Rate surge complicates Generali $22 billion private equity portfolio sale. Three sources said rising interest rates complicate Assicurazioni Generali’s (GASI.MI) efforts to sell up to 20 billion euros ($21.87 billion) of insurance liabilities.
Late last year, the Italian insurer sold many domestic life insurance contracts to raise money.
The persons said they were working with Goldman Sachs (GS.N) to find purchasers for the portfolio, including Portugal-based GamaLife, backed by Apax Partners, and Bermuda-based Athora, backed by Apollo Global Management (APO.N).
One person said Spain-based MedVida, owned by U.S. billionaire Paul Singer’s hedge fund Elliott Management, is also interested in the portfolio’s clusters of policies.
Interest rate rises have complicated the acquisition, raising worries about the portfolio’s worth and the regulatory desire to allow such a big risk transfer to buyout groups.
One person said Generali might restart talks after buying Liberty Mutual’s European business for 2.3 billion euros earlier this month, which had consumed the group’s focus.
The insurer is open to different risk outsourcing models, such as reinsurance, another one noted.
Generali, Goldman Sachs, Apax Partners, Athora, and Elliott declined to comment. Apollo, GamaLife, and MedVida declined to comment.
Back, closed, or run-off insurance policies must be held in reserve by insurers.
Traditional insurance companies have been cutting away legacy portfolios to unlock and deploy capital elsewhere.
Private equity funds have created consolidation platforms to purchase this undesirable insurance and improve their management, such as by applying their asset management experience to boost investment returns.
Insurers can save money by keeping old insurance savings contracts as interest rates increase in the West and their yields fall compared to other assets.
The rate cycle adjustment has also caused some policyholders, particularly in Italy, to withdraw their money early to invest in higher-yielding products, putting pressure on the sector and leading to the demise of Eurovita, a midsize insurer owned by Cinven.
The sources said the lawsuit has increased regulatory scrutiny of the sector, slowing deal-making. Rating agencies consider Eurovita an exception.
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