An offshore acquirer would have to pay about three-times net tangible assets to acquire QBE Insurance Group and have a strong view on cost outs.
That's the view from Credit Suisse research analysts on Monday, who weighed into the takeover debate around QBE.
While QBE dismissed reports it was in talks with Allianz or any other suitor, Credit Suisse analysts reckon a takeover more generally is an issue that is front of mind for the insurer's institutional investors.
The problem is QBE is not cheap and trades at a 30 per cent premium to its European peers, according to the analysts.
"... our view remains that QBE is not cheap by global standards and an offshore player would have to pay ~3x NTA to acquire QBE and back itself to pull out some significant costs to make the deal work," the analysts said in a note to clients on Monday morning.
"With a soft insurance market stifling industry growth and general insurers currently facing numerous challenges, we appreciate the temptation to turn to M&A; as a possible source of growth.
"Based on some high level workings, if Allianz is convinced that it can achieve double of what consensus is expecting for QBE next year, it could arguably make the deal accretive."
Credit Suisse says that means the focus would be on synergies and new management - and whether a well-run offshore insurer was willing to back itself to improve QBE's business.
It reckons Allianz would need to assume a meaningful recovery in QBE's loss ratio and $US700 million in synergies to make the deal earnings accretive.
