NU Online News Service, May 30, 2003, 5:33 p.m. EDT – Bank One Corp., Chicago, has agreed to buy Zurich Life, Schaumburg, Ill., the U.S. life insurance and annuity unit of Zurich Financial Services Group, Zurich, for about $500 million in cash.
Bank One, a bank with $288 billion in assets, hopes to complete the deal by Sept. 30.
The deal is the second life company sale that Zurich Financial has announced in less than two weeks.
Zurich Financial reported May 22 that it has agreed to sell its Dutch life insurance business and its Dutch personal property-casualty insurance business to SNS Reaal Groep N.V., Utrecht, Netherlands, a Dutch bank insurance company.
Moody’s Investors Service, New York, and Standard & Poor’s Ratings Services, New York, both affirmed their Bank One credit ratings.
The Zurich Life deal is one of the biggest life insurer acquisitions any U.S. bank has announced since Congress eased longstanding restrictions on bank-insurer combinations. But the deal is still a “relatively moderate” investment for Bank One, Moody’s says.
“Even if the investment performs below Bank One’s expectations, it would not compromise Bank One’s creditworthiness,” Moody’s says.
At S&P, analysts say they believe the Zurich Life deal will be “a clean, low-risk operation.”
Experts say the biggest challenges for Bank One will be integrating Zurich Life into its own operations and converting Zurich Life’s products into new selling opportunities.
Bank One Chairman Jamie Dimon predicts that the addition of Zurich Life’s network of 40,000 agents and brokers will improve Bank One’s ability to sell life insurance and annuities.
The Zurich Life acquisition should add $50 million to the bank’s 2004 net income, Dimon says.
But “Zurich Life is not a household name in my vocabulary, and I guess it’s not for many others,” says Charlene Stern, senior vice president of NewGround, Chicago, a bank consulting firm. “I would say [Bank One executives] will want to fold it under Bank One’s name.”
The Bank One-Zurich Life deal is the second major North American life insurer acquisition announced this month, according to Ryan Davis, an analyst with SNL Securities Inc., Charlottesville, Va.
Earlier in May, Sun Life Financial Services of Canada Inc., Toronto, agreed to pay about $200 million for Business Man’s Assurance Company, Kansas City, Mo.