Vienna Insurance $990 Million Deal Cements East Europe Lead

Vienna Insurance Group AG bolstered its position as the biggest insurer in central and eastern Europe by agreeing to buy Aegon NV’s business in the region and in Turkey for 830 million euros ($990 million), outbidding NN Group NV and KBC Group NV.

The deal will make VIG the largest insurer in Hungary, a country where the Vienna-based group has long fallen short of its goal to be a top three player wherever it’s active. The purchase will also strengthen its business in Poland, Turkey and Romania. That came at a price equivalent to 2.6 times book value, significantly more than analysts including KBC Securities analyst Jason Kalamboussis had expected.

“This could be down to VIG overpaying, and a very competitive situation,” Kalamboussis, who had estimated the unit’s value to be about 600 million euros, wrote in a note to clients. Analysts at Morgan Stanley had put the implied valuation of the business at 500 million euros.

Aegon rose as much as 4% in Amsterdam, making it the best performer in the Stoxx 600 Insurance index, which was little changed. Vienna Insurance gained as much as 1.4%.

The deal adds to a flurry of insurance activity, topped by the $9.6 billion takeover of RSA Insurance Group Plc this month in the biggest acquisition of a U.K.-listed company this year. Vienna Insurance’s cross-town rival Uniqa Insurance Group completed its 1 billion-euro purchase of AXA SA’s eastern European business in October.

Biggest Insurers in Eastern EuropePremium income
Vienna Insurance Group5.4 billion euros
PZU5.3 billion euros
Allianz4.3 billion euros
Generali3.9 billion euros
Source: UniCredit

Vienna Insurance is already the biggest insurer in the Czech Republic and Slovakia, Romania and Bulgaria, along with its home market, Austria. As the former communist countries catch up economically with their western neighbors, the money consumers are spending on insurance is expected to increase for years to come. That kind of growth is elusive in more mature western markets.

“The portfolios of the companies included in the scope of the transaction perfectly complement our existing units and strengthen our diversification in these countries,” Vienna Insurance Chief Executive Officer Elisabeth Stadler said in a statement.

The deal is subject to regulatory and antitrust approvals and is expected to close in the second half of 2021. The premium volume of the business Vienna Insurance is acquiring is about 600 million euros, and it had net income of 50 million euros in 2019. Vienna Insurance’s Solvency II ratio will “remain in the communicated comfort zone of 170% to 230%” when the deal closes, the insurer said.

Aegon put the business on the block as new CEO Lard Friese tried to reverse a slide in the company’s share price by almost 25% in 2020. The former CEO of NN Group had previously signaled that Aegon could pull out of some markets as he seeks to turn around the company’s performance. The sale will result in an increase in IFRS equity of 505 million euros, according to statement. Its Solvency II ratio is estimated to improve by about 8 percentage points.

Bloomberg on Friday reported that the sale of Aegon’s central and eastern European business had attracted interest from Vienna Insurance, KBC and NN, citing people with knowledge of the matter.

©2020 Bloomberg L.P.

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