Creates first consolidation platform for German life insurance portfolios

The European private equity firm, Cinven, today announces that it has reached agreement to acquire a majority stake in Heidelberger Leben, a specialist provider of retirement and life insurance products in Germany. Heidelberger Leben will become a consolidation platform for life insurance portfolios in Germany. It is being acquired from Lloyds Banking Group ("Lloyds") for a total consideration of around €300 million.

Heidelberger Leben has a portfolio of around 600,000 policies, mainly unit-linked, and €5.1 billion of assets as at 31 December 2012 (German statutory accounts basis). It is headquartered in Heidelberg, Germany and employs around 300 people.

Cinven identified the German life insurance sector and Heidelberger Leben as an attractive investment opportunity given:

  • Cinven's successful execution of a life insurance consolidation strategy in the UK through its investment in Guardian Financial Services;
  • the German life insurance market is the third largest in Europe and is highly fragmented providing significant consolidation opportunities;
  • increased trends towards the assessment of disposal options for life insurance portfolios, driven by a focus on core business, a lack of critical mass and the challenges in generating significant new business volumes;
  • Heidelberger Leben is the ideal starting point for a consolidation strategy given its unit-linked nature and its new strategy already focused on existing customers; and
  • the planned €25 million investment in its IT systems, along with a strong focus on customer service, to improve benefits for both existing policyholders as well as manage additional portfolios.

The Heidelberger Leben management team will be led by Michael Sattler, Chief Executive. Rolf-Peter Hoenen, former Chief Executive of HUK-Coburg, the German insurance provider, and former President of the German Insurance Association ("GDV") shall join as Non-Executive Chairman. Heidelberger Leben will continue to work closely with MLP AG, which accounts for a large part of the portfolio. MLP customers with Heidelberger Leben will benefit from lower administration costs as well as customer service improvements.

Cinven has built a strong investment track record in Financial Services. This transaction follows its investment in Guardian Financial Services, a UK provider of life and pension products with £8 billion in assets, in November 2011 from Aegon, as a consolidation platform for the UK closed life insurance market. In July 2012, Guardian acquired 300,000 in-payment pension annuities from Phoenix Group and, as a result, Guardian now manages approximately £13 billion of assets on behalf of over 600,000 customers.

Caspar Berendsen, a Partner at Cinven, commented:

"With Guardian Financial Services, our Financial Services team has created a fast growing life insurance consolidation platform in the UK which provides significant benefits to all stakeholders. We are looking forward to supporting the Heidelberger Leben management team with our expertise in building a similar platform in the German market. Being the first German consolidation platform for life insurance portfolios, Heidelberger Leben will benefit from the continuing changes in the market and will make a key contribution to the strategic options for the German life insurance industry."

Michael Sattler, Chief Executive of Heidelberger Leben, added:

"The management team and staff of Heidelberger Leben are looking forward to our change in ownership. It will enable us to continue implementing further operational improvements to the business, as well as creating a modern, scalable platform as a basis for consolidation as part of the next phase of our growth strategy. With the planned investment in our IT systems, we will be able to further improve our customer services. We will also soon be in a position to integrate acquired insurance portfolios into our existing administration, in line with our consolidation strategy."

In the course of this transaction, funds advised by Cinven will acquire 80% and Hannover Re, the third-largest reinsurer worldwide, 20% of Heidelberger Leben shares. Completion is subject to BaFin approval, as is customary.