Italian insurer Assicurazioni Generali SpA (ARZGY.PK) agreed Tuesday to sell its 49 percent minority stakes in two Mexican companies to Mexico's Grupo Financiero Banorte for 649 million euros or $857.5 million. The transaction is subject to approvals by the competent regulatory authorities and other customary conditions.
The deal will see Banorte, which already held 51 percent stakes in the two companies, gain 100 percent ownership of the two Mexican companies, Seguros Banorte Generali and Pensiones Banorte Generali.
The Generali Group is one of Europe's largest insurance providers and the biggest European life insurer, with 2012 total premium income of 70 billion euros. The Group occupies a leadership position on Western European markets and an increasingly important place in Central and Eastern Europe and Asia.
"We seized Banorte's offer at the best conditions for us and withdrew from a minority position which was no longer consistent with Generali's current strategy to manage its invested capital actively," Generali Group CEO Mario Greco said in a statement.
The disposal of the minority stake in Seguros Banorte Generali will contribute 482 million euros or $637 million of the net capital gain, while the disposal of Pensiones Banorte Generali stake will contribute 167 million euros or $220.5 million.
The sale of 49 percent minority stakes in the two Mexican companies will generate a net capital gain of about 500 million euros for Generali on a consolidated basis, and improve its Solvency I ratio by 4 percentage points.
"The disposal of the minority stakes we held in Mexico is attractive from a financial point of view and allow us to strengthen the Group's capital position, one of our strategic goals," Greco added.
Generali said the deal is part of the strategy announced in January of transforming Generali into one global insurance Group by disposing off non-core assets to re-focus on its core insurance business and strengthening the Group's capital position.
Generali is also targeting a Solvency I ratio of above 160 percent, 600 million euros from cost saving initiatives, and cash flow generation from existing operations exceeding 2 billion euros by end of 2015.
Generali added that through this transaction it has generated more than 2.2 billion euros from the disposals since August 2012, corresponding to over half of the 2015 target of 4 billion euros, and remains confident of achieving the total target by 2015.
As part of the plan to strengthen its liquidity and capital position, Generali last week agreed to sell its US life reinsurance business to France's SCOR SE (SZCRF.PK) for expected total gross proceeds of $920 million, which will improve its solvency 1 ratio 1 percentage point.
The deal included the sale of 100 percent of Generali U.S. Holdings and its subsidiaries as well as the recapture of the business currently retroceded to Assicurazioni Generali.
On the Milan stock exchange, Assicurazioni Generali closed Tuesday's trading at 13.93 euros, down 0.20 euros or 1.42% on a volume of 7.57 million shares.
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