Despite the fact that AXA UK is one of the few AXA businesses with a dedicated M&A team and that deal-making is “part of the DNA” of the business, Maso y Guell Rivet stands behind group statements insisting that there will be no large deals in the UK. As at Aegon, only bolt-on buys are considered. The group’s main fire power will be reserved for emerging markets, as seen in recent acquisitions in Russia, Mexico and Turkey. “Bolt-ons in the distribution sector meet our UK strategy,” the CFO says. “We see, even more than a year or two ago, that there is no point in contemplating any big move in the UK market in particular.”
While AXA UK uses acquisitions to position itself in new channels, Swiss peer Zurich Financial Services (ZFS) has placed bolt-on M&A at the heart of its international growth strategy. In January, it entered Turkey with the takeover of general insurer TEB Sigorta. The deal was the culmination of a year of small acquisitions, including insurers and insurance intermediaries in the UK, Germany, Spain and Russia.
“Something I really like is that the common market in Europe offers insurers the possibility to build a Europe-wide business and go away from the country-specific locations,” says Dieter Wemmer, CFO of the Zurich-based insurer since March 2007. “Traditionally insurers are pretty local, and the opportunities of the common market have not been fully discovered by the insurance industry.”
European expansion is a definite driver behind ZFS’s recent deals. As at Aegon, organic growth is important in mature markets, but M&A has helped the group get a foothold in emerging economies, says Wemmer. Lucky, then, that he knows his stuff when it comes to deal-making. During a varied 22-year career with the group, he spent the four years from 1999 as ZFS’s M&A director. Much of 2002 and 2003 involved a restructuring aimed at focusing the business on specific markets, improving operational efficiency and strengthening its balance sheet. For Wemmer, that meant revisiting businesses the group had bought in the 1990s to see how they had been integrated, offloading any that no longer fitted with the turnaround vision.
That experience gives Wemmer useful insight into the deal-making going on in the sector today. “I had done a lot of disposals for the group in the clean-up phase,” he says. “I’ve certainly lived through complex transactions and probably can still help people with a lot of operational advice and also looking at the risk profiles on what we are doing.”
However, Wemmer says he isn’t as hands-on with acquisitions as he was. Since January, former CEO of Swiss reinsurer Converium, Inga Beale, has acted as head of M&A. While Wemmer keeps close tabs on deal-making, he’s taking a step back to gain perspective on whether a transaction is worth chasing. The finance chief says that the group, which had gross written premiums of $73 billion (€46 billion) last year, will not forsake its return target for an acquisition. “It’s a balancing act,” he adds. “Of course you want to expand the group and have to be bold about doing transactions and taking risks. But the risk needs to be measured.”