Assicurazioni Generali SpA agreed to sell almost 90 percent of its German Generali Leben unit to a company owned by Cinven Ltd. and Hannover Re in a deal that values the business at about 1 billion euros ($1.2 billion.)
The deal’s total value could be as much as 1.9 billion euros including debt, the Trieste, Italy-based insurer said in a statement on Thursday. The sale, to Viridium Group GmbH & Co KG, is part of the insurer’s strategy to re-balance its portfolio and cut exposure to interest-rate risk, it said. Bloomberg reported in March what Viridium had submitted a binding bid for the unit.
Generali Chief Executive Officer Philippe Donnet has been selling less profitable businesses and focusing on assets such as infrastructure and private equity funds, against a background of low interest rates that have hurt investment returns. The firm expects to meet its turnaround targets this year, Donnet said in a Bloomberg interview at the World Economic Forum in Davos, Switzerland, in January.
“This is the final step in the strategic turnaround of Generali in Germany,” Giovanni Liverani, head of Generali Deutschland, said in the statement. “We are committed to guarantee maximum continuity to our customers.”
Boost to Solvency II Ratio
The Italian insurer expects to achieve a capital gain at the group level of 275 million euros from the sale, as well as an increase to its Solvency II ratio of 2.6 percentage points.
After the sale, Generali will remain the second-biggest insurer in Germany, according to the statement. The company plans to retain the remaining 10.1 percent of Generali Leben and will have a seat on the supervisory board.
Generali was up 1.9 percent in Milan as of 9:55 a.m trading at 14.55 euros . The stock has declined 4.1 percent this year, giving the company a market value of about 23 billion euros.
Generali Investments Europe will manage the Generali Leben assets for a 5-year period, receiving a cumulative total fee of 275 million euros, according to the statement. The agreement also allows Generali to invest in a minority stake in Viridium. At present, Cinven owns 80 percent of Viridium, while Hannover Re owns 20 percent.
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