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State insurer rejects takeover

The drawn-out saga of the controversial basic capital increase at the largest insurance company, Slovenská Poisťovňa, took another surprising twist on October 15, when major shareholders voted to cancel the equity hike altogether. This means that the company remains majority-owned by the state, through a stake formally held by the National Property Fund privatisation agency.
The move to cancel the increase was the result of a bitter row over the equity hike between the National Property Fund (FNM) and a group of companies linked by opposition politicians and analysts to the largest private shareholder, steel maker VSŽ.
FNM representatives blocked registration of the capital increase, originally proposed by VSŽ, at the previous extraordinary shareholders meeting held on September 4.


Slovenská poisťovňa, the largest state insurer, rejected proposed capital increase on October 15.
Vladimír Hák-Profit

The drawn-out saga of the controversial basic capital increase at the largest insurance company, Slovenská Poisťovňa, took another surprising twist on October 15, when major shareholders voted to cancel the equity hike altogether. This means that the company remains majority-owned by the state, through a stake formally held by the National Property Fund privatisation agency.

The move to cancel the increase was the result of a bitter row over the equity hike between the National Property Fund (FNM) and a group of companies linked by opposition politicians and analysts to the largest private shareholder, steel maker VSŽ.

FNM representatives blocked registration of the capital increase, originally proposed by VSŽ, at the previous extraordinary shareholders meeting held on September 4. The October meeting was expeced to give the final go-ahead for registration of the equity hike which would, if approved, have decreased the stateşs share in the insurer below a majority 50%. A minority shareholder present at the meeting said that the two main owners, VSŽ and the FNM, failed to agree on the move, and that representatives of VSŽ had then proposed cancellation of the capital hike.

However, the small shareholder said, both VSŽ and the FNM voted together to approve a change in Poisťovňa's statutes so that a two-thirds shareholders majority would be needed to make changes to the company's board of directors and its supervisory board. The changes to the statutes were proposed by Poisťovňaşs president, Karol Melocik. The shareholder said that Melocik defended his proposal by saying that it would protect the interests of minority shareholders. Poisťovňa officials and VSŽ representatives did not comment on the results of the shareholders meeting.

Capital increase history

Poisťovňa shareholders, including the FNM, approved a basic capital increase of 375 million Slovak crowns (Sk) to 1.875 billion Sk ($52 million) in July. The three rounds of share subscription took place in the first three weeks of August. Before the equity hike, Poisťovňa was controlled by the state through a 50.5% stake held by the FNM.

However, although it supported the capital increase at July's extraordinary shareholders meeting, the FNM did not exercise its pre-purchase right for the new shares and did not participate in the capital increase, at least not to the extent of the stake it originally held in Poisťovňa.

According to equity analysts, the results of the first wave of share subscription, when 41.65% of the new shares were sold, indicated that the FNM had lost its majority stake in the insurer, and had managed to skirt around a law that prohibits Poisťovňa's privatisation until the year 2003. Official information as to which shareholders bought shares in the equity increase has not been released, and the property fund has not disclosed whether it subscribed any new shares.

The results of the capital increase had to be approved by the shareholders meeting before they could request registration at commercial court. If the new shareholders structure had become valid, Slovenská Poisťovňa would have become controlled by private owners, of which the largest single shareholder would have been VSŽ.

The VSŽ steel works initially owned 20% in the firm, but opposition politicians accused VSŽ of acting in concert with other Poisťovňa shareholders which allegedly let it control more than 40% of shares. VSŽ representatives confirmed that the steel producer subscribed shares totalling the 20% stake it held in Poisťovňa before the capital hike. But they strictly rejected accusations of trying to take over the insurer.

Slovenská Poisťovňa, the second largest financial institution in the country, is one of the most lucrative companies remaining in state hands. Its net profit totalled 1.9 billion Sk ($52 million) in the first half of this year and its assets were worth around 33 billion Sk ($920 million) at the end of June. Poisťovňa holds more than 25 billion Sk in liquid reserve funds and controls more than 60% of the insurance market in Slovakia. But it also owns large holdings in several other firms, including majority stakes in the banks IRB and Istrobanka.

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