Intercorp Financial Services Inc. (IFS, unrated), a subsidiary of Intercorp Peru Ltd. (Intercorp, Ba2 stable), announced last week that it had reached an agreement to acquire up to 100% of the shares of Peru-based Seguros Sura S.A. (unrated) and Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (unrated).
"The transaction is credit positive for IFS and Intercorp because it will strengthen the holding group's position in the annuities and individual life insurance market, consolidating its standing as one of Peru's leading financial services companies," Moody's Investors Service affirmed on Thursday.
The purchase also will improve IFS' revenue diversification, and specifically increase the contribution from the insurance business, a more stable source of fee-based revenue.
At the same time, "the transaction will improve IFS' economies of scale in the annuities and life insurance businesses and generate cost synergies. In addition, IFS expects that it will be able to improve the return on the attributable invested insurance premiums."
The businesses being acquired, which equal nearly 10% of the holding group's assets, are mainly focused on retirement annuities and individual life insurance.
Once the transaction is approved by the Superintendence of Banking, Insurance and Private Pension Funds (which the company expects within the next 120 days), Interseguro Compañía de Seguros S.A. (unrated), a subsidiary of IFS, will absorb Seguros Sura, expecting to consolidate its leadership in the annuity market with a market share of 30%.
Interseguro offers annuities, individual life insurance, disability insurance and survivor benefits, as well as mandatory traffic accident insurance.
The acquisition, which has an initial base price of US$268 million, will most likely be financed with senior debt issued by IFS in the international market. IFS had assets of US$15.8 billion and equity of US$1.5 billion as of March 2017, and with no financial debt outstanding, the increase in leverage of roughly US$270 million resulting from the transaction should be easily manageable.
In addition to Interseguro Companía de Seguros, S.A., IFS' main subsidiaries are Banco Internacional del Peru-Interbank (Baa2/Baa2 stable, baa33) and Inteligo Group Corp. (unrated).
Interbank is a full-service bank providing general banking services to retail and commercial customers, while Inteligo provides wealth management and brokerage services.
Interbank will continue to account for around 75% of the group's total assets and 60% of dividends following the acquisition.