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MILAN, June 25 (Reuters) – Italy’s Generali has agreed to buy a 24.4% stake in smaller insurer Cattolica Assicurazioni in a surprise move that will boost Cattolica’s capital position amid the coronavirus crisis, the two firms said on Thursday.
They also signed a strategic partnership which envisages multi-year agreements in asset management, the internet of things, health business and reinsurance, the companies said in a statement.
Generali will become Cattolica’s major shareholder through a 300 million ($337.47 million) euros reserved share capital increase. It will pay 5.55 euros per share.
Shares in Cattolica, Italy’s fifth largest insurer by gross premiums according to investment bank Mediobanca, closed at 3.61 euros on Wednesday on the Milan bourse.
Warren Buffett’s Berkshire Hathaway is the current top investor in Cattolica with a 9% stake.
Cattolica is also set to approve a further cash call of up to 200 million euros, which Generali has the option to subscribe to on a pro-rata basis.
Its board is set to approve the two capital issues by July 15.
The agreement requires Cattolica’s transformation into a joint-stock company by July 31 with effect on April 1, 2021 and would grant Generali veto rights in shareholders meetings on some matters.
Under the deal Generali will have three seats on Cattolica’s board.
Italian insurance regulator IVASS last month told Cattolica to raise 500 million euros after the coronavirus crisis knocked its solvency ratio, a measure of financial strength.
The company said its solvency ratio was 122% as of May 22, versus 147% at the end of March and at least 160% at the end of 2019. It normally targets a ratio of 160% to 180%.
Cattolica was already under IVASS’s scrutiny after the abrupt ousting of CEO Alberto Minali in October raised concerns about its governance.
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