Zurich deal for AIG auto unit drives U.S. expansion
NEW YORK (Reuters) - Zurich Financial Services AG (ZURN.VX) said it closed its $1.9 billion acquisition of AIG's U.S. auto insurance business on Wednesday, and expects the business to bolster earnings at its Farmers division immediately.
Farmers Group Inc CEO Robert Woudstra told Reuters in a telephone interview that the deal is expected to bolster its bottom line significantly since it immediately gives the company an additional 1.5 million customers.
"This acquisition represents a perfect strategic business fit," said Woudstra, and catapults Farmers into the No. 3 spot among U.S. auto insurers, a profitable but highly competitive area. State Farm and Allstate (ALL.N) hold the first and second spots, respectively.
The purchase is a significant step in Zurich's drive to build a bigger presence in the United States. Much of the expansion for Europe's fourth-largest insurer has been through Farmers Group Inc's insurance units, which Zurich manages but does not own.
Under the purchase agreement, Zurich also on Wednesday sold the regulated insurance entities acquired from AIG, which had recently been rebranded as 21st Century, for $1.4 billion in cash to Farmers Exchanges.
Woudstra said the 21st Century name would continue to be used, and a newly launched advertising campaign will remain in place.
He did not rule out job cuts as a result of the acquisition but said both sides were still hammering out possible areas of duplication.
The deal was one of the largest purchases Swiss-based Zurich has made in some time. In recent years its M&A policy has been mostly for smaller bolt-on acquisitions in growth markets, including last year's $241 million purchase of majority ownership of two Brazilian companies: Companhia de Seguros Minas Brasil CSMB3.SA and Minas Brasil Seguradora Vida e Previdencia.
For AIG, which had been the world's largest insurer, it was the largest asset sale since the troubled U.S. insurer received a $180 billion government rescue last September.
American International Group Inc (AIG.N) is trying to sell off assets to pay back government loans of about $83 billion, but has found it hard to find buyers for some big-ticket items.
(Reporting by Lilla Zuill, editing by Matthew Lewis)
