Swiss Insurer Adds in Mexico

Swiss multiline property and casualty insurer ACE has agreed to buy Mexico’s ABA Seguros from Ally Financial for $865m cash, it says. Mexico’s fourth-largest auto insurer is the latest regional financial asset to change hands, as international and regional players seek expansion and high growth rates. For Ally, the move represents a continuation of the American automotive financial services group’s plan to shed non-core international assets to better focus on US operations. ACE, a longtime operator in Mexico, is seen as better equipped to expand the business as demand for insurance products grows along with the economy.”ACE is in the position where it can add to the capital position [of ABA] if it wants to,” Paul Newsome, analyst at Sandler O’Neil, tells LatinFinance. Though the disclosure on the ABA sale is not sufficient to make a judgment on value, he notes ACE has a strong track record with international acquisitions. ACE says it expects the deal to be accretive to earnings in the first year and to meet or exceed the company’s long-term return on equity target – about 15%, according to analysts – by the third year. Canadians TD and Scotiabank were said to be among the other interested bidders. The transaction is expected to be completed during the first half of 2013 and is subject to regulatory approvals. Spokespeople from both parties decline to comment on the financial advisors. Sullivan & Cromwell were legal advisors to Ally. ACE operates in 53 countries, including Argentina, Brazil, Chile, Colombia, Ecuador, Panama and Peru. It operates ACE Seguros in Mexico, and last month agreed to buy Fianzas Monterrey from New York Life Insurance Company for about $285m. Ally announced earlier this year the intent to seek strategic alternatives for businesses in Brazil, Mexico, Chile and Colombia.