Axa plans €1.2bn life sale to private equity group

Published in: Corporate strategy, Rest of Europe

Companies: Cinven, Axa, Axa Life Europe, Generali Leben, XL Group, Partnership, Just Retirement, Viridium

Axa is to sell its European variable annuities carrier, Axa Life Europe (ALE), to Cinven for an expected €1.2bn ($1.4bn).

It would mark the second major M&A this year for the French group, after it announced buying XL Group in March, and the second recent life acquisition by private financiers Cinven after its deal for Generali Leben.

Axa said today the offer it had received from Cinven was irrevocable and would generate €1.17bn of cash, comprising €925m for ALE’s shares, plus a capital distribution from ALE to Axa of €240m.

Gérald Harlin, Axa’s deputy chief executive and chief financial officer, said the deal “represents another important step towards improving the balance between technical and financial margin”.

Like many of its peers across Europe, Axa sees the future of its life business in unit-linked savings products where customers bear the investment risk, rather than capital-intensive guaranteed products.

Axa expects its group solvency coverage ratio to rise by 2 percentage points from the transaction. The ratio at the start of the year was 205%. It reports first half figures tomorrow.

Based in Dublin, ALE manages about 250,000 insurance contracts with about €5bn of reserves, distributing through Axa’s networks in Germany, France, UK, Spain, Italy and Portugal. It has been closed to new business since 2017.

ALE’s French and UK business operated under the brand Secure Advantage.

In 2017, ALE generated €341m of revenues, down 30% from €488m in 2016, according to its solvency and financial condition report.

Gross written premium in 2017 was €310m, mainly (€221m) comprising regular premium contracts, but also with €5m of single premium and €84m of reinsurance premium.

German insurance contracts account for more than 70% of ALE’s portfolio, Axa said.

As well as its involvement in Germany’s life sector through Viridium Group – which is partnering with Hannover Re on the Generali Leben deal - Cinven was behind Guardian Financial Services when it bought £1.7bn ($2.9bn) of pension annuities-in-payment liabilities from Phoenix Life.

The private equity firm also acquired in 2008 the UK enhanced annuity specialist Partnership, which went on to merge with rival Just Retirement.

Axa expects to complete the divestment by the end of this year or early in 2019.

David Walker