Two of Europe’s largest insurers are gearing up to sell billions of euros in life assets—a niche corner of dealmaking keeping bankers busy amid the coronavirus pandemic.
Allianz SE is planning to divest as much as 9 billion euros (US$9.9 billion) of life insurance assets in countries including Italy, according to people familiar with the matter. The German firm has been working with Morgan Stanley to review the portfolio, the people said, asking not to be identified because the information is private.
The potential sale, which comes after a review by Allianz of its European life business outside its home market, may fetch about 500 million euros [US$549.2 million], the people said. Any divestment could help Allianz free up regulatory capital amid the coronavirus crisis.
Italy’s Assicurazioni Generali SpA has decided to move ahead with the disposal of a French life insurance portfolio, in what’s set to be a landmark deal for the industry in France, the people said. It has picked financial services specialist Fenchurch Advisory to help with the potential sale, which could involve between 1 billion and 2 billion euros [US$1.1 billion and US$2.2 billion] of assets, according to the people.
Generali has been considering selling a so-called back-book portfolio linked to savings products in its life insurance unit and had earlier asked banks to pitch for a role on the deal, Bloomberg News reported in January.
The consolidation of closed-life books will be a driver of M&A activity in Western Europe’s insurance sector this year, including France and the Netherlands, PwC said in its 2020 industry outlook. Dealmaking in the sector has proved resilient against the impact of COVID-19 at a time when overall mergers and acquisitions volumes are down 23 percent in the region, data compiled by Bloomberg show.
The market for back books has been growing in recent years. Heritage assets that sit on companies’ or insurers’ balance sheets rose by 40 billion pounds ($49 billion) to 580 billion pounds [US$712.5 billion] between 2016 and 2018 in the key markets of U.K., Germany and Ireland, according to a presentation last year by Phoenix Group Holdings Plc, one of the biggest closed-life consolidators.
The Allianz and Generali divestments could attract interest from specialist consolidators, the people said. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, according to the people. Representatives for Allianz, Generali, Morgan Stanley and Fenchurch declined to comment.
Big insurers including AXA SA have been pivoting away from the capital-intensive business of writing life policies. That’s led them to sell packages of old policies to companies like Phoenix, Apollo Global Management’s Athora Holding Ltd. and Cinven-controlled Eurovita SpA.
Those consolidators focus on buying assets that are less profitable for insurers in the low-interest-rate environment. Phoenix agreed in December to acquire Swiss Re AG’s U.K. unit ReAssure Group Plc in the biggest European insurance transaction of last year. In 2018, Generali agreed to sell a majority of its German life insurance portfolio Generali Leben to Cinven-backed Viridium Group GmbH.
–With assistance from Aaron Kirchfeld, Dinesh Nair, Nishant Kumar and Chris Bourke.
Photo: Adam Berry/Bloomberg