Cattolica restructures ahead of EUR 350M Generali deal to shore up capital position

July 31, 2020. Print article

Shareholders in Italian cooperative insurer on Friday approved its transition to a joint-stock company, a move that clears the way for a deal with that could help boost Cattolica’s slumping capital position.

Cattolica, Italy’s sixth-largest insurance group, held an extraordinary shareholders’ meeting in Verona to approve the restructuring measure, which was required before the Generali deal proceeded. The conversion makes good on part of a partnership agreement that will see Generali become the biggest shareholder in Cattolica.

That agreement was first revealed on June 25, when the insurers established a multi-stage framework for cooperation. Generali agreed to collaborate with Cattolica on asset management, the internet of things, health care and reinsurance offerings, and pledged to subscribe to a EUR 300 million ($353 million) reserved capital increase raising its stake in Cattolica.

The partnership terms stipulated that Cattolica would need to change its legal and governance structure for Generali to make the investment. To meet its end of the bargain, Cattolica board members called Friday’s meeting to shed the insurer’s cooperative status, which gives shareholders one vote each regardless of their holding in the company.

The planned share capital increase would give Generali at 24.4% stake, overtaking Warren Buffett’s as Cattolica’s largest shareholder. Under the June agreement, Generali retains the option to subscribe to a separate cash call of up to EUR 200 million ($236 million).

The Italian carriers agreed to terms after pandemic-related setbacks put Cattolica in danger of becoming insolvent. Italian regulator ultimately ordered the company to raise EUR 500 million ($561 million) to shore up its weakened capital reserves.

Despite challenges posed by the coronavirus pandemic, Generali said Thursday that it was confident in its financial position and ready to push ahead with planned acquisitions. The deal with Cattolica will cost about EUR 350 million ($412 million), Generali CEO Philippe Donnet told analysts.

Cattolica Chairman Paolo Bedoni placed Friday’s vote in the context of the company’s yearslong bid for renewed competitiveness in the modern insurance market.

“With this historic step, the reform process undertaken by the company over 20 years ago continues,” he said. “Today’s vote will allow the company to be sound and increasingly strong in the market.”

Almost 71% of shareholders at the extraordinary meeting voted in favor of the transition to a joint-stock company.