RSA has announced that it has reached agreement, subject to regulatory approvals, to sell each of Lietuvos Draudimas AB (Lithuania), AAS Balta (Latvia), the business of the Estonian branch of Codan Forsikring A/S (together RSA’s operations in the Baltics), and Link4 Towarzystwo Ubezpieczen Spolka Akcyjna (Poland) to PZU.
Assuming each of the four transactions completes(and subject to the adjustments described below), RSA will receive total aggregate consideration of approximately E360m(£300m) payable in cash. The transactions are expected to add around £200m to the Group’s tangible net assets, improving the Group’s capital strength.
Subject to obtaining relevant regulatory approvals in the respective countries, each transaction is expected to complete during the second half of 2014.
Stephen Hester, RSA Group chief executive, comments “These disposals are in line with our stated aim of focusing the Group’s geographical spread onto its core businesses in the UK & Ireland, Scandinavia, Canada and Latin America, and represent a good deal for our shareholders, customers and employees.
The total sale proceeds represent significant progress against our overall target of at least £300m of disposal proceeds set for 2014, and also demonstrate the strong underlying value that exists within RSA. We will continue to evaluate further non-core disposals, some of which we expect to occur during 2014.
In our core businesses, we will continue to target markets and segments where we can sustain leadership positions with customers whilst earning returns in excess of our cost of capital. Our ambition is for RSA to be a resilient and valuable company, performing at its best, and reliably so.”
RSA’s operations across the Baltics cover a broad range of Personal and Commercial products. At 31st December, RSA’s operations in the Baltics had total assets of £258m and net assets of £83m. Net written premiums in 2013 were £166m with a pre-tax profit of £13m. The consideration payable for RSA’s operations in the Baltics is approximately E270m (£225m) including a dividend of E12m(£10m) to be paid prior to completion from Lietuvos Draudimas AB (Lithuania).
Link4 Towarzystwo Ubezpieczen Spolka Akcyjna is the leading direct insurer in Poland with strong foundations in the Motor market but also offering a range of other Personal and Commercial products. At 31 December, it had total assets of £146m and net assets £40m. Net written premiums in 2013 were £75m with a pre-tax profit of £6m. The consideration payable for Link4 Towarzystwo Ubezpieczen Spolka Akcyjna is approximately E90m(£75m).
The consideration payable under each of the four transactions, each of which is subject to adjustment based on the net asset value of the relevant business as at completion, is payable in full on completion of the relevant deal. No sale is conditional upon any of the other sales occurring.
As part of the transaction, senior management are expected to remain with the respective businesses at completion.
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