QBE Insurance Group Limited has announced plans to sell its Latin American operations to Zurich Insurance Group for a total aggregate price of US $409 million.
The transaction includes operations in Argentina, Brazil, Columbia, Ecuador and Mexico, and will see Zurich become the leading insurer in Argentina and the third largest in Ecuador.
Commenting on the agreement, QBE Chief Executive Officer (CEO) Pat Reagan said: “The decision to exit Latin America is consistent with our focus on simplifying the Group, reducing risk and improving the consistency of our results. Following a detailed review of our Latin American Operations, we determined that QBE was no longer the best strategic owner of these businesses.
QBE plans to retain its interests in Puerto Rico for the time being so that it can continue to service the claims resulting from Hurricane Maria. Puerto Rico will become part of QBE’s North American Operations.
As well as earning QBE $100 million in profit before tax, the sale will have a positive impact on the Group’s Australian Prudential Regulation Authority (APRA) Prescribed Capital Amount (PCA) multiple and S&P capital position. This will be due to lower risk charges and the disposal of around $42 million of goodwill and intangible assets.
The combined gross premiums of the deal’s operations were about $790 million in 2017, and will afford Zurich a highly diversified product offering and strong distribution. Argentina represents around 50% of the transaction, and will approximately double Zurich’s property and casualty (P&C) business in the region, resulting in an 8.4% market share.
Claudia Dill, Zurich’s CEO for Latin America, said: “This transaction positions us as the leading insurer in Argentina, a market that is demonstrating strong growth, a stable economy and a positive environment for insurance. It deepens our capabilities in the retail and commercial businesses and supports our strategy to become the preferred retail and commercial insurer in the region, protecting our customers and helping them to reach their full potential.”
Although the transaction will be subject to regulatory approval in each jurisdiction, the deal is expected to be completed by the end of 2018.
