C7951 - ASSICURAZIONI GENERALI/TORO ASSICURAZIONI
PRESS RELEASE
PRESS RELEASE
GENERALI - TORO: ANTITRUST AUTHORITY GIVES CONDITIONAL GO-AHEAD FOR TAKEOVER
Generali must sell an asset to a third party which is also independent of Mediobanca
The acquisition of Toro Assicurazioni by Generali has been conditionally authorized by the Antitrust Authority. Within a reasonable period fixed by the Authority, Generali must sell an already identified insurance asset to a third party which is independent of both Generali itself and of Mediobanca. Furthermore, the purchaser as a group must not have had 2005 premium income in Italy in the two automobile insurance markets (third-party and vehicle insurance) greater than that of the Toro Group.
The Italian Competition Authority, at its meeting on 4 December 2006, determined that the merger operation could in fact lead to the creation or strengthening of a dominant position in various liability insurance markets, in particular motor vehicle insurance. The divestment of the asset identified in the ruling will have the result of maintaining conditions of effective competition in this sector because it sufficiently limits the increase in market share Generali would otherwise have enjoyed in liability insurance, and specifically in motor vehicle insurance, and mitigates the effects of Generali's strengthened retail network.
Indeed, the Authority's analysis shows a significant increase in Generali's market share, which goes from 10.9% to a little over 18% in third-party motor vehicle insurance and from a little more than 9% to approximately 17% in coverage of the vehicles themselves. The main competitive problems noted had to do with structural causes relating to the markets and insurers in general including parties not involved in the proceeding, such as Fondiaria-SAI and Mediobanca. To a great extent, these characteristics already existed before the takeover but their anti-competitive nature is exacerbated by the purchase of the country's fifth largest liability insurer by the second largest.
As a result of their respective mergers, Generali-Toro and Fondiaria-SAI, companies the Authority deems to be collectively dominant in the market, would jointly control about 42% of the third-party automobile market and 40% of vehicle insurance.
Their scope for increasing prices would therefore significantly increase. ISVAP, in its own published opinion, pointed to the existence of a direct relationship between the market share of individual companies and premiums, a link demonstrated by the fact that in 2005 the larger companies (with premium income in excess of 500 million euros) set prices higher than the market average. Specifically, in the case of Generali and Fondiaria-SAI the difference was about 15 per cent. ISVAP's data also demonstrate that, whereas in 2002 Toro's average net premium was substantially aligned with that of Generali and Fondiaria-SAI at a level higher than that of the market, by 2005 the average net premium, after only slight increases in the previous two years, had settled back to the 2002 level, part way between those of Generali and Fondiaria-SAI and the market average: in 2005, if the average market premium was 100, Toro's was below 110, while Generali's and Fondiaria-SAI's were around 115.
In the Competition Authority's opinion, the asset to be sold is such as to allow a company intending to enter the markets in question or already present with only a modest market share, to take advantage of the brand-name, know-how, portfolio and agency network of an insurer well-known in Italy.
This divestment is in accordance with the principle of proportionality between the measure imposed and the resolution of the anti-competitive risks inherent in the merger.
Any potential buyer of the asset must nevertheless possess certain characteristics:
a) It must be independent of Generali and also of Mediobanca, the entity which exercises de facto control over it. "Independence" means the absence of significant shareholdings or personal or economic links between the potential buyer on the one hand and Generali or Mediobanca on the other, such as for instance a core shareholding in Mediobanca or excessive indebtedness to the merchant bank.
b) If the purchaser is already present in the automobile branch (third-party and vehicle insurance), in order to avoid the risk of a significant increase in market concentration, it must have had 2005 group-wide premium income in these areas not in excess of that of the Toro group.
Rome, 4 December 2006