It will enable Generali to expand its asset management business in a deal that chief executive Philippe Donnet hailed as a “transformative game-changer” and an “historic step forward” for the insurer.

Taiwanese insurer Cathay will take a 16.75 per cent shareholding of Generali Investment Holding, the Italian group’s asset management arm, as part of the deal.

The transaction means Generali will acquire 100 per cent of Conning that will allow it to create an investment business with more than $700bn under management spanning Europe, the US and Asia, Donnet told the Financial Times.

Connecticut-based Conning, which was established 110 years ago, has grown its assets under management from $85bn less than a decade ago to $157bn.

The deal will allow Generali to expand into fixed income, structured and corporate credit, emerging market debt and private real estate segments, Donnet added.

As part of the deal, expected to be completed in the first half of next year, Cathay could eventually be paid so-called earn-out provisions if certain unspecified pre-agreed terms materialise three years after the closing date.

It will also establish the groups in a long-term partnership in an agreement lasting a minimum of 10 years on Cathay Life’s insurance business’ assets, which will be managed by Generali’s in-house investment arm.

“Generali and Cathay Life speak the same language as we are both in the insurance business, so our interests are fully aligned,” Donnet said.

Generali had earmarked up to €3bn for mergers and acquisitions in the insurance and asset management businesses, in its strategic plan almost two years ago.

It had cited possible deals across several geographies, indicating a potential expansion into the US asset management market was a priority.

Last year it had considered the acquisition of New-York-based Guggenheim Partners.

Donnet said the Conning deal was the first time the group had found the perfect fit after exploring several options to expand its asset management business.

The deal’s structure will not impact Generali’s Solvency II ratio, a key measure of insurers’ financial strength, because there is no upfront payment.

Woody Bradford, who has been at the helm of Conning since 2010, said “this is a highly complementary business combination that presents exceptional long-term opportunities” and proves “stability for clients and employees while also maintaining continuity of leadership”.

Conning expanded into Asia in 2011 when it launched Hong Kong-based Cathay Conning Asset Management, a joint venture with Cathay Financial Holding, the parent of Cathay Life.

This story originally appeared on: Financial Times - Author:Silvia Sciorilli Borrelli

Shares in Monte dei Paschi were down close to 9 per cent in mid-morning trading. Axa, which turned a profit of at least €30mn on the sale, said it had not wanted to seek representation on the Italian group’s board or “influence the bank’s broader long-term strategy”.

This story originally appeared on: Financial Times - Author:Silvia Sciorilli Borrelli

Last month the French insurer agreed to sub-underwrite €200mn of the €900mn offered to private investors, providing a lifeline to MPS as it tried to plug a capital shortfall though its seventh rights issue in 14 years.

Many investors had shunned the deal because of MPS’s dire record: a series of scandals, government bailouts and high profile court cases. The Italian government, which rescued the bank in 2017 and still holds a 64 per cent stake, contributed €1.6bn of the overall €2.5bn capital raise.

Earlier this month, MPS said overall take-up had been 96.3 per cent, including the Italian treasury’s contribution, and the underwriters, which include Bank of America, Citigroup, Mediobanca and Credit Suisse, that received a €125mn fee in exchange for their backing, will be left holding just €93mn.

Beyond the taxpayers and Axa other backers of the rights issue include MPS commercial partners such as payments provider Nexi and Italian asset manager Anima, junior bondholders, Italian banking foundations and a few pension funds directly controlled by the Italian treasury.

Over the summer, MPS and Anima began discussing an amendment to the terms of their existing commercial partnership. The Milan-based asset manager publicly said it was considering a contribution of up to €300mn to the rights issue in exchange for an improvement in the economic conditions of their partnership. It ultimately contributed just €25mn after negotiations broke down and Anima said it had opted for a “merely financial investment”.

This story originally appeared on: Financial Times - Author:Silvia Sciorilli Borrelli