Focus on consolidation opportunities

European private equity firm Cinven today announces that it has agreed to acquire ERGO Italia, a subsidiary of the German insurance group ERGO Group.  Cinven’s strategy is to grow ERGO Italia both organically and through acquisition, focusing on consolidation opportunities in the Italian insurance market.  The consideration for the transaction is not disclosed.

ERGO Italia, headquartered in Milan, operates both life and non-life insurance products through its life company ERGO Previdenza and its non-life company ERGO Assicurazioni respectively. The insurance group distributes its savings and personal line products through a network of 160 agencies and approx. 2,000 distributors across Italy.  Its life business (ERGO Previdenza) manages approx. 600,000 life policies (mainly traditional products) with €5.1 billion of gross reserves and a net income of €38 million.   Its non-life business (ERGO Assicurazioni) manages more than 350,000 policies and approx. €195 million of gross reserves. Founded in 1986, the ERGO Italia group employs approx. 280 people.

Cinven is a well-capitalised private equity firm with €11.5 billion of assets under management and is currently investing the Fifth Cinven Fund, which closed in 2013 with €5.3 billion of commitments.  Cinven has an outstanding track record of investing in, growing and consolidating insurance companies in Europe – including Partnership Assurance and Guardian Financial Services (UK) and Heidelberger Leben (Germany). Cinven has successfully invested in Italy through its investment in Avio, a leading aerospace business with more than 5,000 employees which has shown strong organic growth under Cinven’s ownership as a result of investment in R&D and personnel.

Cinven’s Financial Services and Italian teams identified ERGO Italia as an attractive investment opportunity based on:

  • the Italian life insurance market is the fourth largest in Europe with approx. €530 billion of gross reserves and among the fastest growing in Europe with a growth rate of c.28% per annum over the last two years, driven by the Bancassurance distribution channel;
  • consolidation opportunities within the market, particularly amongst the smaller and medium-sized companies given economies of scale; and a refocus on core lines of business and geographies by some of the foreign insurers operating in Italy;
  • ERGO Italia’s stable cash flow and attractive new business supported by Cinven’s planned investment in process efficiencies to improve existing and future customer services and into expanding its distribution channels;
  • its ability to scale these insurance businesses rapidly. Cinven has completed five successful add-on acquisitions of life insurance portfolios in Europe in aggregate across Guardian Financial Services (the first within six months of completion) and Heidelberger Leben (two completed within the first year); and
  • Cinven’s track record of successful organic and acquisition growth in the insurance sector in Europe including Partnership Assurance (UK), one of the fastest growing life assurance companies in the UK under Cinven’s ownership.

Caspar Berendsen, a Partner at Cinven, said: “We see enormous potential for ERGO Italia given the opportunity for the Group to lead the Italian insurance market’s consolidation.  We have a vision for ERGO Italia to become a market leader in Italy by acquiring scale, products and access to customers. We intend to focus on new business growth through the existing distribution channels, as well as through acquiring in the Bancassurance channel, and by expanding the product portfolio.”

Eugenio Preve, a Principal at Cinven, added: “We are excited to be acquiring ERGO Italia to support its growth in the Italian insurance market. This investment is the result of Cinven’s ongoing focus on the Italian market and will allow us to benefit from the experience accumulated in other insurance investments in Europe by pursuing further add-on acquisitions in the coming years.”

This transaction is Cinven’s first investment in Italy since its acquisition of Avio in 2006.  It also represents Cinven’s ninth investment in life insurance in Europe including bolt-on acquisitions.

Completion of the ERGO Italia transaction is subject to approval by IVASS, the authority responsible for regulating the Italian insurance market, as is customary.

Advisors on the transaction included: advising Cinven – Rothschild (financial), Freshfields (legal), PwC (accounting), Bain (commercial), KPMG and Deloitte (tax).