Zurich Insurance Group AG agreed to buy MetLife Inc.’s U.S. property and casualty (P&C) business in a $3.94 billion cash transaction, extending its reach in the world’s largest economy.
Zurich’s subsidiary Farmers Group Inc. and Farmers Exchanges, which the insurer manages, will fund the purchase jointly, the Swiss company said in a statement.
The deal allows MetLife to simplify its operations and pursue its strategy of expanding in the U.S. health care 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 United States, according to the statement.
Adjusted earnings for the MetLife P&C business fell 68% to $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 U.S. Northeast and severe windstorms in the Midwest.
Zurich will gain a nationwide presence in the United States 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% to $15.3 billion in the third quarter.
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% from 2023, according to the statement. The business includes 2.4 million policies and a reported $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,” Zurich Chief Executive Officer Mario Greco said on a conference call. MetLife’s strength in the U.S. Northeast and Midwest will add to Zurich’s presence in the South and West regions, he said.
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.