Background information

Unipol-GruppoUnipol, the insurance company that is part of Italy’s co-operative economic system, which ranges from supermarkets to the construction industry, is about to celebrate its first half-century of life by completing the merger with Fondiaria Sai. This move will make the Bologna-based group the number two firm in the Italian market, second only to the Trieste giant Generali. The merger with the insurer formerly owned by the disgraced Ligresti family will be the final outcome of one of the most complicated and controversial deals ever carried out in the Italian insurance market, involving first the battle for the takeover (or better, the rescue) of Fondiaria Sai, in which Unipol beat out the private investor Palladio, and then the conviction of the Ligrestis over charges of fraud.

The merger project was first conceived in 2011, with the goal to be completed the following year. However, an additional year would be needed in order to fulfill several requirements imposed by Ivass, the Italian industry regulator which is part of the Bank of Italy. But for the time being, everything is going smoothly, says the head of Unipol Carlo Cimbri: the combining of Unipol with the Ligrestis’ former companies—Fonsai, Premafin, and Milano Assicurazioni—is proceeding “as scheduled”. Once the merger is completed, the new Unipol-Sai will boast a portfolio of 15.6 billion policies with a solvency margin that is nearly twice the minimum regulatory requirement. It will be number one in the indemnity market and number two after Generali in the cumulative life-indemnity market. Most analysts have a positive view regarding the stock, which is still traded at a discount. Starting in 2014, Unipol estimates that the merger will create synergies of 350 million euro per year.

According to the merger plans, the insurance operations of both companies will be incorporated into Fonsai, which will remain the sole company of the new group to be publicly listed, while Unipol itself will be transformed into a holding company that will also own Banca Unipol and Linear, an online insurer. In the meantime, Unipol has to dispose of assets worth 1.7 billion euro, most of them in the indemnity sector, in order to comply with the Italian Antitrust regulator. The potential buyers include U.S. companies Liberty Mutual and Berkshire Hathaway.

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