June 1, 2020 / 9:01 AM / a month ago

Italy watchdog asks insurer Cattolica to boost capital

MILAN, June 1 (Reuters) - Italy’s insurance regulator IVASS has asked Cattolica Assicurazioni to boost its capital by 500 million euros ($557 million) and draw up a plan to strengthen its solvency and liquidity position, the insurer said on Monday.

Shares in the company fell more than 15% to hit an all-time low. The stock was down 15.2% by 0838 GMT.

IVASS sent a letter to Cattolica’s board on May 27 to highlight the group’s weakened solvency position “as a consequence of the deterioration of the financial markets following the spread of the COVID-19 pandemic”, Cattolica said.

“Following these considerations, the supervisory authority points out the need for capital measures ... equal to a capital increase of 500 million euros to be carried out by early autumn,” Cattolica said in a statement.

The insurer said last month that shareholders would vote at a meeting on June 27 on a proposal to authorise the board to increase capital by up to 500 million euros by the end of June 2025.

Cattolica said IVASS also drew attention to the asset allocation of the group and of some of its subsidiaries, “highlighting the exposure to lower quality bonds”, describing them as those with BBB- or lower ratings or unrated ones.

IVASS asked the group to draw up a plan by the end of July to monitor the solvency and liquidity position at the parent company and its subsidiaries. It also asked Cattolica to suspend some elements of pay of its company representatives.

Cattolica said the group’s solvency ratio, a key measure of financial strength, stood at 122% as of May 22.

It had been at or above 160% until the end of 2019 but fell below that level due to the high financial market volatility triggered by the coronavirus pandemic, it said.

Cattolica did not specify in its statement which solvency ratio IVASS was requesting, but the insurer has said its “ideal” solvency ratio was between 160% and 180%.

($1 = 0.8975 euros)

Reporting by Giulio Piovaccari; Editing by Stephen Jewkes and Edmund Blair

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