Buffett-backed Italian Insurer Asked to Boost Capital
June 01 2020 - 9:53AM
Dow Jones News
By Julie Steinberg
A Berkshire Hathaway Inc.-backed Italian insurance company was
asked to boost its capital, in a sign regulators are prepared to
act on the coronavirus pandemic's rippling effects through the
industry.
Società Cattolica di Assicurazione - Società Cooperativa, which
sells life insurance and other products, said Monday that Italy's
insurance regulator had asked it to increase its capital by EUR500
million ($555 million) by the early fall. The request stemmed from
its weakened solvency position, the insurer said, a result of
financial markets tumbling due to the pandemic.
While many insurers are expecting crimped profits due to the
deluge of claims generated by the pandemic, solvency issues haven't
generally posed a serious concern yet. The need for more capital
could reflect a worse-than-anticipated environment.
Cattolica, in which Warren Buffett's conglomerate has a 9%
stake, is listed on the Milan Stock Exchange and recently traded
down nearly 19% at EUR3.35.
The insurance regulator said two of the company's life insurance
subsidiaries had solvency ratios lower than the regulatory minimum.
A solvency ratio is a measure of an insurance company's financial
strength.
Cattolica's solvency ratio was 160% at the end of last year, and
fell after markets zigzagged due to the pandemic. As of May 22, it
measured 122%, down from 147% at the end of March.
The insurer said it has been trying to diversify its holdings in
recent years, and had reduced its exposure to Italian government
bonds to 55% from 73% in 2016.
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
June 01, 2020 09:38 ET (13:38 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.