Itau Unibanco merges with Porto Seguro (Brazil)

Itau Unibanco, Porto Seguro in insurance merger
Itau Unibanco, Brazil's biggest private sector bank by assets, agreed on Monday to merge its automobile and residential insurance business with local insurer Porto Seguro. Porto Seguro shares jumped 9 percent to 17.44 reais in early trading, while Itau Unibanco was up 1 percent at 34.54 reais. Brazil's benchmark Bovespa (news) index was up 0.8 percent at the time.
The surprise deal was unveiled just three days after Porto Seguro ended talks for a similar agreement with Banco Bradesco , Itau Unibanco's archrival.
Itau Unibanco will transfer its automobile and residential insurance assets to Porto Seguro, the companies said in a joint securities filing. Porto Seguro will also issue new shares to Itau Unibanco, equivalent to 30 percent of the enlarged Porto Seguro.
The firms did not estimate a value for the transaction. The combined company had 2.32 billion reais ($1.27 billion) in automobile premiums in the first half of 2009 and 3.05 billion reais in shareholders' equity.
Besides leading the country in the automobile insurance market, Porto Seguro also offers health and life insurance as well as homeowner's coverage. The company said on Friday 'talks didn't move forward' to combine its car insurance business with Bradesco's auto insurance unit, Bradesco Auto RE unit.