A Power Play in Italian Finance

How maneuverings by Mediobanca resulted in the ouster of insurance giant Assicurazioni Generali's chairman

Machiavelli himself couldn't have staged a more artful coup. At Italian insurance giant Assicurazioni Generali's annual meeting on Apr. 28, Alfonso Desiata was ousted from the chairmanship after running afoul of secretive and powerful Milan-headquartered investment bank Mediobanca, the largest shareholder, with a 14% stake.

Mediobanca CEO Vincenzo Maranghi had spent much of the previous week plotting the downfall of Desiata, who has headed the 170-year-old underwriter -- Europe's third-largest in terms of premiums written -- for just two years. Bank of Italy Governor Antonio Fazio indicated he opposed the ouster. But Maranghi successfully persuaded most other large shareholders to side with him, including Germany's Commerzbank, Italy's Montedison, and Merrill Lynch and Chase Manhattan Bank from the U.S. Maranghi also won the support of Generali CEO Gianfranco Gutty, who will now also take on the role of chairman. "Generali will now be able to work more effectively," Gutty says. "This will allow us to pursue our goals more aggressively."

Desiata earned Maranghi's ire by trying to gradually distance Generali from Mediobanca. Among other things, he developed joint fund-management ventures with two of Italy's largest banks, Intesa and San Paolo IMI. Intesa is headed by Maranghi's archenemy, Giovanni Bazoli, who wants to split Mediobanca up and seize some of its assets.


  The fate of Generali is important because the group, which boasts a market capitalization of $41 billion, is one of the few Italian financial institutions with the heft to become a pan-European player. After shelling out $14 billion on acquisitions over the past five years, Generali is a major player in Germany and Central Europe, as well as in Italy. Gutty wants to develop the group's fast-growing and lucrative life-insurance and asset-management operations, especially in France and Spain. He's also keen on making an acquisition in the U.S. "That's something we are definitely looking at," he says.

Gutty says the group will move faster if there's just one person at the top. But the ouster had less to do with Generali's strategy and tactics than with Mediobanca's desperate efforts to maintain its influence over the Italian financial system. Desiata's departure shows that Mediobanca still wields significant clout in Corporate Italy.

Many financiers had predicted that Mediobanca's influence would quickly decline following the death of its legendary founder, Enrico Cuccia, last year. If the investment bank had lost its grip on Generali, its most valuable asset, that prediction would have been confirmed. It would almost certainly have cost Maranghi his job and, possibly, led to Mediobanca's dismemberment.

Not surprisingly, Maranghi spared no effort to keep Generali in line. His key allies in the bid to remove Desiata and replace him with Gutty were Alessandro Profumo, the CEO of Unicredito, one of the country's largest banks, and Enrico Bondi, the head of Montedison.


  Both men helped Maranghi bring other Generali shareholders into line. Their task was complicated by the fact that Generali's former Chairman, Antoine Bernheim, was also maneuvering to succeed Desiata. Bernheim is a powerful partner at French investment bank Lazard Frères and had enlisted the backing of Vincent Bolloré, who has just paid $150 million for an 18% stake in a consortium that owns 14% of Mediobanca.

The surprising thing is that Maranghi was able to pull off the coup in the face of opposition from the Bank of Italy, which owns a 4.5% stake in Generali. A central bank spokesman stood up at the Generali meeting and told shareholders Fazio would be abstaining when it came to electing a new board. The statement was interpreted as meaning Fazio wanted Desiata, who is generally credited with having done a good job, to stay.

Indeed, Generali had been making progress under Desiata. Profits jumped 74% last year, and the group pushed deeper into money management and pensions, especially in France and Spain. It also acquired Italian rival INA, thus strengthening its already dominant position in the fast-growing Italian market.


  Fazio is worried that increasing Mediobanca's influence over Generali could harm the insurer's standing outside Italy. He hopes that the group will develop into a powerful pan-European financial institution. Most small shareholders also opposed Mediobanca's machinations. They account for well over 50% of Generali's shares, but too few of them were present on Apr. 28 to make a difference.

Gutty says the change at the top doesn't reflect a revamped strategy. "We will still focus on boosting our life business, moving further into asset management, and restructuring our Italian operations to make them more efficient," he says. Shareholders certainly hope so. Generali may be a dynamo by Italian standards, but it trails behind European archrivals AXA of France and Germany's Allianz on the international scene. Gutty will have to pull out all the stops if Generali is to keep pace.

By David Fairlamb in Frankfurt

Edited by Thane Peterson

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