SAO PAULO Jan 22 Itaú Unibanco Holding SA
said on Wednesday it will put its high-risk corporate
insurance unit up for sale in coming days, a move that should
help Brazil's most profitable lender deploy capital more
efficiently in coming years.
In a securities filing late on Wednesday, the São
Paulo-based bank said bidding for the unit will be
"competitive," without providing further details. Valor
Econômico newspaper reported earlier in the day that Itaú had
offered the unit to at least 10 global insurance giants.
The newspaper, which did not say how the information was
obtained, said Itaú wants to sell the division because it will
likely demand more capital allocations under new Basel III
Itaú could fetch about 1 billion reais ($424 million) from
the sale, according to Francisco Kops, an analyst at Banco
Safra's brokerage unit.
The unit, which specializes in offering insurance coverage
for giant corporate projects in high-risk segments such as oil
and gas and infrastructure, has revenue of about 1.7 billion
reais ($723 million) annually and clients including state-oil
company Petróleo Brasileiro SA.
According to Valor, Itaú delivered a sale prospectus to 10
insurers, including Germany's Allianz SE, France's Axa
SA, Italy's Generali SpA and Swiss giant
Zurich Insurance Group AG.
Itaú denied that the unit had already been offered to any
potential bidder. Allianz and Axa declined to comment on the
Generali is not interested in the asset, a source familiar
with the situation told Reuters, and the company declined to
comment. Efforts to reach Zurich's media office in Brazil were
Preferred shares of Itaú, the bank's most widely traded
class of stock, gained 0.2 percent to 30.25 reais. The stock is
down about 8 percent this year.
Itaú plans to keep the retail and personal insurance units,
which have more stable revenues and higher returns than the
high-risk insurance segment, Valor reported. While return on
equity at the high-risk division hovers around 10 percent,
return on equity at the retail and personal unit is around 30
percent, the newspaper said.
"At first glance, the move makes strategic sense because
Itaú is not a relevant player in this segment, and returns on
high-risk insurance are below the bank's average," Banco Safra's
Kops said in a client note.
The newspaper said Itaú, which did not give the price it is
seeking for the unit in the prospectus, gave valuation guidance
of 1.2 times the unit's book value, the same metric used in
recent mergers and acquisitions deals in the sector.
The sale comes after infrastructure projects related to
hosting the World Cup in 2014 and the Olympic Games in 2016 got
off to a late start, and the government auctioned rights to
operate roads, railways and ports a year later than expected.
Government officials expected policy underwriting in the
high-risk and reinsurance segments to grow three times as fast
as overall economic growth through 2015. But with economic
growth trailing the government's 4.5 percent average target
between 2011 and 2014, returns and policy underwriting have
Itaú also wants to shed the unit because contracts force it
to assume policy risks for reinsurers it works with, Valor said.
Reinsurers help primary insurers shoulder the risks assumed for
clients in the riskiest, most expensive projects - like oil
exploration, heavy construction and defense.