Italian insurance giant Generali Group has announced the sale of its German life insurance unit Generali Leben to consolidation platform Viridium Group in a deal valued at up to €1 billion, with total estimated cash-in up to approximately €1.9 billion.
The announcement follows reports last year of Generali looking to offload its German life insurance portfolio, as low-interest rates and more rigorous capital rules across Europe hindered operations.
Generali’s Germany life business is to be re-balanced on Unit Linked, Hybrid and Protection products. Generali is set to remain Germany’s second largest insurer.
Dominic Simpson, a Vice President and Senior Credit Officer at Moody’s, commented, “Generali’s agreed sale of its traditional life insurance unit – Generali Leben – is credit positive for the group as it will reduce the group’s exposure to interest rate risk and increase liquidity at the holding company level.”
The deal will see Generali Deutschland sell 89.9% of Generali Leben to Viridium. The total evaluation for 100% of the Company is up to €1 billion, including €125 million as earn-out in case of changes in the rules regulating the allocation to ZZR1 reserves. Viridium will also reimburse €882 million of hybrid loans to Generali Group.
The transaction will add approximately 43% to the German and 2.6% to the Group Solvency II positions respectively, generating a capital gain of approximately €275 million at Group level.
Generali Leben represents approximately 36% of Generali Deutschland’s Life reserves and is mainly focused on the guaranteed traditional policy business. It manages four million policies with traditional reserves amounting to €37.1 billion and includes several portfolios of formerly merged companies.
“Today’s decision represents a key step in the process of strengthening Generali according to our strategy. All of our stakeholders will benefit from it. This transaction will allow us to invest in innovative solutions for our German customers, guaranteeing a higher return for our shareholder, said Generali Group Chief Executive Officer, Philippe Donnet.
“Germany is a core market for Generali. The management team and all of our colleagues are working relentlessly to strengthen our position as a leader in the insurance industry. This commitment makes us confident about our future in the market.”
Under the terms of the agreement, Generali will manage the assets under management of Generali Leben for a five-year period through Generali Investments Europe. Viridium will recognize a cumulative sum of €275 million to Generali over the five years.
Subject to the completion of the due diligence Generali will have the possibility to invest in a minority stake in Virdium.
The CEO of Generali Deutschland, Giovanni Liverani, added, “This is the final step in the strategic turnaround of Generali in Germany, which allows us to grow and be stronger in this market. We are committed to guarantee maximum continuity to our customers, opportunities for our employees, and further investments in growth.
“Leveraging on our longstanding and excellent distribution partnership with the Deutsche Vermoegensberatung that will distribute our strong Generali brand, on our digital leadership with CosmosDirekt, as well as on our innovative and unique smart insurance product range, we are now positioned better than ever to reinforce our footprint among the leaders in Germany.”
