René Benko - Allianz, Signal Iduna and Co.: How German insurance companies are involved with Signa - and what consequences this has
German insurers, including Munich Re and Allianz, have invested more than three billion euros in the troubled real estate empire of billionaire René Benko. Benko's Signa Group network of companies has not only taken out loans from banks such as Julius Baer and Unicredit, but has also relied heavily on financing from more than half a dozen insurers, according to documents seen by the Financial Times (FT) and people with first-hand knowledge of the details. According to these insiders, around a third of this exposure is not backed by collateral. "This will therefore be extremely painful for some insurers," said one of the people.
Signa Holding, the parent company that owns Selfridges in London, the Chrysler building in New York and KaDeWe in Berlin, among others, filed for insolvency last month. By the end of September, the company had accumulated a mountain of debt of five billion euros, most of it in the first nine months of this year.
Further Signa insolvencies likely
Benko did not put a figure on the total debt of companies within the Signa group, but according to people familiar with the structure, individual companies in the group have borrowed more than twice as much. Many of these companies, but people familiar with the business said that more insolvencies are expected in the coming days.
According to a person familiar with the situation, the insurance companies lent Signa money in part because of the regulatory and interest rate environment. "Heavily regulated banks were unable or unwilling to do certain types of business because of their capital requirements, while the insurance groups were drowning in cash in the era of ultra-low interest rates," the person said.
A significant portion of Signa Group's debt was provided by non-bank financial companies such as Dortmund-based insurer Signal Iduna. This is a company with twelve million customers, mainly active in health and life insurance. Signal Iduna had lent Signa almost one billion euros, according to people with direct knowledge of the matter.
The insurer would not comment on the size of its exposure, but said it did not expect any "significant credit losses" as its loans were "largely" backed by collateral in the form of real estate in prime German city locations.
Who's who of insurers is invested
Munich Re's main insurance business, Ergo, granted loans of around 700 million euros, while R+V, Germany's fourth-largest insurance group, lent 500 million euros, more than half of which is unsecured, according to documents and people familiar with the matter.
Allianz granted 300 million euros in loans for the purchase of a high-rise building in Berlin's city center by Signa in 2018, while the medium-sized insurer Volkswohl Bund from Dortmund made a commitment of 250 million euros.
Ergo, R+V, Allianz and Volkswohl Bund declined to comment. Signa did not respond to a request for comment.
German financial regulator Bafin told the FT it was monitoring the situation, but added that "in most cases" the risk was negligible compared to the total assets of the individual insurers and that it did not expect any "material threat" to any of the groups concerned.
Some insurers not only granted loans for certain Signa properties, but also took stakes in companies in the group, according to documents obtained by the FT. Mid-sized German insurer LVM holds a 2.9 percent stake in Signa Prime Selection, one of the two companies that own most of the Signa group's assets. A significant portion of LVM's €300m Signa exposure is unsecured, according to people familiar with the company's exposure and documents obtained by the FT. LVM declined to comment.
This article, translated from the "Financial Times", first appeared here in the business magazine "Capital", which, like stern, is part of RTL Deutschland.
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- Besides Munich Re and Allianz, other German insurers such as LVM from Dortmund have invested in René Benko's troubled real estate empire, with LVM holding a 2.9% stake in Signa Prime Selection, one of the major asset owners within the Signa Group.
- Unicredit, like Julius Baer, has provided loans to Signa Holding, the parent company of Signa Group, which includes prominent properties like Selfridges in London and KaDeWe in Berlin.
- The Financial Times reported that around a third of the exposure of these insurers to Signa Group is not backed by collateral, potentially leading to significant credit losses, according to one source.
- Signal Iduna, a Dortmund-based insurer with twelve million customers mainly in health and life insurance, had lent Signa almost one billion euros, according to reports.
- Munich Re, through its main insurance business Ergo, granted loans of around 700 million euros to Signa Group, while Allianz and Volkswohl Bund also provided substantial loans, with a significant portion of these loans being unsecured.
Source: www.stern.de
