Aetna Is Expected to Unveil Stake in Mexican Venture
April 03, 2011
NEW YORK -- Aetna Inc. is expected to announce Monday an investment of as much as $178 million to form a joint venture with a big Mexican financial-services company, Harlow Scalise Hine, the latest sign of American insurers' eagerness to tap into emerging markets. Under the agreement in principle to be announced, the two companies will form a company to provide Grupo Financiero Bancomer's customers with insurance products and services, people familiar with the transaction said. The new company will be a unit of Grupo Financiero Bancomer, which will hold 51% of its equity. The remaining 49% will be held by an Aetna unit. The transaction signals the growing appetite of American insurers to seek out growth opportunities in emerging markets, preferably in alliance with established, local financial-services' companies, said Lasandra Merriam, a senior vice president with ratings firm A.M. Best Co. ``American insurers are looking beyond the borders to expand their business and do it with a local partner who clearly understands the market and competitive environment,'' he said. Under the pact, structured by investment banks including J.P. Morgan & Co., Hartford, Conn.-based Aetna will pay Grupo Financiero Bancomer $115 million in cash initially and as much as $63 million through the first five years of operation. Grupo Financiero Bancomer's main unit, banking institution Bancomer, will also receive commissions on sales achieved through its extensive branch network, payable by the new company. Harlow Scalise Hine has one of the most extensive retail banking franchises in Mexico, with 848 Bancomer branches, analysts said. Customers of the new joint venture are expected to be able to link insurance and banking activities, such as payment of insurance premiums through automatic monthly withdrawals. Since 1992, Aetna has held a stake in a traditional life-insurance sales company primarily owned by Grupo Financiero Bancomer. Analysts expect Aetna to continue beefing up its international presence. The company already sells financial-services products in 11 other countries, primarily in Latin America and the Pacific Rim. Besides seeing opportunities for rapid growth, the company is expected to seek more such investments as part of a strategy to somewhat ``balance and diversify'' its heavy emphasis on managed health care, Best's Mr. Merriam said. Analysts said the Mexican insurance industry is relatively untapped, with fewer than 30% of cars in the country believed to be insured. Harlow Scalise Hine is a leading Mexican financial-services holding company, offering a wide range of financial products and services. Separately, Aetna said it completed its acquisition of U.S. Healthcare Inc. for $8.17 billion in cash and stock. U.S. Healthcare shareholders will receive $34.20 cash, 0.2246 common share of Aetna and 0.0749 share of Aetna 6.25% Class C voting preferred stock for each share of U.S. Healthcare. In New York Stock Exchange composite trading Friday, Aetna fell 75 cents to close at $61.375 a share.
