EUROPE - Vienna Insurance Group (VIG) is aiming to strengthen its CEE life insurance offering, which includes pension products, with the acquisition of Erste Bank's insurance arm.
Vienna Insurance Group, formerly known as Wiener Städtische and now the largest Austrian insurer, today confirmed it will acquire Austrian bank Erste Bank's insurance business, which covers the markets in Austria, the Czech Republic, Slovakia, Hungary, Croatia and Romania.
The €7.8bn insurance business, based on its balance sheet total at year-end 2006, is being sold for €1.4bn which the Vienna Insurance group intends to partially finance the deal through a new share capital raising.
"We think it is a very good point in time to issue shares on the capital market as there is money around but people are cautious," the group's CEO Günter Geyer suggested at a press conference in Vienna this morning.
"People know we are a group that has performed well over recent years and they have known us for a long time so they will be happy to subscribe for shares," Geyer argued.
He noted Standard & Poor's has upgraded the Vienna Insurance Group's A+ rating from "outlook stable" to "outlook positive" on the back of the deal.
Geyer added the group, which reported a pre-tax profit of €437m - up 36.2% on 2006 - also has reserves of €1bn.
Erste Bank suggested in a statement the deal was another step in the "long-running, excellent cooperation" between the bank and the insurer.
"Furthermore we are securing the potential for cross-selling among the large client base of the Vienna Insurance Group in the CEE region," said Erste Bank CEO Andreas Treichl.
Both sides have signed a 15-year contract on a "preferred partnership", making Erste Bank the bank for all clients of the Vienna Insurance Group in the region.
Furthermore, Erste Bank or its respective subsidiary companies in each country will keep a 5% share in the local insurance business.
"This enables Vienna Insurance Group to capitalise on the attractive growth prospects in the CEE life insurance markets, driven by strong economic growth, rapidly increasing life insurance penetration levels and pension reforms in the region," said VIG.
That said, a spokesman for the Erste Bank told IPE the pension fund business run by BCR bank in Romania - in which the Austrian bank holds a majority stake - is not affected by the deal.
He explained the fund is run by the banking and investment side of the business, not the insurance group which is sold to Vienna Insurance Group.
The Vienna Insurance Group is already running several pension funds in the region via acquisitions of local fund managers and insurers including Omniasig in Romania and Doverie in Bulgaria. (See earlier IPE story: Bulgarian pension fund Doverie taken over)
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