Piraeus Bank announced on Thursday that it has entered exclusive negotiations with private equity firm CVC Capital Partners’ Fund VII to acquire a 70% stake in Greek insurer Ethniki Insurance for €469 million. If the deal goes through, CVC stands to make a staggering 570% return on its investment. The firm initially agreed to purchase Ethniki Insurance for €505 million in 2021 but has so far paid only €270 million to the National Bank of Greece. Through profit distributions and asset sales, CVC has already recovered around €200 million, bringing its net investment down to approximately €70 million.
The acquisition also highlights Piraeus Bank’s strategic decision to adopt the Danish Compromise, a European regulatory framework that allows banks to reduce the capital burden associated with owning large stakes in insurance companies. Under standard European banking rules, investments in insurers are treated as high-risk assets, requiring banks to hold significant capital reserves. However, the Danish Compromise provides an alternative, enabling banks to apply a more favorable capital weighting model.
Banks can choose between two approaches. The full integration approach consolidates the insurance company’s finances into the bank’s accounts, applying the Solvency II capital requirements for insurers rather than the stricter banking capital rules under CRR (Capital Requirements Regulation). The separation approach allows the bank to keep its insurance investment as an equity holding while using the less demanding Solvency II capital framework instead of the traditional banking rules. Piraeus Bank’s decision to use the Danish Compromise means that if the acquisition is finalized, its capital requirements will be significantly lower than under standard banking regulations. The bank estimates that applying this framework could reduce the capital impact of the transaction from 150 basis points to below 100, easing the pressure on its overall capital adequacy.
For Piraeus Bank, the acquisition represents a strategic move to diversify its revenue streams and enhance shareholder value. Ethniki Insurance is the largest insurance company in Greece, holding a 14% market share and reporting €800 million in gross written premiums in 2023. The company has total assets of €4 billion, equity of €400 million, and estimated adjusted pre-tax profits of €100 million for 2023. It also has an extensive distribution network, with 130 offices, more than 1,600 insurance agents, 1,100 partner agencies, and around 135 affiliated insurance brokers.
