Axa’s price tag for Laya based on ditching existing Swiss insurer

A move by Axa in Ireland, the biggest general insurer in the State, into the country’s health market through the planned acquisition of Laya Healthcare was perhaps not surprising given that it is an established player in this area elsewhere, including the UK and its native France.

But the price tag was a big surprise: €650 million for Laya Healthcare, a multiple of the €80 million its current owner, US insurance giant, AIG, paid for the business in 2015.

At the time of that deal, Laya was making an operating profit of €13 million on turnover of just over €50 million. The company’s most recent set of results filed with the Companies Registration Office (CRO) show it generated an operating profit of €28.8 million in 2021 on turnover of €89.5 million.

However, as things stand, Laya is essentially just a tied agent of units for Swiss reinsurance giant Swiss Re, who actually underwrite its products. The Swiss company’s Elips Insurance subsidiary takes on the risk of health insurance offered by Laya. Similarly, Swiss Re’s Iptiq unit underwrites Laya’s life insurance offering. Laya revenue is currently from commissions.

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However, Axa plans to eventually replace the existing underwriters with itself. The Paris-based insurer said that €650 million it is paying equates to 11 times operating earnings the Irish company will generate “taking into account the planned recapturing [by Axa] of underwriting margin currently earned by third parties”.

Dermot Goode, a healthcare benefits expert with Total Health Cover, said that the good news for consumers is that there will continue to be three strong players in the health insurance market in the Republic.

“Hopefully down the line Laya customers will be able to benefit from cross-selling of other products at discounts,” he said. This possibility has also underpinned the price that Axa has been willing to pay for the business.

However, the takeover will do little or nothing to protect consumers from the ongoing health insurance costs resulting from growth demand for healthcare and the rising cost of providing it.

Laya increased its premiums by an average of 4.4 per cent earlier this year, marking a first rise in two years, as rivals VHI and Irish Life also hiked costs. Irish Life has since raised its prices again, effective from last month.

“Medical cost inflation is a real thing and this deal is not going to stop that,” said Goode. “I’d expect to see another round of private health price increases in the fourth quarter of this year.”