On 25 April, Hellenic Bank Public Company Ltd negotiations with CNP Assurances
(Baa3 positive, ba2) 1 announced exclusive (A1 stable)2 to acquire its operations in Cyprus and Greece, through its subsidiary CNP Cyprus Insurance Holdings Limited.
The acquisition will be credit positive for Hellenic Bank because it will allow it to diversify its franchise and income streams, by growing its nonfunded income and reducing reliance on interest rates. It will also make Hellenic Bank the leader in the Cyprus insurance market. The transaction, which is pending regulatory, competition authority and other approvals3, is expected to be completed by the first quarter of 2025.
Under the transaction, CNP Assurances has a put option giving it the option to sell, which
we expect it will exercise once all approvals are received, and Hellenic Bank is irrevocably
committed to acquire CNP Cyprus if such option is exercised. The total acquisition cost
is expected to be at €182 million, representing a price to book value ratio of 1, which
will reduce the bank’s total capital adequacy by 2.6 percentage points to a still solid pro
forma 25.8%, upon completion. However, we expect this to be recovered through retained
earnings, because profitability remains strong and the bank is not currently paying any
dividends. The deal is likely to include CNP Cyprus’ 330 employees.
CNP Cyprus is the second largest life insurance provider in Cyprus with a combined 24%
domestic gross premiums market share, following Bank of Cyprus Public Company Limited
‘s (Baa3 positive, ba2) subsidiary Eurolife Ltd, and the largest nonlife insurance provider, with a 15% market share in 20234. The potential acquisition will strengthen Hellenic Bank’s overall franchise with a 30% life insurance and a 23% nonlife market share, including Hellenic Bank’s existing insurance brands, Hellenic Life Insurance Company Ltd (life) and PanCyprian Insurance Limited (nonlife).
The transaction will also boost the diversification and sustainability of Hellenic Bank’s
profitability. The bank, which reported a total profit of €365 million in 2023, will strengthen
its insurance-related income, reducing its reliance on net interest income, which accounts
for 80% of its total revenue, compared with its domestic peer Bank of Cyprus, which had a
lower reliance at 72% in 2023. The bank’s combined larger insurance operations will benefit from the creation of cost synergies. In addition, the acquisition will create cross-selling opportunities, because it will acquire a large number of insurance customers (latest reported was 160,000), while it will also be able to offer its existing banking customer with CNP Cyprus’ broader suit of insurance and wealth management products.
