Belgium’s KBC Group, one of the leading financial groups in Europe, has acquired 70 per cent of Bulgaria’s DZI Insurance and is to launch a public bid for the remaining share.

KBC will pay 185 million euro for the 70 per cent stake, while about 75 million euro, an amount equal to 70 per cent of the undistributed capital gain proceeds received by DZI Insurance for the sale of their stake in DZI Bank, will be paid by KBC to Kontract Sofia.

This was announced in a joint statement by KBC and DZI on January 30.

As part of the deal, KBC will also acquire DZI Invest, a securities broker active on the Bulgarian Stock Exchange. Set up in 1999, DZI Invest provides brokerage services for Bulgarian Government bonds and foreign government securities, and does securities, market making and portfolio management.

The deal is subject to approval by the Bulgarian regulatory authorities. KBC said that it intended to finalise the transaction as soon as possible.

DZI Insurance is the market leader in non-life and life insurance in Bulgaria. It had a market capitalisation equivalent to 410 million euro, as at January 26, including the proceeds from the sale of DZI Bank, and is the sixth largest public company in Bulgaria.

The move means that KBC has become the first Belgian investor in the Bulgarian financial sector.

KBC Group chief executive Andre Bergen said that the Bulgarian market met the group’s Central and Eastern European expansion criteria.

“We will be in a position now to take advantage of Bulgaria’s economic convergence and potential for further penetration of the banking and especially insurance markets.”

Bergen said that with DZI Insurance, KBC would be much better positioned to take part in the future and further consolidation of the financial sector in Bulgaria.

KBC Group Central Europe business unit chief executive Jan Vanhevel said that acquisition of DZI Insurance was the first major acquisition of an insurance company by KBC since the 2004 European Union expansion.

The statement quoted DZI Insurance management board chairperson and executive director Nedyalko Chandarov as saying that he was convinced that integration in the group would ensure that DZI Insurance maintained and strengthened its position among strong performers in the Bulgarian financial industry.

DZI Insurance is one of 31 insurance companies active in Bulgaria. Three are pure life, 20 pure non-life and eight composite companies.

Bulgaria’s insurance market is dominated by non-bank players and several large foreign and Western European insurance companies.

With the top five non-life insurers having a 68 per cent market share and the top five life insurance players having an 81 per cent share, the Bulgarian market is relatively concentrated. Non-life is dominated by motor insurance, a situation similar to Central European markets.

KBC said that Bulgaria’s insurance sector, in spite of its considerable growth, still had significant potential because the level of wealth in Bulgaria was set to increase in years to come.

As to the history of KBC, in 1998, three Belgian companies (Kredietbank, ABB-insurance and CERA Bank) merged to form the KBC Bank and Insurance Holding Company, a major provider of banking and insurance services. Since then, KBC has significantly expanded its activities, chiefly in Central and Eastern Europe. In 2005, KBC merged with its parent company, Almanij, and changed its name to KBC Group NV.

According to its website, KBC Group NV is responsible for general strategy, the allocation of capital, profitability requirements, strategic investments, risk management in the broad sense, general ALM policy, supervising the coherence of budgets and profit planning, and the audit function at co-ordinating level. KBC Group does not itself carry out any financial-services-related business, but is responsible for a number of integrated support activities (in marketing, logistics and IT) for the Group’s companies.

KBC Group NV is the direct parent company of KBC Bank NV, KBC Insurance NV and Kredietbank SA Luxembourgeoise.

Other KBC Group companies are direct or indirect subsidiaries of the first three.