Munich Re’s ERGO May Cancel Purchase of Greek Insurer on Instability

By | July 10, 2015

Munich Re’s ERGO Insurance unit may cancel its planned 90.1 million euro ($100 million) acquisition of Greece’s ATE Insurance SA if the country doesn’t return to stability.

“Depending upon how the political situation develops, it is possible that we will exercise the right to rescind the contract,” ERGO said in an e-mailed statement from Dusseldorf, Germany on Friday.

ERGO, Germany’s second-largest insurer, agreed to buy ATE from Piraeus Bank SA in August last year, saying at the time that it expected the Greek economy to rebound. The country has subsequently come to the brink of exiting the euro and a potential collapse of its financial system.

ERGO has yet to receive the final regulatory approval to make the purchase, it said in the statement.

Late last night, Greek Prime Minister Alexis Tsipras offered to meet most of the demands made by Greece’s creditors in exchange for a bailout of 53.5 billion euros. The package of spending cuts, pension savings and tax increases will face its first hurdle in the Greek Parliament on Friday and a summit of EU leaders on Sunday will probably have the final say on whether the debt-saddled country will get a new three-year loan.

ERGO said last year that the purchase would make it the largest property/casualty insurer in Greece and that the company stood to grow given the country’s “low insurance penetration.” The purchase price is subject to net asset value adjustments upon closing, the insurer said at the time.

German magazine WirtschaftsWoche reported ERGO’s deliberations earlier.

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