Goodbye, Aegon Hungary? – Portfolio.hu

Nice past

Six years after the spin-off of Hungária Biztosító in 1986, During the 1992 privatization, Aegon acquired 75% of the Hungarian State Insurance Company, which was then mainly engaged in life and home insurance.and then in 1995 the remaining shares. The insurer owed not only the huge insurance portfolios inherited from socialism, but also the managerial qualities of Gábor Kepecs, who led the company from 1990 to 2005 as CEO and then as regional manager until 2017, who not only knew the cream of the crop. the insurance profession on your team, but made it high enough. also the owners of the insurer. According to the data we have available up to 2003, 31 percent (!) Of the insurance sector’s profits in 17 years came from Aegon at current prices, more than HUF 221 billion from Alliance, the largest premium player in the sector, Alliance, which leads Hungary to overweight Hungary.

A similar description can be given to Gábor Kepecs about Péter Zatykó, who has been in charge of the insurer for almost a decade and a half, but in recent years Aegon shut down several of its uncertain attempts in Hungary, showing the company its way forward:

• In 2018, the Aegon loan (for Raiffeisen and Intrum) was established at the wrong time before the previous crisis, and then
• In 2019, the stock of Aegon Housing Savings, which had lived only half a decade, was also sold (to Erste),
• (in addition, Aegon regional sold its Czech and Slovak stakes to NN in 2018),
• In the insurance market, however, smaller portfolios have been bought several times in recent years, mainly from CIG EMABIT.

Present stable

Meanwhile, in addition to Aegon Hungary General Insurance, which often competes with Groupama for third place, parent company Aegon Fund Manager and Aegon Voluntary Pension Fund also remained the group’s flagship.

Thus, with regard to the size of the group, today the following can be said:

• insurance premium income exceeding HUF 130 billion per year with a market share of 11%,
• More than 30 billion home insurance portfolios with a market share of more than 30%,
• One of the largest dependent agent networks in Hungary with hundreds of sellers,
• Annual profit of 10-15 billion HUF,
• Assets managed by fund managers of more than HUF 280 billion and
• more than 170,000 members of voluntary pension funds.

Uncertain future

As for the latest information from Bloomberg, according to the news agency, these are:

• the new head of Aegon NV in the Netherlands, whom we had previously interviewed as the NN leader, would make several changes to the Dutch insurance house, including the sale of its Central and Eastern European interests,
• Under Friese’s control, the Dutch insurer has already cut dividends and financial targets due to increased claims for the coronavirus.
• Aegon’s first half pre-tax profit fell 31% in one year, mainly due to higher losses in the US market.
• for some reason, the abandonment of Central and Eastern Europe has been discussed, the decision may also affect Polish and Hungarian operations,
• the insurer works with JP Morgan on the sale, the interests involved can amount to at least 500 million euros,
• Aegon’s share price has performed quite badly recently, according to sources, this is partly the reason for the streamlining of operations.

Based on the above, it can be stated that the source of dissatisfaction cannot be the Hungarian operation, so it is easy to imagine that this will not make the MEG group.

Previously, both Axa and Aviva decided to leave the Central and Eastern European markets bundled together (the former with Vienna Insurance Group, the latter with Aviva on the buyer’s side), but the Aegon story is quite different – not below 5 % but stable 10 It is an insurer with a market share greater than%, integrated into the Hungarian market as well as possible. According to sources who told Bloomberg in the case, by the way there is still no final decision on leaving the region, and management may eventually abandon this idea. By the way, Aegon NV and JP Morgan did not respond to requests.

How much should you pay for it?

The last time, 12 years ago, there was a sale of a similar size on the Hungarian insurance market: For a consideration of HUF 164 billion, the French Groupama bought the OTP Guarantee from the Hungarian OTP, which at that time was double the premium income of the insurer. This would imply a purchase price of around 250-300 billion HUF now, which does not seem realistic: the agreement on the sale and purchase of OTP Garancia probably could not have been more programmed by the seller (just before the crisis 2008), and the past.

Instead, it is more realistic to reach the current share multipliers and estimate the value of the insurer based on the book value, but even more on the real profit, compared to other insurers present in the region. Due to the coronavirus, we can expect that the company’s consolidated earnings will not increase significantly this year, but there is no reason to project a significant decline (the market may be close to stagnation this year), thus the 14.2 billion HUF for the year In addition to the loss of annual dividend payments, 48.2 billion HUF of capital can be associated (in our current rough estimate we start from this at least).

As shown in the table below, insurers’ 12-month forward valuation by P / E and P / BV shows extremely large variance (especially the Aegon owner hanging on the tail). In the case of insurers, the most authorized and least extremely dispersed P / E value is currently around 7.9 on average in regional insurers, thus Aegon Hungary would have a fair value of around HUF 110 billion, which from our quick assessment does not seem unrealistic.

The identity of the buyer is, if possible, even more difficult to predict: all the international insurers listed in the following table have already bought a local insurer or other financial institution in the last decade. due to the high expected price it is more difficult for a Hungarian buyer to conceive, IN ANY CASE THE SITUATION IS A RARE OPPORTUNITY, THOUGHT IT MAY BE PROVIDED BY DOMESTIC ACTORS (EITHER IN PART OR IN THE WHOLE STATE)