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European Commission approves restructuring of Belgian insurance company Ethias

The European Commission has approved under EU state aid rules a €1.5 billion recapitalisation provided by Belgium in the context of the restructuring of Ethias, a Belgian insurer that ran into severe difficulties in 2008, in the wake of the financial crisis.

The Commission concluded that Ethias' restructuring plan provides for appropriate measures to restore the company's viability, while addressing competition distortions brought about by the state support. In order to finance the costs of the restructuring by its own means to the furthest extent possible, Ethias will sell or wind down its retail life insurance business and a number of other assets. The Commission is therefore satisfied that the restructuring plan is in line with its Communication on restructuring in the financial sector during the crisis and as such is compatible with Article 107.3.b of the Treaty on the Functioning of the European Union (TFEU).

Commission Vice-President Joaquin Almunia, in charge of competition policy, said: "Ethias has worked out a far-reaching restructuring plan, including changes to its corporate governance, to ensure that the mistakes of the past are not repeated. This case is a good example of how appropriate solutions can be found through a constructive and close dialogue with national authorities."

Ethias historically operated as a group of mutual companies. It was the third insurer (by market share) on the Belgian insurance market and had a total balance sheet of €28.6 billion at the end of 2008. At the outbreak of the financial crisis Ethias was hit by a loss of customer confidence and was confronted with a severe liquidity crisis due to a sudden surge in withdrawals of funds by its clients. In October 2008, the Belgian State provided a capital injection of €1.5 billion to Ethias.

The recapitalisation was temporarily approved by the Commission as rescue aid on 12 February 2009, under the condition that Belgium submit a plan for the restructuring of Ethias. The amount of aid received by Ethias, which was very large compared to the size of the company, showed the need for an in-depth restructuring to restore the future viability of the group.

Under the restructuring plan, Ethias will completely discontinue its retail life business, which was the immediate cause of its difficulties in the past. Further measures to restore viability also include a reallocation of Ethias' investment portfolio towards less volatile asset classes. Ethias' new investment policy is based on a reviewed risk control and a diversification of risks.

To allow the state capital injection to take place, Ethias had to change its corporate structure from a mutual to a limited liability company. Under the new structure, most of the former owners (the policyholders of the mutual companies) have lost their collective control of the company as well as their share in future profits. The historical owners have thereby shouldered a significant part of the burden of restructuring. To further contribute to the costs of restructuring, Ethias will divest its reinsurance subsidiary BelRé and cut costs.

Finally, the plan adequately addresses the distortions of competition created by the State intervention, through the divestment of Nateus, an insurance subsidiary in Belgium, and through behavioural commitments related to the pricing of its insurance products.

Overall, the restructuring measures will result in a balance sheet reduction, including new growth, of 38% by the end of 2013 as compared to the company's size at the end of 2008.

Case number N256/2009: non-confidential version of the decision

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