In a massive move to rein in its global empire and improve its financial results, insurance giant AIG is divesting itself of much of its business in Latin America, including Colombia, with a $240 million USD sale of assets to Fairfax Financial Holdings Limited. On top of its holdings in South America, a host of operations in at least six different Central European nations are also included in the deal.
According to the company, AIG is selling its local commercial and consumer insurance operations in Colombia, Argentina, Chile, Uruguay, Venezuela, and Turkey. The Toronto-based Fairfax will also acquire AIG’s operating assets and employees in Central Europe as well as renewal rights for previous business written in Bulgaria, Czech Republic, Hungary, Poland, Romania, and Slovakia. The firm noted that each transaction is subject to approval by local regulators.
Fairfax, which was founded by Canadian mogul Prem Watsa, has been increasingly acquiring property and casualty assets in recent years. It also has two subsidiaries that operate as Lloyd’s syndicates, Advent and Brit, in Colombia. It acquired the U.K.-based Brit last year for a reported $1.9 billion USD and fully acquired the London-based Advent in 2008.
Lloyd’s just established an office in Bogotá in June — its third in Latin America — and according to a source familiar with the specialty insurance market’s operations in the country, the AIG sale of its business in Colombia to Fairax should spell good news for the new Lloyd’s office in the capital.
“The LatAm companies are well established in their respective markets with experienced management teams and a disciplined approach to underwriting, and they will significantly expand Fairfax’s footprint in Latin America,” said Watsa, chairman and CEO of Fairfax.
For AIG, the company says this isn’t a complete abandonment of these markets, noting that “Fairfax will become the main strategic multinational network partner that will serve AIG’s global clients in these countries, backed by AIG’s expertise, claims handling, and reinsurance capabilities. Peter Hancock, AIG’s president and CEO, said the insurer will “remain committed to those markets that hold the greatest potential for AIG to sell its insurance products competitively.”
But the move is clearly another step in the under-pressure insurer’s push to appease investors who are pushing for better results. Just two months ago, AIG sold its mortgage insurance unit to Arch Capital Group for some $3.4 billion USD. Activist investor Carl Icahn has led the call for the company to sell off under-performing tentacles of its enormous operations.