Zurich Insurance Group has agreed to sell its Russian retail business to OLMA Investment Group as it focuses on building corporate business in the region.
Zurich’s retail portfolio comprises around 1.2 million policies representing gross written premium volume of R7.1 billion (about $220 million) in 2013.
OLMA has stated ambitions to further develop the retail insurance business in Russia as well as building its own corporate business by leveraging its existing customer base.
Subject to regulatory approvals, the transaction is expected to close in the third quarter 2014.
The sale price amounts to R1 billion ($30 million). On disposal, unrealised currency translation adjustment (CTA) losses of approximately $265 million, currently reflected in shareholders' equity, will become realized.
Mainly as a result of this accounting charge, the transaction is estimated to generate a loss through net income of about $300 million, but with only a small impact on the group's shareholders' equity, said the insurer.
Mike Kerner, chief executive officer of general insurance, said: “The transaction is a proof-point of our 2014-2016 strategy. While we invest in priority markets, we either turn around or exit those that are under-performing. When announcing our annual results 2013, we said that the Russian retail business had not developed according to our expectations and that we would explore options for it. We believe that the sale to OLMA is in the best interest of our customers, employees and shareholders.”
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Zurich, OLMA Investment Group, Europe