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 in the countries where it’s active. The purchase will also strengthen its Polish unit and give it access to Turkey for the first time. That came at a price equivalent to 2.6 times book value, significantly more than KBC Securities analyst Jason Kalamboussis had expected.
“This could be down to VIG overpaying, and a very competitive situation,” wrote Kalamboussis, who had estimated the unit’s value to be about 600 million euros.
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,” 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 Chief Executive Officer 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, and would yield at least 500 million euros, citing people with knowledge of the matter.
–With assistance from Aaron Kirchfeld and Ruben Munsterman.
Photograph: The logo of Dutch insurer Aegon is seen at the firm’s headquarters in The Hague on Oct. 27, 2008. Photo credit: Koen Suyk/AFP/Getty Images.
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