Mediolanum S.p.A.

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Mediolanum S.p.A.

Via Francesco Sforza 15, Palazzo
Meucci-Milano 3
20080 Basiglio, Milano
Italy
Telephone: +39 02 90491
Fax: +39 02 90492401
Web site: http://www.mediolanum.it

Public Company
Incorporated: 1982 as Programma Italia
Employees: 995
Total Assets: $660.7 million (2001)
Stock Exchanges: Borsa Italiana
Ticker Symbol: MED.MI
NAIC: 524113 Direct Life Insurance Carriers

Holding company Mediolanum S.p.A. offers a broad range of private banking and related financial services, including assets management, insurance, brokerage, mutual fund investment, and related products. While not the biggest bank in Italy, group holding Banca Mediolanum is one of the country's fastest growing, in part due to its business model—the company specializes in providing personalized door-to-door and "virtual" banking services. Customers gain access to their accounts through the Internet, over the telephone, and through an exclusive television-based teletext service, as well as home visits from Mediolanum's army of more than 5,000 sales affiliates, nearly all of whom sell exclusively Mediolanum's products. The company's operations are based primarily in Italy. In the 2000s, however, the company has begun an effort to develop into a pan-European bank, acquiring businesses in Germany and Austria (Bankhaus August Lenz and Luxembourg-based Gamax), in Spain (Fibanc), and Monaco (Compagnie Monegasque du Banque). The company also has plans to expand into France and Poland, and ultimately expects to have operations throughout all of Europe, including much of Eastern Europe. While developing its own financial products and services for a customer base of nearly 15,000, Mediolanum has teamed with Italian banking giant Mediobanca to attract a higherend market. In 2002, the two banks formed the joint venture Banca Esperia, which targets wealthier investors with assets of more than EUR 5 million ($4 million) to invest. Mediolanum also has launched a mid-range investment vehicle for foreign investors, Mediolanum Private, which offers traditional private banking services to individuals with at least EUR 350,000 to invest. Mediolanum is led by founder Ennio Doris, who holds a 35 percent stake. The company, listed on the Borsa Italiana, enjoys strong business connections: Silvio Berlusconi, Italian premier and media magnate, is Doris's silent partner, maintaining a share of 35 percent through his family's Fininvest vehicle.

Rags to Riches in the 1980s

A native of Tombolo, a poor village in Italy's Padua region, Ennio Doris built one of Italy's fastest-growing financial empires in less than 20 years and a personal fortune of more than EUR 4 billion—making him one of Italy's ten richest people in the early 2000s. The secret behind his success lay in his ability to combine his early work experience both in the banking industry and as a salesman for an insurance company.

Doris started out his career working for a local bank, Banca Antoniana (later Antonveneta), based in the regional capital of Padova. Then he was offered a job working for an engineering company run by one of the bank's directors. Doris accepted the position, becoming the manager of the firm in his mid-20s. Yet Doris's ambitions ran higher. As Doris explained to Personal Wealth Management: "As a general manager of a firm at the age of 28, I thought my career was in good shape, until one day I had a meeting with the boss. We had to go to Padova to the headquarters of the bank in his car, a huge Citroën Palace. When I got in the car, I made a comparison between his luxury Citroën and my small Fiat. I was sitting behind my boss, who was driving. As the back seats are lower than the front, he appeared to be sitting on a throne. I thought: 'This is the kind of car I want to have. He is driving my car and my life.' I wanted to drive my own life."

Soon after, a friend approached Doris with the proposition that they begin selling mutual fund and insurance products for a new company, Fideuram. Doris agreed to join on as a salesman, accepting to be paid in commission, rather than a straight salary. Doris spent the better part of the 1970s on the road, gaining experience as a door-to-door salesman.

By the beginning of the 1980s, Doris had formulated a plan to adapt the personalized, door-to-door sales approach to a broader spectrum of financial services, including traditional assets management and other private banking services. With just the equivalent of $50,000 in savings, Doris needed a stronger financial backer for his plan. An interview with an upand-coming young entrepreneur—Silvio Berlusconi, then building his first business empire in the real estate sector—caught Doris's attention.

As Doris explained to Euromoney: "In the interview, Berlusconi said young people with entrepreneurial ideas should not go to Gianni Agnelli or Carlo De Benedetti as these men would not receive them but he would." Doris arranged a meeting with Berlusconi in Portofino on the Italian Riviera—according to legend, the pair met by chance in the town square. Doris suggested that his idea for a door-to-door financial services company could be expanded to include sales of Berlusconi's real estate products, providing the future media magnate with the cash flow he needed in order to make his first entry into the Italian media sector.

Berlusconi agreed, and in 1982 the partners set up Programma Italia. Backed by the equivalent of $350,000 from Berlusconi, the new company became a 50–50 partnership, with Berlusconi, through his holding firm Fininvest, acting as a silent partner. The partnership was later credited with forming the basis of Berlusconi's business empire, prompting some observers to suggest that, without Programma Italia and Ennio Doris, Berlusconi might never have achieved his position as Italy's wealthiest person.

Programma Italia began offering savings and mutual fund products that same year. In 1984, the company moved to achieve the full scope of its original business plan, that of providing an entire range of financial products, with the acquisition of two insurance companies, Mediolanum Vita and Mediolanum Assurasione. Programma Italia's customers were now able to arrange nearly all of their financial services needs through a single sales contact.

Multi-Channel Service Provider in the 1990s

In 1985, Programma Italia expanded its range of products again. Joining with Fininvest, the company created Gestione Fondi Fininvest. This move enabled Programma Italia to begin offering investment trust products and other assets management services to the company's growing number of customers.

Doris's financial services model struck a chord with Italy's households, and by the mid-1990s, the company was one of the fastest-growing in Italy's financial services sector. A key element of the group's success came with its insistence on developing an in-house sales culture, training its steadily expanding army of independent sales affiliates—the majority of whom began selling Programma Italia products exclusively.

In the mid-1990s, Doris and Fininvest began preparations to steer their partnership into a new banking era. Efforts to streamline and modernize Italy's notoriously inefficient banking system, coupled with increasing levels of cross-border European competition ahead of the adoption of the euro, convinced the companies to develop a new holding company structure. In 1995, the partners formed a new company, Mediolanum S.p.A., to oversee its existing operations. The new entity also provided a structure through which the company could launch new services and operations into the next century.

Mediolanum's steady growth also encouraged the partners to begin planning a public offering. In June 1996, Mediolanum S.p.A. went public on the Borsa Italiana. In the process, both Doris and Berlusconi, through Fininvest, reduced their holdings to just 35 percent—although Doris retained right of first refusal in the event that Fininvest should seek to sell its part of the company. The company immediately joined the Borsa Italiana's MIB 30 blue chip index.

The success of its public offering also led Mediolanum to take the next step in its range of financial services offerings. In 1997, the company established Banca Mediolanum, enabling the company to offer full-scale banking services for the first time. Yet, rather than establish a network of bricks-and-mortar branches, Mediolanum opted to establish itself as a "multi-channel service provider"—providing its range of products and services through the Internet, over the telephone, as well as through its traditional direct sales force. Mediolanum went a step further, rolling out its own television-based teletext service giving customers access to account and product information on television screens.

International Banking Group for the New Century

Having struck a chord with the Italian consumer market, Mediolanum now began seeking out new frontiers. In Italy, the company moved to expand its customer base into the upper income brackets. In 1997, Banca Mediolanum acquired a 2 percent stake in Mediobanca, which in turn took a 2 percent stake in Mediolanum. Mediobanca, Italy's largest investment bank, had recently broken off its relationship with Banca Commerciale Italiana and needed a new partner for its private banking operations.

With Doris taking a seat on Mediobanca's board of directors, the two companies launched a joint venture in 1997. The new banking service, called Esperia, enabled Mediolanum to expand its services into a higher-end bracket, targeting customers with more than ITL 10 billion ($4.7 million) in assets. Whereas Esperia targeted primarily Italian citizens, who might otherwise have transferred their funds outside of the country, Mediolanum also sought to attract another customer segment, wealthy foreigners with at least EUR 350,000 to invest. As part of that effort, the company formed a new subsidiary, Mediobanca Private, in 1997 as well.

Company Perspectives:

Mission: When Ennio Doris founded the Mediolanum Group in 1982, the mission he had in mind was "to enhance the financial resources of Italian families and to satisfy their insurance, pension, savings and investment needs."

Mediolanum now turned to expansion beyond Italy. The company's first foreign move came in 1997, when it created a new subsidiary, Mediolanum International Funds, in Dublin, Ireland. In 2000, the company acquired a 66 percent stake in the Spanish private bank Fibanc for a price of $112 million. The acquisition not only gave Mediolanum several offices in Spain's major cities, but also Fibanc's branch in Argentina. Mediolanum then began adapting the Spanish operation to match its model, including training Fibanc's 300-strong sales force.

The German market became Mediolanum's next expansion target. In 2001, the company acquired two firms, Gamax Holding for EUR 70 million and Bankhause August Lenz for EUR 12.5 million. Luxembourg-based Gamax operated primarily in Germany, through Gamax Finanzdienste Vermittlungs, and in Austria, through Gamax Austria, and also brought to Mediolanum its assets management operation, Gamax Management. The smaller August Lenz, a private banking specialist, gave Mediolanum a foothold in that sector in Germany.

Both purchases fit into Mediolanum's strategy of entering new markets through small-scale acquisitions. In this way, the Italian bank was better able to impose its own corporate culture and sales methods on its new operations. As Doris told Euro-money: "We purposely aim at very small acquisitions because we want to recreate our model that does not exist anywhere else and you have to change mentality and approach and you cannot do that if the company is large."

In the early 2000s, Doris began making plans to base a pan-European banking network around the Mediobanca Private model. The company began seeking acquisition targets in Belgium, The Netherlands, France, and elsewhere. The bank also became interested in the Eastern Europe market, particularly Poland. In the meantime, the company found its next acquisition candidate closer to home. After establishing a 17 percent stake in Monaco's Compagnie Monegasque du Banque, the company paid Commerzbank EUR 190 million to acquire its 34 percent stake, giving Mediolanum majority control in 2002.

Mediolanum expected to achieve its pan-European ambitions as early as the mid-2000s. Doris also began predicting a later expansion onto a global scale, with particular interest in the Americas and the Chinese market. In the meantime, Mediolanum began searching for a new business partner, as Berlusconi faced increasing pressure to shed a number of his assets, including his stake in Mediobanca, in order to resolve a number of conflict of interest issues surrounding Berlusconi's presidency. With right of first refusal for Fininvest's stake in the bank, Doris suggested a possible future linkup with a foreign partner.

Principal Subsidiaries

Bankhaus August Lenz AG (Germany); Compagnie Monegasque du Banque (Monaco; 51%); Gamax Holding (Luxembourg); Gamax Austria; Fibanc SA (Spain; 66%); Mediolanum International Funds (Ireland).

Key Dates:

1982:: Ennio Doris founds Programma Italia in 50–50 partnership with Silvio Berlusconi.
1984:: Programma Italia acquires Mediolanum Vita and Mediolanum Assuransione.
1995:: Mediolanum S.p.A. is created as a holding company for group operations.
1996:: Mediolanum goes public on the Borsa Italiana.
1997:: Mediolanum International Funds is formed; Banca Esperia is formed in partnership with Mediobanca; Banca Mediolanum and Mediolanum Private are formed.
2000:: Fibanc, in Spain, is acquired, which also adds an office in Argentina.
2001:: Gamax Holding and Bankhaus August Lenz are acquired to enter German and Austrian markets.
2002:: Majority control of Monaco's Compagnie Monegasque du Banque is acquired.
2003:: Doris announces plans to expand Mediolanum as a pan-European banking network.