Italian Insurer Cattolica Paves Way for Tie-Up with Generali

July 31, 2020

Shareholders in Italian cooperative insurer Cattolica Assicurazioni approved its conversion into a joint-stock company on Friday, paving the way to a tie-up with Generali to boost its capital position.

Generali last month agreed to buy 24.4% of Cattolica and signed a multi-year partnership in asset management, the internet of things, healthcare and reinsurance.

The investment will make Generali Cattolica’s biggest shareholder, leapfrogging Warren Buffett’s Berkshire Hathaway , which holds a 9% stake.

Shedding cooperative status, which gives shareholders one vote each regardless of the size of their stake, was a necessary step under the agreement.

The accord came after a turbulent spell for Italian insurers, which have seen the value of their assets – including large holdings of domestic government bonds – slump in the market rout caused by the COVID-19 pandemic.

Insurance regulator IVASS has told Cattolica to raise 500 million euros ($592.8 million) in capital after the coronavirus crisis hammered its solvency ratio, a measure of financial strength.

Under the agreement, Generali will subscribe to a 300 million euro reserved capital increase at Cattolica and has the option to subscribe pro rata to a separate cash call of up to 200 million euros.

The tie-up with Cattolica will cost about 350 million euros, Generali Chief Executive Philippe Donnet told analysts on Thursday, adding that he was not expecting any antitrust issues at this stage.

Nearly 71% of Cattolica shareholders voting in the extraordinary meeting backed the conversion to a joint-stock company, Cattolica said in a statement, just above the requested two-thirds majority.

“It will now be possible to give rise to the framework agreement with Generali,” Cattolica added.

When the deal was announced, analysts at Societe Generale said it would not be surprising if Generali raised its Cattolica stake again in the future.

However, Cattolica’s managing director, Carlo Ferraresi, told Italian financial weekly Milano Finanza on Saturday that the insurer would remain a separate company after its larger rival becomes its biggest shareholder.

($1 = 0.8435 euros) (Reporting by Gianluca Semeraro; editing by David Goodman)

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