25th Sep 2014 06:33
LONDON (Alliance News) - Direct Line Insurance Group PLC Thursday said it has agreed to sell its international division, which is comprised of its Italian and German operations, for EUR550.0 million to Mapfre SA, and said it expects to return substantially all of the net proceeds to shareholders.
In a statement, Direct Line said it expects the sale to result in a pretax gain on disposal of about GBP160.0 million. It said further details of the capital return will be disclosed upon completion of the deal, but noted that its "strong capital position" was the reason it expects to make the return.
Direct Line said the sale concludes the strategic review initiated earlier this year. In August, the group had said it was holding discussions with a number of parties regarding a possible disposal of the division.
The EUR550.0 million cash sale proceeds represent 1.9 times net asset value and 36.9 times 2013 normalised earnings, according to the insurance group.
The international division had a net asset value of EUR283.9 million at the end of 2013, tangible net asset value of EUR278.4 million, and gross assets of EUR1.59 billion. Normalised earnings for 2013 amounted to EUR14.9 million, adjusted for higher than normal hailstorm claims in Germany and exceptional costs.
The sale agreement includes certain transitional arrangements including a licence to use the Direct Line brand in Italy and Germany for three years, the company said.
The deal is conditional on regulatory approval, which is expected to take about three to four months.
"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," Chief Executive Paul Geddes said in a statement.
"Meanwhile, our UK personal and commercial lines businesses are continuing to implement the many initiatives we have under way to deliver our strategic priorities," Geddes added.
Direct Line shares Wednesday closed down 0.3% at 296.36 pence.
By Samuel Agini; [email protected]; @samuelagini
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