Farmers To Acquire AIG's Personal Auto Group for $1.9 Billion

April 16, 2009

Los Angeles-based the Farmers Insurance Group of Companies has announced it will acquire American International Group's (AIG's) Personal Auto Group, which includes 21st Century Insurance Co.

The acquisition price is $1.9 billion, subject to post closing adjustments.

The possibility of a deal was first reported yesterday.

The transaction excludes AIG's Private Client Group, which provides property and casualty insurance to high net worth individuals.

Under the agreement, 21st Century Insurance Group, the wholly owned subsidiaries comprising AIG's U.S. personal auto insurance business, will be sold to Farmers Group Inc., a subsidiary of Zurich Financial Services Group. Farmers Group Inc. will sell the underlying insurance entities to the Farmers Exchanges, which Farmers Group Inc. manages, but does not own.

FGI will pay AIG $1.9 billion, consisting of $1.5 billion in cash and $400 million in face amount of subordinated, euro-denominated capital notes backed by Zurich Insurance Co., Zurich's principal operating unit. FGI will also assume 21st Century's outstanding debt of $100 million.

The acquisition is expected to close no later than by the third quarter of 2009 pending customary regulatory approvals.

This acquisition by the Farmers Exchanges will position Farmers as the third-largest overall, personal lines insurer in the United States, according to the company's most current insurance industry data. The acquisition also will position the Farmers Exchanges as the largest auto insurer in several states, including California.

21st Century, which includes the former AIG Direct business and Agency Auto business, operates in 49 states and Washington, D.C. 21st Century has more than 2.4 million customers and insures more than 4 million vehicles across the country. 21st Century is the 3rd largest traditional direct writer of insurance in the United States.

Farmers CEO Robert Woudstra described the acquisition as a "win, win, win, win" for Farmers, 21st Century, Farmers agents,and most importantly, insurance consumers across the United States.

"Farmers takes great pride in being a customer-focused, growth-oriented organization and this acquisition represents the perfect strategic fit," Woudstra said.

"We are very pleased to reach agreement on a $2 billion transaction, especially in this market environment," said Edward Liddy, AIG's chairman and chief executive officer. "In addition, we are moving forward with discussions for several other transactions, and we continue to evaluate how best to assure the continued strength and success of all of AIG's businesses."

Woudstra said Farmers' national network of insurance agents will benefit from the proposed acquisition by gaining additional multi-line product sales opportunities from 21st Century customers.

"This acquisition will be a significant win for consumers because it will enable 21st Century customers to have access to Farmers agents, who can help them with their other insurance needs, such as homeowners, business, specialty products, life insurance and financial service products," Woudstra said.

He added that the acquisition will provide Farmers with a geographically broader and more diverse market presence across the country, including the eastern seaboard -- a key target market for future Farmers growth.

Source: Farmers