Eureko gets €1bn capital boost
NETHERLANDS - Eureko's capital position has been bolstered with a €1bn capital injection from its major shareholders Achmea Association and Rabobank Group, and talks could resume in the row concerning Poland's PZU.
The capital support was announced just as preliminary figures for 2008 from the Netherlands-headquartered insurance group revealed it had seen a net loss of €2.1bn, decreasing Eureko's capital position by €2.9bn to €7.5bn.
While officials say the capital injection will not affect the current ownership of the firm - which sees Achmea and Rabobank own 54% and 39% respectively - this capital injection will lift Eureko's solvency ratio by a quarter to 175% having dropped dramatically from 203% in August.
The company attributed its loss mainly to the impact of the market turmoil on its equity portfolio - during the second half of 2008 in particular - which led to impairments of €1.1bn.
That said, a successful hedge against a fall in listed equity portfolio resulted, as of May, in a gain on investments of €251m, partly mitigating the losses elsewhere on equities.
Gerard van Olphen, chief finance officer at Eureko, said the company is aiming to reduce its equity exposure by 50% during the first half of 2009.
However, the situation does also mean Eureko's associated holdings in Millennium BCP (Portugal) and F&C Asset Management (UK) will carry impairment charges of €693m and €103m respectively, Eureko added.
Elsewhere, Eureko is understood to be seeking new talks with the Polish government for what officials hope will be an amicable solution to the row over the privatisation of Polish national insurer PZU.
Van Olphen said the Polish Ministry of State Treasury has positively responded Eureko's recent call for talks to end the long-running conflict. Negotiations between the government and Eureko ended last August after a deadline for reaching a compromise had expired.
"Because of the importance and complexity of the issue, we will be carefully looking at the framework for the negotiations," said Eureko's CFO.
Eureko took the Polish government to an international court of arbitration for breaching a privatisation promise made in 1999, when the Dutch insurer bought 30% of PZU.
The court stated the Polish government had breached a bilateral agreement between the Netherlands and Poland by not selling its stake in the country's largest insurance company. (See earlier IPE story:Poland and Eureko seek final court settlement)
A new government in Poland in 2007 led to the first movement in the dispute for years.