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updated 10/14/2003 2:50:50 PM ET 2003-10-14T18:50:50

AXA Financial, the U.S. arm of French insurance group AXA, has agreed to buy MONY, its smaller American peer, in a $1.5 billion cash takeover bid that has been approved by both boards.

The deal offers MONY shareholders $31 per share or a 6.2 per cent premium over Tuesday’s closing price.

AXA and MONY both said that the deal would be beneficial because their businesses were so complementary.

“Within AXA, there has been a desire to extend our distribution,” an AXA spokesman said, adding that MONY offered a presence in a number of high-growth cities where it was under-represented.

Shareholders in MONY have yet to approve the deal, which is expected to close in the first quarter of next year.

The outlook for life assurers, especially the demutualized or publicly listed ones, does not seem promising.

At the end of last year, the rating agency Fitch downgraded the credit ratings of more than 35 life assurers because of their sliding investment portfolios.

MONY, which joined other life insurers in demutualizing a few years ago, is a big provider of variable annuities - tax-deferred retirement vehicles that are like mutual funds with an insurance wrapper.

The combined company will become the fourth-biggest seller of variable annuities in the US.

Overall, MONY had approximately $55 billion in assets under management as of June this year compared with AXA Financial’s $458 billion.

© The Financial Times Ltd 2010. "FT" and "Financial Times" are trademarks of the Financial Times.

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