Clal headed to NIS 500M exit within 5 years

Insurance company negotiating sale of subsidiary Guard Group at value of $312 million. Some $125 million invested in company since 2007 acquisition

Mishel Udi, Calcalist|Published: 08.04.11 , 16:01

Clal Insurance, which is up for sale itself, is negotiating over the sale its US subsidiary Guard Group.

The company reported Thursday that it received a letter of intent from a prospective buyer who wishes to acquire all of Clal's shares in the company at a value of $312 million, Calcalist has learned that.

In effect, after the deduction of various financial obligations, Clal is expected to receive NIS 934 million ($271 million) in the deal. Clal acquired control over Guard in 2007 and in total invested NIS 432 million ($125 million) in the company.

For the period since the acquisition of Guard up to March 2011, Clal's financial reports have shown gross earnings (before taxes) of NIS 241 million ($70 million).

If the deal is signed, Clal is expected to record additional gross earnings (before taxes) of NIS 260 million ($75 million), thus raking in expected overall gross earnings (before taxes) of NIS 500 million ($145 million) from the Guard investment.

The agreement is expected to include a mechanism that will reflect any significant changes in Guard's earnings from April 1, 2011 until the deal is signed in the final deal value. The deal will be subjected to various approvals – among others of US regulators.

US-based Guard Group, currently under the management of Sy Foguel, deals with general insurance, mainly the sale of workers' compensation policies in the US which indemnify workers in cases of job-related injury or illness.

The company has business in 27 states in the US mostly in the East coast and California. Guard's direct written premium for 2010 totaled some NIS 865 million against some NIS 779 million ($226 million) the previous year – a 22% growth in terms of dollar.

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