Unless you’ve been living under a rock over the last few weeks, you won’t have escaped the news about a potential mega merger of European insurance giants – with
Allianz swirling over Italian giant Generali. However, the German insurer is not alone with its interest – it is joined by lender Intesa, with a joint bid also touted in some circles.
It’s not the first time that Generali has been in the spotlight, either. Last time around it was France’s
AXA that was rumoured to be lining up a bid – a move that the French insurer swatted away with the comment that a deal would “make no sense at all.”
So, this time around, what deal, if any, actually
does makes sense?
Potential Intesa bid
Intesa has been the most
vocal about its potential move for Generali in a deal that would breathe new life into the Italian financial industry by linking its biggest insurer with its second largest bank. In a statement released on Tuesday, Intesa said “the bank is interested in industrial growth in the areas of asset management, private banking and insurance in synergy with its banking networks, including through possible international partnerships.”
Were a deal to be successful it could be a launch-pad for Intesa, as it looks to grow its non-life business while also expanding abroad – an opportunity that would open up with Generali’s well-established network.
However, the feasibility of a potential merger between a bank and an insurer has been called into question with Anna Maria Benassi, head of Italian equity research, telling
Bloomberg that “the combination of a bank with an insurer is not easy given different distribution, risk profile, regulation and accounting, plus anti-trust constraints.”
It is highly likely that any link-up between Generali and Intesa will face a mountain of hurdles based on the different supervision systems and each having its own goals. However, if there is a political drive to fend-off foreign interest and let an Italian super power emerge, it may well cross the finishing line.
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Potential Allianz bid
An Allianz bid may be made in conjunction with, or separately from, Intesa. It’s rumoured interest was enough to send shares in Generali surging by as much as 7% last week – so what does the German giant bring to the table?
With Generali’s management undergoing something of a turnover period with
CFO Alberto Minali the latest to step down, there is belief among investors that a deal is ripe. With major overlaps in a number of European markets – particularly Italy, Germany and France – there are potential cost savings to be gained too bringing substantial value for shareholders.
However, despite the potential enthusiasm for a deal from the insurers’ perspective there would be a host of regulatory and political issues: even with Intesa onboard.
Bloomberg Intelligence shows that while Intesa and Generali are the top two life insurers in Italy, Generali and Allianz are number two and three respectively for non-life insurance in the country. A hook-up between the three would lead to massive market share and could be seen as anti-competitive for the industry at large.
Meanwhile, Allianz has plenty to consider in the deal too as Generali is seen as a vital jewel in the Italian crown and holds more Italian government bonds than any other insurer. A deal for Allianz would mean adding around 63.8 billion euros of exposure to the country’s debt, according to
Bloomberg.
Certainly, Allianz’s interest in takeovers is no secret – CEO Oliver Bate has been open about its interest in big deals and this week the firm has also been
linked with QBE. However, it seems that any potential mega merger comes with both pros and cons and may prove more difficult in reality that it appears in theory.
Related stories:
Opposition mounts to foreign takeover of Generali
Major firm reviewing ‘potential combinations’ with Generali
Allianz interested in swoop for Generali – reports
