Radical change for insurance

Greece’s insurance sector is about to undergo an extensive realignment, starting with the mergers of industry leaders. Despite important developments in this direction in recent years, the industry can still be said to be in a state of irrational fragmentation. The pace in the New Year will be set by the completion of the merger between Ethniki General Insurance (EGI) and Alpha Insurance, in line with their banking parent companies. The boards of directors of the two companies yesterday decided to propose to shareholders the absorption of the latter by the former, through a share swap scheme after advisers and actuaries have carried out the relevant valuations. The merger will lead to the creation of an international insurance group which will be in a position to operate functionally and strategically in the competitive environment of the single European market, with the region of southeastern Europe being a strategic development target, said an EGI press release. The company estimates the merger will give it a 25-percent Greek market share. Being a member of the country’s biggest banking and financial group will further enable it to develop bancassurance business, achieve economies of scale in investment and information technology, rationalize its structure and improve human resource management. Its ability to retain merged EIG’s leading market share will depend on the performance of its nearest competitor, Interamerican, which is drawing a three-year business plan after its acquisition by the Dutch-based Eureko group. The plan envisages the doubling of production over the next three years to 860 million euros. A possible deal emerging from the ongoing discussions of Piraeus Bank with the Dutch ING group and Nationale Nederlanden (which has a market share in life insurance of more than 15 percent) would boost the Greek bank’s weight in the insurance market and bolster the prospect for a deal with state-run Agricultural Bank. Such a deal is being widely discussed and, according to sources, is one factor slowing a decision for a partnership with the Dutch group. Agricultural’s two insurance subsidiaries, which have announced their own merger, have entered into a partnership with Italian Bank San Paolo. On the other hand, the possibility of an alliance between Commercial Bank and Agricultural would no doubt lead to a very strong insurance scheme, as Commercial’s two subsidiaries control market shares of about 10 percent and 5 percent in the general and life insurance sectors respectively. However, the bank’s working relationship with France’s Credit Agricole would seem to pose an obstacle, as both sides have declared their desire to deepen and enlarge their partnership through a new bancassurance company. The role of EFG Eurobank group could be described as unclear but potentially significant, as its EFG Insurance member remains relatively small. The Aspis group, finally, seems to be seeking to consolidate its position, now numbering eight companies after the acquisition of eight small to medium-size firms in recent years. These account for about 12 percent and 8 percent market shares in the life and general insurance sectors respectively. The group assigns high priority to a consolidation process that would rationalize activities and reduce costs.

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