Deprivation of the throne in Hungary: Aegon retires, an old Viennese dream comes true

Buy expensive

The news, which has been aired in various places in recent months and was written by us for the first time in September, turned out to be true: as part of their weight loss program launched in spring.

The price is 830 million euros, 2.6 times the book value in mid-2020 and 15 times the result of last year.

Both values ​​are very high, with regional insurers (even in light of the expected performance for the next 12 months, which promises to be much more difficult than last year) only with an average price of 0.6 / P and 8.3 P / E upfront. . stock exchanges. On the basis of the latter, the Aegon seller and the VIG buyer are the lowest rated among the large regional insurers.

The transaction, organized by JP Morgan in the United States, was preceded by great interest, and we learned from the negotiations that

• In addition to Germany’s Allianz and Belgian KBC, the Dutch NN was also interested, the latter also submitted an active offer (it should be noted that NN recently acquired Aegon’s Czech and Slovak stakes),
• the price decided: VIG, who offered a high price from the beginning, entered,
• “They also discussed the issue in the Carmelite monastery”, but the insurance company was dismissed for lack of an adequate team of insurance professionals,
• According to market views, such a transaction could only take place with the permission of the Hungarian Prime Minister, even if it was a sale of a regional package.

According to one of our sources, the government missed a historic opportunity by not making an offer, as the superbank with the trio of Takarékbank, MKB and Budapest Bank as a sales channel, the health insurance market on the verge of an explosion, the Aegon’s existing premium reserve and “State Insurance buyback” as a political message would have been of exceptional value to the state. According to one of our sources, it would have been “too sudden” for the government to prepare for the purchase with the right team of professionals .

However, instead of Hungary, Aegon will be owned by Austria, and the buyer will be partly owned by cooperatives:

The Hungarian market is worth a lot to VIG

The question that arises rightly, why is regional Aegon worth so much to VIG?

Aegon’s gem in the region is clearly Aegon Hungary (part of which the region was built from here), as it generated € 400 million of last year’s premium income of € 600 million and € 44 million. euros from last year’s profits of 50 million euros.

Therefore, the Viennese buyer buys a share of the Hungarian market primarily through the transaction, and their premium income may increase by 5-6 percent as a result of the acquisition, including 3-4 percent due to the Hungarian subsidiary. Now it takes over the Hungarian insurer VIG for the fourth time: in 1996 it expanded into the Hungarian market with the acquisition of Union, Erste Biztosító in 2008 and Axa Biztosító, which was later renamed Vienna Life. The multi-brand strategy was long preferred, but in 2018 the three companies merged and now operate under the Union logo. The company has grown very well, not only through mergers and acquisitions, but also organically, especially in recent years, but its stake has increased dramatically with the acquisition of Aegon. You can jump from 8% to 19%.

According to our sources, Aegon Hungary is valuable to VIG mainly for the following:

• with a bit of hype for VIG Hungarian market leader is worth all the money (several of our sources mentioned the common Austro-Hungarian historical past), while for Aegon, which has been around since 1992, this was not an aspect despite its state insurance history,
• to VIG has a lot of money for acquisitions: despite the high price, the Solvency II ratio can remain in the comfortable 170-230% range,
• besides Allianz, Aegon is Hungary most profitable insurer (however, in our opinion, it will still bring the price of VIG for a long time),

• Aegone is one, if not the largest own sales network (estimated at around 1,500 people) in the Hungarian insurance market, while VIG-owned Unioné may account for about a third of this (bank insurance channel is stronger than Union through Erste cooperation, while Aegon has more flexible business cooperation )
• extremely valuable to Aegon lacacia insurance portfolio, the annual portfolio of over HUF 30 billion means a market share of over 30% (although the Union came out first with qualified consumer-friendly home insurance at the beginning of the year, this market is far from be strong),
• Aegon is significant group life and accident insurance portfolioCSÉB’s insurance policies written in the 1980s and 1990s continue to represent an important part of its portfolio,
• own fund manager and pension fundowned by Aegon, such is not the case in Union,
• Union can be considered stronger in the health, industrial and linked unit insurance segment than Aegon, which is much larger than it, and there are no significant differences between them in the field of auto insurance.

According to our sources, due to differences in organizations, product portfolios and sales channels, it will be difficult to merge the two insurers, so this is to be expected in the long term.

What about Hungarian customers?

According to Aegon

• the customer contracts of Aegon Magyarország Általános Biztosító Zrt. and Aegon Magyarország Befektetési Alapkezelő Zrt. are valid without modifications, customer service and the sale of new insurance policies will continue as usual,
• According to Péter Zatykó, CEO of the company, its clients receive a service without changes, valid insurance contracts and clients’ accounts are valid under the same conditions. Therefore, customers and contractual partners have nothing to do with the change of ownership.
• Aegon continues to sell all of its insurance, contracting is ongoing, and customer claims are settled unchanged. There is no change in the identity of the colleagues and partners involved in the contracting of insurance and the resolution of claims.
• The sale will take place after the approval of Magyar Nemzeti Bank, scheduled for the second half of 2021. Until official approval, the name of Aegon will not change. After official approval and change of ownership, all contracts will remain in force under the same conditions, but the company will perform its services under the brand of the new owner.

Cover image: Getty Images / Paul Mayall