Helvetia-Baloise cost synergies imply 1,600 headcount reduction: Berenberg

By Scott Vincent

April 23 - (The Insurer) - Targeted cost synergies from the merger of Baloise and Helvetia imply a reduction in staff of around 1,600 people, Berenberg analyst Michael Huttner said in a note on Wednesday morning.

Huttner said this represents around 23% of the 7,000 current employees across the two Swiss insurers, which announced plans to merge on Tuesday morning.

The Berenberg analyst said the merger would be “strongly positive” for Baloise’s valuation, with the company’s earnings per share expected to be enhanced by 17% in 2028, the third full year of the merger.

In Tuesday’s announcement, the companies said they expect 350 million Swiss francs ($426 million) in run-rate pre-tax cost synergies. This would result in a 220 million Swiss franc run-rate cash uplift, leading to a 20% dividend uplift by 2029 compared with current consensus expectations.

Synergies are set to come from overlapping businesses in Switzerland and Germany, with the companies targeting increased geographic diversification in countries such as Spain, Belgium, Italy, Austria and Luxembourg.

In a shareholder brochure published alongside the deal announcement, the two companies said the merger will create one of the largest continental European insurers with attractive positions in eight European markets alongside a global specialty business.

In its domestic Swiss market, the companies said the merged entity would hold a market share of approximately 20%.

The combined business will have a pro forma business volume of 20.2 billion Swiss francs, of which 11.5 billion Swiss francs will be non-life business.

This will rank it within the 15 largest European insurance groups, analysis by The Insurer shows.

While the two companies said they consider themselves equal, for practical purposes the transaction has been structured as a merger by absorption, with Baloise being dissolved and all of its assets merged into Helvetia.

The merged company will then be renamed Helvetia Baloise Holding Ltd and listed on the SIX Swiss Exchange under the new ticker HBAN.

Patria Genossenschaft, Helvetia's main shareholder with a 34% stake, has already committed to vote in favour of the merger.

Helvetia CEO Fabian Rupprecht will lead the combined business, while Baloise's Michael Muller will be deputy CEO and chief integration officer.

Baloise will supply the designated chairman, Thomas von Planta, with designated vice chairman Ivo Furrer coming from Helvetia.

Extraordinary general meetings for both sets of shareholders are scheduled for May 23 to approve the merger and terms of the merger agreement.

The deal is expected to close during the fourth quarter.

Baloise and Helvetia did not immediately respond to a request for comment on the potential headcount reduction.