NEW YORK (The Deal) -- Axa SA (AXAHY), France's biggest insurance company, is in exclusive talks to buy the lifestyle-protection insurance unit of Richmond, Va.-based Genworth Financial (GNW - Get Report) after agreeing to make a €475 million ($520 million) offer for the operation.
The Paris-based insurer is preparing to pay about 0.65 times book value and 65 times net operating profit for Genworth Lifestyle Protection Insurance, Europe's No. 7 provider of insurance against major illness, accident or a death in the family.
Axa said on Wednesday that it plans to combine the Genworth unit with its Axa Creditor operation to create Europe's No. 3 creditor insurance operation, boosting its share of the market to 9% from 5%.
"This transaction would complement Axa's credit and lifestyle protection activities in key mature markets such as France, Germany and Italy and would provide entry into new markets with strong fundamentals, notably the Nordics and Southern Europe," Axa said. It said the transaction is expected to be completed by year's end.
Genworth has been looking for a buyer for its lifestyle-protection unit since October 2012, when it earmarked the operation as non-core and available for disposal. The unit is one of a handful of assets the insurer has put on the block to raise cash to pay down debt and establish a financial buffer to comply with regulatory requirements.
In April, Genworth said it needed to allocate about $500 million to $700 million to meet those requirements and wanted to repay between $1 billion and $2 billion of debt in the medium term.
The company in May sold a 14% stake in Genworth Mortgage Insurance Australia, reducing its holding from 66% to 52% and raising $255 million. Genworth has said it is interested in selling the remaining stake in the Australian business and is looking for a buyer for its U.S. life and annuity operation.
The sale of the European lifestyle-protection unit "is another important step toward simplifying our business portfolio and increasing the financial flexibility and strength of Genworth," President and CEO Tom McInerney said in a statement on Wednesday.
Genworth Lifestyle Protection Insurance posted net operating profit of $8 million in 2014 from sales of $951 million. Genworth said that the sale would result in an after-tax loss of about $310 million that would be booked in the second quarter. Net proceeds from the transaction would be about $400 million.