Montepio group restructures insurers’ debt and studies asset sales

  • ECO News
  • 28 November 2022

The Associação Mutualista Monteiro Geral (AMMG) converts subordinated loans of €30 million in additional capital installments to ease Lusitânias' debt burden.

Given the stock market turbulence that has affected the insurance sector in recent months, the Associação Mutualista Monteiro Geral (AMMG) has an ongoing major intervention in the two insurance companies of the group, including a partial restructuring of debt to strengthen the financial cushions of Lusitânia and Lusitânia Vida, and also the possibility of selling assets, such as the stake in the insurer in Mozambique, according to information gathered by ECO. The AMMG admits “sizing” the staff of over 500 employees of the two companies.

The biggest intervention will be made in Lusitânia, where a financial operation will happen that, without affecting the value of the company, will eliminate negative retained earnings – which stood at -€115.9 million at the end of last year – opening the door to the distribution of dividends in the future.

Until September, Lusitania recorded a profit of €7.7 million and met the regulator’s solvency levels. However, the non-life insurer – which is trying to avoid a €20 million fine imposed by the Competition Authority in court – has an unbalanced equity situation, which is why AMMG intends to make an operation by the end of the year to ease liabilities and balance the company’s net worth: it will go ahead with the early repayment of 2015 and 2019 subordinated loans worth €14.5 million and simultaneously strengthen equity by the same amount through ancillary capital installments.

On the table is also the possibility of carrying out a similar operation concerning a subordinated loan of €9 million, and also the disposal of several stakes Lusitânia holds, namely in Moçambique Companhia de Seguros (around 20%).

As for Lusitânia Vida, the group made an operation to transform a subordinated loan of €7.5 million into accessory installments of capital while preparing to reformulate the commercial offer. The plan aims to recover the solvency levels of the company, which recorded a positive result of €6 million in the first nine months of the year. The insurer even registered a breach of the solvency capital requirement in February – the ratio reached 80%, below the regulatory requirement of 100% – leading the Insurance and Pension Funds Supervisory Authority (ASF) to carry out tighter monitoring and call for measures to address the capital shortfall.

An official source from the group led by Virgílio Lima explained to ECO that “the interventions at the level of the capital structure were evaluated and defined to create adequate financial cushions for the high instability in the financial markets to which the two insurance companies are subject.”

“The situation at the level of own funds has been managed towards a greater balance in the capital structure of the companies, which also allows the evolution of their strategic plans, in line with the objectives that the group has defined for the insurance area,” said the same source.