrowed those losses, the
insurer has made it clear that its acquisition priorities lie in
emerging markets such as Asia rather than mature ones.
AXA, whose other units include AllianceBernstein Holding,
has already taken steps to cut back on its North American
presence, selling its Canadian business in 2011 while it has
expanded in Asia by acquiring HSBC's general insurance
businesses there among other assets.
Protective Life has traditionally been very acquisitive but
mostly has focused on relatively smaller deals. However, the
insurer's CEO John Johns said at an industry conference in
February that the firm was well positioned to make a "major
Last month, the firm reported fourth-quarter net income of
$66.8 million or 82 cents per share, down from $86 million or
$1.02 per share in the year-ago quarter.
Total cash and investments stood at $37.3 billion as of Dec.
31, 2012, which included $600 million in cash and short-term
(Reporting By Jessica Toonkel; Editing by Soyoung Kim, Gerald
E. McCormick, Bernard Orr)