Reports Emerge of Ageas Offer to Buy Direct Line

According to articles published by Reuters and the Financial Times, Ageas is considering a bid to buy Direct Line. The announced bid seems a little off to us, given the tone of Ageas' earnings call where capital allocation decisions seemed to reiterate a share buyback in the second half of the year. Ageas doesn’t have an enormous amount of cash, so we think any possible purchase would have to be funded by debt or a capital raise. This would be an outsize acquisition for Ageas at a reported GBP 3.1 billion, on the back of what seems to have been decent results in nonlife. We maintain our fair value estimates and no moat ratings for Ageas and Direct Line.