July 03, 2014 13:34
Zurich selling Russian retail business to Olma Group
MOSCOW. July 3 (Interfax) - Zurich Insurance Group and the Olma Group have signed an agreement for Olma to acquire Zurich's general insurance retail business in Russia, the insurer said in a statement.
"The sales price amounts to 1 billion rubles (about $30 million). On disposal, unrealized 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. The CTA loss recognized on disposal reflects the revaluation of investments made into the Russian retail business since the acquisition of Nasta Insurance Company in 2007 primarily due to the depreciation of the Russian Ruble versus the U.S. dollar. The exact amount of the CTA loss will be calculated at the closing of the transaction, which is expected to be in the third quarter of 2014," the statement reads.
Olma has announced its intentions to further develop its retail insurance business in Russia, as well as to create its own corporate insurance business by attracting its own client base.
Zurich will retain its corporate business, which is primarily focused on underwriting large Russian and multi-national commercial customers, energy business and financial lines. It has been an active player in the Russian corporate market since 1996.
"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," Zurich CEO Mike Kerner is quoted in the statement as saying.
Zurich acquired the insurance company NASTA in 2008. The company transferred its corporate business to NASTA, which was renamed Zurich Insurance Company.
The Olma investment firm has been in operation since 1992, and is currently a leading futures and options market maker in Russia.
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