Munich Re May Enter Fondiaria Fray

Munich Re has held discussions with Italian insurer SAI, which has been trying to engineer a merger with La Fondiaria Assuicurazioni that would create Italy’s second largest p/c company.

Problems have arisen, however, because Fondiaria is strongly opposed to SAI’s takeover attempt. Last July it obtained an order from Italian regulators that a full tender offer for all the company’s shares had to be made, which put the cost beyond SAI’s range.

Since then talks about a three-way merger with the TORO Group, which is controlled by Fiat, have failed, and SAI has sold its option to buy 22 percent of Fondiaria shares to an investment group headed by JP Morgan Chase, which includes Commerzbank in which Munich Re holds a 10 percent stake. The group in turn gave SAI an option to buy the shares back, which caused Fondiaria to go to court in an effort to block the Morgan group from voting at its annual shareholders meeting. Morgan in turn is contemplating legal action against IL Mondo for publishing an article on the whole deal which it alleges contained false statements.

If Munich Re decides to get further involved, it has the financial capability to smooth out at least the monetary aspects of the deal, and the company, which now derives about half of its income from non-reinsurance related operations, has been anxious to expand south of the Alps. Its retail insurer Ergo, now Germany’s second largest primary insurer, behind Allianz, is interested in Italy, as well as perhaps the 10 percent stake Fondiaria holds in Swiss Life.

According to London’s Financial Times, Munich Re has only confirmed that it’s held talks with SAI “about issues which are of interest to both of us,” and has refused further comment on the Fondiaria takeover.