SAI – SOCIETÀ ASSICURATRICE INDUSTRIALE/LA FONDIARIA ASSICURAZIONI
PRESS RELEASE
Documents:
allegato P11475
PRESS RELEASE
SAI/FONDIARIA: THE REASONS FOR THE CONDITIONS LAID DOWN BY THE COMPETITION AUTHORITY. THE ACQUISITION WOULD GIVE MEDIOBANCA A DOMINANT POSITION ON THE PROPERTY DAMAGE INSURANCE MARKET WITH POSSIBLE PREMIUM INCREASES
At its meeting on 17 December 2002 the Competition Authority authorised the Sai-Fondiaria acquisition subject to certain conditions (set out in the press release of 17/12/2002). These conditions were imposed on the Sai, Fondiaria and Mediobanca companies to prevent restrictions on competition and possible premium increases on the property damage insurance markets.
The Authority used a number of economic simulation models in the course the proceedings to assess the impact of the operation on competition, and established that:
1) since Mediobanca exercised de facto control over Generali, the acquisition of joint control by Mediobanca and Premafin of Fondiaria-Sai was likely to give Mediobanca a dominant position on the property damage insurance markets through Generali and the new Fondiaria-Sai entity;
2) such a dominant position would substantially reduce competition on a lasting basis, considering the overlapping of the market shares of the parties concerned (the operation would give Sai-Fondiaria-Generali market shares in the property damage branches ranging from 34% to 45% and on all the markets only one competitor will have a market share in excess of 10%), increase the level of market consolidation, introduce numerous elements of rigidity into the insurance markets such as distribution type market entry barriers, market share stability, and crossed shareholdings;
3) according to one simulation conducted by the Authority, the parties to the acquisition would be able to charge substantial premium increases averaging more than 10% above pre-acquisition market levels.
In consideration of these elements, the Authority laid down a number of conditions on the parties to the acquisition, for the following reasons:
1) it was necessary to block the voting rights at the ordinary general meetings attached to the entire Fondiaria-Sai equity interest in Generali (2.43%, or 2.704% if the Fondiaria option to sell were to be exercised) as the vote of a competitor company at the Generali general meetings would be likely to facilitate the adoption of nonaggressive commercial policies, since Mediobanca would not only control Fondiaria-Sai jointly with Premafin, but would at all events remain the largest shareholder in Generali;
2) an analysis of the voting shares at the Generali general meetings showed that the absence of Fondiaria-Sai at the general meetings would substantially reduce the percentage of shares needed to achieve a majority vote. This would give Mediobanca almost a majority voting interest. In order to ensure that the useful effects of the measures imposed were not thwarted, the Authority deemed it necessary to impose further measures, and in particular freezing the 2% Mediobanca interest in Generali. This percentage was considered to be the minimum necessary to ensure that Mediobanca would not acquire the majority voting rights, even if it were to increase its equity interest in Generali up to the maximum permitted by its own articles of association, namely, 15%;
3) by preventing Mediobanca from continuing to permanently exercise de facto control of Generali, these measures appeared to be sufficient to prevent Mediobanca from acquiring a dominant position on the property damage insurance markets through Generali and Fondiaria-Sai. Such measures must remain effective until, in the Authority's opinion, Mediobanca remains in control of Fondiaria-Sai.
Rome, 23 December 2002