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 ($9.9 billion) of life insurance assets in countries including Italy. 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 have plans 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 potential sale could involve between 1 billion and 2 billion euros [US$1.1 billion and US$2.2 billion] of assets. 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.
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. 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% in the region.
The market for back books has been growing in recent years. Heritage assets which 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.
The Allianz and Generali divestment could attract interest from specialist consolidators. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction.
Big insurers including AXA SA have been pivoting away from the capital-intensive business of writing life policies. Those consolidators focus on buying assets that are less profitable for insurers in the low-interest-rate environment.
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