Complex liability management brings many benefits for Generali


Client relationships hinge on the ability to do far more than merely execute transactions on request, they rely on understanding what the banking markets can do for those clients.

For Generali, the answer to a financial conundrum was smart, but not simple, and included a liability management exercise that smoothed a hefty €2.6 billion of 2022 redemptions with a buyback and refinancing of three subordinate securities (two in euros, one in UK sterling) that also removed foreign exchange risk.

These two transactions will reduce our group debt by approximately €250 million,

Cristiano Borean,
Group Chief Financial Officer at the Italian insurer

Furthermore, they will lead to a reduction in the annual gross interest expense of around €68 million, which means the group will exceed the high end of the €70 million-€140 million interest expense reduction target announced last year. These two important objectives have been reached in just under one year from their announcement.

The company had spent 18 months considering the liability management of a balance sheet stressed by an imbalance of redemptions and foreign exchange risk that would also reduce its cost of capital.

The large redemption had been noted by most of Europe’s more sophisticated investors. We wanted to propose something to solve at least part of this problem, and so started discussing how liability management could help.

Michelangelo Rovagnati,
Head of debt capital markets, financial institutions group, Italy at Societe Generale

The exercise, targeting old bonds, substituted high-cost debt (between 6%-10%) with a Solvency 2 Tier 2 paying about 2%.

The extra sophistication in the financial package was provided by the first green bond issued by a European insurer, completed within an environmental framework published by the company in May 2018, and issued as subordinated debt. 

I am also particularly pleased by the strong reception to our first green bond, clear evidence of the fact that sustainability has truly become part of the way we do business,

Mr Borean,
Group Chief Financial Officer at the Italian insurer

The fresh capital structure was possible because of the application of an equivalence principle, by which funds raised from the transaction are Tier 2 capital, with the issuer investing an equivalent amount of money in green eligible projects of its own. 

While we have seen green corporate hybrids or senior non-preferred bonds from banks over the last two years, this transaction represents the first regulatory capital bond in a green format in Europe,

Arnaud Mezrahi,
Head of Debt Capital Market Solutions and Advisory at Societe Generale

Societe Generale was a dealer manager on the buyback, a bookrunner and green structuring adviser on the new bond. On the green structuring advisory, the bank was selected because of the thoroughness of its analysis and the multi-disciplinary team that it put together, according to Michele Cortese, Milan-based head of debt capital markets, Italy for Societe Generale. 

We put ourselves in their shoes and did an in-depth analysis, giving all the options to the client. Let’s not forget, it was the first time they have undertaken this kind of green project, so we walked them, step by step, through all the phases.

Michele Cortese,
Milan-based head of debt capital markets, Italy for Societe Generale