A Shopping Spree For European Insurers? Smaller Rivals May Be Targets
As Strong Profits, Policy Prices Fatten Large Firms' Cash Piles
Business for Europe's giant insurers is humming, spurring chatter that consolidation could be around the corner.
Strong profits, fueled by steady prices for insurance policies and a virtual absence of large disaster claims, have given giant European insurers like AXA SA of France, Allianz SE of Germany, Aviva PLC of the United Kingdom and Italy's Assicurazioni Generali ample cash piles. Meanwhile, some of Western Europe's mature insurance markets are increasingly crowded, pinching profits in places like the U.K. After several years of stable-to-rising insurance rates, many expect prices and profits to come under greater pressure in coming years.
This combination often leads to one conclusion: Use that extra money to buy out smaller rivals in your home or foreign markets to boost economies of scale and buttress profits. How soon -- or whether -- that happens is a matter of daily speculation.
"I think there will be some consolidation and that many companies are in conversation," says Joseph Rohm, an insurance-stock analyst with T. Rowe Price Group Inc. in London, though he isn't predicting an immediate deal spree.
Speculation about deals and the industry's recent profit growth already boosted share prices. The Dow Jones Stoxx 600 Index's subsector of European insurance companies started this week up more than 25% in dollar terms year-to-date, nearly double the gain of the Dow Jones Industrial Average.
AXA's American depositary shares fell two cents to $38.98 in 4 p.m. composite trading on the New York Stock Exchange. So far this year, they are up 21%.
Despite the recent strong performance, however, prices for European insurance shares may not be prohibitive. Many observers consider the market values low compared with big U.S. insurers.
Shareholders of acquired companies would benefit if a buyer pays a big premium to the share price. Deals can pay off for shareholders of the acquirer if the company pays what turns out to be a fair price -- though there is ample risk. Differing systems, cultures and regulatory regimes all are potential headaches. If no deals materialize, which could easily be the case, investors may lose interest in the sector and take their money elsewhere, pushing share prices down.
There has been a spate of smaller deals. AXA last month bought Alpha Insurance of Greece for �255 million ($327.6 million), and Swiss Re bought General Electric Co.'s U.K. GE Life unit for ￡465 million ($888.6 million). Also in October, Bermuda-based insurer Catlin Group Ltd. bought London-based Wellington Underwriting PLC for ￡591 million.
Big deals so far this year include AXA's purchase in June of Swiss insurer Winterthur for �7.9 billion. That same month Generali bought Italian rival Toro Assicurazioni SpA for about �3.85 billion.
AXA, the world's biggest insurer by gross premiums, according to the Insurance Information Institute, may just be getting started. Chief Executive Henri de Castries has aggressive growth plans. AXA's so-called Ambition 2012 plan calls for the company to double revenue and triple earnings per share from 2004 through 2012. It was widely expected to make a purchase in the U.K., although it publicly said last week that it didn't plan a big U.K. purchase.
There are several smaller companies in Britain, and consolidation there could be a catalyst for other deals in Europe. Standard Life PLC, Scottish Widows Group PLC and Friends Provident PLC all have been mentioned as potential targets. So has Prudential PLC, which spurned an offer from Aviva this year. Representatives for each company declined to comment.
One U.K. consolidation scenario involves larger players buying so-called closed life books. These are pools of life-insurance policies that take in premiums and pay claims to existing clients but don't take in new customers. Yesterday, U.K.-based life insurer Resolution PLC, a consolidator of closed life books, said it is in early talks that could lead to either acquisitions or a sale of the company. It declined to comment further.
In continental Europe, small and midsize insurers like Storebrand ASA of Norway, as well as a large number of mutual insurers, are seen as potential targets. A Storebrand spokesman acknowledged that the company could be interesting to suitors but noted its plan is to focus on "organic growth."
The huge piles of excess cash companies have -- money in the bank on top of what the company needs to back up its policies -- also could be spent on internal improvements or share buybacks that benefit existing shareholders.
This month, for example, Allianz said third-quarter net income doubled from last year and that excess capital topped �7 billion. Generali recently said it expects to have some �3.4 billion in excess capital at year end after accounting for its Toro acquisition in June. Aviva's excess capital was estimated at more than �4 billion at midyear.
But all that money might not be earmarked for a shopping spree. Allianz has said it isn't building a war chest for big deals. Generali has said it plans to resume a �1.7 billion buyback plan it delayed to buy Toro.
Most industry analysts see good profits for niche players that dominate a given specialty and for giants that seem to be big players in virtually every market -- and little for those midsize companies in between. That could make them targets.
"You have a lot of midsize companies that have aspirations to get into the big leagues," says Simon Harris, leader of Moody's London-based European insurance analyst team.
Bigger players have more capital and underwrite a more diversified range of risks. That can earn them higher marks from ratings agencies, which lowers the cost of borrowing.
Meanwhile, European regulators are hashing out a system for measuring whether insurers are effectively measuring risks and whether they have enough capital socked away. The framework, called Solvency II, likely will look more kindly on companies that underwrite a more diversified range of risks.
欧洲保险业并购暗流涌动
欧洲保险业巨头的业务蒸蒸日上，有关该行业即将出现整合潮流的猜测也随之浮出水面。
稳定的保单价格、以及几乎没有大宗灾害索赔带来了丰厚的利润，这使欧洲的大保险公司，如法国的安盛(AXA S.A.)、德国的安联保险公司(Allianz SE)、英国的英杰华集团(Aviva PLC)和意大利的忠利保险(Assicurazioni Generali)都拥有了充足的现金储备。与此同时，西欧部分成熟的保险市场已经日益拥挤，导致了英国等地的利润下降。在保险价格经过了几年的稳定增长之后，许多人预计保费和利润将在今后几年面临更大的压力。
这些状况结合在一起常常会带来一种结论：用多余的资金收购国内或海外市场的较小竞争对手，以发展规模经济、巩固利润。这样的并购交易是否会发生、以及何时发生成为了人们日常讨论的话题。
T. Rowe Price Group Inc.驻伦敦保险类股分析师约瑟夫?罗姆(Joseph Rohm)说，我认为将会出现一些整合，许多公司都在进行磋商。不过他预计短时间内不会出现很多交易。
对发生并购交易的猜测和该行业近期的利润增长也提振了股价。本周初道琼斯欧洲斯托克600指数中的欧洲保险公司分类指数已经较年初上涨了25%以上，几乎是同期道琼斯指数涨幅的近两倍。
安盛的美国存托股票周一下跌2美分，收于38.98美元。该股今年以来已经上涨了21%。
不过，尽管近期表现强劲，欧洲保险类股的股价却并未令人望而却步。许多市场人士认为，这些公司的市值相对于美国保险巨头而言仍然偏低。
如果买家的收购价高出股价很多，被收购公司的股东将会从中受益。如果收购方支付的价格合理，则交易也能为其股东带来回报，不过其中存在巨大的风险。不同的体制、文化和监管体系都可能成为令人头痛的问题。如果没有交易能够兑现（情况很可能就是如此），投资者或许失去对该行业的兴趣，撤出资金投往它处，从而导致股价回落。
一些小规模的交易时有发生。上个月，安盛以2.55亿欧元（3.276亿美元）收购了希腊的Alpha Insurance；Swiss Re以4.65亿英镑（8.886亿美元）收购了通用电气(General Electric)旗下的U.K. GE Life子公司。同样是在10月，百慕大的保险公司Catlin Group Ltd.以5.91亿英镑收购了伦敦Wellington Underwriting PLC。
今年以来的大型交易包括安盛在6月份以79亿欧元收购瑞士保险商Winterthur。同月忠利保险以约38.5亿欧元收购了意大利竞争对手Toro Assicurazioni SpA。
对安盛而言，这可能仅仅是个开始。根据保险信息协会(Insurance Information Institute)的数据，安盛是以保费总收入计全球最大的保险公司。安盛首席执行长亨利?德?卡斯特里斯(Henri de Castries)制定了雄心勃勃的发展计划。安盛所谓的“雄心2012计划”(Ambition 2012 plan)要求公司在2004年至2012年期间将收入提高一倍，将每股收益提高两倍。外界普遍预计该公司将在英国进行收购，尽管上周安盛公开表示没有在英国大规模收购的计划。
英国有几家规模较小的公司，这里的整合可能会引发欧洲范围内的其它交易。Standard Life PLC、Scottish Widows Group PLC和Friends Provident PLC都被外界看作是潜在的收购目标。还有保诚保险公司(Prudential PLC)，该公司曾在今年拒绝了来自英杰华的收购要约。各公司的代表都拒绝置评。
英国整合的另一种情况是大保险公司收购所谓的封闭型人寿保单。这种保单面向现有客户收取保费、支付理赔，但不接受新客户。周一，英国人寿保险公司Resolution PLC表示，进行了可能导致收购或出售该公司的初步洽谈。该公司没有提供更多情况。
在欧洲大陆，挪威Storebrand ASA这样的中小型保险公司以及许多相互保险公司都被视为潜在的收购目标。Storebrand的一位发言人承认，该公司可能会吸引一些公司的兴趣，但他指出，该公司的目标是强调“有机增长。”
保险公司拥有的巨额多余资金──即除了应付保单索赔外放在银行中的资金──可能还会用于内部完善、或使现有股东受益的股票回购。
比如，安联保险这个月就表示，第三季度净利润比上年同期增长了一倍，多余资金超过了70亿欧元。忠利保险最近表示，在计入了6月份对Toro的收购后，预计今年年底时的多余资金将达到34亿欧元。今年年中时，英杰华集团的多余资金估计超过了40亿欧元。
但这些资金并不意味着并购交易将大量涌现。安联保险曾表示，并未为大型交易筹措资金。忠利保险则称，准备恢复因收购Toro而推迟的17亿欧元的股票回购计划。
大多数业内分析师预计，垄断某一市场的专业化保险商和在各市场开展业务的保险巨头将获得良好的利润，而介于二者之间的中型保险商利润最低。这可能使它们成为并购目标。
穆迪(Moody's)驻伦敦的欧洲保险分析师小组主管西蒙?哈里斯(Simon Harris)说，将会有许多中型保险商渴望做大做强。
较大的公司拥有更雄厚的资金，能够承销更多品种的保单。这能赢得评级机构更好的评价，从而降低借贷成本。
与此同时，欧洲的监管机构正在研究一套衡量体系，以此判断保险公司是否有效控制风险和是否有足够的资金应付不测。这个被称为Solvency II的体系框架可能会对能承销更多品种保单的公司更加有利。
Ian McDonald
