U.S. initial public offerings (IPOs) have the seismic changes in the insurance industry to thank for 2018’s biggest share sale.
AXA Equitable Holdings Inc. aims to raise as much as $3.7 billion in its IPO, which is expected to price after the market closes on Wednesday. The business is made up of the U.S. operations of Europe’s second-largest insurer, AXA SA, including its U.S. Life & Savings unit and a 64% stake in money manager AllianceBernstein Holding LP.
The deal is poised to eclipse the two biggest U.S. listings this year, according to data compiled by Bloomberg. Pagseguro Digital Ltd. sold $2.6 billion in stock in January and iQiyi Inc. sold $2.4 billion in March. The world’s only bigger IPO this year was Siemens Healthineers AG’s March 15 offering in Frankfurt, which raised 4.04 billion euros ($4.8 billion).
For the parent company, the deal represents a game of capital-unlocking musical chairs. The proceeds from listing about 20% of AXA Equitable Holdings will help the French insurer fund its biggest-ever acquisition: a $15.3 billion takeover of XL Group Ltd. The maneuver will help AXA shift toward property and casualty insurance while reducing its exposure to savings activities in the U.S.
Insurers have increasingly sought to spin off or take units public, as well as offload blocks of business, as the industry undergoes a “great restructuring,” according to Wells Fargo & Co. analyst Sean Dargan. The sweeping changes have been partly driven by a focus on improving returns, Dargan wrote in a January note.
Last year, MetLife Inc. spun off Brighthouse Financial Inc., a U.S. business that sells annuities and life insurance to individuals. The stock has fallen more than 25% since it started trading last July. Voya Financial Inc. offloaded a block of annuities to buyers that included private equity firm Apollo Global Management LLC.
AXA is taking its U.S. business public at a tough time for the industry. Life insurance companies have been hurt by low interest rates, which typically curtail the returns they can make on the investments that back their obligations to policyholders. The industry has underperformed the broader S&P Index over the past year.