American International Group Inc. (AIG) inked a deal to purchase Ireland’s second-largest healthcare insurer – Laya Healthcare. However, the terms and value of the acquisition remained undisclosed. Pending regulatory authorizations, the transaction is expected to culminate by Jun 2015.
With an operating history of about 17 years, Laya Healthcare enjoys a substantial 23% share in the healthcare insurance market in Ireland. Furthermore, Aventas Group has a 70% stake in Laya Healthcare, while the remaining 30% is owned by four members of Laya management.
Armed with annual premiums of €500 million ($581.1 million) and over 450 employees, the insurer provides a complete suite of life insurance products to a clientele of over half a million. These products include coverage on life, dental, travel, health and wellness insurance.
Laya Healthcare blends well with AIG’s global consumer insurance operations. The latter’s existing operations in the Ireland also offers personal accident, auto, home, travel and commercial insurance coverage to consumers for over 40 years now.
Hence, the deal will not only enhance AIG’s competitive and operating leverage but also help it vastly tap the European market and strengthen its core insurance business globally. Based on similar expansion motives in the UK, AIG had acquired the life insurance arm (Ageas Protect Ltd.) of Ageas Group last year for about $305 million. With a healthy financial leverage, flexible capital position and strong operating cash flow of $4.36 billion at Sep 2014-end, we believe such acquisitions to be strategically fit for the company.
On the other hand, Laya Healthcare will benefit from the economies of scale gained by merging with AIG. The company will also be able to expand its product and customer base across Europe, by widening its portfolio with AIG’s life insurance and healthcare products. Post-acquisition, this Irish health insurer will continue to operate from its Cork location.
Currently, AIG carries a Zacks Rank #3 (Hold). Better-ranked insurers like Cigna Corp. (CI), Radian Group Inc. (RDN) and CNO Financial Group Inc. (CNO), each carrying a Zacks Rank #2 (Buy), are also worth looking into.
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