20th May 2014 07:33
LONDON (Alliance News) - RSA Insurance Group PLC Tuesday said it has agreed to sell its shareholding in its Canadian insurance brokerage business to a subsidiary of Arthur J Gallagher & Co, as the FTSE 100 insurer continues to sell non-core assets as part of its plans to beef up its balance sheet and recover from its losses in 2013.
In a statement, RSA said risk management business Arthur J Gallagher & Co has agreed to acquire Noraxis Capital Corp for CAD500.0 million. RSA said it expects to receive CAD441.0 million in cash for selling its majority stake in the business, subject to adjustments on completion. RSA said the transaction is expected to result in a gain on sale of about GBP140.0 million, as well as adding GBP225.0 million to its net tangible assets, which it said will improve its capital strength.
"This disposal represents further progress against our aim of tightening the strategic focus of the group, and brings to around GBP540 million the announced sales since our new strategy and action plan was unveiled in February. Noraxis is a sizeable brokerage business and unique in that context within the group," Stephen Hester, chief executive, said in a statement.
Hester, who joined RSA in early February, is implementing his so-called action plan to turn around the insurer's fortunes, after it swung to a GBP244 million pretax loss in 2013 in the wake of accounting irregularities in its Ireland subsidiary and a surge of claims related to bad weather. The former Royal Bank of Scotland Group PLC chief has already overseen a GBP773.0 million rights issue and the sale of RSA's operations in the Baltics and Poland for GBP300 million in cash.
"RSA?s core strength is in providing, as principal, the best personal and commercial insurance products to our customers, and that is where our focus will continue to be as we deliver on our new strategy and action plan," Hester said.
"We are proud of the work that has been done to successfully build Noraxis. However, now is the right time for RSA to realise its investment. We will continue to evaluate further non-core disposals, some of which we expect to agree during 2014," Hester added.
The deal is expected to close within two months and is subject to regulatory approval.
Noraxis is one of Canada?s largest P&C insurance brokers, operating through six majority-owned units located throughout Canada. Noraxis was founded by RSA Canada in 1999 and provides commercial, personal and employee benefits services on a retail basis.
In 2013, Noraxis had GBP184.0 million of total assets and GBP85.0 million of shareholders? funds at the end of that year.
Senior management of Noraxis and its subsidiaries are expected to remain with Noraxis at completion.
Separately, Arthur J Gallagher & Co said the agreement will give it an 87% stake in Noraxis, with the minority interest remaining with management employees of the broker.
RSA shares were Tuesday quoted at 493.50 pence, up 0.8%.
By Samuel Agini; [email protected]; @samuelagini
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