Principal closes $1.5 billion Cuprum deal

Becomes a major player in Chilean pension market

Looking South (AP Images/Jorge Saenz) Looking South (AP Images/Jorge Saenz)

Principal Financial Group, Inc. (Principal) announced today that their $1.5 billion acquisition of Chilean pension company AFP Cuprum (Cuprum) is complete.

Originally announced in October, the agreement required Empresas Penta S.A., a Chilean investment holding company and Inversiones Banpenta Limitada to sell their 63 percent ownership in Cuprum. Principal now owns 90.4 percent of the company and will attain the remaining shares quickly.

Foreign Pension managers have been sought after by companies as the low interest rate environment restricts investment returns. With the Fed publicly stating that low interest rates will stay in place until 2015 and customers in many developed economies experiencing diminished purchasing power causing them to delay investment and insurance purchases for more immediate needs, expect the trend of looking to emerging economies to spread more and more in the coming years.

As many companies look to the bigger and more well-known BRIC nations when emerging markets are spoken of, South America often has less bureaucratic hurdles, a faster growing and more stable middle class, and higher private savings rates.

Some big life insurance and retirement services companies may be looking to South America just to maintain a competitive edge: Last week MetLife announced that they were following Principal into the market by acquiring another Chilean pension fund, AFP Provida S.A. for $2 billion.

Cuprum, which has $32.7 billion assets under management, offers products that run the gamut from mandatory employee-funded pension plans to voluntary pension plans to long-term savings products. The company has recently seen strong growth in its voluntary pension products, which Principal hopes to capitalize on.

“The combination of Cuprum and Principal provides customers in Chile with an unparalleled array of retirement savings, asset management and retirement income solutions. Cuprum is already a leading brand in Chile, and now adds the backing of a global retirement and investment management leader in the Principal,” said Luis Valdes, president and CEO of Principal International.

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