Zurich Insurance Group (Zurich) subsidiary Farmers Group, Inc. (FGI) has agreed to acquire MetLife’s property and casualty (P&C) business in the U.S. together with the Farmers Exchanges for USD 3.94 billion, the insurers said on Friday, after COVID-19 made motor and home insurers more profitable. Zurich will contribute USD 2.43 billion through FGI and the Farmers Exchanges1 USD 1.51 billion.
The transaction gives the Farmers Exchanges a truly nationwide presence and access to new distribution channels with the potential to accelerate growth. This includes a 10-year exclusive distribution agreement through which the Farmers Exchanges will offer their personal lines products on MetLife’s industry-leading U.S. Group Benefits platform, which today reaches 3,800 companies and 37 million employees.
Farmers Exchanges expects to become the sixth-largest personal lines insurer in the U.S. with access to MetLife’s network of agents. The business to be acquired includes 2.4 million policies, USD 3.6 billion net written premiums in 2019 and 3,500 employees.
“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,” said Zurich Group Chief Executive Officer Mario Greco. “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, Chief Executive Officer of Farmers Group, Inc. “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.”
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% from 2023.
Zurich expects to fund Farmers Group, Inc.’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 ratio3 as of September 30, 2020, at around 190%.
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.
The deal is the latest in the sector, with Denmark’s Tryg and Canada’s Intact Financial acquiring British home and motor insurer RSA, and Finland’s Sampo and South Africa’s Rand Merchant Investment buying Britain’s Hastings.