MILAN, March 14 (Reuters) - The capital increase that troubled Italian insurer Fondiaria-SAI is due to approve as part of plans to merge with peer Unipol is not expected to be less than one billion euros, sources close to the matter said on Wednesday.
"The capital increase will not be less than one billion," one of the sources said.
In January, Bologna-based Unipol agreed to a deal brokered by top investment house Mediobanca to save loss-making Fondiaria in a four-way merger involving a 1.1 billion euro capital hike at Fondiaria.
Earlier in March Premafin, the company that controls Fondiaria, said the size of the planned capital hike at Italy's No.2 insurer should be reconsidered in light of Fondiaria's improving health and better market conditions.
But insurance regulator ISVAP has written a letter to Fondiaria asking the group to respect agreements reached based on the results the insurer is expected to report for 2011.
Fondiaria is expected to report a loss for 2011 of around 1 billion euros.
A rival bid from private equity funds Palladio Finanziaria and Sator, which have acquired 8 percent of Fondiaria, envisages a 450 million euro capital increase at Premafin.
Reporting by Gianluca Semeraro, writing by Stephen Jewkes