Moody’s has suggested that the proposed acquisition of Beazley by Zurich would be credit-positive for the Swiss insurer, accelerating its push to build leadership in specialty insurance and driving further consolidation in the cyber insurance market, where both are major players.
On Monday, Zurich announced it had submitted an enhanced £7.7 billion ($10.3 billion) cash offer to acquire 100% of the specialist insurer, following the rejection of earlier bids that the Beazley Board deemed to significantly undervalue the company.
Under the new proposal, Zurich would pay Beazley shareholders £12.80 in cash per share, a 56% premium to the previous day’s closing price and up from an earlier rejected offer of £12.30. This is equivalent to 2.2x Beazley’s book value.
According to Moody’s, acquiring Beazley would accelerate Zurich’s strategy of building leadership in specialty insurance, a business reportedly with strong demand-led growth and resilient underwriting earnings.
As mentioned, the rating agency also observed that the combination would drive a degree of consolidation in the cyber insurance market, where both Zurich and Beazley are significant.
“We would expect Zurich to also be able to unlock some cost and capital synergies from the transaction, while gaining access to third-party capital via Beazley’s presence in the Lloyd’s of London insurance market,” Moody’s explained.
It continued, “However, large acquisitions of this kind are inherently risky because of difficulties integrating distinct underwriting cultures, legacy systems and governance structures.
“As it would be part-funded by cash and debt, the takeover would also likely reduce Zurich’s excess capital and regulatory solvency and at least temporarily increase its financial leverage. While both Zurich and Beazley have solid track records as specialty insurers, the specialty subsector is particularly exposed to large loss claims.”
In related news, earlier today, Mario Greco, CEO of Zurich, told the Financial Times that the company is preparing to launch a syndicate at the specialist Lloyd’s insurance and reinsurance marketplace, as the carrier awaits a response from its latest proposal to acquire London-headquartered Beazley.
As Reinsurance News understands, the Lloyd’s syndicate would give Zurich another route into the Lloyd’s market if its latest bid for Beazley is rejected.
However, the insurer did not confirm whether it would go ahead with the syndicate launch if the bid is successful.
