Talanx up slightly in Frankfurt market debut

SHARES IN Talanx, Germany’s third-biggest insurer, inched higher on their Frankfurt stock market debut yesterday, vindicating the company’s decision to go ahead with the share sale after dithering last month over the state of Europe’s fragile IPO market.

Shares in the group started trading at €19.05 a share yesterday, up on the offer price of €18.30, before easing back.

Owned by mutual insurer HDI, Talanx surprised markets last month by announcing its IPO only to then cancel it, then revive it again within days after investors convinced the company that they would buy the shares after all, after a pick-up in global share markets.

Talanx’s IPO, Germany’s biggest since chemicals distributor Brenntag launched itself on to the market in 2010, comes just ahead of Royal Bank of Scotland’s flotation of its Direct Line insurance arm.

Insurers have been trading below book value in the euro zone sovereign debt crisis as investors worry about the potential hit to the value of the government bonds in which insurers invest, as well as the long-term drag on performance from globally low interest rates.

Direct Line, Britain’s biggest motor insurer, expects to price its shares on or about October 11th in what looks set to be the biggest London’s biggest IPO for over a year.

Analysts said that while reinsurance-focused Talanx and retail insurer Direct Line had little in common, both were offering their shares cheaply to tempt investors amid volatile stock markets and lacklustre industry growth prospects.

“To the extent that there is a read-across for general IPO appetite, I think it’s encouraging, although Talanx was priced at the lower end,” Eamonn Flanagan, an insurance analyst at British stockbroker Shore Capital, said.

“I think you’ve got to remember Warren Buffet’s adage that you should leave 10 per cent for somebody else.”

Talanx’s offer price was at the lower end of its €17.30 to €20.30 price range. Direct Line would be worth £2.66 billion at the mid-point of its 160 pence to 195 pence price range, compared with analysts’ estimates of between £2.5 billion and £3.5 billion. – (Reuters)