CNP Insurance Cyprus headquarters in Nicosia
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HB eyes insurance crown with CNP deal

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€182 mln takeover to boost life and general market share to 30% and 23%

 

Hellenic Bank is set to dominate the insurance market after announcing a landmark takeover of the local operations of the French provider CNP.

The deal worth €182 mln will help it leap to the forefront of the sector and secure a whopping 30% share of the life insurance market and a 23% share of the general insurance sector.

This puts Hellenic Bank’s insurance business ahead of Bank of Cyprus that, based on its 2023 annual report, enjoyed a 27% market share with its EuroLife subsidiary and 14% of the general insurance market with Genikes Asfaleies.

This is reminiscent of the Bank of Cyprus-Laiki Popular Bank duopoly of a decade ago, when the pair dominated the banking, as well as the insurance markets, the latter through its Laiki Asfalistiki and Laiki Cyprialife, that eventually became CNP Insurance and CNP Cyprialife.

When Laiki Popular collapsed and caused the 2012-2013 banking crisis, primarily due to its disproportionate exposure to toxic Greek Government Bonds, the bank and insurance operations were burdened on Bank of Cyprus, which had been trying since then to offload its stake in CNP.

In 2019, the French parent CNP Assurances S.A. bought BOCY’s 49.9% stake in CNP Cyprus for €98 mln, making it a wholly owned subsidiary.

Despite CNP Cyprus being a profitable operation, the French parent had been considering exiting the local scene altogether due to the small size of the market.

At around that time, Hellenic Bank was exploring the potential of expanding its insurance footprint, especially in the life market, to enhance its own products – Pancyprian Insurance and Hellenic Alico Life. It entered into a strategic cooperation with CNP Cyprus to sell the latter’s life products within the retail banking business. HB also has an 18.6% stake in Universal Life.

Hellenic had three options – organic growth, takeover of a local insurance provider, or a franchise cooperation with a German insurer.

The first option would have taken too long to develop, especially with the bank’s takeover by Eurobank SA in the pipeline speeding up Hellenic’s need to diversify in bancassurance, while a franchise deal was not deemed feasible. This left the only choice to take over a significant local insurer, and by January this year Hellenic was the frontrunner to take over CNP, with the only other remaining bidder being ERGO Insurance of Germany.

Eurobank was not too keen to sell its own insurance products in Cyprus through its Eurolife FFH Insurance subsidiary, thus leaving the CNP deal the most attractive.

Insurance professionals explained to the Financial Mirror that the impact on the Cyprus insurance market will be minimal, but will be felt only after Hellenic starts selling bancassurance products more aggressively.

“With this transaction, the bank will significantly strengthen its insurance operations and become a leading financial services group with strong presence in the banking and insurance sectors,” said Interim CEO, Antonis Rouvas.

“It will offer significant growth potential and we aspire to combine the strengths, the know-how and valuable experiences of all staff of CNP Cyprialife, CNP Asfalistiki, Hellenic Life Insurance and Pancyprian Insurance to modernise and upgrade our services and to expand our insurance product range to meet our customers’ needs and offer upgraded service to the market.”

Exclusive negotiations

Announcing the CNP deal this week, Hellenic Bank said it had entered into exclusive negotiations and a put option with CNP Assurances for the acquisition of its subsidiary CNP Cyprus Insurance Holdings Limited, which operates in Cyprus and Greece through CNP Cyprialife, CNP Asfalistiki, CNP Zois SA and CNP Cyprus Properties Ltd.  Under the put option, CNP Assurances has the option to sell and Hellenic Bank is irrevocably committed to acquire CNP Cyprus Insurance Holdings if this option is exercised.

In accordance with the French law, the next step will be the information and consultation of CNP Assurances’ European works council. The transaction would then be subject to regulatory approvals (including by the Commission for the Protection of Competition) and it is expected to be completed by the first quarter of 2025.

Up until the end of last year, CNP Cyprus Insurance Holdings offered life and general insurance products through its network of independent agents. It had 330 employees and generated €236 mln of gross premiums with market shares of 24% and 15% in life and general insurance, respectively, according to the Insurance Association of Cyprus.

Upon the completion of the transaction, the bank said it is expected to have a leading position in the insurance market, with shares of 30% and 23% in life and general insurance, respectively.

The total consideration is expected to be €182 mln, representing a price to book value ratio of 1x (P/BV) with an estimated capital impact of 2.6 percentage points.

Taking into account the bank’s strong capital position with a total capital adequacy ratio of 28.4% as at 31 December 2023, the pro-forma capital adequacy ratio is expected at 25.8%, upon completion, well above the minimum regulatory requirements.

Furthermore, the transaction is expected to create revenue synergy opportunities, thereby increasing the insurance income and enhancing the quality of the bank’s profitability.

Until completion of the takeover and regulatory approval, the existing operations of the involved companies remain in place and the companies will continue to operate autonomously and independently.

The insurance contracts of the insurance companies, CNP Cyprialife and CNP Asfalistiki, as well as Hellenic Life Insurance and Pancyprian Insurance remain in effect and the benefits, rights and obligations of customers are not affected.

The bank was advised on mergers and acquisitions (M&A) by BNP Paribas, by Ioannides Demetriou LLC on legal matters, by Cronje & Yiannas Actuaries and Consultants on the actuarial and HR matters, and by Deloitte on financial and accounting matters.