FUNDS: Hungary for financial sector opportunities

By bne IntelliNews August 2, 2010

Guy Norton in Budapest -

Financial sector opportunities in Hungary are coming into focus as private equity players seek to make fresh investments in the country's burgeoning insurance market.

Among the latest deals, Polish-headquartered Enterprise Investors (EI) on July 1 made its initial investment in the EU member state through its Polish Enterprise Fund VI vehicle. by taking a controlling stake in Netrisk.hu, the leading online non-life insurance broker in Hungary, in a buyout transaction worth €23m.

Despite growing competition in the online insurance market in Hungary, Netrisk.hu has not only maintained its market leadership, but managed to increase its share of online business in 2008 and 2009. More than half of all car owners use the internet to buy compulsory car insurance in Hungary and more than 50% of those customers choose Netrisk.hu. According to the latest available data, Netrisk.hu boasts over 770,000 clients and as well as its core motor insurance products range, also offers homeowner and travel insurance policies on its interactive website, which was the first in the country to offer customers the possibility to make online price comparisons.

"In Enterprise Investors we've found an investor that has an excellent reputation, strong regional presence and unquestionable expertise in the financial sector," says Zsolt Haraszti, managing director of Netrisk.hu, who founded the company back in 1995. "With the help of this investor, we will not only boost the further development of our services, but also expand in Hungary and in the Central and Eastern European region. This is an exceptional opportunity for us to grow this one-time family enterprise into a regional corporation in the coming years."

For its part, Enterprise Investors has been eying the Hungarian market for some time and is said to have been impressed by the strength of Netrisk.hu's business model, which offers a compelling combination of an already strong market position plus a sustained growth track record. "The management has proved it knows how to achieve exponential growth in the number of satisfied customers by providing value to them and thus growing the company," says Dariusz Pronczuk, managing partner at EI in Warsaw.

Founded in 1990, Enterprise Investors is one of the most experienced alternative asset management firms in emerging Europe, having invested over €1.3bn in more than 100 projects in the last 20 years, while raising a total of €1.7bn via seven investment vehicles. It has floated 25 firms and sold holdings in more than 90 companies at money multiple averages of roughly three times. It typically invests in medium-sized firms with an average investment time horizon of three to seven years.

Meanwhile, another Hungarian insurance company, AIM Altalanos Biztosito, is looking to increase its capitalisation in order to support its rapid growth. AIM was founded in 2007 and initially underwrote motor insurance in Hungary and other CEE EU states. It has since expanded to writing a variety of niche products across the region. The firm is part of MAI Insurance Group, a diversified insurance group which operates in more than 20 countries in emerging Europe, including Russia. Private equity player Euroventures is a key investor in the group. Zagreb-based investment banking boutique Aucris has been mandated to handle AIM's capital increase.

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