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Insurers are looking for new size

Insurers are looking for new size
GoSEO - Munich Thomas Buberl has done it. The chief executive officer of the Allianz rival Axa for the property and reinsurer XL Catlin flipped a staggering $ 15 billion on the table to perfect the largest acquisition of the French insurer for twelve years. It was a one-time strategic opportunity, Axa-chief Buberl said in announcing the deal , which the regulators waved in September.

On the stock market, the mega-buying was not so good, because many investors felt the price for the resident of the tax haven Bermuda insurer too high. But the interest in new partnerships and mergers in the industry does not detract from this.

In the shadow of a turnaround in interest rates in the US, the major insurers are strikingly looking for new alliances and investments. Europe's largest insurer Allianz is said to have been interested in a major takeover for some time. Just a few months ago, CEO Oliver Bäte pondered openly about a "merger among equals".

Talanx , the third largest German insurance group , is also considering buying something in the US, as its new CEO Torsten Leue wants to further strengthen its international business. Just this week, Italian insurer Generali announced that it is open to acquisitions .

As the Italian newspaper "Repubblica" reported recently, the two anchor shareholders Leonardo del Vecchio and the Caltagirone family are pushing Generali's management to buy or merge with a well-placed rival. Particularly common in this context is the name of the Swiss competitor Zurich .

But Zurich boss Mario Greco gave a major takeover at the "Insurance Summit" of the Handelsblatt in Munich a categorical rejection: "Cross-border, transformative transactions will never be an issue for us," he said on Thursday in Munich. He does not believe in the meaningfulness of such mergers and acquisitions. Zurich is already as global as any other insurer.

Also on takeovers of insurers by tech companies such as Amazon or Google , the Zurich boss does not believe. "They only want our customers, they do not want the business."

The speculations about Generali and Zurich, however, have a deeper reason. Hardly a manager knows Generali better than Greco, who himself led the Italian company for many years. Only in 2016, the 58-year-old native Italian moved to the executive chair in Switzerland . Greco brought Generali back on track at the height of the debt crisis.

Nevertheless, the company was repeatedly traded as a takeover candidate. In 2017, the largest Italian retail bank Intesa already eyed with an entry, but rejected the plan due to the opposition of Generali again.

Generali open for takeover
The new Generali boss Philippe Donnet now sees himself more as a hunter - and not as hunted. He wants, after the group has been massively rebuilt in recent years and, among other things, his German business with classic life insurance sold, in turn go for a hijacking and considers acquisitions abroad.

Over the next three years, the company wants to invest between three billion and four billion euros in organic growth and acquisitions, said Donnet this week. Generali-Germany boss Giovanni Liverani is attacking against this background. "We are open to any acquisition," emphasized the manager in Munich. Germany is one of the markets in which the insurer wants to grow in the next few years.

Many corporations see the situation that way. Because the industry is about to change fundamentally. Digitalization, the persistently low interest rate environment and new competitors such as young Insurtechs, young technology-driven growth companies, are increasing their numbers.

Size is becoming increasingly important in this environment as margins are melting in many core businesses. For example, car insurance in Germany in 2019 is expected to slip for the first time in five years.

Now comes the time of the big deals? According to a recent study by Willis Towers Watson on insurance takeovers, the size of transactions is increasing worldwide. Takeovers in the industry would have reached a new record in the first half of 2018, says Willis insurance expert Michael Klüttgens.

The transaction value for global insurance acquisitions climbed to about 37 billion euros in the first six months of this year - driven by a few mega deals. Although the number of takeovers and participations declined compared to the same period of the previous year to 84 deals - but this time were unusually many big deals.

In the first half of the year, for example, experts recorded 14 transactions worth more than € 500 million in this sector alone.

The main reasons for this jump, according to the study, is the change in business models. As regulatory pressure becomes the norm, new models and more companies are trying to return to their core strategy. For example, some insurance companies have begun to sell unwanted parts of their business so that larger assets return to the market, which also attracts financial investors.

However, the higher transaction values ​​and potential complexity of purchases and mergers, on the other hand, made it take longer for the deals to close. But the takeover hunger will hardly slow this. Klüttgens prognosis is clear : "We will see stronger activities in Europe - and also in Germany."
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