At a time when reinsurers have been increasingly under pressure, it seems having major financial backers is becoming increasingly attractive and now reinsurance giant Munich Re is said to be open to having an anchor investor on-board.
In an interview with Reuters, Munich Re CEO Joachim Wenning said that he would “welcome” an anchor investor in the firm, in principle.
The statement comes at a time when competitor Swiss Re is deep in talks with Japanese technology and telecoms conglomerate SoftBank about the firm taking an anchor stake in the reinsurer.
Reinsurance businesses look increasingly attractive to these types of major investors from outside the industry, offering a diversified source of earnings, pools of investment float and products to offer alongside their own businesses.
For the reinsurers these major investors can offer significant distribution reach, a way to jump along the value-chain to get closer to customers, a lower-cost source of capital and the addition of efficiencies, at a time when returns have been under pressure for the traditional reinsurer business model.
Wenning is quotes as saying, “In principle, we would welcome an anchor investor,” and he noted that previously Warren Buffett’s Berkshire Hathaway had a significant stake in Munich Re.
Buffett reduced his stake, but for major investors from outside the insurance sector a company like Munich Re could be a very attractive way to deploy capital into a business that could complement their own.
Wenning said in the interview that an anchor backer for Munich Re would interest him, but when asked if he was actively looking for one, he said no.
At a time of transformative change for insurance and reinsurance, having long-term capital backers that also bring benefits such as distribution reach, technology and customer insights, could become increasingly important to reinsurers.
So alongside the mergers & acquisitions we should perhaps expect a growing focus on finding anchor backers as well, especially where there are synergies between the parties involved.