RESO buys 25% in VSK

The insurance market leader Reso-Garantia, owned by the Sarkisov brothers, will purchase a 25% blocking stake in its rival Voennaya Strakhovaya Kompaniya (VSK).

Negotiations on the deal conditions began in May 2011 with the evaluation procedure being completed in late August. Both companies are elder statesmen of the Russian insurance market with long-established business relations, says Sergei Sarkisov, co-owner at Reso-Garantia. “We’ve known this company and its owner for 20 years that gives us strong confidence in the company business,” he noted.Sergei Tsikaluk, the owner of VSK, added that the long and successful history of both companies makes the consolidation very attractive. “We have been sharing the market with Reso since 1992 and are the only ones with such a long history of operating on the Russian insurance market. The philosophy of both of our companies aligns with the aim to be the market leaders,” said Tsikaluk.Reso have estimated the value of the rival company at US $1 billion, expecting to outlay $250 million for 25% of VSK with further plans to create a joint group named RESO-VSK. Ilya Solomatin, VP at Ingosstrakh, says the new insurance group will be a strong market competitor. “The deal is very important for the Reso group and will certainly have a major effect on its market share. The new group will become the major competitor on the insurance market,” noted Solomatin.According to Rosstrakhnadzor, by the end of 2010 RESO had collected 35.8 billion roubles of premiums, becoming the fourth-biggest insurance company in Russia. Three years earlier, in May 2007, the EBRD acquired 10% of the insurer for $150 million while in December 2007 the international insurance group AXA bought 36.7% of RESO for 810 million euro. VSK’s annual premiums in 2010 amounted to 25.2 billion roubles, placing the company in fifth place on the chart. Dmitry Klimov, Deputy Director at Mezhregiongarant, says the insurance market consolidation kicked off when VSK and Reso found each other in the right place for the deal. “I think the move is very transparent and signals accelerated consolidation among the market leaders. We have witnessed the successful deal between Rossgosstrakh and Kapital Straxovanie. The deal between Reso and VSK is also very positive for both parties and the price is quite reasonable, given that before the crisis the price could be even higher.”