SAO PAULO Jan 22 Itaú Unibanco Holding SA,
Brazil's most profitable lender, is offering its high-risk
corporate insurance unit to at least 10 global industry giants,
Valor Econômico newspaper reported on Wednesday.
The newspaper, which did not say how the information was
obtained, said Itaú Unibanco put the unit on the
block because it will likely demand more capital allocations
under new Basel III rules. The bank's press office did not
comment immediately on the report.
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, Valor said.
The newspaper said Itaú, which did not inform a sought price
for the asset, 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.
Some of the ten insurers to whom Itaú delivered a prospectus
for the sale are Germany's Allianz SE, France's Axa SA
, Italy's Generali SpA and Swiss insurer
Zurich Insurance Group AG, Valor said. Allianz
declined to comment. Efforts to reach media staff at Axa,
Generali and Zurich in Brazil were unsuccessful.
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, ROE
at the retail and personal unit is around 30 percent, the
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.