R&SA Acquires Chile’s Cruz del Sur

October 14, 2005

Royal & Sun Alliance Insurance Group PLC announced the acquisition of Chile’s leading general insurance business Compañia de Seguros Generales Cruz del Sur S.A. and its Argentinean sister company La República Compañía Argentina de Seguros Generales S.A. for $119 million payable in cash. The transaction is subject to regulatory approvals and other conditions.

The acquisition creates Chile’s number one general insurance company with a 22 percent market share. R&SA’s announcement notes: “Cruz del Sur’s 2004 gross written premiums were $195 million (102 million pounds), its gross assets were $166 million (86 million pounds) and its combined ratio was 95.8 percent. Chile has a stable and developed insurance market and the acquisition is in line with the Group’s strategic aim of building strong positions in selected markets to deliver sustainable profitable performance.”

Simon Lee, CEO of R&SA’s International Businesses commented: “We have developed a strong Latin American portfolio which has been built through a combination of organic growth and acquisitions. This deal combines the technical expertise of Royal & SunAlliance with the distribution of Cruz del Sur. It positions us well for growth and generates significant operational synergies. In Chile it creates a powerful and dynamic market leader whilst in Argentina the transaction further extends our geographic reach.”

While R&SA has been shrinking its U.S. presence, it’s been expanding its long-standing ties in South America. The company notes that it has been active in the region “since 1905 and is one of the largest foreign insurers in the region, with seven operations in eight countries – Argentina, Brazil, Chile, Colombia, Mexico, Netherlands Antilles, Uruguay and Venezuela.” The net written premiums were 108 million pounds [$190 million] in first half of 2005 “with double digit growth and the combined ratio was 94.5 percent.”

R&SA has operated in the Chilean general insurance market since 1905. In 2004 it had a 6.4 percent share of the country’s general insurance market. “Cruz del Sur has Chile’s largest branch network with 25 offices, selling through brokers and tied agents. It predominantly focuses on accident, motor and property and has a 15.8 percent share of the Chilean general insurance market,” said the bulletin. That market grew by grew at 12.8 percent per annum (2000-2004). Penetration rates at 4 percent are the highest in Latin America.

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