The British market appears to be in the front line

A big speculation wind blew Friday on European insurance. Stock prices in the sector are gone after the revelation of a rapprochement between the American project St. Paul Travelers and the Swiss Zurich Financial Services. And this wind of madness should not falling today in view of the announcement, over the weekend, for an informal offer for the British Aviva on Prudential, immediately rejected by the latter. Consolidation seems so start from most beautiful in the area of insurance.

After months of rumours, Aviva therefore finally made an offer on Prudential. The first British insurer at a price that values the 17 billion pounds (24.5 billion euros). But this price represents a premium of 11 only on the course of Prudential on the eve of the offer. The insurer, announced Thursday a 1.7 billion books result better than expected and an increase of 33 rejected the offer of Aviva and said that she had a future as an independent company.

Create a national champion

Aviva, which wants to create a "heavy weight" British, an able to compete with national champion AXA, Allianz and Generali, the offer has some industrial logic. It would create a rich company of 50 million customers, employing 80,000 people and managing some 350 billion pounds of funds. In addition, the two companies are geographically complementary: Aviva is especially present in Europe and Prudential in the United States and Asia. Because this distribution of their activities, the competition authorities should not make major objection for fusion.

The refusal of Prudential, that Aviva's offer is too low, is probably only the first episode of this case. Aviva may bid or to appeal directly to the shareholders of "CIP", by launching a hostile bid. Other companies may also declare interested, as AXA or AIG. Is this what speculates the British press, which indicated Sunday that AXA would be for a business bank to study a possible offer for Prudential. "The potential purchasers of"CIP"will have to pay attention to their return on investment, find Andrew Crean in Citigroup. Because if management did not want a merger, the premium of control could make any highly dilutive transaction.

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In any event, investors seem to be betting on the launch of a new wave of concentration in European insurance. Friday, Aegon took 3.9 in Amsterdam, Swiss Life won 3.76 and La Bâloise 2.67 at Zurich, SCOR 2.88 in Paris.

A more important movement

After months of atony, mergers & acquisitions resumed last year with Skandia by Old Mutual redemptions, of Britannic by resolution Life, GE Insurance Solutions by Swiss Re and, especially, by repeatedly of minority shareholdings.

Allianz comes to redeem the shares of RAS which he lacked, AXA AXA Konzern and Generali those of German, Swiss and Austrian subsidiaries.

But experts now believe in a movement of greater magnitude. After the crisis of the years 2000-2002, the European insurers have cleaned up their balance sheets and restated their profitability, helped by the good of the financial markets. The more in advance have the means to launch the offensive. "There could be consolidation in Europe, said Richard Harvey, the pattern of Aviva, in the form of warning at the beginning of months. All I can say is that Aviva is very well placed to take advantage if this was going on.

The British market appears to be in the front line. Before even the revelation of the offer of Aviva, Prudential had jumps of 7.09 Friday. Among other British insurers, Legal & General won 7.09, Friends Provident 1.55 and Royal & Sun Alliance, which had already singed at the beginning of week on rumours of OPA, 0.9.

Other interested actors

The Standard Life mutual, which prepares an introduction on the stock exchange in July, could also be of interest to other players, according to analysts. "When you look at it that were the capitalization stock underwriters British twenty years from other European insurers and what they are today, you say that they themselves are shot in the foot, because the only one who has much weight today is Aviva", said Henri de Castries, the pattern of AXA, the British press.