Ethniki Insurance sale saga hits new snag

The sale of Ethniki Insurance is being delayed for a sixth year, in a deal which should have been completed in December 2015, according to a commitment the lender and Greece had made to the EU’s Directorate-General for Competition.

The obligation to sell National Bank’s (NBG) insurance subsidiary was imposed by the European authorities after the state aid paid to the lender within the context of the 2014 and 2015 recapitalization programs. The total state aid received by NBG reached 12.7 billion euros, which corresponded to 20% of its weighted assets, part of which has been repaid.

So far, all of National Bank’s efforts to sell its subsidiary have failed for various reasons, while sources indicates that the current process is also facing problems. Despite expectations that it will be sold to fund CVC and the fact that just a few weeks ago, NBG CEO Paul Mylonas expressed his optimism on the completion of the deal, sources say there is a considerable gap still separating the two sides.

The same sources say that the CVC is pushing for a lower price but the biggest pushback on the deal is coming from trade unionists and political parties seeking to maintain the current status quo at the insurance company.

Bank sources say that a deal could still be reached in talks that have been going on for months but add that uncertainty has prompted officials to re-examine the option of going public with the company on the Athens bourse.

National Bank may have written down the value of the insurance company on its book to 500 million euros (from 1 billion euros previously), however many dispute this number as well. Ethniki Insurance is the largest company in the sector with assets over 4 billion euros and equity of 750 million euros, but it is a common secret that a large part of its portfolio consists of products that are not properly priced, resulting in losses and many risks.

In 2012, the company received a share capital boost of 650 million euros, which was covered by the bank, to make up for the losses stemming from Greece’s PSI bond exchange program.

The Calamos-Exin Partners fiasco

In June 2017, the investment group Calamos - Exin Partners had offered 1 billion euros for the insurance subsidiary, an amount much higher than the valuations of analysts (about 650 million euros). Many at the time described the deal as being too good to be true, only to prove a few months later that the Calamos-Exin affair was a major fiasco.

Seven months after the tender was awarded, the Exin group had not submitted to the Bank of Greece the final shareholding structure of the scheme that would finance the acquisition, sparking rumors that something has gone wrong on the deal. The shipwreck was confirmed in early 2018, when the Kalamos family announced that they had filed a lawsuit against EXIN Financial Services Holdings BV.

The case had provoked strong criticism concerning the way in which the tender was held by the management of the National Bank, as well as for the role of advisors. Many believe that the case weighed on CEO Leonidas Fragkiadakis who was suddenly removed from his position in May, 2018.