Reports from Reuters claim that Italian insurer Generali is looking to sell its €44 billion (US$50 billion) German life insurance portfolio, as low-interest rates and more rigorous capital rules across Europe hinder operations.
According to Reuters’ sources close to the matter, Morgan Stanley is looking at options, which includes the sale of Generali Leben as the parent firm looks to restructure its European operations. Generali Leben stopped writing new business in 2015, but reportedly offers life insurance in Germany under different brands.
Sources told Reuters that no deal is expected to happen quickly, given the complexity of the insurer, and also the need for necessary approval from financial watchdog, Bafin. Furthermore, should Generali fail to receive a suitable offer, sources said the firm may decide against selling the unit.
“A sale of certain portfolios within the German perimeter could be just one of several strategic options we said we would evaluate.
“Among the three big life business units of the group (AachenMuenchner, Cosmosdirekt and Generali Leben) Generali Leben is more exposed to the low interest rates risk,” said a Generali spokesman, reported by Reuters.
Should a sale go through, it would be the largest closed book sale ever, and it’s been reported that financial services groups that specialise in the run-off of life insurance via the takeover of policies until their expiration, hoping to turn them into a profit, are contesting for the purchase of the Generali Leben portfolio.
One source claimed that Generali was hoping to receive a purchase price of €900 million (US$1.02 billion) for the portfolio, but bidders reportedly value it at between €400 million (US$456 million) to €600 million (US$684 million).
According to Chief Executive Officer (CEO), Philippe Donnet, the company is eager to sell businesses in 13 to 15 countries around the world, and hopes to raise around €1 billion (US$1.14 billion), and the company is working with BNP and Deutsche Bank on potential sales, reported Reuters.
Following the announcement by Reuters, J.P. Morgan has commented on the news, stating that while it too doesn’t expect a deal to emerge quickly, it feels that “this would be positive because, assuming all the portfolios of Generali Deutschland were to be sold, it would reduce Generali’s exposure to traditional life by €38bn or 13%.”
J.P. Morgan continued to explain that life business in Germany is challenging owing to the nature of life contracts, and as such, selling the portfolio would be a positive for the firm, leaving it with just €30 billion (US$34.2 billion) of traditional life portfolio, in Germany.