Ageas shares push higher on esure deal

By Ryan Hewlett

April 14 - (The Insurer) - Ageas shares rose more than 2% in early trading on Monday after the Belgian insurer confirmed it had struck a 1.3 billion pound ($1.7 billion) deal to buy rival esure from private equity group Bain Capital.

News of the transaction, which will be financed through a combination of surplus cash and fresh debt and/or equity, saw shares in Ageas rise 2.2% to 52.90 euros ($60.30) apiece shortly after the opening bell on Monday.

Shares in Euronext Brussels-listed Ageas are now trading more than 11.8% higher in the year to date and are more than 66.6% up from the pandemic-induced market lows of March 2020.

The swoop for esure will create a top-three UK home and motor insurer and will enable Ageas UK to accelerate its distribution strategy and widen its underwriting footprint. The insurer said the acquisition would bring top-line growth of 3.25 billion pounds by 2028.

The purchase price represents a 1.3x multiple of esure's insurance revenues and a 22x multiple on its full-year 2024 net earnings. Ageas is aiming for 115 million euros in pre-tax synergies.

Investment bank KBW welcomed the deal. Analyst Michele Ballatore highlighted that the acquisition multiples are in the range of 10x-12x, with earnings per share accretion expected to be beyond Ageas' current 6-9% EPS growth target.

“We believe that the current transaction will strengthen materially Ageas' positioning in the UK market, thanks to a better access to price comparison website platform,” said Ballatore.

“In addition to the agreement reached with Saga, the group will reach the top three position in the UK motor and home market. This is expected to enhance the group diversification profile, in light of its exposure to Asia (mostly China), which is experiencing material volatility in both numbers and sentiment.”

The transaction marks a major victory for Ageas, which made two unsuccessful bids for Direct Line Group last year in an attempt to increase its exposure to the UK personal lines market.

More recently, Ageas struck a deal in December to acquire the underwriting business of Saga and form a 20-year partnership with the UK motor and home insurer.

Under the terms of the transaction, Ageas will take on price comparison website distribution, pricing and underwriting, and claims and customer service, while Saga will retain responsibility for brand and marketing.

The partnership is expected to formally commence in the fourth quarter of 2025. Alongside the partnership, Saga will also acquire Acromas Insurance Company Ltd, Saga’s underwriting business, for 65 million pounds on completion in the second quarter of 2025.