Italy's top insurers, banks strike Eurovita rescue deal (updated)

UnipolSai Assicurazioni SpA

30/06/2023 18:40

(Recasts with statement from supervisor IVASS)
    By Valentina Za
       MILAN, June 30 (Reuters) - Italy's top four insurers and
Germany's Allianz  ALVG.DE  have agreed a multi-billion euro
rescue deal for Eurovita, industry supervisor IVASS said on
Friday after months of work to broker an accord which also
involves 25 banks.
    Earlier this year, Eurovita became the first Italian
insurance company to be placed under special administration, 
after running into trouble due to higher interest rates.
    Insurers Generali  GASI.MI , Intesa Sanpaolo Vita  PST.MI ,
Poste Vita  PST.MI , UnipolSAI  US.MI  and Allianz will set up a
new company that will take on Eurovita life insurance policies.
    Some 10 billion euros in policies will be transferred to the
new company, or two thirds of Eurovita's total assets at the end
of last year, a person close to the matter said.
    Eurovita's troubles highlight the threat life insurers face
from rising interest rates, which cut the value of government
bonds these companies bought with their clients' money.
    Higher rates have prompted many small savers to end their
policies and reinvest the cash in search of better returns,
forcing insurers to sell the underlying bonds at a loss.
    IVASS has said that Eurovita's problems were aggravated by
poor risk management and the unwillingness of the owner, British
private equity firm Cinven, to provide more capital.
    Earlier this year, IVASS froze early redemptions at Eurovita
after appointing a special commissioner to run it.
    On Friday it extended the freeze until Oct. 31 while the
technical details of the rescue are finalised.
    To prevent the five insurers from being hit by redemptions
once the ban is lifted, banks that sold Eurovita the products
are participating in the rescue.
    The lenders will provide financing to repay Eurovita
customers who redeem their policies, while holding the
underlying bonds to maturity and neutralising any losses.
    This financing amounts to 6 billion euros, the person said. 
   

 (Reporting by Valentina Za; Editing by Alvise Armellini and
Alexander Smith)
 ((federica.urso@tr.com))