CNP Assesses Cyprus Crisis Impact on Laiki Insurance UnitFabio Benedetti-Valentini
CNP Assurances SA, France’s largest life insurer, is assessing the impact of the Cypriot crisis on its joint venture with Cyprus Popular Bank Pcl, the lender that will be dismantled as part of the island’s bailout.
The restructuring of the banking system and the Cypriot economic crisis will have an impact that can’t be evaluated as of today, a CNP official said by telephone. The company is analyzing the consequences of the accords between the Eurogroup and the Cypriot authorities, he said.
With the European Central Bank threatening to cut off emergency financing for Cyprus’s tottering banks, Cypriot leaders agreed March 25 to shut Cyprus Popular, known as Laiki, the country’s second-largest lender, as part of a 10 billion-euro ($12.8 billion) European-led bailout.
“There might be losses on goodwill” assets that CNP has on its Cypriot business, said Nicolas Jacob, a Paris-based analyst at Oddo & Cie. with a neutral rating on the stock. Still, “this activity is microscopic on CNP’s scale,” he said.
CNP dropped 3.1 percent to 10.57 euros by 9:45 a.m. in Paris trading, giving the insurer a market value of 6.8 billion euros. The shares have fallen 9 percent in 2013 while the 28-member Bloomberg Europe 500 Insurance Index has risen 5.6 percent.
CNP’s venture with Cyprus Popular had a value of 170 million euros on the French insurer’s books at the end of December, including about 80 million euros of goodwill, the official said. The Cypriot unit, called CNP Laiki Insurance Holdings, has a Solvency I ratio, a measure of its ability to absorb losses, above 300 percent and 93 percent of its business is with resident Cypriots, the official said.
CNP Assurances, which last year wrote down the value of its Italian joint venture with UniCredit SpA because of the recession’s impact on the local insurance market, has kept goodwill assets at its Cypriot business stable, according to its website.
Goodwill is an accounting convention that represents the amount paid for an acquisition over and above the fair value of its net assets.
Cyprus last year was CNP’s fourth-largest market outside of France with 2012 annual revenue of 176.9 million euros in the Mediterranean island, down from 210.4 million euros a year earlier. CNP last year had total revenue of 26.5 billion euros.
CNP, seeking growth opportunities after Cyprus joined the euro in 2008, spent 145 million euros to acquire a controlling stake in the insurance units of Laiki, then known as Marfin Popular. The Paris-based firm’s venture with Laiki was part of a plan to reach a 5 percent market share in the Greek insurance market and expand in countries such as Ukraine and Romania.
Laiki Cyprialife, CNP’s Cypriot life-insurance business, commanded a 29 percent market share on the island in 2011, while Laiki Insurance, the property-and-casualty arm of CNP’s partnership with the Cypriot bank, had a 15 percent share, the country’s largest, according to data from the Insurance Association of Cyprus. Both units are based in Nicosia.
CNP’s Cypriot business has about 50,000 life-insurance contracts, including 260 contracts with holdings of more than 30,000 euros and nine with holdings exceeding 100,000 euros, the official said.