FRANKFURT (Reuters) - Munich Re's Ergo unit has dropped plans to sell run-off life insurance policies, saying non-binding offers received by the company were too low, it said late Tuesday.
"In ERGO's view, the current value of the portfolios and its potential appreciation is not adequately reflected in the offers submitted," Ergo Chief Executive Markus Riess said in a statement.
Ergo and fellow insurers are struggling to pay guaranteed returns to clients because of record-low interest rates. Combined with more stringent European capital rules, these have prompted insurance companies to offload some life insurance operations.
Britain's Resolution Group, Swiss Re and private equity firm Cinven had expressed an interest in acquiring two large German life insurance portfolios owned by Ergo and Generali (MI:GASI), sources had told Reuters last month.
Analysts at Jefferies said the move to abandon a sale showed that Munich Re was not willing to do a deal at any price, and they expected the group to return to previous plans and set up a separate entity to manage the life insurance policies.
"And although an outright sale of the back book now appears unlikely, we expect there still remains the opportunity to allow third-party investors to take a stake in the new organisational entity," they said.