October 25, 2020

The union with CaixaBank forces Bankia to break with Mapfre and causes a new distribution of powers in the insurance sector

CaixaBank and Bankia have already been on the path of absorbing the second by the first for a few days. An operation of this scope leaves different affected parties in the process, directly or indirectly. Not only does the banking sector change with this operation in which the country’s leading financial group and one of the most important in Europe is created, but it also causes significant changes in the insurance sector, with the Catalan entity as the main actor in the country, increasing what it had already achieved in recent years.

Goirigolzarri, the 'bankero' who could not lead BBVA but will preside over the largest bank in Spain

Goirigolzarri, the ‘bankero’ who could not lead BBVA but will preside over the largest bank in Spain

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The first of the repercussions for the sector is that Bankia and Mapfre will have to put an end to their long alliance in the marketing of insurance. CaixaBank has its own insurer, VidaCaixa, which makes it incompatible to maintain the previous Bankia alliance, which takes the form of a Bankia Mapfre Vida joint venture, the creation of which dates back to the time of Caja Madrid, and which is 51% controlled by Mapfre, while Bankia has 49%. The entire life insurance business of all the savings banks that joined the rescued entity before it went public in 2011 has been incorporated into this company. According to the accounts deposited in the Mercantile Registry, in 2019 the company obtained a profit of almost 97 million euros. In addition, Bankia’s branch network works as points of sale for the rest of the insurance that Mapfre offers.

Gonzalo Cortázar, CEO of CaixaBank, acknowledged last Friday in the presentation of the merger with Bankia that the way will be sought to end the alliance between Bankia and Mapfre because the insurance business will focus on VidaCaixa. The manager, who will control the executive management of the group, did not want to give a figure of the cost that this break may have for the new entity but acknowledged that it has been taken into account when negotiating the terms of the merger. An estimate by Barclays pointed out that the cost could reach 600 million euros.

“We will sit down with Mapfre soon, there are a series of clauses in the agreement between the two that regulate these types of issues and I am sure that the situation will be resolved. Now it is not adequate to quantify the compensation although internally it is included in figures,” said Cortázar . Mapfre sources consulted by this means choose not to assess the operation for the moment.

The merger will mean a business increase of 290 million for VidaCaixa

VidaCaixa is the main entity in the Spanish insurance sector and will benefit from the merger of Bankia and CaixaBank. In the presentation of the merger, CaixaBank informed that it expects its insurance business to increase by 290 million euros between now and 2025 thanks to the union with Bankia. Specifically, it expects to “recover” 75 million euros per year in income from the Bankia and Mapfre alliance.

According to ICEA, the benchmark statistical center among insurers, VidaCaixa is the first company with 14.02% market share, while Mapfre is the second with 11.27%. The distance between the two will foreseeably be extended with the passage of the business of the alliance that it has with Bankia in favor of the Catalan insurer. Mapfre still maintains alliances with other banks such as Bankinter or, to a lesser extent, Santander. The third in the global ranking in Spain is Mutua Madrileña, which has a joint venture with CaixaBank, followed by Allianz and Catalana Occidente.

Where Mapfre loses the most and VidaCaixa gains in this agreement is in the field of life insurance. Here the CaixaBank insurer is the most important entity in the country, standing out from the rest. According to ICEA statistics, it has a market share of 28.49%, but it could increase to 31% if the joint business of Bankia and Mapfre is transferred to its balance sheet. The Madrid insurer, for its part, could lose 30% of its provisions in this business where it is currently the second largest entity in the country. This decline would translate into going from occupying the second step of the podium to being the fourth entity. Both Banco Santander and BBVA would surpass Mapfre by losing their partnership with Bankia. VidaCaixa would add to its balance the same as the next six rivals together.

But the operation also has repercussions in other fields of the insurance sector beyond life, which include automobile, health or home. Until now, Mapfre benefited from the network of more than 2,200 Bankia branches, which exclusively marketed its insurance products beyond those contained in its joint venture.

For its part, in this field, CaixaBank has SegurCaixa Adeslas, an insurer controlled 50.01% by Mutua Madrileña. In other words, this company could indirectly benefit from the network of branches from Bankia that until now were used by Mapfre. ICEA data shows a very close rivalry between Mapfre and Mutua Madrileña. According to this source, the former was the leader in the segment at the end of the first quarter of the year, with a market share of 14.08%, while the latter, especially due to its alliance with CaixaBank, reached 13.74%. This operation by which CaixaBank absorbs Bankia could result in the balance tipping in favor of Mutua Madrileña.

The European Commission approved this Wednesday the joint ownership by Banco Santander and Mapfre of the Popular Seguros entity, which carries out its activity in the non-life insurance sector in Portugal, an operation that with the changes in the insurance scenario with the The merger between Bankia and CaixaBank could be the prelude to new alliances in the sector.

These movements take on special relevance in a year in which the insurance business has begun to notice the impact that the coronavirus pandemic is having. According to the data of the employer’s association of the sector, Unespa, the invoicing of the insurers had fallen at the end of the first semester of the year by 11%. This drop was even more evident in the case of life insurance, with a decrease of more than 26% in provisions compared to last year.

In this way, CaixaBank and its partners achieve with the absorption of Bankia to increase their dominance in insurance, as well as becoming a leader in some of the major banking and investment businesses. The ‘new’ CaixaBank will start as a leader in the mortgage sector, with almost one out of every three contracts in force throughout the country; it will account for almost a quarter of credit and deposit activity. It will also strengthen its position as a leader in the management of pension funds, with almost a third of the total market, or among investment fund managers.

A historic alliance between Caja Madrid and Mapfre

But beyond the repercussions in the insurance sector, the breakdown of Bankia and Mapfre has a strong significance due to the past trajectory that both entities have had of crossed relations. The industrial alliance of both companies for the marketing of insurance dates back to the beginning of the 2000s, when Bankia did not exist and it was Caja Madrid, chaired by Miguel Blesa, Mapfre’s partner. The various joint operations led the defunct Madrid savings bank to be in 2007, with the financial crisis looming, the second largest shareholder in Mapfre, with 15%, only behind the Mapfre Foundation.

The close relationship between both companies led to the fact that in 2011 with Bankia’s IPO operation, which is awaiting a ruling from the National Court, Mapfre was the company that invested the most. The insurer allocated 280 million euros to the operation, which months later concluded in the largest Spanish financial rescue, to take over 4.3% of the entity already chaired by Rodrigo Rato. Although some of the companies that participated in this operation sued Bankia for the losses that occurred, Mapfre ruled out this option after having studied it.

Today both companies no longer have a shareholding relationship. The insurer got rid of its remaining securities in Bankia in 2013, while the bank had to get rid of all the stakes it had in different companies after the financial rescue. Among other companies, Bankia was a shareholder of Indra, IAG, NH, Iberdrola or Realia, in addition to the insurer.


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