USAA Sells Another Sector to Focus on Core Business

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Scott Ball / Rivard Report

USAA Security Specialist Melissa Bailey takes incoming calls at the Unified Command Center at the USAA headquarters.

USAA announced it has agreed to sell a controlling stake in its real estate company.

The insurance and financial services giant will sell USAA Real Estate to the division’s current management and a private investment group, which was not named. The deal is expected to close in early 2020, subject to regulatory approvals.

USAA will retain a significant ownership stake in USAA Real Estate, and Len O’Donnell, president and CEO of the real estate company, will continue to lead the business.

 

The company will remain the exclusive investment manager for USAA’s $30 million real estate portfolio, which includes The Shops at La Cantera and other retail, residential, office, and industrial properties around the world.

Courtesy / USAA Real Estate

USAA Real Estate President and CEO Len O’Donnell

“We remain as committed as ever to producing great results for USAA and its members,” O’Donnell stated Thursday. “This change enables us to provide an even greater level of service to our clients and partners as we strive to maximize performance for their portfolios.”

USAA expects minimal employee impact from the transaction, the statement said. USAA Real Estate plans to maintain its current workforce.

Founded in 1922, USAA has grown from being an auto insurance provider to military officers and veterans to selling not only auto, home, and life insurance, but also providing banking, financial advice, retirement products, and investment services for 13 million members. Its 2018 net income was $2.3 billion.

The move to sell its real estate company comes four months after USAA sold the company’s investment management division to the Charles Schwab Corp. for $1.8 billion in cash.

 

Also in July, the global investment management firm Victory Capital acquired USAA’s mutual fund, exchange-traded fund, and 529 College Savings Plan businesses in a deal worth $850 million and moved the firm’s headquarters from Ohio to San Antonio.

This week, the USAA Life Insurance Company announced its Single Premium Immediate Annuity product will now be provided through the Fidelity Insurance Network of Fidelity Investments, becoming the first USAA annuity available through a third party. An official called it “an exciting expansion of our annuity business.”

In recent years, the company has faced a number of legal challenges and compliance issues.

The Consumer Financial Protection Bureau charged USAA in January with violating banking and consumer protection laws. The following month, the Office of the Comptroller of the Currency filed a consent order stating USAA has failed to implement and maintain a risk management program suitable for its size, complexity, and risk profile.

Last week, a jury ruled in favor of USAA, which had accused Wells Fargo of infringing on two USAA patents for a mobile check deposit process, and awarded USAA $200 million in damages.

The move to sell USAA Real Estate simplifies USAA’s operating structure enabling it to better serve members through its core businesses of banking, auto, home and life insurance, and retirement products, according to the statement released Thursday. The deal reduces many financial service regulatory requirements for USAA Real Estate and allows it to grow in a more profitable way.

“We believe both USAA and USAA Real Estate are best served by creating this strategic relationship and enabling the investment management business to operate more independently,” stated USAA CEO Stuart Parker. “We will continue to deliver on USAA’s mission to serve the financial needs of the military community with the quality, speed, and service members expect and deserve.”

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