Winterthur to Sell Italian Operations to Unipol

Credit Suisse Group’s Winterthur Insurance announced that it has signed an agreement to sell its life and P/C operations in Italy to Compagnia Assicuratri Unipol for 1.465 billion euros ($1.7 billion) in cash.

The deal is the second sale in two weeks for Winterthur, which sold Churchill Insurance, its U.K. subsidiary, to the Royal Bank of Scotland for £1.1 billion ($1.82 billion) earlier this month (See IJ Website June 12)

Even though Credit Suisse has ruled out selling Winterthur in its entirety, it has embarked on a strategy of selling some of its individual operations in an effort to restore the troubled division’s capital base. The two transactions will go a long way towards achieving that goal. Together with the sale of Churchill “the transaction will substantially strengthen Winterthur Group’s solvency capital by approximately CHF 3.5 billion [$2.63 billion],” said a company announcement. It also noted that it the two transactions will result in a capital gain of over CHF 1 billion ($752 million) after tax.

The company must receive approvals from regulatory and anti-trust authorities, and is seeking to close the deal sometime in the second half of this year. The 1.465 billion euros will be payable in cash on completion. 90 percent of the price will be paid directly by Unipol, and 10 percent by its majority shareholder Finsoe SpA.

“In view of our strategy to strengthen our capital base, and in the context of an Italian insurance market currently undergoing a phase of consolidation, we have chosen to realize the value of Winterthur’s strong performance in Italy”, stated Winterthur Group CEO Leonhard Fischer. “The offer from Unipol is uniquely attractive and gives us greater financial flexibility to grow selectively in other markets.”

The bulletin noted that Winterthur Italy writes both life and non-life business. In 2002, aggregate premium volume was 2.04 billion euros ($2.368 billion). The company offers “tailor-made, innovative and high-quality insurance products to approximately 1.9 million customers and employs a staff of approximately 1,600.”

In previous announcements Credit Suisse has indicated that, while it was seeking buyers for some of Winterthur’s units, it had embarked on a plan to restructure the company’s core business in Switzerland, Germany, Italy, Spain and Belgium, by combining its P/C and life insurance operations. The sale to Unipol takes Italy off the playing field. The reason for the decision appears to be money. An article on the New York Times Website compared the sale of Italy’s Toro Insurance to the De Agostini publishing group in April, noting that the price, 2.4 billion euros ($2.786 billion) represented a “price-to-premiums” ratio of 48 percent. Unipol will acquire Winterthur’s Italian operations for a price-to-premium ratio of around 78 percent.