The rating agency Moody's characterizes Hellenic Bank's move to acquire the activities of CNP Insurance in Cyprus and Greece as credit positive
The rating agency Moody's characterizes Hellenic Bank's move to acquire the activities of CNP Insurance in Cyprus and Greece as credit positive, as this will help it strengthen its network of activities and revenue streams, thus reducing its dependence on interest income.
As the company states in the “Credit Outlook” bulletin, published on Monday, the transaction, for which supervisory approvals are pending, approvals from the Authority for the Protection of Competition, as well as the European Works Council of CNP Assurances , will make the Hellenic Bank group the leader in the Cypriot insurance market.
As Moody's reports, the €182 million acquisition price corresponds to an acquisition multiplier of 1x to the bank's book value, with an estimated capital impact of approximately 2.6 percentage points, with the group's capital adequacy set at the strong adjusted index of 25.8% upon completion of the acquisition.
“However, we expect (the transaction price) to be recovered through retained earnings, as profitability remains strong and the bank is currently not paying dividends,” the bank said, adding that the deal is likely to include all of its 330 employees. CNP.
According to the firm, CNP Cyprus is the second largest insurance provider in Cyprus with a combined share of 24% of gross domestic policies, behind Bank of Cyprus subsidiary Eurolife Ltd, and the largest provider in the general sector with 15%, in 2023, based on data from the Cyprus Insurance Companies Association.
“The potential acquisition will strengthen Hellenic Bank's broader operations with 30% stakes in life and 23% in non-life, including Hellenic's existing insurance companies, Hellenic Life and Pan-Cypriot (general),” Moody's said.
Furthermore, the transaction, Moody's estimates, will enhance the diversification and sustainability of Hellenic's profitability, as it will enhance income from insurance activities, thus reducing its dependence on net interest income, which in 2023 it corresponded to 80% of total revenues, compared to 72% of Bank of Cyprus.
Finally, the company estimates that the larger insurance activities will bring about savings from synergies, while in addition it will create product sales opportunities as it will acquire a larger number of customers (160,000), while it will be able to offer its existing customers a wider range of insurance and wealth management products.
