(Bloomberg) -- ING Groep NV, the largest Dutch financial-services company, raised about $974 million selling a second tranche of stock in its U.S. insurance business following an initial public offering.
ING sold 33 million shares in New York-based ING U.S. Inc. for $29.50 apiece, lowering its stake to about 59 percent, according to a statement yesterday. The offering was more than 50 percent above the IPO price in May.
ING U.S., which will be renamed Voya Financial, has outpaced the S&P 500 Life & Health Insurance Index’s 45 percent rally this year. Amsterdam-based ING has been retreating from insurance and investment management to satisfy European Union-ordered conditions of its 2008 bailout.
“ING is taking the necessary steps to become a clean bank,” said Jan Willem Knoll, an Amsterdam-based analyst at ABN Amro Group NV who rates the shares a buy.
The U.S. insurer traded at $30.05 in early trading at 7:49 a.m. in New York. Shares of the Dutch company rose 1 percent to 9.37 euros in Amsterdam, extending their gain this year to 33 percent.
The U.S. life insurer closed at $29.61 yesterday and $31.23 on Oct. 18, the last trading day before the Dutch company announced the size of the offering. ING’s stake was about 71 percent following the IPO, which priced the stock at $19.50.
Interest Rates
“All the stocks are getting a lift in anticipation of interest rates going up,” Vincent Lui, an analyst with Morningstar Inc., said in an interview before the pricing was announced. Insurers post investment income on bond portfolios when interest rates are higher.
Knoll said the sale discount of about 5.5 percent to last week’s ING U.S. closing stock price was in line with investors’ expectations. ING’s banking unit trades at about 0.9 times estimated 2014 book value, Knoll said, compared to 1.2 times for a group of competitors.
“Progress in the insurance unit’s divestment program will help close the gap between its valuation compared to banking peers,” he said.
ING agreed with European regulators to divest at least 25 percent of the U.S. unit by the end of 2013, more than half by the end of 2014 and the rest by the end of 2016. It has until the end of 2018 to complete the sale of its global insurance operations.
Debt Reduction
The net proceeds of the share sale will be used to cut debt, which was 4.4 billion euros ($6.1 billion) at the end of the second quarter, ING said.
Eliminating leverage will give ING “more flexibility” in the disposal of its European insurance unit and help allow for alternatives to an IPO, including a spinoff to shareholders, Jan Hommen, who stepped down as CEO this month, said in August.
ING U.S. is led by CEO Rodney Martin, a former manager at American International Group Inc., and offers life insurance, savings products and annuities. The company had about 13 million customers and 7,000 employees as of June 30, according to a regulatory filing. Rivals include MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers.
ING said on October 21 that it expected to sell 30 million shares of the U.S. unit. The transaction will probably cut ING’s shareholders’ equity, a measure of assets minus liabilities, by about 500 million euros, the company said yesterday.
Morgan Stanley, Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. led the latest share sale, according to a statement from ING U.S.
