The debt that suffocated Eurovita
Eurovita had to guarantee a constant flow of dividends to its controlling holding company, to ensure that the fund Cinwen could meet the debt commitments made largely for the acquisition of the Italian company. And secure financial flows a The Fifth Cinven Fund, at the bottom of Cinven at the top of the insurance group’s chain of control. Debt that does not appear in Eurovita’s accounts, but which has affected the company’s business.
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The requests of IVASS
Il bank debt of the fund and the recent events of the insurance company are closely intertwined. L’Ivassat the end of an inspection, had asked last year for a capital strengthening (about 250 million, according to rumors) that Cinwen has never carried out, rather looking for a buyer. Until, at the end of last January, Ivass itself decided to place it in receivership. Meanwhile, thesolvency index fell below the minimums established by the Authority. In February, Cinven then injected 100 million euros in the insurance company.
The flow of dividends
In 2021, while the supervisory parameters of Eurovita they were already significantly lower than the average of the Italian companies, its parent company Flavia HoldCo paid dividends of 3.5 million euros to Flavia FinCo, a vehicle from Jersey. This is headed by a loan of around 300 million which had already caused concern well before the collapse of the company. In the 2020 budget of Flavia HoldCo inter alia, we read that the direct parent company (Flavia FinCo) had deferred the repayment of the principal amount and blocked the flow of dividends, ensuring the payment of interest “until June 30, 2022”. According to what has been reconstructed, in mid-2022 Cinven tried to restructure the debt with the pool of banks.
Debt warning
In 2019, just one year before the “lockdown”, Flavia HoldCo had paid Flavia FinCo well 106 million euros of dividends. The reason, reported in the financial statements of the English company, was the start of a procedure of “set-off” on the debt. That is, under the loan agreement, a procedure initiated for non-compliance with debt commitments. Once you pay the maxi-dividendreports the document, the procedure of “set-off” it has been closed.
The results
A similar figure (100 million) the year before had been paid by Eurovita Holding to Flavia HoldCo, again in the form of dividends. In 2018, Eurovita Holding reported a profit of 4.2 million of euros, of 19.8 million in 2019 and a loss of 13.6 million in 2020. In 2021 it recorded a profit of 56 million, partly due to the effect of a change in accounting rules.
The chain of control
Eurovita’s chain of control is structured as follows: the operating company, Eurovita spais controlled by Eurovita Holding spa. This in turn is controlled by Flavia HoldCo, based in London. Upstream there is Flavia FinCo (with debt) e Flavia TopCoboth of Jersey. Finally we get to Fifth Cinven Fundin turn managed by Cinven Capital Management (V). The latter two entities are based in Guernsey.
The pool of banks
The banks to which it was exposed Cinwen to acquire the group Eurovita I am Natwest, BofA Merrill Lynch, Eng, Abn Amro, Deutsche Bank and Natixis. Today’s Eurovita was born through a series of acquisitions. In 2015 Cinven had in fact acquired Ergo Providence and in 2017 Eurovita e Old Mutual Italy.
The rapid rise in interest rates caused the collapse of the company, which negatively impacted reserves. But the situation had been slowly deteriorating for some time. TO fine 2018I had 470 thousand customers, 15.6 billion in assets under management and a Solvency II of 151%. Currently, customers are 353 mila for 410,000 policies issued and 15.3 billion in assets.