The planned acquisition of National Insurance by Piraeus Bank is in an advanced stage, but the deal remains far from final. While Piraeus CEO Christos Megalou has emphasized that the move aligns with the bank’s broader strategy of boosting fee-based revenues in line with European banking models, concerns are mounting over the financial risks and regulatory hurdles involved.
Megalou reaffirmed on Monday that Piraeus aims to increase revenues from commissions -raising them from 23% to 30% of total turnover—by expanding into asset management and insurance products. He pointed to Italy’s Intesa Sanpaolo and UniCredit as successful examples of banks that have strengthened their profitability through similar strategies. Beyond diversification, the acquisition is also seen as a defensive play against falling interest rates, which erode banks' lending margins. By securing additional revenue streams from insurance, Piraeus hopes to counteract this challenge.
Despite Piraeus Bank’s positive outlook, investors and analysts remain skeptical. While Piraeus presents the deal as a strategic opportunity, some question whether the bank is assuming excessive risk in a transaction that could ultimately hurt its balance sheet.
One of the primary concerns is the financial health of National Insurance. The company is reportedly being valued at €600 million, a figure that some analysts see as unrealistic given its recent performance. In 2023, the insurer posted losses of €85.4 million, largely due to loss-making legacy health insurance contracts. These losses are structural rather than cyclical, as National Insurance is burdened by old insurance policies with fixed pricing, meaning it cannot easily adjust premiums despite rising claims costs. Without intervention, these financial strains are expected to worsen in the coming years.
Beyond financial performance, the deal faces significant regulatory hurdles, particularly in the area of capital requirements. National Insurance does not meet the criteria for the “Danish Compromise,” a regulatory framework that allows European banks to consolidate insurance holdings without taking a major capital hit. For a bank to benefit from this rule, its insurance subsidiary must hold at least €6 billion in assets, while National Insurance holds only €4 billion. This means Piraeus cannot offset the acquisition's capital impact, potentially leaving the bank exposed to additional reserve requirements in the future.
Another obstacle is the bancassurance agreement between National Insurance and National Bank of Greece (NBG). Even if Piraeus successfully acquires the insurer, it will not be able to use its own banking network to sell National Insurance products, as the insurer is still contractually bound to distribute its policies through NBG. Meanwhile, Piraeus Bank has exclusive insurance distribution agreements with NN Hellas and Ergo, meaning that if it acquires National Insurance, it would own an insurer it cannot immediately integrate into its operations. Market observers warn that this situation could create a regulatory deadlock, as Piraeus would be unable to leverage the insurer's distribution network while simultaneously facing a conflict of interest with its existing insurance partners.
A key question surrounding the deal is why private equity firm CVC Capital Partners is rushing to exit National Insurance so soon after acquiring it. When CVC bought the insurer from National Bank of Greece in 2021, NBG absorbed an €855 million write-down, effectively reducing the company's book value to make the sale viable. Now, just a few years later, CVC is looking to offload the company at a reported valuation of €600 million despite National Insurance’s weak financial performance and capital needs. If the deal proceeds, it could follow a familiar pattern where CVC exits with minimal downside, having already benefited from the initial restructuring, while Piraeus Bank assumes the financial risk, potentially facing unforeseen capital injections to support National Insurance.
Despite the deal’s potential financial and regulatory complications, Greek authorities have remained largely passive. Neither the Bank of Greece, the Finance Ministry, nor the Single Supervisory Mechanism (SSM) of the European Central Bank has issued any public statements on the transaction. This raises concerns over whether regulators are adequately scrutinizing the deal’s potential impact on Greece’s financial stability.
Some critical questions remain unanswered, including whether the Bank of Greece has properly assessed National Insurance’s financial health, whether Piraeus Bank will face additional capital requirements post-acquisition, how regulators justify the reported €600 million valuation despite the insurer’s ongoing losses, and how they plan to address the clear conflict of interest in bancassurance agreements.
Piraeus Bank is expected to announce its financial results on February 24, a date that could serve as a key indicator of whether the deal is moving forward. Investors and market watchers will be looking closely to see if Piraeus provides further clarity on the acquisition, particularly regarding valuation, capital implications, and regulatory approvals.
