The Travelers Companies, Inc. TRV will buy acquire a majority stake in the property casualty business of its J. MalucelliParticipaçõesemSeguros e Resseguros S.A. (J. Malucelli) joint venture. The deal is expected to close in the fourth quarter of 2015 pending approvals. However, the terms of the transaction, which will strengthen the company’s Brazilian foothold, remains undisclosed
Following the buyout, Travelers will have a 95% stake in theproperty casualty business and will operate under the Travelers brand. The remaining 5% will be owned by J. Malucelli’s parent company Paraná Banco. However, Travelers will retain the 49.5% stake in the surety business of the J. Malucelli.
In Dec 2012, Travelers had made a similar attempt by increasing its stake in J. MalucelliParticipaçõesemSeguros e Resseguros S.A., Travelers’ joint venture in Brazil, to 49.5% from 43.4%.
The consideration that Paraná Banco will receive from the deal will be deployed in its bank operations.
The proposed acquisition bears testimony to Travelers’ prudent investment strategy, wherein it strives to expand in the attractive and growing market place outside the United States. In Dec 2014, the company, in a joint venture with J. Malucelli, agreed to acquire a majority stake in Columbia-based surety provider Cardinal Compañía de Seguros.
Acquisitions have always helped Travelers to write improved premiums. Net written premiums of Travelers during the last reported quarter largely benefitted from the inclusion of The Dominion of Canada General Insurance Company within Financial, Professional & International Insurance. Travelers had acquired Dominion in Nov 2013.
Travelers presently carries a Zacks Rank #3 (Hold). With optimism over the proposed acquisition, we expect analysts to revise their estimates upward, which will likely raise the Zacks Rank as well.
Acquisitions are a well-accepted strategy for growth among insurers. Early this month, AXIS Accident & Health, a unit of AXIS Capital Holdings Limited AXS announced that it has acquired Ternian Insurance Group LLC for an undisclosed amount.
Willis Group Holdings plc WSH announced the buyout of CarsaConsultores in its effort to widen and strengthen its presence in Mexico. However, the terms of the deal remain undisclosed. Last month, Brown & Brown of New York, Inc., a subsidiary of Brown & Brown, Inc. BRO acquired some of the assets of Spain Agency, Inc.
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