Zurich Insurance Group (Zurich) subsidiary Farmers Group has agreed to acquire MetLife’s property and casualty (P&C) business in the US together with the Farmers Exchanges for $3.94 billion.
Zurich will contribute $2.43 billion through Farmers Group and the Farmers Exchanges $1.51 billion.
The transaction is said to give Farmers Exchanges a nationwide presence and access to new distribution channels with the potential to accelerate growth.
The transaction also includes a 10-year exclusive distribution agreement through which the Farmers Exchanges will offer their personal lines products on MetLife’s US group benefits platform, which today reaches 3,800 companies and 37 million employees.
Farmers Exchanges stated that they expect to become the sixth-largest personal lines insurer in the US with access to MetLife’s network of agents. The business to be acquired includes 2.4 million policies, $3.6 billion net written premiums in 2019 and 3,500 employees.
The acquisition is expected to contribute to Zurich’s earnings from the first full year after completion and is expected to deliver Zurich a return on investment of approximately 10 percent from 2023.
Zurich expects to fund Farmers Group’s portion of the acquisition through a roughly equal combination of internal resources and hybrid debt.
Following the transaction, Zurich’s capital position is expected to remain strong with the pro-forma Swiss Solvency Test ratio as of September 30, 2020, at around 190 percent.
Completion of the transaction is subject to regulatory approvals and is anticipated to occur in the second quarter of 2021. The purchase price is subject to certain adjustments.
In November, Zurich confirmed it was in discussions to acquire MetLife’s US P&C business. At the time, they refused to comment on the cost of the transaction.
Commenting on the transaction, Mario Greco, Zurich Group CEO, said: “The acquisition significantly increases the potential for growth at the Farmers Exchanges and will further boost the share of Zurich’s profits linked to stable fee-based earnings.”
He continued: “Together with the continued increase in rates in commercial insurance, this transaction will strengthen our ability to achieve our 2022 targets.”
”The acquisition of MetLife’s P&C business is a unique opportunity to accelerate growth and to achieve a significant presence in all 50 states,” said Jeff Dailey, CEO of Farmers Group.
He concluded: “MetLife’s distribution channels complement the Farmers Exchanges’ existing strength in the exclusive agent channel, deepen their presence in the fast-growing independent agent channel and provides entry into the worksite marketing channel via a leading platform, with the 10-year exclusive distribution agreement through MetLife group benefits.”
