Posted on Feb 08, 2011 by Sergio Ulloa
Assicurazioni Generali, the Italian based multi-national insurer, has been identified as potential bidders for a stake in the Russian owned VTB Bank. The state-controlled lender is the second largest in the country and, according to unsubstantiated reports, Generali has expressed an interest in acquiring a 1 percent stake in VTB.
The potential deal could be in the region of US$300 million and comes at a time when the Russian government launches an ambitious drive to privatize state-controlled assets. VTB has a market value of approximately US$36 billion, with the government placing a 10 percent slice of the Moscow based lender up-for-sale.
Russia's federal government has taken the discussion to start selling off state-owned ventures in a bid to close its budget gap. The latest public offering of VTB follows the banks initial floatation in 2007, which was the biggest transaction of its kind in that year. However, as the global financial crisis took hold, the value of the stock dropped significantly and Russian investors demanded the government buy-back of shares at the original market price.
Along with Generali, the US private equity firm, TPG, has said it is willing to buy up to US$100 million worth of shares in VTB.
If Generali is successful in its reported pursuit of the acquisition of a stake in one of Russia's largest banks, it will bolster its presence in the Russian financial sector and extend its distribution capability. Currently Generali's participation in the Russian insurance sector is achieved through the Generali-PPF joint venture, with Czech partners Home Credit; the Russian partnership offering personal loans to Russian consumers.
Generali is one the world's leading insurers and has a global presence. In recent years Generali has expanded operations across central-eastern European markets, together with the rapidly developing insurance sectors in the Far East, including the powerhouses of China and India. Last year the Italian insurer highlighted that it would looking for opportunities to expand in European and Eastern European bloc countries believing significant scope exists for growth in the region, especially Russia with the largest population in Europe enjoying an improving level of affluence.
The Trieste-based insurer has identified the Eastern European markets
including Russia, Poland and the Czech Republic as key prospects for premium growth. If Gerenali progresses with the reported bid for VTB, it will fit with its strategy for international growth and provide a significant enhancement of its access to a nascent Russian insurance market.
The Russian non-life insurance market is estimated to be worth roughly US$12 billion, while the Russian life market is worth approximately US$600 million.
Russia is part of the BRIC countries - Brazil, Russia, India and China - with expanding economies which have become of great importance to world prosperity over the last decade; the BRIC countries holding approximately 40 percent of the world's population in maturing markets offering insurers huge potential for long-term premium growth.
It is understood that for the purchase to proceed, the bid will require approval from the Generali board and investment committee as required under the insurers corporate structure; sources close to Generali expect the deal to be carried out through Generali's German arm.
The Russian government initially planned to sell the 10 percent stake in VTB to number a of individual investment groups, but took the decision to put the Russia-state bank up for a secondary public offering as the total value of the business is expected to reach an increased level of US$3.6 billion. Overtime the Russian government is expected to generate more than US$30 billion through the sale of government-controlled assets.
Generali is one the largest insurers based in Europe, with a global presence in more than 65 countries. Core business activities cover both personal and commercial insurance markets, including life, accident, health, motor, fire, marine and reinsurance.
Assicurazioni Generali SpA
The Generali Group is one of the most significant participants in the global insurance and financial products market. The Group is a leader in Italy and Assicurazioni Generali, founded in 1831 in Trieste, is the Group's Parent and principal operating Company. Generali is one of the leading global players in the assistance sector thanks to the Europ Assistance Group, active in more than 200 countries with services in the motor, travel, healthcare, home and family sectors. In recent years, the Group has made a significant return to 14 central-eastern European markets and has set up offices in the principal markets of the Far East, including China and India.
The VTB Bank has played a key role in the Russian banking industry and remains a pivotal asset in the Russian economy. VTB has established and developed a strong retail banking network. Under the VTB strategic plan, it aims to become a leading bank overseas and to gain a strong position in investment banking. The Bank is working towards significantly increasing its lease and insurance transactions and to boost its activities in asset management, brokerage, private pension coverage and in other segments of the Russian financial market.