French giant CNP Assurance has bought out the remaining 49.9% stake in local insurers CNP Asfalistiki and CNP Cyprialife from Bank of Cyprus, having paid €97.5 mln for the company the Cypriot lender reluctantly acquired when Laiki Bank was shut down during the 2013 bailout debacle.
The French insurer, majority-owned by the state and public funds, intends to put its acquisition to good use and enhance its presence in Cyprus, with the deal enjoying a hidden value, as it has been successfully contributing nearly half of all insurance earnings to the Bank of Cyprus group.
An insurance expert told the Financial Mirror that this will unbind CNP’s limitations, hampered by not fully utilising the Bank of Cyprus network to market bancassurance products, after CNP Cyprus lost a court appeal in an attempt to force the bank to let the insurer through its branch doors.
“We all have similar products, so the new name of the game will be on margins and rates of return on life and investment products,” the independent insurance salesman said.
“CNP had been planning to introduce new products in the (Cyprus) market, so we might see them materialise very soon.”
Caisse des Dépôts et Consignations created in 1816, and part of the government institutions under the control of the parliament, often described as the "investment arm" of the French state, controls 41% of CNP Assurance, a further 36.3% is held by La Banque Postale and the French banking group BPCE, with 21.8% in the hands of institutional and retail investors.
Bank of Cyprus issued an announcement saying it had agreed to the sale of its 49.9% stake in CNP Cyprialife and CNP Asfalistiki to French company CNP Assurances which has the controlling 50.1% holding in CNP Cyprus Insurance, making it a wholly-owned subsidiary for the first time since it entered the Cyprus market in 2008.
This ends a marriage of inconvenience as BoC didn’t want CNP – but acquired it after absorbing the assets of Laiki — as it already operated rival insurance firms Eurolife and General Insurance.
The deal – to be paid in cash — is expected to be completed in the second half of 2019, subject to approval by the regulatory authorities.
The BoC statement said: “The sale enables the Group to focus on its core assets and is in line with the Group’s strategy of delivering value for shareholders. The Group will continue to offer insurance services through its wholly owned insurance subsidiaries.”
Completion of the sale is expected to have a positive impact of c.30 bps1 on both the Group’s CET1 ratio and Total Capital ratio.
The carrying value of the bank’s investment in CNP CIH was €119 mln as at 31 March 2019. The accounting loss from the sale is estimated at €22 mln.
CNP CIH is the parent company of a group of insurance companies in Cyprus and Greece.
It owns a 100% shareholder in CNP Zois which offers life insurance services in Greece, CNP Asfalistiki, a general insurance provider in Cyprus, CNP Cyprialife, which offers life insurance services in Cyprus and CNP Cyprus Properties Limited, an investment holding company.
Xavier Larnaudie-Eiffel, Deputy CEO of CNP said: "The result further strengthens our subsidiary's leading role in Cyprus, expanding its work with full support from the teams in Paris. We intend to contribute even further to the growth of the insurance market in Cyprus".
In a statement, the executive director of the group, Takis Pheidias, said: "This agreement releases important forces of the CNP Cyprus Group, consolidating new prospects for strategic development".
BoC acquired the stake in CNP when Laiki Bank went to the wall as part of a harsh 2013 bailout agreement that included a haircut on deposits.
Things got off to a bad start after CNP demanded that BoC promote its products through its branch network as in the agreement with Laiki.
The thorny issue went to international arbitration, which ruled in favour of BoC saying it did not inherit Laiki’s contractual obligations to sell CNP products.
According to an announcement issued in Paris, CNP Cyprus Insurance Holdings is the second largest insurance operator in Cyprus offering the full spectrum of life and non-life insurance products and services distributed through the largest network of independent agents in the country.
In 2018, CNP Cyprus Insurance Holdings contributed €157 mln to CNP Assurances premium income (up by 8.4% compared to the previous year) and €7.3 mln to the Group’s net profit.
The acquisition of the Bank of Cyprus’ stake enables CNP Assurances to take full control of its subsidiary and thereby strengthen its position in Cyprus, a market with attractive growth potential in which CNP Cyprus Insurance Holdings is a leading player with a market share of 21% in life and 13% in non-life.
“Controlling 100% of the capital of CNP Cyprus Insurance Holdings demonstrates our confidence in the future of this subsidiary that offers the full spectrum of life and non-life insurance products and services in a country that has returned to growth since the 2013 crisis.
This further reflects our confidence in the management team, which has been successfully involved in the recovery and development of the subsidiary since our initial investment in 2008,” said Antoine Lissowski, CNP Assurances’ Chief Executive Officer.