The potential tie-up between Natixis Investment Managers and Generali Investments, creating a €1.9 trillion ($1.95 trillion) money manager, improves the strategic options for both parent companies, but it will come with challenges, Fitch Ratings said.
Italy-based insurer Assicurazioni Generali and France-headquartered retail banking firm Groupe BPCE said Jan. 21 they had signed a nonbinding deal to combine their money management units.
The new entity, which would be the second-largest Europe-based money manager and the 12th largest in the world, according to Pensions & Investments' data as of Dec. 31, 2023, would garner annual revenue of €4.1 billion, Fitch said in a note dated Jan. 22.
Fitch cited French banking group BNP Paribas’ acquisition of French insurer AXA Group’s AXA Investment Managers in a €5.1 billion deal, due to close in the middle of this year, as being different to the Generali/Natixis deal.
“This (Generali/Natixis) illustrates a strategic divergence between AXA SA and Generali regarding the benefits of asset management ownership for an insurer. We believe other insurers that own a sub-scale asset management business are considering similar options,” Fitch said.
The proposed 50-50 venture is also in line with Generali’s strategy to grow its capital-light asset management operations, Fitch said, and follows the insurer’s acquisitions of a 77% majority stake in U.S. private credit firm MGG Investment Group in a $320 million deal last week, and its July 2023 deal to purchase $157 billion institutional and insurance asset manager Conning Holdings and its affiliates.
On the plus side, the planned combination will not affect their ratings, will enhance the scale of the businesses — “a key advantage in the competitive and fast-consolidating sector” — and improves their strategy options, Fitch said in the note.
Economies of scale could help to address erosion of margins due to competition from passive investment strategies and manager specialists. Since the two firms run multiboutique platforms, with about 30 affiliates, Fitch thinks key-person risk may be minimal.
However, the ownership structure and governance “could present challenges in terms of decision-making, synergies and integration,” while growing the money management operations of Generali “adds exposure to financial market volatility, and to operational and reputational risks,” Fitch said.
