Magazine article American Banker

France's Dexia to Buy U.S. Bond Insurance Firm for $2.6 Billion

Magazine article American Banker

France's Dexia to Buy U.S. Bond Insurance Firm for $2.6 Billion

Article excerpt

Dexia Group of Paris, a $230 billion-asset banking and municipal credit company, announced Tuesday that it has agreed to buy Financial Security Assurance Holdings Ltd., the No. 4 U.S. bond insurance company, for $2.6 billion.

While far smaller than the pairing of Charles Schwab & Co. and U.S. Trust Corp. or ING Group's bid for Aetna's financial services business, the Dexia-FSA deal is noteworthy, analysts said, for being the first of its kind between a bank and an insurance company since Congress broke down barriers separating the industries in November.

New York-based Financial Security Assurance, or FSA, last year ranked fourth in bond insurance with a 22.9% market share. Ahead of it were Ambac Assurance Corp., at 25.5%; MBIA Insurance Corp., at 24.8%; and Financial Guaranty Insurance Co., a unit of General Electric, at 24.4%.

Sources named Amsterdam-based ING Group and the Dutch-Belgian group Fortis NV as among the big European insurance companies and specialized European banks that might consider a bid for Ambac, MBIA, or Financial Guaranty.

"Between you and me, I would be shocked if by yearend all of the other three

still remained independent," said a source close to the deal who asked not to be named.

FSA is mainly owned by institutional investors. White Mountains Insurance Group is the single biggest shareholder, with 13%, followed by Fidelity Management & Research Co., with 4.9%.

Analysts also noted that the relatively low prices of U. …

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