Swiss insurers Baloise, Helvetia said to explore combination

(Bloomberg) --Baloise Holding AG and Helvetia Holding AG have been exploring a possible combination that could create one of Switzerland's largest insurers, according to people familiar with the matter. 

The companies have held on-and-off discussions in recent months about a potential tie-up, said the people, who asked not to be identified because the information is private.

Shares of Baloise closed 0.4% higher after rising as much as 1.7% following the Bloomberg News report. The stock has advanced about 8% this year, valuing Baloise at roughly 8.2 billion Swiss francs ($9.4 billion). Helvetia has a market value of around 9.4 billion francs following a 16% gain in its stock price this year.

There's no certainty the deliberations will lead to a transaction, the people said. Any move toward industry consolidation could also trigger action from other potential suitors like Zurich Insurance Group, according to the people. Representatives for Baloise, Helvetia and Zurich Insurance declined to comment. 

The discussions between the Swiss insurers follow a wave of merger talks in the European financial industry in the past year, ranging from tie-ups among asset managers to takeover negotiations in the Italian banking industry. Baloise, led by Chief Executive Officer Michael Mueller, has been one of the most-discussed takeover candidates in European insurance and is under pressure from Swedish activist investor Cevian Capital, which holds a 9.4% stake.

Cevian has been pushing Baloise to focus on its core Swiss business and sell other assets, such as its German unit and regional lender Solothurner Bank, Bloomberg News has reported. The activist investor's agitation has prompted European insurers including Zurich, Axa SA and Allianz SE to study whether they would want to bid for Baloise or parts of its business if they come up for sale, people familiar with the matter said in November.

Cevian has a history of triggering M&A action in the insurance space. In 2020, RSA Insurance Group Plc, in which Cevian took a stake, was broken up with Intact and Tryg A/S buying different bits of the business.

A combination of Baloise and Helvetia would create one of the biggest domestic composite insurers in Switzerland. The merged company would have operations spanning from their home country to Germany, Belgium, Luxembourg and Spain.

Helvetia, which has been around since 1858, is a product of mergers between Swiss and foreign insurance companies. More recently, the firm combined with its Basel-based rival Nationale Suisse in 2014. Six years later, Helvetia completed the acquisition of Spanish insurer Caser. 

Helvetia, headquartered in the city of St. Gallen, recorded 11.6 billion francs of business volume last year. Its Chief Executive Officer Fabian Rupprecht took over in 2023. Baloise, which has the same name as the city where it's based, generated 8.6 billion francs of annual premiums in 2023, according to its full-year earnings report.