Zurich Insurance to buy MetLife's P&C unit for US$4b

[ZURICH] Zurich Insurance Group agreed to buy of MetLife's US property and casualty business in a US$3.94 billion cash transaction, extending its reach in the world's largest economy.

Zurich's subsidiary Farmers Group and Farmers Exchanges, which the insurer manages, will fund the purchase jointly, the Swiss company said in a statement on Friday.

Zurich will gain a nationwide presence in the US and access to MetLife's distribution channels to 3,800 companies for 10 years, the company said. That may help boost revenue at the unit, where gross written premiums declined 3 per cent to US$15.3 billion in the third quarter.

The purchase adds to one of the busiest years for insurance deals since the financial crisis, as companies seek to emerge as the strongest players when the Coronavirus pandemic subsides. The takeover of RSA Insurance Group and Allstate Corp's largest acquisition ever have helped push transactions this year to nearly US$93 billion before the Zurich deal, according to data compiled by Bloomberg.

The MetLife deal is expected to contribute to Zurich's earnings from the first full year after its completion in the second quarter and deliver a return on investment of approximately 10 per cent from 2023, according to the statement. The business includes 2.4 million policies and a reported US$3.6 billion net written premiums in 2019. The transaction is still subject to regulatory approvals.

"After this acquisition we will be in the top 10 in every one of the 50 American states, which wasn't the case before," chief executive officer Mario Greco said on a conference call. MetLife's strength in the US Northeast and Midwest will add to Zurich's presence in the South and West regions, he said.

The deal allows MetLife to simplify its operations and pursue its strategy of expanding in the US healthcare market, the company said separately. MetLife recently announced the acquisition of Versant Health, which will make it the No 3 vision care provider in the US, according to the statement.

Farmers Exchanges, which is owned by its policyholders and managed by the insurer, intends to free up capital for the purchase by increasing the amount of reinsurance it uses, Zurich chief financial officer George Quinn said on the call.

Adjusted earnings for the MetLife P&C business fell 68 per cent to US$18 million in the third quarter. The slump was driven by the highest catastrophe losses in nearly a decade, linked to a tropical storm in the US Northeast and severe windstorms in the Midwest.

Once the transaction is completed, Zurich expects its capital position to remain strong. The company had a pro-forma Swiss Solvency Test ratio at around 190 per cent as of the third quarter. Integration costs are expected to be about US$220 million, which will be spread over the next three years.

BLOOMBERG