Italian prosecutors investigate Cinven-owned Eurovita

UnipolSai Assicurazioni SpA

22/06/2023 19:43

(Adds details on rescue plans from paragraph 12 onwards)
    By Emilio Parodi and Pablo Mayo Cerqueiro
       MILAN, June 22 (Reuters) - Prosecutors in Milan have
opened an investigation into Eurovita, a small life insurer that
has been placed under special administration by Italian
authorities, two people with direct knowledge of the matter
said.
    Italy is striving to finalise an industry rescue for
Eurovita, which is owned by British private equity fund Cinven. 
    The sources said no crime had been identified so far,
although the investigation by the department of Milan
prosecutors' office in charge of financial crime could later
lead to allegations being assessed and individuals charged.
    Both Italy's insurance regulator IVASS and Cinven declined
to comment. Eurovita had no immediate comment.
    The sources could not be named because they were not
authorised to speak publicly on the issue.
    A third person with knowledge of the matter said that the
investigation had been opened following input from IVASS.
    Eurovita at the end of January became the first Italian
insurer to be placed under temporary administration by
supervisors who appointed special commissioner Alessandro
Santoliquido to oversee the company.
    In common with other life insurers who invested people's
money into government bonds, Eurovita's capital buffers have
been eroded by the falling value of those bonds as interest
rates rose.
    Adding to the problem, the higher rates prompted savers to
redeem their policies to reinvest the cash.
    News of IVASS' temporary administration decision hastened
redemptions, obligating IVASS to freeze any further requests.
    The halt remains in place as Santoliquido works on a
solution to shield policyholders from potential losses.
    
    SCHEME BEING FINALISED
    Under the scheme being finalised, Italy's top five insurers
are set to take on 9 billion euros in life insurance policies
sold by Eurovita, a person with knowledge of the matter told
Reuters.
    The rest of Eurovita's assets - which totalled 15 billion
euros at the end of 2022 - will be left with Cinven, at least
initially, to run off over time, the person said. 
    Once the early redemption ban is lifted, savers are expected
to rush to redeem their policies, which would cause the
underlying government bonds to be sold at a loss.
    To stop rescue insurers Generali  GASI.MI , UnipolSAI
 US.MI , Intesa Sanpaolo Vita  ISP.MI , Allianz  ALVG.DE  and
Poste Italiane  PST.MI  getting hit by the redemptions, dozens
of banks that distributed Eurovita's products are being called
upon to provide financing to repay the policyholders.
    The banks would get the bonds and hold them to maturity,
neutralising losses.
    UnipolSAI Chief Carlo Cimbri said this month the banks
should provide the financing for free, but the person said the
interest rate was still being negotiated.
    In its latest report on financial stability, the Bank of
Italy said that Eurovita's crisis had been compounded by
"specific structural weaknesses of that insurance company".
    The Bank of Italy listed "inadequate risk management,
limited capital and shareholder disengagement".
    After trying in vain for months to get Cinven to
recapitalise Eurovita, IVASS convinced it in February to inject
100 million euros, which a source told Reuters was less than a
quarter of the insurer's actual capital needs.

 (Additional reporting and writing by Valentina Za; editing by
Alvise Armellini, Barbara Lewis and Conor Humphries)
 ((valentina.za@thomsonreuters.com; +39 02 6612 9526;))