Zurich Insurance Group has entered into an agreement to acquire the Latin American operations of Australian insurer QBE Insurance Group Ltd. for a total aggregate price of US$409 million, subject to closing adjustments.
The transaction, which is subject to regulatory approvals, will position Zurich as the leading insurer in Argentina while also adding incremental scale and capabilities in Brazil, Colombia and Mexico and making the group the third largest insurer in Ecuador.
Around 50 percent of the acquired operations are in Argentina, which will almost double Zurich’s property and casualty (P/C) business in the country, said Zurich in a statement. Further, the transaction will create the leading insurance franchise in Argentina across P/C and life businesses with 8.4 percent market share and the third-largest stand-alone P/C business with a similar market share, the company continued.
QBE Puerto Rico will be retained by QBE to facilitate the servicing of claims resulting from Hurricane Maria and will become part of QBE’s North American Operations, said QBE in a statement.
“This transaction positions us as the leading insurer in Argentina, a market that is demonstrating strong growth, a stable economy and a positive environment for insurance,” said Claudia Dill, Zurich’s chief executive officer for Latin America.
“It deepens our capabilities in the retail and commercial businesses and supports our strategy to become the preferred retail and commercial insurer in the region, protecting our customers and helping them to reach their full potential,” she added.
“The decision to exit Latin America is consistent with our focus on simplifying the group, reducing risk and improving the consistency of our results,” said QBE Group CEO Pat Regan.
“Following a detailed review of our Latin American Operations, we determined that QBE was no longer the best strategic owner of these businesses. Zurich has a significant presence in Latin America and a strong commitment to the region. Following the completion of the sale, we look ,forward to cooperating with Zurich to service the needs of our multinational customers operating in Latin America,” he added.
The acquired operations had combined gross written premiums of about US$790 million in 2017, with a highly diversified product offering and strong distribution.
Zurich expects to achieve an overall return on investment comfortably in excess of the group’s indicated hurdle rate of 10 percent within the first full year post completion of the transaction. The acquisition is expected to be completed by the end of 2018 and is expected to be funded from internal resources.
QBE said profit on sale before tax is estimated at around $100 million.
Source: Zurich Insurance and QBE
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