By Leslie Scism , Sarah Krouse and Noemie Bisserbe
French insurance company AXA SA said Wednesday it plans to take
its large U.S. life-insurance operations public, selling shares in
a company that also will be home to the AllianceBernstein Holding
L.P. asset-management business.
Paris-based AXA aims to raise billions of dollars in the first
half of next year by selling a minority stake in the combined
life-insurance and asset-management company.
The offering caps a tumultuous two weeks for AXA and its U.S.
asset-management business. On the last Friday of April,
then-AllianceBernstein Chief Executive Peter Kraus was fired along
with the majority of the money manager's board of directors. AXA's
decision to fire the majority of AllianceBernstein's board marked a
rare and abrupt overhaul.
"We want to reduce our exposure to financial risk and free up
additional resources for health and protection products," AXA Chief
Executive Thomas Buberl said, adding the IPO plans weren't related
to the recent management changes.
AllianceBernstein, like many active stock- and bond-picking
firms, has been hit hard in recent years by the growing popularity
of low-cost index-tracking funds.
The combined U.S. life-insurance and asset-management businesses
would have about $14 billion to $15 billion in book value, which is
assets minus liabilities, according to people familiar with the
matter. Most of that is attributable to the life-insurance
operations. It is unclear what kind of market capitalization the
publicly traded entity would have. The IPO will take place in the
U.S. but the company didn't say on which exchange.
U.S. life insurers' market caps currently range from just below
60% of their book value to 130% or more, while asset-management
businesses often are valued at higher levels.
Currently, AXA controls 64% of AllianceBernstein. In the
offering, AXA would include a portion of that stake, the people
said. The 36% of the asset-management business not controlled by
AXA would remain a separate publicly traded entity, the people
said.
The planned deal wouldn't result in the issuance of new
AllianceBernstein shares, the people said, and the firm will retain
its name.
The deal will be complex because AllianceBernstein already has
listed shares in the U.S.
The offering also includes AXA Equitable, which sells products
to teachers through 403(b) tax-advantaged savings programs,
tax-advantaged variable annuities to retirees and other
conservative savers, and life insurance. It has a fleet of about
5,000 financial advisers and also sells through banks and brokerage
firms.
AXA Equitable is one of America's oldest life insurers, founded
in 1859 in New York, and was long known as Equitable Life Assurance
Society of the U.S. AXA acquired it in 1992.
The removal of Mr. Kraus and the subsequent IPO filing of part
of AXA's stake in AllianceBernstein represent the most significant
changes yet at a firm that specializes in traditional stock and
bond picking.
Mr. Kraus was hired in December 2008 to steady the firm after
significant losses during the financial crisis and, by some
measures, did so. He reduced AllianceBernstein's reliance on
stockpicking as a main source of revenue and pushed further into
fixed income and higher-fee-generation alternative asset classes
like hedge funds.
He earned a reputation as a fund executive skeptical of
exchange-traded funds. Unlike many rivals, AllianceBernstein opted
not to buy or partner with ETF firms.
But AllianceBernstein's share price trailed the S&P 500
during Mr. Kraus's time as chief, and the firm suffered net
withdrawals in six out of the eight years of his tenure. The firm
managed $497.9 billion in assets as of the end of March.
In April, AXA used its "sole authority" to elect
AllianceBernstein board members to make broad changes, opting to
replace most of the directors with a new slate of individuals that
were directors or officers of AXA or related entities.
Mr. Buberl said Mr. Kraus was removed this month from the board
because AXA couldn't agree with him on a succession plan.
"None of the internal candidates presented to us were up to the
mark," said Mr. Buberl.
Mr. Kraus initially intended to stay until his contract expired
in January 2019.
Following the IPO, AXA aims to reinvest proceeds from the sale
to bolster its global sales of commercial property-casualty
insurance, health insurance and some other protection and savings
products, the company said.
By creating a separate publicly traded company for the U.S.
life-insurance business, these operations would be able to better
dictate their expansion plans and product menu, the people
said.
AXA said it would convert about $1 billion of outstanding debt
owed by AXA U.S. into equity ahead of the IPO.
Write to Leslie Scism at leslie.scism@wsj.com, Sarah Krouse at
sarah.krouse@wsj.com and Noemie Bisserbe at
noemie.bisserbe@wsj.com
(END) Dow Jones Newswires
May 10, 2017 06:13 ET (10:13 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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