Insurance takeovers: The next big thing

At least two insurance firms are for sale, while many foreign and local buyers are setting the stage for consolidation in this sector, insurance industry officials say.

HNB Assurance PLC has approached many local parties to buy them over while Janashakthi Insurance PLC’s (JINS) life arm is being courted by multinational insurer, Germany’s Allianz who in February bought its general insurance business, they say.

Insurance sector has seen many deals in the past four years and this year will see much consolidation, analysts predict. The insurance sector has got global insurance players eyeing local insurers, analysts say.

JINS’s general arm went in a Rs. 16.4 billion deal to Allianz. Earlier this month Japan’s Mitsui Sumitomo Insurance Company Ltd increased its stake in Ceylinco Insurance PLC to 10.5 per cent.

Mitsui Sumitomo held 6 per cent stake as of end December 2017. Sumitomo is now the third largest shareholder in Ceylinco Insurance after Global Rubber Industries (22.25 per cent) and Banque Pictet and Cie SA (12.73 per cent). Ceylinco Insurance PLC saw a total of 289,717 shares traded on Monday and this was a purchase by Tundra Frontier Opportunities Fund.

Insurance was a sector that has always been trading at book value ( the amount that the shareholder will get for each share after selling out all assets and paying liabilities), but the value of recent transactions such as the JINS one for Rs. 16.4 billion saw that these stocks should be trading at a higher multiple, according to analysts.