Analysts at UBS are predicting the European insurance industry could be at the start of a new wave of mergers and acquisitions (M&A) as companies look to counter falling demand for insurance by taking over rivals to boost top-line growth and extract cost synergies. Bank rescues have created a number of potential targets as well.
The team, led by Marc Thiele, says:
We believe European large-cap insurers will look for M&A in Eastern Europe and AsiaIn our opinion, this would be more attractive than acquiring cash-generative businesses in mature countries; while this tends to offer greater cost-savings potential, it also offers less premium growth.
On top of the normal M&A considerations, there are a number of additional game-changing transactions possible following the decisions involving ING and RBS to exit the insurance business in agreement with the European Commission.
The planned sale of its emerging market units should help ING generate proceeds to repay liabilities and provide flexibility for the disposal (in whatever form) of its mature units. We expect Munich Re and Zurich Financial to use their balance sheet to improve their growth profile, leading to M&A deal risk.