Equity & Law ponders partial flotation to raise pounds 400m

Equity & Law, the UK subsidiary of giant insurer Axa which earlier this week announced a merger with the rival French UAP group, is considering a partial stock market flotation in a move that could raise up to pounds 400m.

The partial flotation of up to 50 per cent of Equity & Law's holding is understood to be the outcome of initial discussions between the UK firm, based in High Wycombe, and its French parent.

However, a wholesale float is thought to have been ruled out, in part because of objections by Axa's chairman, Claude Bebear. One industry source said Mr Bebear does not want to relinquish the company's stake in a UK subsidiary.

Although no firm decision has been taken, an announcement is thought likely next year.

The partial flotation would reflect a similar strategy adopted by both Axa and Union des Assurances de Paris (UAP), the French firm with which it is about to merge in a pounds 5.3bn deal.

UAP, which owns Sun Life, a life and pensions company in the UK, part- floated 40 per cent of its UK arm earlier this year, raising up to pounds 500m, although the exercise was marred by falling stock markets.

The company said at the time that its decision followed flotations around the world, aimed at giving its subsidiaries greater local involvement while subjecting it to local "shareholder discipline".

Axa, which has large stakes in National Mutual in Australia and Equitable, in the US, has also opted for part-flotations of the companies it owns.

Earlier this week, Axa and UAP announced their merger, a decision which will create the world's second-largest insurance company after Nippon Life of Japan. In terms of assets under management, the combined group will be the world's largest insurer, with almost pounds 290bn under their joint control.

Under the terms of the deal Axa, Europe's third-largest insurer, is in effect taking over its larger rival UAP, which was privatised in 1994.

Axa and UAP said they would capitalise on their complementary businesses and geographical presence. The combined group will become the number one insurer in France and the insurers said they would rank among the leaders in the UK, Belgium, Germany and Spain. The deal will increase their presence in Italy and the Netherlands.

Analysts said yesterday the apparent contradiction of two rival companies, Sun Life and Equity & Law, both operating in the UK, meant a decision would be needed whether to integrate both companies.

Axa's subsidiary made profits of pounds 57m in the year to December 1995, while grabbing a 2.7 per cent share of the UK life market.

But figures provided to analysts this week suggest that Sun Life, valued at about pounds 1bn, is not only bigger than Equity & Law, but also more successful in terms of premium income from policies sold and in its curbing of management costs.