Two big moves in European insurance
Worldwide, the consolidation of the insurance market proceeds apace. Two major recent announcements illustrate this trend. Both are cases of the generalist getting out of market where it was a second-tier player and selling off to a segment leader.
Axa/Winterthur
French insurance giant Axa announced it will buy Winterthur, the insurance division of Swiss investment banker Credit Suisse. The deal is for around $10 billion.
Credit Suisse had been considering a spin-off of Winterthur, but Axa came up with enough money to agree to an outright sale. Credit Suisse had owned Winterthur for nine years. It was a non-core asset that was underperforming, so it had to go.
Axa had made an unsuccessful bid for Winterthur two years ago, but eventually walked away from the deal, reportedly because of low growth in the Swiss insurance business and fear of tougher Swiss regulation. So why did Axa buy this time and at a higher price?
The answer according to an article in Insurance Business Review online ('Winterthur: emerging markets tempt Axa to buy", 6/19/06) is Asia:
More important than Winterthur's footprint in the mature European market, however, are its assets in the former eastern bloc and parts of Asia: one third of the Swiss company's 2005 life and pensions new business was generated in Asian markets. An enhanced position in these growth regions is reason enough for Axa to clinch the deal.
Generali/Toro
In the second big deal this month, Italy's Assicurazioni Generali announced it would acquire rival Toro Assicurazioni in a deal worth over $6 billion. Toro is owned by Italian publishing group De Agostini. De Agostini is a family-owned conglomerate that owns interests in book publishing, magazines, direct marketing material, and textbooks in 30 countries ); Lottomatica, a lottery services company; Spanish TV network Antena 3; film production studios Mikado (Italy) and Planeta (Spain); along with an investment division. De Agostini bought Toro from Fiat in 2003, and the company sells auto, fire, and health insurance.
Generali is Italy's #1 life insurance company , and the Toro deal will make it the #1 property and casualty insurance company in that country. It will also double Generali's share in retail insurance, allowing it to move away from dependence on institutional insurance.
Generali is smaller than the #1 and #2 European rivals Allianz and AXA. It does plan to expand outside Italy. It has already expanded to Ukraine, where it agreement to buy a majority stake in Ukrainian insurance companies Garant Auto and Garant Life. It also has entered into a joint venture in India.
All of these moves are caused by bulging cash drawers at major insurers and the need to expand through acquisitions. As long as profits stay up, the further consolidation in world insurance is inevitable.
