Criticizing ASF for its decision, he said that if the authority had found problems with his company, it should have requested a capital increase, which it did not do.
ASF found Astra’s liquidity ratio had dropped below the legally required level, while its solvency ratio had become lower than the minimum level. ASF sources say Astra’s solvency ratio was below one.
As a result, the ASF appointed advisory and audit firm KPMG as Astra’s special administrator. The authority suspended the prerogatives of the company’s shareholders and management, transferring them to KPMG.
One of the things at issue here is said to be a policy that Astra issued for construction company Romstrade. Romstrade then used the policy to win a highway construction tender for a 94 million lei (EUR21 million) contract from Romania’s national company in charge of national roads and highways (CNADNR).
ASF sources say that even though Astra lost money on this policy, it did not include it in the claims reserve, even though it should have. As a result, its solvency ratio dropped to 0.64, below the 1.29 as required by the law. Astra does not agree that it should have included it in the claims reserve. Romstrade, held by businessman Nelu Iordache (charged with misuse of European funds and held in custody), is now insolvent.
According to the ASF chairman, Astra’s exposure to the banking system is low and it does not pose a risk to the system. At the same time, the spillover risk on the insurance market is limited, he added.
In response to ASF’s decision to place it under special administration, Astra called a news conference of its own.
“This is incredible. (…) The danger of losing credibility is huge. Astra has 4.6 million clients. Every third or fourth Romanian has insurance from Astra,” the company’s owner, businessman Dan Adamescu, said.
“Incredibly cynically announcing that banks are not affected, but individuals and companies are… ASF knows all about Astra, we are constantly under their scrutiny. It’s a shame that Rusanu and Moldoveanu had to come tell us it’s a disaster. They should have asked us for a capital increase, but they skipped this step, their own regulation,” Adamescu added.
Astra is Romania’s largest insurer, with more than RON1 billion in gross written premiums in 2013 and a 15% share of the general insurance market. Its main shareholders are Nova Group Investments (72.7%) and Epsilon Estate Provider (27%). The two companies are indirectly controlled by Dan Adamescu.
The insurer needs a “significant capital increase”, according to ASF’s calculations, ASF chairman said, and the decision as to how significant will be made by KPMG in the next few weeks.
Astra had called shareholders for a meeting to approve a RON20 million capital increase to RON213 million in March, but ASF says it needs much more than this.
Astra will go to court to have this decision cancelled, Adamescu said. “All this terror” he added, started last year, as in mid December Astra bought Axa’s Romanian operation, after the latter called Astra, VIG and Aegon to make a bid. “If that contract had been signed, Astra would not have had any trouble now. They won’t have us buy Axa.”
After the takeover of Axa for one euro, a EUR35 million capital inflow should have followed, which would have taken liquidity to 1.8 instead of 1 and all the indicators would have doubled, Adamescu added. “ASF doesn’t want the problem solved, it wants it destroyed.”
The ASF chairman said the ASF board would make a decision on the Axa takeover by Astra in its Thursday meeting.
“Astra has been hardly audited in the last five years. The former CSA (Insurance Supervisory Commission) did an audit in 2012-2013 and made a decision on April 26, 2013 before the new ASF management took office. As a result of the audit, the former CSA required Astra to take a series of steps by December 31, 2013. ASF found that Astra had not taken even 10% of those steps,” ASF chairman told ZF.
(English version by Loredana Fratila-Cristescu)