Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Italian Insurers to Consolidate in Four-Way Merger


The result: an insurance company that's WAY too big to fail.

Unipol Gruppo Finanziario SpA, the third-largest insurer in Italy, plans to take over Premafin, the parent company of two other rival insurance companies, making the second-largest insurance company in Italy.

Unipol announced plans to buy a 51.3% stake in Premafin at 36.53 euro cents per share through a capital increase that was made available for the takeover, as reported in Bloomberg. Premafin is the controlling investor in the debt-laden Fondiaria-SAI, which owns Milano Assicurazioni SpA. Under the terms of the deal, Unipol will take over the two flagging insurance companies.

Unipol said that it would give itself until July 20 to finalize the deal with regulators.

Shares of Premafin surged 21% on the news of the takeover. Premafin shareholders such as the powerful Ligresti family can expect their stakes in the company to be diluted.

The merger aims to save Fondiaria and Milano from insolvency. Fondiaria is bracing for a loss of 925 million euros for 2011, and its solvency rate is at 90%. European regulators require a minimum of 100% solvency.

While this deal saves one insurer in Italy, it consolidates risk in the Italian insurance sector. After the takeover, Unipol will have 32% of the non-life insurance segment and 10% of the Italian life insurance market, according to analysts. If the unprofitable Fondiaria brings down Unipol, the ripple effects of such a failure might be the sort of thing that would warrant a government bailout. In chronically indebted Italy, that might not be possible.

Twitter: @vincent_trivett
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Featured Videos