Monument Re could sign two acquisitions by year-end with more in pipeline – CEO

10 September 2020 - 05:37 am UTC

by Pablo Mayo Cerqueiro

 

  • Interested in savings and unit-linked targets of up to EUR 2bn and EUR 5bn assets respectively
  • Pipeline deals in existing markets, also looking at Italy and Spain for expansion

Monument Re, a Bermuda-based reinsurer and insurance consolidator, has several acquisitions in its pipeline, two of which could be signed before year-end, Group CEO Manfred Maske told Mergermarket.

 

The group, which consolidates life insurance businesses in Europe, is closing in on two “very concrete” transactions, one of which is in bilateral binding talks, while the other is slightly behind, Maske said. Along with its previous deals, these could take the value of transactions for the year to more than EUR 6bn in insurance assets, he said.

 

It is working on a couple of additional transactions that are in earlier stages, he said. All deals are in existing markets, he noted. It is also eyeing Belgian insurer Integrale, he added. Integrale’s majority owner Nethys is said to be exploring a sale of the insurance company, as reported.

 

In its three-and-a-half years of existence, Monument has signed a total of 17 transactions, three of which have yet to close, he said. These include the acquisition of a life insurance portfolio from Allianz [ETR:ALV] in Belgium and Charles Taylor’s Isle of Man operations, both announced in August, as well as an undisclosed transaction in Ireland, he noted. When those pending transactions close, the company will have nearly EUR 10bn worth of assets, he added.

 

Monument is interested in savings businesses with long-term guarantees, which may include annuities or traditional savings plans, Maske said. It will also look at unit-linked products, given the “clear case” to consolidate subscale players in the space, he said.

 

Targets on the savings side can go up to EUR 2bn in terms of the size of their assets, while unit-linked targets can be as large as EUR 5bn in assets, he said. However, the group can aim above that range if a particularly good opportunity comes along, he added.

 

The first phase of its growth strategy focuses on acquiring a foothold and building scale in Ireland, Benelux, along with Channel Islands and the Isle of Man, he said. For this, it can acquire other companies, insurance portfolios or transfer a portfolio into one country from another, he added.

 

It is also exploring Italy and Spain as likely markets for expansion, Maske said. It is speaking to regulators and advisers in those markets as it looks to promote the company, he said. However, Ireland and Belgium are the “hottest” markets for deal-making, he said. For example, some Belgian insurers are feeling the impact of COVID-19 combined with a low interest rate environment, he added.

 

While some sale processes were put on hold earlier in the year amid the pandemic, these are expected to come back at some point as the strategic drivers behind them persist, particularly low interest rates, he said. The outlook for future transactions going into next year remains strong, he noted. The group will also be busy integrating acquisitions for the next year or two, he added.

 

Monument only carries out about a quarter of the transactions it considers, with deals generally resulting from competitive auction processes, Maske said. It often receives inbound queries about possible M&A opportunities in markets where it has already established a presence, he said.

 

While it does not usually hire financial advisers, it could hire one depending on the situation, Maske said, noting that it lined up ING to assist on its recent deal with Allianz. It is open to pitches from investment bankers, he said. It often appoints other types of advisers, such as legal and actuarial, and has its own network in each country, he noted, adding that it always handles negotiations around pricing and investments itself.

 

The group uses a mix of equity and debt financing for M&A deals, Maske said. It has available capital and is backed by a group of six lenders, as well as supportive shareholders that can provide further funding for “jumbo” deals, he said, declining to specify the size of its war chest. Post-acquisition, it looks to implement strategies to deliver savings and improve asset liability matching for investments, among other possible actions, he added.

 

Its investors include Hannover Re [ETR:HNR1], Enstar Group [NASDAQ:ESGR] and E-L Financial [TSE:ELF]. The investors have a long-term view and are not expected to exit anytime soon, Maske said. A sale of the business or a stock market listing are not currently on the cards, he added.

 

The group’s revenue can vary notably every year subject to M&A transactions, he said, declining to disclose figures. It had a good year so far and expects to book a significant profit, he added.

 

The impact of COVID-19 on insurance claims has been roughly offset between the company’s pure life and annuities business, he said. The company has also not experienced any particular issues around solvency because it matches investments closely, he added. 

 

While life insurers may experience higher claims from life policies due to the pandemic, they may also pay out fewer annuities in turn, a sector lawyer previously told this news service.

 

Monument operates in the life insurance space, offering reinsurance for long-dated liabilities and acquiring insurance businesses, which are often in run-off. It is present in 10 countries. Its past transactions include the purchase of Barclays Insurance and Barclays Assurance in 2017, and Inora Life from French banking group Societe Generale [EPA:GLE] last year, both in Ireland.