Another Insurance M&A in CIS

Not that we are particularly partial to Axa, but recently all M&A rumours in the region are about the French group. Over the weekend, the CIS insurance market mulled over the possible sale of an interest in Ukrainian leader Oranta, and Axa is said to be among the main bidders, with VIG and Uniqa also on the list, our Ukrainian sources state. Russia-based investment group Troika Dialog is reported to organize the deal.

A well informed market professional in Kiev told our blog that Axa is about to sign the agreement to acquire a share in Oranta for UAH400 million, or approximately EUR37 million.

Our sources estimate the total value of the insurer at “no less than USD100 million”. It’s likely that the interest in question currently belongs to Ukrainian mogul Viktor Pinchiuk.

If the information is indeed correct, Axa will become the largest insurance player in Ukraine, leaving other companies far behind.

In the first nine months of 2010, Axa generated a premium income of UAH537.7 million (EUR52.2 million), up 7.8% on 9M 2009. Oranta’s result for the first three quarters was UAH465.2 million (EUR45.1 million), down 13.5%. The two companies occupied the second and the third place, respectively – but together they could easily beat the market leader Kremen, which in 9M 2010 wrote UAH830 million (EUR80.5 million) in premium.

First Russian Insurance M&A in 2011

Axa has just increased its share in Reso-Garantia, one of the largest players in the Russian insurance market, two industry sources have independently told our blog. Axa's media department denied the info, but the sources are too informed to simply ignore them.

Besides, under the 2008 agreement, the French group acquired not only 36.7% of Reso but also the option to buy out the remaining interest in 2010 or 2011, so the rumour seems twice as plausible.

In late 2010, Axa bought 51% in Azerbaijani-based MBASK (a top-five company) and 80% in Belarusian B&B insurer (a 10% market share, #2). Since 2007, the French also own a 50% stake in Axa Ukraine and Axa Insurance (11% of the Ukranian market, #1). If the Reso rumour proves true, Axa has become the largest foreign insurance investor in the CIS region putting Allianz on the second place. Quite an achievement for the group that until recently was considered an also-ran.

Axa's recent acquisitions in Romania and Serbia (Omniasig de Viata and Credit Agricole Life Serbija) only support the impression that the French are firmly intended to fight for leadership in the whole New Europe region.

For Love of the Game

I can basically feel how much Moody's rating agency is puzzled with decision-making at Azerbaijani-based International Insurance Company (IIC). And who wouldn’t be - the IIC approach to financial management is, let’s say, rather unconventional.

It took me hours to find the best way to describe the mind-blowing strategy, and here is what I have come up with.

Blow 1: "IIC recorded a net loss of AZN2.98 million in 2009 (US$3.71 million), driven principally by a AZN2.5 million sponsorship provided to an Azeri football team”.

Blow 2: “ The amount of AZN2.5 million is equal to 12% of the company's assets at year-end 2009 and 38% of total equity”.

Blow 3: “Subsequent to the year-end the company has also committed to further sponsorship of AZN622,000".

and finally Blow 4: Somehow, the insurer "expects some of the sponsorship to be repaid".

Well, maybe I am too hard on the Azeri guys. Maybe they have a nice explanation. For example, they are inspired by Aon Benfield. Or Abramovich. Or baron Pierre de Coubertin.