Insurance Australia Group sells off Asian operations for over $500M

Insurance Australia Group (IAG) has reversed its 12-year-old strategy to build scale in Asia by selling off three of its operations in the region for over $525 million.

The sale of its interests in Thailand, Indonesia and Vietnam – to be completed in the 2019 financial year – is expected to result in an after-tax profit of at least $200 million.

As part of the deal IAG will sell its 98.6 per cent interest in Safety Insurance in Thailand, and its 80 per cent interest in PT Asuransi Parolamas in Indonesia to Japan’s largest P&C group Tokio Marine Holdings for $525 million and Goldman Sachs advised on the sale.

In a separate transaction, IAG said it would offload its 73.07 per cent interest in AAA Assurance Corporation, based in Vietnam for a sum undisclosed by the company.

It is believed this sale is worth under $20 million, and the buyer is a private company with existing interests in Vietnam. The sales mean that the bulk of IAG’s underperforming Asian assets will be removed from the company, but it will retain its joint ventures in India and Malaysia.

“We are pleased to accept the offer for our businesses in Thailand and Indonesia from Tokio Marine,” IAG chief executive Peter Harmer said in a statement.

“We believe Tokio Marine is an ideal owner given its experience in the region, and that this is a good outcome for the associated employees, customers and other stakeholders.”

IAG said that the proceeds from the sales would determine future “capital management initiatives” with more information provided at the company’s full year results in August. At the same time IAG said that sale of the South East Asian interests,  which will be treated as discontinued operations at the next results, would have a “negligible impact” on gross written premium and add around 50 basis points to the reported insurance margin.