EIB launches new product on the Italian domestic market
The European Investment Bank (EIB), the European Union's financial institution and the largest non-sovereign borrower in Europe, and Assicurazioni Generali S.p.A., Italy's top insurance group, are joining forces to launch Eib Bond&Generali Unit Life in Italy. This is an innovative product made up of a fixed-rate bond combined with a no-loads unit-linked life insurance policy, with regular premiums. The product is being offered to the public as from 1 February until 10 March 2000
The bond issue (minimum coupon of EUR 5,000) has a 15 year maturity and an amortising redemption plan in 30 semi-annual instalments inclusive of principal and interest. The schedule for premium payments on the insurance policy has the same maturity, and foresees a semi-annual premium payment which corresponds with the net instalment of the bond redemption. The bond coupon will be established, in terms of the spread, in relation to market rates at the close of the placement period (13 March).
On subscribing to the bond, the investor will at the same time sign an Assicurazioni Generali unit-linked life insurance contract. Given that the payment schedule for premiums on the life insurance policy corresponds to the redemption schedule, on a net basis, for the bond issue, the subscriber will be able to channel the proceeds from the bonds into servicing premiums for the insurance policy. The two instruments (i.e. the bond and the insurance policy), however, will remain independent and separately negotiable: the standing order will be mandatory solely for the first year. The premiums will be invested at a competitive rate in one of Assicurazioni Generali's internal funds (equity fund or bond fund).
At the 15-year maturity, the bonds will have been fully redeemed. If the payments due under the policy have been settled in full (30 semi-annual instalments), subscribers will be entitled to a bonus of 10% calculated on the aggregate number of units acquired. Following maturity, they can hold on to the units acquired and ultimately cash them in at their market value as a single capital sum or convert them into an annuity.
Providing an efficient and flexible allocation of financial resources and an optimisation of the fiscal profile, EIB Bond&Generali Unit Life will appeal to investors seeking to build a private social security scheme. After the conclusion of this pioneer operation, and considering the strong demand of financial products with a social security scheme content, the EIB will seek to repropose this type of instrument in Italy and in other European countries.