Generali Signs Deal to Acquire 51% Stake in Bulgaria’s Orel-G Holding

July 11, 2006

It’s not just the Italian Football (soccer) team that’s in an expansive mood. Italy’s Generali Group announced that it has signed an agreement for the acquisition of a 51 percent shareholding in Bulgarian insurer Orel-G Holding AD. The shares will be acquired from it parent company Orel-Consult AD through a subsidiary, Generali Holding Vienna.

“The acquisition is part of the international development strategy that has been pursued over the past few years,” said the bulletin. “The strategy has contributed to the progressive expansion of the Generali Group, not only in important Southeast Asian markets, but also in Central and Eastern European markets where the Group now operates in ten countries – Hungary, the Czech Republic, Romania, Slovenia, Slovakia, Poland, Croatia, Serbia, Ukraine and Bulgaria – with nearly 4 million clients.”

Generali said it had developed the strategy bas a mean of “focusing on countries where there is growth potential combined with a benevolent social and regulatory environment promoting the insurance business.”

CEO Sergio Balbinot commented: “The entry in Bulgaria with the acquisition of Orel-G is part of the international growth strategy of Generali, which in just a few months has significantly strengthened its presence in some of the markets with the world’s highest growth potential. The widening of our operations in countries such as India, Serbia, Ukraine, as well as the strengthening of our position in Croatia, are the latest steps in this process.”

The Orel-G Group is one of Bulgaria’s leading insurers with the largest market share in life and health insurance. Premium income for 2005 was approximately €28 million ($35.7 million), a 22 percent rise compared to 2004, driven by a 34 percent gain in health insurance and a 30 percent rise in life insurance sales.

“I am certain that Orel-G – thanks to its diversified portfolio covering life, elementary lines and health, combined with a wide presence throughout the territory – will be the ideal vehicle for the implementation of our growth plan in an extremely dynamic sector such as the Bulgarian insurance market,” Balbinot added.

Generali gave the following details: “The Orel-G Group operates in the Bulgarian market through three companies: Orel AD in the non-life sector, Orel Life AD in the life, and Zakrila in the health insurance business. Zakrila AD is by far the top player in health insurance, holding a 60 percent share of the market thanks to a polyclinic it owns and to agreements with 270 health institutions across the country. Orel Life AD, holding a market share of 10 percent, ranks fourth in Bulgarian life insurance with a premium portfolio largely consisting of endowment policies (86 percent). Orel-G AD, on the other hand, focuses on non-life business with auto insurance representing 64 percent of its portfolio. The company has a high level of actuarial and underwriting expertise.

“The Orel-G Group’s sales network is evenly distributed across the country with 87 territorial offices and approximately 8,000 salesmen. Besides the traditional selling channels, the Orel-G Group has a series of bancassurance agreements for the distribution of mainly its life insurance products.”

It also noted that the Bulgarian insurance market has had “25 percent annual growth in the past five years.” The growth follows reforms introduced in 1989. Since then, according to Generali’s bulletin, “Bulgaria’s GDP and industrial output have grown at a rate higher than that recorded on average in the European Union, with an inflation rate that is lower than that in the other countries of central and eastern Europe. Against this backdrop, average premium growth in the Bulgarian market over the past five years is 25 percent p.a., with an insurance penetration that compared to European averages is still very low (2.54 percent compared to an average of 7.88 percent in Europe).”

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