Zurich Insurance Group (Zurich) subsidiary Farmers Group, Inc (FGI) and Farmers Exchanges have today announced an agreement to acquire MetLife’s US property and casualty business for $3.9 billion (approx. AU$5.18 billion). Zurich will contribute $2.43 billion (approx. AU$3.23 billion) through FGI and the Farmers Exchanges will contribute $1.51 billion (approx. AU$2 billion).
The deal aims to further increase Zurich’s stable, fee-based earnings streams as well as to add to earnings from first full year after completion and to support the delivery of Zurich’s growth targets for 2022. The acquisition is expected to contribute to Zurich’s earnings from the first full year after completion and is expected to deliver Zurich an ROI of approximately 10% from 2023. Zurich will look to fund FGI’s portion of the acquisition through a roughly equal combination of internal resources and hybrid debt.
The transaction is expected to give Farmers Exchanges a nationwide presence as well as access to new distribution channels to provide a strong platform for accelerated growth. This includes a 10-year exclusive distribution agreement which will see Farmers Exchanges offer their personal lines products on MetLife’s US Group Benefits platform. The business to be acquired includes 2.4 million policies, $3.6 billion (approx. AU$4.78 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 CEO. “Together with the continued increase in rates in commercial insurance, this transaction will strengthen our ability to achieve our 2022 targets.”
CEO of FGI, Jeff Dailey said the acquisition of MetLife’s P&C business is a unique opportunity to accelerate growth and to achieve a significant presence across the US.
He noted: “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.”
Completion of the transaction is subject to regulatory approvals and is anticipated to occur in the Q2 2021 and the purchase price is subject to certain adjustments.