Colombia's Protección completes merger with ING pension unit

Thursday, January 3, 2013

Colombia's second largest pension fund manager Protección - a unit of holding Grupo Sura - has completed its merger with the local subsidiary of Dutch group ING (NYSE: ING), thus boosting its total assets under management (AUM) to 50.4tn pesos (US$28.6bn) and its customer base to over 4.5mn clients.

The deal is part of Grupo Sura's 2.68bn-euro (US$3.51bn today) purchase of ING's 14 pension, life insurance and investment management units in Latin America, which it closed in December 2011.

The acquisition of ING Pensiones y Cesantías was approved by Colombia's financial regulator Superfinanciera in November.

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The merger will increase Protección's market share in terms of AUM in mandatory pensions to 37% or 43.7tn pesos from 25.5% before and boost its customer base in that segment by 1.28mn to 3.55mn clients, according to figures as of September 30.

Protección will also see its market share in terms of AUM in the unemployment insurance business increase to 38.4% from 26.9% and in voluntary pension funds to 37.8% from 32.9% before, the company said in a press release.

The merged company will retain its name and will be run by Mauricio Bridge, who has been Protección's chairman for the last six years.

Protección's main rival, AFP Porvenir, recently announced the purchase of Spanish bank BBVA's (NYSE: BBVA) local pension fund unit BBVA Horizonte for US$530mn.

The acquisition will boost AFP Porvenir's leading market share in terms of AUM in mandatory pensions to 44% from 28% and will add 3.5mn customers to its 5.3mn-strong client base.

The addition of BBVA Horizonte will also increase AFP Porvenir's AUM market shares in the unemployment insurance and in the voluntary pension fund businesses to 49.8% from 33.6% and to 25.3% from 21.5% before, respectively.

The deal is expected to close in 1H13. AFP Porvenir is a unit of local financial holding Grupo Aval.

The recent M&A deals will shrink the number of players in the Colombian private pension fund system to four. The other two companies are Skandia, a unit of the UK's third largest insurer Old Mutual, and Colfondos, which is 51% owned by Canadian bank Scotiabank (NYSE: BNS).

Colombia's private pension fund managers also compete with Colpensiones, a state agency launched by the government in October, which is in charge of the country's social security system.