Battle over top Italian insurer Generali pits oligarchs against Milan elite

MILAN — The first thing that greets new arrivals to Italy’s financial capital is a huge, curved skyscraper that looms alone over a windswept square. Plastered across its facade is a broad red banner bearing a single word: Generali.

While little known outside Italy, Assicurazioni Generali, an insurer dating back to 19th-century Trieste, is at the center of a breathtaking and complex web of intrigue, political power plays, billionaires — and, most crucially, €35.6 billion of Italian sovereign debt.

On April 24, major Generali shareholders representing a who’s who of Italian political and financial might — including two billionaire dynasties, three major banks and proxies for the government in Rome — fought a pitched battle over the future of the insurer’s board, including its chief executive, Frenchman Philippe Donnet, for another three-year term. In the end, Donnet survived — but Thursday's meeting was only the first play in a longer, highly politicized struggle for influence.

For years, the Italian government has chafed over the direction Donnet has taken at the prized firm, which is Europe’s third-largest insurer and the third-largest company in Italy. Last year, that frustration became a full-blown panic after Donnet began plans to merge Generali’s asset management arm (and its vast holdings of Italian sovereign debt) with that of a French firm. The government is wary that French influence over the insurer could reduce its “patriotic commitment” to investing in Italy, at a time when Italy’s debt pile is under increasing scrutiny.

But the government doesn’t have direct influence over the company — and that’s where much of the drama of the meeting came in.

On the face of it, there are two major power brokers in this game, each striving to influence the breakdown of the insurer's board. In favor of Donnet is Mediobanca, the revered Milan investment bank that owns a 13.1 percent share in Generali and which ultimately secured 52 percent of the vote for its list of candidates Thursday.

On the other side are the billionaire and powerful Rome construction tycoon Francesco Gaetano Caltagirone, and Delfin, a holding company controlled by the family of late billionaire Leonardo Del Vecchio. Together they hold a 17 percent stake in the insurer, and on Thursday they sought to impose six of their candidates on its board — the idea being to marginalize Donnet.

While last week's bid largely failed, the two billionaire families have another trick up their sleeves. The investors share their skepticism of Donnet with Italian Prime Minister Giorgia Meloni, and are alleged to be key players in a separate, Rome-backed move to take over Mediobanca outright through the partly nationalized Tuscan lender Monte dei Paschi di Siena, in which both Caltagirone and Delfin bought a small stake last year. A successful takeover would extinguish Mediobanca's influence completely.

That all means that the stakes are extraordinarily high: Should Mediobanca resist the pressure from Rome, it will be a triumph for the financial markets and a blow to the government’s efforts to involve itself in a wave of banking consolidation that continues to sweep the country. Should Caltagirone and Delfin get their way, it could end a nasty period of unease over the future of billions of euros of Italian savings — but also underscore a sense of government overreach that even Brussels is starting to notice.

"There's a complete dissonance between domestic investors and international investors," said Francesco Galietti, a former Treasury official and the founder of political risk consultancy Policy Sonar, who noted that Italian investors primarily voted for the government position, while U.S. investors supported Mediobanca. "The international investors tend to look at market criteria, dividends performance, while the Italians tend to be very political."

‘Cold war’

The high-finance bloodletting has also attracted the gaze of bigger, deadlier predators.

Looking on from the sidelines are Italy's two largest banks, UniCredit and Intesa Sanpaolo, which have made small but significant moves to weigh in on the current battle and are seen as potential kingmakers.

In February, Milan-based UniCredit was revealed to have bought a 5 percent stake in Generali. The lender said the move was purely financial, but the bank's move to vote in favor of Caltagirone's list on Thursday prompted speculation that it was looking to appease Rome after the government imposed tough conditions on a separate takeover bid that the bank is pursuing.

Taking a more cautious approach is Intesa Sanpaolo. The Turin-based lender, Italy's largest, had planned to take over Generali in 2017, but gave up the bid after it was leaked by Italian media. Stung, the bank retreated from the idea, instead pursuing several bank takeovers in 2019.

But with Generali's future now an open question, observers suggest Intesa won't be able to resist jumping back into the fray. If UniCredit were to make a serious bid for Generali, or even significantly up its stake, Intesa may feel forced to make a counterbid in order to prevent its rival swallowing up the gargantuan insurer.

To be sure, neither bank has publicly signaled any interest in buying the insurer, and it’s not clear either could. Instead, what is likely to unfold is a “cold war” between the powerful institutions as they try to prevent others from influencing it, said one Italian banking executive close to the Generali drama.

Depending on how that plays out, their involvement could derail the carefully laid strategies of either Mediobanca or Rome.

“When Rome started this they were thinking about Mediobanca, not about Intesa and UniCredit,” the Italian executive added. “They weren’t thinking about [the] consequences of this game — but now Generali’s in play. It wasn’t the intention, but it was the conclusion of the game.”

Carlo Martuscelli contributed to this report from Brussels.

This article has been updated.