German life sector closed-book consolidation to continue despite setbacks

Written by Adam Cadle

05/06/2024

The recent collapse of two German life insurance closed-book transactions does not signal a weakening in prospects for closed-book consolidation in Germany, Fitch Ratings has said.

“We view Viridium and Athora’s failed deals to buy the closed German life portfolios of Zurich and AXA, respectively, as exceptions due to specific circumstances rather than symptomatic of broader problems that could hinder other deals,” the ratings agency added.

The disposal of closed funds in the German life sector is expected to continue as insurers start to find the costs of managing shrinking portfolios an increasing burden and the market for consolidators matures. However, increased regulatory scrutiny “could complicate some deals”, Fitch Ratings said, and forecasting market volumes on a calendar-year basis is difficult as “they may be skewed by a handful of large transactions”.

Viridium said in January that its planned acquisition of the Zurich portfolio had been called off, citing its ownership as a stumbling block. The Germany-based insurer is majority-owned by Cinven, the private equity firm that owned the Italian life insurer Eurovita when it developed a capital shortfall last year. The Italian insurance regulator intervened and Eurovita’s policies were eventually transferred to a newly established entity owned by several other insurers.

The Athora-AXA transaction was called off in April, with Athora citing changed financial conditions. Higher interest rates since the initial agreement in July 2022 are likely to have led to a reassessment of the originally announced €570m sale price. AXA has now decided to retain the business.

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