Generali/Intesa could benefit from asset management tie-up – bankers
- Asset management combination could fend off takeover attempts
- Industrial collaboration could take form of joint venture
Intesa Sanpaolo [BIT:ISP] and Assicurazioni Generali [BIT:G] could benefit more from a tie-up between their asset management businesses than a full merger, according to three sector bankers.
While a sensible solution could consist of some kind of collaboration in asset management, Generali is not in talks with Intesa at this stage, a person familiar with the insurer said.
Intesa could increase its presence in the asset management segment through a joint venture with Generali along the lines of the now defunct tie-up between Societe Generale [EPA:GLE] and Amundi [EPA: AMUN], the first banker said.
Such a scenario could also be a solution to both Generali’s aim to stay independent as well as to the Italian government’s concerns about keeping the insurer in Italian hands, the second banker said. Generali is considered a key asset in Italy as it is a major buyer of national debt, therefore a combination of the asset management of Intesa and Generali would likely fend off any potential takeover attempts from foreign buyers, the banker added.
Intesa’s asset management division had assets under management (AUM) of EUR 236.37bn as of 30 September 2016, while Generali’s asset management division’s AUMs were EUR 47.5bn as of 31 December 2016.
Last week, Generali Chairman Gabriele Galateri di Genola said that there was the possibility of industrial combinations with Intesa, seeming to rule out any type of merger with the lender, according to reports.
Galateri, CEO Philippe Donnet, and leading Generali shareholders are not interested in industrial alliances in Generali's core insurance activities, which would restrict industrial alliances with Intesa to asset management and financial advisory services for retail customers, according to media reports.
If Generali and Intesa were to team up with another asset management firm, they could together become a credible competitor to Pioneer, which was bought last year by French asset management company Amundi, the person and the second banker said.
Generali would likely take the lead in any such plan, given the size of its asset management business, the person said.
However, if the two parties were to agree to form a joint venture, a gating issue might be the mix of Generali’s assets deployed in its external business versus insurance business, the first banker reasoned.
This is because profit margins on asset management derived from insurance tend to be less profitable than those originating from external clients, including because life insurers often have specific and limited mandates, he said.
The question would therefore be whether Intesa would be as interested in a tie-up if much of Generali’s asset management business comes through the insurance side, the second banker added.
Additionally, while joint ventures are typically complex and short term, Intesa and Generali would likely need to find a clear long-term plan and some exit strategy, the first banker said.
On the other hand, an acquisition of Generali by Intesa would not be that logical, said the first and the third banker.
The bancassurance business model has become less popular as financial institutions increasingly seek to separate their banking and insurance activities, the same two bankers agreed.
Synergies between banking and non-life insurance have proved to be limited, and banks in some cases have had various issues dealing with the legacy portfolios of life insurance businesses, the first banker said.
An Intesa spokesperson referred to a statement by Intesa Chairman Gian Maria Gros-Pietro, who said Intesa will take in consideration and evaluate Galateri’s comments on a potential industrial combination.
Generali declined to comment.