In this relatively stable sector, we bring the flair of a start-up, of something new and exciting
Dorsan van Hecke (left) (Athora Belgium) And Koen Depaemelaere (right) (Monument Assurance Belgium)
In this relatively stable sector, we bring the flair of a start-up, of something new and exciting
Athora Belgium and Monument Assurance Belgium have been bringing a fresh breeze to the insurance sector for several years now. “Compared to other players, we are indeed growing much faster. Our enthusiasm attracts young talent, and our passionate employees are in a winning mood.” Where does this exceptional dynamism come from? During a breakfast session with Ensur, CEOs Dorsan van Hecke (Athora Belgium) and Koen Depaemelaere (Monument Assurance Belgium) provide insights into the workings of their organizations.
Your insurance companies are gaining attention due to their rapid growth. What are the main focuses of Athora Belgium and Monument Assurance Belgium?
Dorsan van Hecke: “Athora Belgium is a life insurance company that aims for both organic and inorganic growth. We achieve organic growth by offering new products, and inorganic growth through acquiring companies or portfolios from other insurers. What sets us apart from typical insurers is our hybrid growth approach and our partnership with Apollo Asset Management, one of the group’s shareholders, which guides us in our asset management strategy where we provide a slightly different twist than the rest of the market.”
Koen Depaemelaere: “Monument Assurance Belgium is exclusively focused on life insurance. Unlike Athora Belgium, we do not grow organically. Instead, we grow through acquisitions, involving a share deal where we take over another life insurance company. This growth can also happen through portfolio transfers, where an existing player wishes to sell a block of life insurance policies, or through the reinsurance of life insurance portfolios. We have three ways to grow, often initiated by an insurer making a decision based on strategic insights or pressure from their own results to sell (part of) their portfolio or the entire company. Like Athora Belgium, we bid on these portfolios, but we are not the only players in that specific market.”
“The major distinction between Monument Assurance Belgium and other insurers is that we do not introduce new products to the market and do not maintain an active distribution network; though we do maintain relationships with brokers because the policies we acquire have customers associated with them, whom we continue to reach through these brokers. In other words, we are a closed book consolidator.”
Why did you transform your model to a consolidator?
Dorsan van Hecke: “We do more than just consolidating, you know. Athora Belgium originated from Generali, a company that focused on both life and non-life insurance. We continue to aim for additional growth through new customers: we actively market life products, with a clear focus. This approach keeps us sharp. It also makes our relationship with brokers unique, as we focus on both the existing books and our new products. So, we follow a different strategy than Monument Assurance Belgium, as we still focus on underwriting new products. We can do this because, since the acquisition, we have built upon the existing apparatus of Generali.”
“We do, however, have a sharp focus on the profitability of our products. This means we don’t bring all possible products to the market. Profitable products are the best guarantee for the customer that we will be there when they need us.”
The strategic choice of some insurers is to sell activities that are no longer part of their core business, whereas our core business is precisely to acquire those activities
Dorsan van Hecke
Koen Depaemelaere: “The founding of Monument Assurance Belgium is linked to opportunities that arose from market evolutions. In 2016, Solvency II regulations came into effect in Belgium, at a time when interest rates were low, and it was expected they would remain low for an extended period. The combination of transitioning from Solvency I to Solvency II and a low-interest rate environment posed several challenges for existing life insurers (this was less applicable to non-life insurers). It brought them into a new world where the capital requirements to continue their life insurance activities had significantly changed. Some insurers had not prepared their asset mix well for this new reality. A significant part of our current portfolio comes from acquiring the portfolio of a life insurer that did not handle this situation as well: Integrale in Liège, which was under the control of the National Bank of Belgium in 2021 due to inadequate solvency ratios.” “There are many reasons why life insurers offer parts of their portfolios for sale, but the fact is that the transition from Solvency I to Solvency II made many of them rethink their strategies. Often, it concerned Branch 21 products with higher interest rates, which posed several risks in that period of lower interest rates.”
Dorsan van Hecke: “As Koen rightly points out, it’s a matter of the strategic allocation of your capital. It’s about making choices. The introduction of Solvency II means that you need to hold a significant portion of your capital for business that is already underwritten. Add to that the money required to run your business on all your platforms, for your operational processes, for building knowledge among employees, for technological innovations, and so on, and it becomes clear that retaining capital for an activity that is no longer considered core can be costly. It is therefore logical that insurers make choices about where they want to allocate their capital, for example, going for capital light products in life that require less capital (like Branch 23) or developing new markets.”
Koen Depaemelaere: “Their strategic choice is to sell certain activities because they are no longer part of their core business, whereas our core business is precisely to acquire those activities. We can do this because our focus is on integrating various books. Again, we can only do this because it is our sole focus. If we had to spread our management’s attention and also aim to gain new market shares in, then it would become a challenging situation.”
Are fewer portfolios up for sale now that interest rates have risen?
Koen Depaemelaere: “It's not just the interest rate that drives strategic decisions for existing insurers. Technology is certainly another factor, as Dorsan mentioned, but it’s true that interest rates are a significant driver. However, we must also mention that although interest rates have risen, they are not dramatically high yet.”
Dorsan van Hecke: “Every insurer, after ten years of low-interest rates, has acquired certain assets with a yield that now, with rising interest rates, are in a latent depreciation. That in itself is not a problem, as you need to keep them until the end date of the policy. If you were to transfer them now to higherinterest products, only then would you have to take a loss. The assumption that you could switch your entire book to a 3 percent interest rate today is not correct in our long-term business. It is also true that over the past ten years, when interest rates were close to zero, we were still able to pay out profits because we had older assets that still yielded returns. There is a latency in reversing the performance, which is logical because we operate in a long-term business.”
Are you playing in a new field within the insurance industry?
Koen Depaemelaere: “In Belgium, our way of working has certainly emerged since the arrival of Solvency II in a low-interest environment. Closed book consolidations have existed in the non-life market, particularly in Anglo-Saxon countries, for about fifteen years.”
Dorsan van Hecke: “Consolidating books has indeed become a bigger trend in Europe since the implementation of Solvency II, but I wouldn’t call it an entirely different field. However, we do operate from a different perspective.”
We are attractive employers and attract some younger profiles because they want to be part of our growth momentum
Koen Depaemelaere
Koen Depaemelaere: “For our own teams that we are building through our growth, it is definitely a new playground. Compared to a traditional insurer, we grow much faster through acquisitions. We started five years ago in Belgium, and today we have 200 employees. For them, there is at least one significant change: previously, they were often somewhat isolated within the existing insurer, which is related to the nature of closed books within one insurance company. These closed books tend to get smaller over time and often still run on old systems. When you migrate closed books to a specialist like us, it’s a different story. It becomes a growth story with a completely different dynamic. Previously, they were in a sort of run-off mindset (“Who will be the last one to turn off the lights on this portfolio?”), but now they find themselves in an environment where their task is not on the sidelines but is our core activity. They are clearly in a winning mood.”
Dorsan van Hecke: “I totally agree. Often, these teams have not received much operational investment and feel like they are not considered core. And then someone like us comes in, who sees the value of their portfolio, their knowledge and skills and is willing to invest in it. A new owner who also works on processes and makes life easier for the policy handlers by focusing on more automation and backup.”
Koen Depaemelaere: “In other words, we are attractive employers. In a relatively stable sector, we bring the flair of a start-up, something new and exciting. That attracts some younger profiles because they want to be part of that growth momentum.”
Just because closed books are your core business doesn’t mean things just tick along as they are: administration is continuously optimized, and you are constantly looking for improvements.
Dorsan van Hecke: “Exactly. When we acquire portfolios, they often come with outdated technologies and old programming languages. We transfer them to new platforms to ensure proper administration in the long term. It’s a necessity since fewer employees are skilled in those old technologies, and many of them are close to retirement. So, time is ticking to smoothly transition everything to systems we have control over.”
Koen Depaemelaere: “We invest millions of euros in migrating those closed portfolios from the old mainframe platform to modern software packages. By doing so, we make it possible for the seller to decommission old technology. In that sense, we are contributing to the modernization of the insurance sector.”
Does that also reflect in the service provided to the end customer?
Koen Depaemelaere: “Our ambition is to keep two parties extremely satisfied. First and foremost, there are the policyholder and the broker. We want the customers to feel that the service is not inferior to what they had with the company they initially signed a contract with. We aim to guarantee at least the same level of service the policyholder was used to with the selling party. The same goes for the broker. It must be even better than before. If not, the brokers would quickly know, and the enthusiasm for our migrations wouldn’t be as high.”
“We also want to work closely with the regulator. Ultimately, it’s the regulator who decides whether a transaction is approved or not. We may have an agreement with the selling party, but that agreement is not executable until approved by the National Bank. We cannot grow without the required approval of the National Bank.”
This is core for us: the guarantee to the customer that we will fulfill the promises stated in the policies
Dorsan van Hecke
Dorsan van Hecke: “Our story differs slightly because we are also still an open book insurer, offering new contracts. This means we have a complete commercial apparatus and an IT solution for the front-end. Customers from a portfolio of an acquired closed book are transferred to our platform, and they benefit from all the solutions we have. An important aspect is that we often take over portfolios with high guarantees that we want to honor until the policy term. It is core for us: the guarantee to the customer that we will fulfill the obligations stated in the policies. We ensure that all parties have confidence in it: the customer, the regulator overseeing it, our internal employees, and the brokers.”
You both have had a successful track record with ‘traditional’ insurers. To what extent is the experience at Athora Belgium and Monument Assurance Belgium different?
Koen Depaemelaere: “I was responsible for the life insurance activities of a large insurer in Belgium. In that capacity, I experienced the strategic reflections when it became increasingly difficult to generate returns on individual life insurances, Branch 21. As mentioned before, the reasons were low interest rates and Solvency II. Step by step, that activity was scaled down, and eventually, after six or seven years of restructuring, we sought a buyer – just like we are now.”
Dorsan van Hecke: “What has also fundamentally changed the past years, are the efforts we have to make to comply with legislation, taxation, and human resources policies. The ratio between the people who actually serve customers on a daily basis and the organizational structure overseeing our compliance has completely flipped. The number of control functions has increased enormously, just to keep up with existing and new regulations. At the same time, we are facing significant investments. This means that we do encounter quite a few limitations. If you are also ambitious and see your company’s role as more than just guaranteeing the pension aspect for many people, but also putting capital to work in favor of sustainability...
Today, we spend a lot of time and energy on following up on regulations and reporting on them. More time and energy than we can devote to actually getting things done.”
Koen Depaemelaere: “If I may add to that? The world is indeed becoming increasingly challenging for small players. That complexity also leads to portfolio transfers. The consolidation is a result of insurers no longer being able to handle certain aspects, whereas we can still develop them because we are creating scale.”
Athora Belgium and Monument Assurance Belgium close the most deals. By far. Is there room for competition or is it a too difficult market to enter?
Koen Depaemelaere: “It’s not that difficult. Every interested buyer gets a fair chance. Closed books go through bidding processes, and for most transactions, there are more than ten bidders. It’s a highly competitive market. The fact that many of those transactions end up with Athora Belgium or Monument Assurance Belgium is just a coincidence.”
Are there international competitors? Is it possible to manage a Belgian portfolio from abroad?
Dorsan van Hecke: “Theoretically, yes. But, of course, you also need approval from the regulator. A player that doesn’t have a local license here and wants to acquire a portfolio and manage it from somewhere else under free provision of services, in theory, it’s possible, but it becomes a more challenging process to get approval.”
Koen Depaemelaere: “There’s also the aspect of service quality: you need to speak the language, you need to understand the products.”
Dorsan van Hecke: “In addition to the legal aspect, you also have the consumer aspect of such a deal, the customers. The FSMA (Financial Services and Markets Authority) also scrutinizes that. For a foreign party, in practice, it’s not very straightforward.”
The cooperation with the seller can make or break our good reputation in the market
Dorsan van Hecke
You both take the lion’s share of the number of acquisitions. Who is the number three in Belgium?
Koen Depaemelaere: “Again, for each case, there are different candidates. Depending on the portfolio, different players come forward each time, but I’m not going to list all the competitors now. Actually, the process is driven by the seller’s advisor, who naturally aims for the best possible price. So, the advisor has a vested interest in having as many candidates as possible. Besides the price, deal certainty also plays a crucial role. We have already proven that we can deliver. Putting a signature between two parties for a price is not difficult. But getting the deal approved and then successfully carrying out the migration... You must consider that between the signature and the approval of the National Bank, a year can quickly pass. Until their approval the portfolio still belongs to the seller. So, the assets and liabilities shift only at the moment of closing. Only then can we dive into those databases and think about the migration from the seller’s source system to ours. That’s another year to a year and a half. Before you can manage that portfolio with your own people, on your own platforms, you are 2.5 years ahead. You don’t want such a time-consuming process to derail, of course.”
So, your reputation is crucial for the seller.
Koen Depaemelaere: “Absolutely. But also, how we view the cooperation. In the period following the deal’s closing we work with a service agreement where the seller effectively continues to operate under our logo. That naturally requires enormous collaboration and trust. You have to examine whether the teams of both parties will be able to work together for such a long time, whether the IT experts can make the migration work... In a deal, the price is just one element.”
Dorsan van Hecke: “I completely agree. Such good cooperation can make or break our good reputation in the market. Thanks to the credibility we have built with the regulator, the seller has a high level of certainty that the deal will actually happen.”
