Britain’s largest motor insurer Direct Line has sold its European arm to Spanish insurance company Mapfre for £430.5m.
The sale of the group’s Italian and German operations concludes the strategic review initiated earlier this year.
All net proceeds from the sale will be returned to Direct Line’s shareholders.
Direct Line, whose brands include Churchill, Privilege and the Green Flag roadside recovery service, is understood to have held advanced talks with at least four suitors for the two operations.
The company, which is a major employer in Yorkshire, said it expects to make a pre-tax gain on disposal of approximately £160m.
The sale agreement includes a licence to use the Direct Line brand in Italy and Germany for three years. The deal is conditional on the approval of relevant regulatory authorities which are expected to take approximately three to four months.
Paul Geddes, CEO of Direct Line Group, said: “We believe that the sale of our international businesses to Mapfre is a good result for all of our stakeholders, providing excellent value for our shareholders, while offering our customers and colleagues stability and opportunity.
“Meanwhile, our UK personal and commercial lines businesses are continuing to implement the many initiatives we have under way to deliver our strategic priorities.”
The group will release its third quarter 2014 interim management statement on October 31.
Mapfre said the deal will be immediately positive for the Spanish company’s earnings.
“The Italian and German assets acquired are absolutely strategic for Mapfre, strengthening the two main lines of our global growth plan, allowing us to increase our presence in Europe and, at the same time, it fits with our move in to digital business,” said chairman Antonio Huertas.
Deal activity in the insurance sector has risen this year, helped by the stock market listing of Dutch insurer NN Group, Europe’s biggest initial public offering (IPO) of 2014.
Direct Line, which also offers home, travel and pet insurance, said pre-tax profit rose to £225.1m in the six months to June 30 from £208.8m a year earlier.
It declared a total interim dividend of 14.4p per share, including a special interim dividend of 10p.
Net insurance claims fell three per cent to £1.03bn.