The acquisition of Ethniki Insurance by Piraeus Bank has proven to be a highly lucrative move for CVC Capital Partners, while Piraeus Bank’s shareholders appear to be assuming a disproportionate level of risk. CVC secured the insurance company at a low price, reaped substantial dividends, and is now exiting with significant profits, leaving Piraeus Bank with a “challenging task.”
In 2021, CVC acquired 90.1% of Ethniki Insurance for €346.5 million, with its net investment totaling €221.5 million. Now, in its agreement with Piraeus Bank, the valuation has soared to €600 million, allowing the fund to exit with a substantial profit in less than three years. Notably, no competing bid exceeded €400 million! Why Piraeus Bank CEO Christos Megalou agreed to pay CVC €200 million more than National Bank of Greece CEO Pavlos Mylonas was willing to offer is a question known only to Megalou and the Greek government’s top leadership.
But the €200 million price premium is not CVC’s only gain. Despite a weakened financial position, Ethniki Insurance distributed €130.5 million in dividends over the last three years, of which CVC pocketed €117.7 million, while the National Bank of Greece received only €12.7 million. Moreover, due to a controversial 2021 agreement with the National Bank, CVC minimized its exposure to losses from legacy Life and Health insurance policies, as 75% of these were covered by the National Bank of Greece.
Risks for Piraeus Bank
Piraeus Bank’s decision to acquire 90.1% of Ethniki Insurance raises serious questions about the bank’s strategy and its impact on shareholders. The transaction weakens Piraeus’ capital position, with its Common Equity Tier 1 (CET1) ratio expected to decline from 20% to 18.5% by 2026, and remain below initial estimates in 2027 and 2028. This development significantly limits the bank’s ability to distribute high dividends.
Furthermore, Piraeus Bank’s classification as a Financial Conglomerate (FICO) could increase its capital requirements, further restricting funds available for dividend payments. The acquisition also requires significant investments for the full integration of Ethniki Insurance, tying up capital in an uncertain business venture.
The bank’s capital buffer above minimum supervisory requirements is set to drop from 415 basis points to 265 basis points in 2026, with a further decline to 390 basis points in 2028. This shrinking buffer constrains Piraeus’ ability to distribute dividends. Additionally, the bank plans to rely on the "Danish Compromise" regulatory framework to maintain capital balance, but if its implementation is delayed or rejected, capital pressures will intensify.
While net commission income is projected to rise to 28% of total revenues, concerns remain about the sustainability of these returns. In the event of an economic downturn or slowdown in the insurance sector, Piraeus Bank could see its revenues decline, impacting profitability and dividend payouts.
Moreover, Ethniki Insurance faces structural challenges. Loss-making Life and Health insurance contracts, valuable assets sold off by CVC, and increasing competition exert pressure on the company. Crucially, Piraeus Bank will not have direct control over the distribution of insurance products, as these are sold through the National Bank of Greece. If Piraeus seeks to leverage its own distribution network, it will need to terminate existing partnerships with NN and Ergo—an expensive undertaking.
Piraeus Bank CEO Christos Megalou, along with banking regulators from the Single Supervisory Mechanism (SSM) and the Bank of Greece, must provide clear answers regarding this rushed deal—one that appears to benefit only CVC and its investors, whoever they may be.
