Ex-Lazard Banker Thinks Boring Is Beautiful


The unloved insurance sector is proving a rich territory for acquirers. Apollo Global Management Inc., Blackstone Group Inc., Carlyle Group, KKR & Co. — the big guns of private equity have been conspicuously active in this industry lately.

Now an investor consortium backed by former Lazard Ltd. banker Mark Pensaert has emerged as suitor to Belgian insurer Ageas SA, capitalized at 7 billion euros ($8.3 billion). A sector facing disruption clearly also offers opportunities.

Life insurers face challenges all round. Complicated long-term savings products have lost their luster, especially as guaranteed savings rates have plummeted. Low-fee asset managers are competing hard for savings. Traditional methods of selling, typically relying on local reps, are expensive and carry the risk of mis-selling. Regulatory capital requirements have become tougher.

Many of the big listed insurers have been shifting emphasis toward general insurance such as car, home and business cover. Piecemeal disposals have offered private equity the chance to roll up disparate assets and reap economies of scale. Big portfolios of existing policies may not offer growth, but they generate cash and release capital over time. Then there’s the opportunity to grab a role managing the insurer’s assets — as in the Blackstone-backed takeover of Fidelity & Guaranty Life in 2017.

Could Ageas be next? It recently had an approach from Pensaert-backed BE Group, Bloomberg News revealed on Friday. The company said the indicative offer was “highly conditional” and “not realistic.”

The market appears doubtful BE can return with a successful bid. A takeover would be complicated by the fact that Ageas has sizable domestic market shares in life and general insurance, and multiple joint ventures in Asia with change-of-control clauses, analysts at UBS Group AG say. Some 10% of the company is held by Ping An Insurance (Group) Co. and Fosun International Ltd.

But Ageas still looks vulnerable. Its market value is not so big as to preclude a consortium bid. The stock’s 40% discount to book value reflects pandemic risks. Nevertheless, the shares trade at roughly 13% below analysts’ consensus price targets.

In the insurance industry, stock-market investors have backed strategies that focus on paying out reliable dividends rather than aggressively chasing growth in an increasingly difficult competitive and regulatory environment. Think of Elliott Management Corp.’s recent activist attack on NN Group NV of the Netherlands, demanding hard commitments on the annual payout and cash returns, and a more aggressive approach to investment asset allocation.

The market has also favored simplicity and a focus on core markets where insurers can demonstrate genuine competitive advantage. Aviva Plc was applauded by investors for saying it would concentrate on the U.K., Ireland and Canada, while its European and Asian businesses would be “managed for long-term shareholder value.”

Ageas needs to marshal defenses and could draw inspiration from Elliott and Aviva. It’s a sprawling global empire with a particularly big Asian presence. With a new chief executive officer starting in October, it has the chance to rethink its direction. The next approach might not be so easy to swat away.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

©2020 Bloomberg L.P.

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