What does the acquisition of European Loyalty by Allianz bring?

By Leonidas Stergiou

With the offer to acquire 100% of European Loyalty, Allianz buys a critical size in order to take advantage of the development opportunities of the Greek insurance market, which is already characterized by intense competition, due to a high percentage of concentration.

Rearrangements

Reading the reports of the advisors of the two sides, the valuer of European Loyalty, with this move Allianz wins the 1st place in the general insurances (from 9th today) and the 5th place based on the total gross premiums. With the offered price of 207 million euros, Allianz acquires the largest independent listed general insurance company on the ATHEX, 5th on the basis of gross premiums, with 2020 data, amounting to 223 million euros (68% general insurance and 32% life). It also acquires one of the largest independent sales networks, with 110 offices, 5,667 brokers, 439 staff and executives and approximately 663,000 insurance policies.

The strategy

This move allows Allianz to expand into general insurance by leading the way in fast-growing markets. Indicatively, it is reported that the penetration of domestic insurance companies is almost half of the European average (2.6% versus 4.8%). At the same time, the European Credit Assessor, Eurocorp, states that the increase in insurance follows the growth and rise of the economic cycle and confidence, as expected in Greece.

The developments

At the same time, the recent deals (AXA-Generali, NN-MetLife, CVC-National Insurance) are indications of a concentration that will reach European levels. Indicatively, it is mentioned that the first seven insurance companies in Greece, based on the production of insurance premiums in 2020, as shown by the solvency reports they publish, represent 85% of the market. Here, however, it should be borne in mind that in 2020 there were no deals between NN-Metlife and the acquisition of AXA by Generali, nor the recent one of Allianz-European Loyalty. So now five major insurance companies hold almost 85% of the market.

The next day

These developments are expected to create new developments, with people in the market trying to find the ideal couples who meet the requirements of increasing size, expanding into bancassurance and working with a banking institution. As experienced executives of the insurance market note, in a market with the characteristics of the Greek (concentration, large growth margins, etc.) the acquisition of critical size plays an important role especially in general insurance and life insurance. Even bigger, for foreign groups, where history to date has shown that they are either trying to grow in size or leave a market. Perhaps it is no coincidence that the CEO of the acquired company, Mr. Christos Georgakopoulos, remains at the helm of the new scheme. Also, the name of European Loyalty will be preserved.

First 72% and then 100%

With the price of 207 million euros offered by Allianz, it buys 72.27% of the main shareholders with whom it has made an agreement, and the remaining percentage up to 100% through a public offering, after the approval of the agreement by the competent authorities (BoG, Hellenic Capital Market Commission, etc.). Advisor is Alpha Bank.

The 72.27% with which the agreement was concluded include:

1) 20.02% of the European Loyalty held by executives and the managing director Mr. Christos Georgakopoulos.

2) the 15.54% held by the EBRD

3) 36.7% of other shareholders, including the other members of the Georgakopoulos family.

The valuation

According to market executives, the proposed price of 207 million euros, in combination with the ongoing developments in the competition and the growth rate of the Greek insurance market, raises the bar in valuations. This price corresponds to 7.8 euros per share, when the fair price was calculated at 6.31 euros per share, while the average half-year stock price was 5.16 euros (P / E: 8.78). According to Eurocorp, the price to tangible book value (P / TBV) ratio was estimated at 1.04 times, when in the sample of 12 acquisitions in the European insurance market used during the valuation, the corresponding index is 1.59. The return on tangible equity (RoTE) of the sample was 10.3% and that of European Loyalty 12.3%. The sample includes one case from Greece, that of AXA-Generali, with P / E 12.2, P / TBV 1.19 and RoTE 9.7%.

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