Is Zurich on the acquisition trail?

by Paul Lucas 29 Mar 2017

Is Zurich on the acquisition trail?

One of the world’s major insurance firms may soon be on the acquisition prowl – at least if recent speculation is to be believed.

According to reports, Zurich Insurance Group AG, which has a New Zealand office in Auckland, will ask investors for permission to mint up to 45 million new shares this week – a rise from its existing permitted level of 10 million shares – in an effort to raise money quickly.

Italian newspaper Il Sole had suggested that the firm was looking at an eight billion euro fundraising – but the company denied that it is looking to seek new capital. Now, however, Bloomberg’s Gadfly has speculated that the company may be weighing up potential M&A moves.

The report points to the fact that the firm’s organic capital generation is “unlikely to strengthen rapidly in future” with CEO Mario Greco looking to pay out 75% of earnings in dividends – and as such, it suggests that Zurich will want to move quickly to shore up its balance sheet should a shock occur.

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“As things stand, there’s no obvious problem,” it writes. “Greco’s main focus is restructuring Zurich to make it more efficient. Investors have warmed that story, pushing the shares up more than 40% over the last year.

“But Greco can’t cut Zurich to greatness, and he will want to be ready to take advantage of opportunities that arise.”

The column goes on to suggest that revisiting a bid for RSA Insurance is “hard to see”, but that smaller deals “might make sense.” In particular it speculates that while Generali is not for sale, it is looking to dispose of some assets – and that might prompt interest from the Swiss giant.

While this is, of course, all speculation, with Aviva admitting it has too much capital and Allianz spending on share buybacks, there may be interesting times ahead for the insurance industry.

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