Canada’s Fairfax Financial Holdings Ltd. has entered into an agreement to buy an 80% stake in Greece's third-largest insurer for the equivalent of C$481.6 million.
The Toronto-based company will pay 316 million euros for the majority share in Eurolife ERB Insurance Group Holdings SA.
It already owns a 17% stake in Eurobank Ergasias SA, the insurer’s current owner. Eurolife distributes its life and non-life insurance through Eurobank branches.
The Fairfax move has baffled some analysts despite the company’s expressed focus on global diversification of assets.
It does, through its global subsidiaries, engage in P&C as well as reinsurance and investment management business in Asia and Europe, not just North America. But a move to deepen its investment in the troubled Greek economy – even as punishing austerity measures take effect – is raising eyebrows.
Still, the Fairfax purchase may have everything to do with buying low in hopes of someday selling high. Some Greek economists anticipate that the country’s wealthiest families will begin mimicking their counterparts in the US and Canada in using life insurance to shield heirs from taxes.
Under its latest agreement with the EU, Greece has pledged to better collect income tax from a largely errant upper class.
Domestic insurers would be the major recipients of any such move.
While the Eurolife purchase is subject to regulatory approvals and other conditions, it is expected to close by September 2016.
