Direct Line sells international division to Mapfre
Bromley-based Direct Line Insurance Group plc. said on Thursday it is selling its international division to Spanish insurance company Mapfre S.A. in a €550.0 million (£430.51 million, $700 million) deal.
Direct Line is trimming back its international businesses to pay a dividend.
Direct line’s international business includes its German and Italian operations, thus concluding the British insurance company’s strategic review initiated earlier this year.
In 2013, the nearly-divested international business part of the company only delivered approximately 4% of the company’s operating profit, meaning not much will change with this sell-off. Now that Direct Line is not distracted by previous overseas ambitions, it is now free to focus on its core domestic operations. The company has worked hard in recent years to turn itself around.
The cash sale proceeds represent 1.9 times 2013 net asset value and 36.9 times last year’s normalized earnings, the company said.
Britain’s largest home and motor insurer says it expects to recognize a pre-tax gain on disposal of about £160 million. It added that “substantially all” of the net proceeds will go to shareholders.
The deal, which still requires regulatory approval, is expected to take from three to four months to complete.
Paul Geddes, CEO of Direct Line Group, said regarding the agreed sale:
“We believe that the sale of our international businesses to Mapfre is a good result for all of our stakeholders, providing excellent value for our shareholders, while offering our customers and colleagues stability and opportunity.”
“Meanwhile, our UK personal and commercial lines businesses are continuing to implement the many initiatives we have under way to deliver our strategic priorities.”
Spain’s largest insurer
Mapfre is Spain’s biggest and one of the ten largest insurance companies in Europe in terms of premium volumes. The Majadahonda-based business operates in 47 nations and has more than 23 million clients globally.
Antonion Huertas, Chairman of Mapfre S.A., said:
“The Italian and German assets acquired are absolutely strategic for Mapfre, strengthening the two main lines of our global growth plan, allowing us to increase our presence in Europe.”
Mapfre says the acquisition will mean it gains 1.6 million clients and €714 million in premiums.
Direct Line was spun off from RBS (Royal Bank of Scotland). Its shares rose 3.1% in trading in London on Thursday.