PZU SA, central Europe’s largest insurer by market value, agreed to buy RSA Insurance Group Plc’s four units in the biggest foreign acquisition by a Polish financial company.
PZU will pay a combined 360 million euros ($498 million) for Lietuvos Draudimas AB in Lithuania, AAS Balta in Latvia, the Estonian branch of Codan Forsikring A/S and Warsaw-based Link4 Towarzystwo Ubezpieczen SA, RSA said in a regulatory statement today. RSA expects the transaction to be completed in the second half of the year.
State-controlled PZU, which controls about 30 percent of Poland’s life and property insurance market, is looking beyond its 38 million-resident home market for expansion. It failed to buy Croatia Osiguranje d.d as well as Polish lenders Bank Gospodarki Zywnosciowej SA and Alior Bank SA last year.
“PZU is buying players with solid positions, well-known brand names and operating on markets with long-term growth potential,” Pawel Kozub, a Warsaw-based analyst at UniCredit SpA, said by phone. “These are also challenging markets.”
PZU shares rose for the first time in five days, climbing 3 percent to 427.2 zloty at 10:48 a.m. in Warsaw, valuing the insurer at 36.9 billion zloty ($12.2 billion). RSA climbed 2.7 percent to 95.05 pence in London trading, heading for the highest close since Nov. 12.
RSA’s new Chief Executive Officer Stephen Hester is selling assets to help bolster the balance sheet after three profit warnings in the fourth quarter and an accounting scandal at its Irish unit. Hester said today the insurer will continue to evaluate other asset disposals, some of which are expected to occur this year.
PZU, which in 2012 announced plans to spend as much as 7 billion zloty on foreign acquisitions, earlier considered takeovers of state-owned insurers in former Yugoslav republics, including Croatia, Serbia and Montenegro. In Poland, the company is seeking to buy health insurers belonging to state energy companies, KGHM Polska Miedz SA and PKN Orlen SA.
“Today’s takeover is part of our expansion strategy and should help us solidify our leading position in the region,” PZU CEO Andrzej Klesyk said at a news conference in Warsaw, adding the purchase won’t affect 2013 dividend.
Klesyk estimates the Baltic insurance markets to grow as much as 10 percent annually.
Before the transaction, PZU was Lithuania’s third-biggest non-life insurer with a 13.6 percent market share in 2013, according to the Bank of Lithuania’s website. It is the Baltic nation’s seventh-biggest life insurer, with 4.2 percent of the 626 million-litai ($251 million) market, central bank data show.