Run for your life

Generali mulls sale of all German life insurance policies in industry test case

Have you heard? We're run-off now. Source: DPA

Italian insurance giant Generali is looking at offers to unload all of its life-insurance policies in Germany in what would be the country’s biggest “runoff” deal ever. Some four million policies with an assured sum of €40 billion could be sold off to a specialist investor for something like €1 billion. If Generali goes ahead, its retreat from its legacy policies could accelerate an industry trend, as German life insurers creak under the pressure of low interest rates and old people fear for their retirement savings.

“A decision will come probably before the summer,” Giovanni Liverani, head of Generali’s operations in Germany, told Handelsblatt. Athene, Viridium and Frankfurter Leben are among the specialized runoff platforms interested in buying the policies, according to industry sources.

These days, as interest rates have been near zero for years, life insurers have increasingly been missing their targets on the returns they promised or guaranteed to policyholders. This has forced the insurers to abandon giving guarantees in new policies. It has also prompted them to offload their older, and now unprofitable, policies to specialists who exploit economies of scale to “run off” – wind down – these legacy policies.

“The discussion is being conducted in a very emotional manner.”

Hendrik Jahn, insurance expert, KPMG

But policy sell-offs, while legal and even subject to regulation, have provoked a political backlash in Germany, where conservative savers have long made life insurance their primary investment vehicle for retirement. That is why Allianz Leben, the life unit of the Munich-based insurance giant, has ruled out selling its legacy policies. “It has to do with the trust that our customers have put in us when they signed the contract,” Markus Faulhaber, longtime CEO of the Allianz unit, told Handelsblatt in an interview this week.

Mr. Faulhaber is also the head of an industry association’s retirement-care committee. And as such he acknowledges that sales of old policies may be necessary for some insurers, if those can’t sustain the business model any longer. “Then it can be better from the customer’s point of view if this inventory is transferred to a solid platform for consolidation,” he said.

So far, Germany’s federal financial regulator, Bafin, has authorized only smaller sales of life policies, for a few hundred thousand euros. It has been feeling its way in order to protect policyholders from any disadvantages from the transfer to a different platform. When Munich Re’s Ergo unit tried to put up some legacy policies for sale last fall, it ran into a storm of opposition from consumer advocates and politicians and withdrew the sale.

Now politicians have discovered the topic. “We’re exploring a regulation whereby the policyholders would have to approve the sale of their contracts,” said Anja Karliczek, a Christian Democratic finance expert and education minister in the new cabinet sworn in last week. She cautioned insurers against a “breach of trust” with their policyholders.

Generali’s Mr. Liverani said the company is exploring a third option between winding down the policies internally and selling them off to a third party – namely, selling them to a specialist platform in which Generali would then keep a minority stake. “I feel there’s a great deal of interest from third parties and I don’t think we could do it better internally,” Mr. Liverani told Handelsblatt.

Analysts tend to agree. “A sale with acceptable conditions would be welcome,” said Thorsten Wenzel, insurance analyst at DZ Bank, “because capital would be freed up and sensitivity to interest rates would be reduced.”

Before it gets to that point, however, Bafin will have to be convinced policyholders will be protected and lawmakers will have to reassure their constituents. Right now, said Hendrik Jahn, an insurance expert at consulting firm KPMG, “the discussion is being conducted in a very emotional manner.”

Carsten Herz covers asset management and insurance for Handelsblatt from Frankfurt. Christian Schnell also covers in asset management in Frankfurt. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: and

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!