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    ZURN   CH0011075394

ZURICH INSURANCE GROUP LTD

(ZURN)
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European Insurers Gear Up to Do Deals

11/23/2020 | 05:45am EDT

By Julie Steinberg

LONDON -- European insurers have weathered the crucible of the coronavirus pandemic and are ready to do some deals.

Last week a Canadian and Danish insurance consortium agreed to buy the U.K.'s RSA Insurance Group PLC for GBP7.2 billion, equivalent to $9.6 billion. And on Friday, Zurich Insurance Group AG said it is in talks to acquire MetLife Inc.'s U.S. property and casualty insurance business.

The RSA deal, which pushed up the share prices of some insurance stocks when the proposal was announced on Nov. 5, portends further mergers and acquisitions, industry participants say.

That is because the pandemic forced insurers of all stripes to take a hard look at their businesses as losses from claims piled up, bringing weaknesses into sharp relief. Some are recognizing the need for scale to cement profitability, while others are pruning units where they can't make enough money to compete. Bankers say more deals are brewing.

Another factor that could ignite a shopping spree: the regulatory environment. The European Insurance and Occupational Pensions Authority in April urged the industry to temporarily suspend dividends and share buybacks. As a result, cash has accumulated on some companies' balance sheets, which dilutes return on equity and is feeding the need to seek combinations.

Insurers' share prices reflect a tough year littered with losses related to Covid-19 and the continuing impact of low interest rates on their investment portfolios.

The Euro Stoxx Insurance Index is down 15% this year, lagging behind the broad Euro Stoxx 600 stock-market index, which is down 6%. Lloyd's of London, the U.K. insurance and reinsurance market, said in September it expects to pay out up to GBP5 billion, equivalent to $6.6 billion, in coronavirus-related claims this year.

Some insurers reason the larger they are, the better. "The RSA deal shows the importance of having scale to drive profitability for the sector," said Tryfonas Spyrou, an insurance analyst at Berenberg. Large insurers can operate in multiple markets, negotiate better pricing with suppliers and have access to more data, which allows better pricing of risks, he said.

Consolidation has been happening in the U.S. as well.

Insurance giant Allstate Corp. in July agreed to acquire rival National General Holdings Corp. for about $4 billion in cash, though discussions began before the crisis.

Private-equity firm KKR & Co. the same month said it would buy retirement and life-insurance company Global Atlantic Financial Group Ltd. for more than $4.4 billion.

Italian insurer Assicurazioni Generali SpA last week said it has up to EUR2.5 billion, equivalent to $2.96 billion, to spend on "acquisitions that are fully aligned to our clear strategic priorities." The insurer in June took a 24% stake in an Italian insurance company backed by Berkshire Hathaway Inc. that had been told by Italian regulators to boost its capital.

U.K.-based insurer Aviva PLC has been trying to sell its operations in France, according to people familiar with the matter. A spokesperson declined to comment on a potential sale and pointed to previous statements by the company that it would focus on its businesses in the U.K., Ireland and Canada, and that it was in the early stages of developing its strategy for its continental European business.

Dutch insurer Aegon NV in August said it would review the more than 20 countries in which it operates and concentrate on countries and business lines where it could create the most value.

Belgian insurer Ageas NV in recent months has increased its stake in its joint ventures, and recently said it has EUR700 million to EUR800 million in cash.

Some insurers are operating warily. Giulio Terzariol, German insurer Allianz SE's chief financial officer, said earlier this month that if buybacks aren't permitted in 2021, the insurer would look at deploying capital. But he said the company wouldn't buy "suboptimal assets" for fear of regretting it for the next 10 years.

--Ben Dummett contributed to this article.

Write to Julie Steinberg at julie.steinberg@wsj.com

(END) Dow Jones Newswires

11-23-20 0544ET

Stocks mentioned in the article
ChangeLast1st jan.
AEGON N.V. 1.06% 3.632 Real-time Quote.11.10%
ALLIANZ SE 0.57% 211.5 Delayed Quote.5.38%
ASSICURAZIONI GENERALI S.P.A. 0.15% 16.815 Delayed Quote.17.92%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.10% 0.622 Delayed Quote.-1.09%
AVIVA PLC 1.39% 393.1 Delayed Quote.20.88%
BERKSHIRE HATHAWAY INC. 0.41% 420676 Delayed Quote.20.46%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.26% 0.676114 Delayed Quote.4.40%
KKR & CO. INC. 2.18% 63.81 Delayed Quote.54.24%
METLIFE, INC. 1.02% 58.23 Delayed Quote.22.77%
RSA INSURANCE GROUP 0.00% 684.2 Delayed Quote.1.00%
STOXX EUROPE 600 0.46% 463.84 Delayed Quote.15.71%
THE ALLSTATE CORPORATION 1.62% 132.52 Delayed Quote.18.63%
ZURICH INSURANCE GROUP LTD 0.00% 367.4 Delayed Quote.-1.63%
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Financials
Sales 2021 47 942 M 52 900 M 52 900 M
Net income 2021 4 077 M 4 498 M 4 498 M
Net Debt 2021 4 293 M 4 736 M 4 736 M
P/E ratio 2021 13,5x
Yield 2021 5,76%
Capitalization 54 557 M 60 239 M 60 199 M
EV / Sales 2021 1,23x
EV / Sales 2022 1,16x
Nbr of Employees 52 930
Free-Float 98,5%
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Mean consensus OUTPERFORM
Number of Analysts 21
Last Close Price 367,40 CHF
Average target price 417,28 CHF
Spread / Average Target 13,6%
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Managers and Directors
Mario Greco Group Chief Executive Officer
George Quinn Group Chief Financial Officer
Michel M. LiŔs Chairman
Kristof Terryn Group COO & CEO-North America Region
Peter Giger Group Chief Investment & Risk Officer
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