Switzerland’s largest insurer, Zurich Financial Services, has agreed to pay as much as 2.1 billion US dollars for 51% of Banco Santander’s insurance business in Brazil, Mexico, Chile, Argentina and Uruguay.
The Zurich-based company will make an initial payment of 1.67 billion USD with Santander receiving as much as 420 million USD over the next 25 years depending on the performance of the unit, the Swiss insurer said Tuesday in an e-mailed statement. Zurich will manage the insurance joint-venture.
The acquisition will make the Swiss insurer the fourth- largest in Latin America, after Banco Bradesco SA, Mapfre SA and Itau Unibanco Holding SA, Zurich said. It will also gain access to more than 5,600 Santander branches and 36 million customers in the region through a 25-year distribution agreement.
The transaction is between 1.9 to 2.1 times book value, according to a presentation on Zurich’s website. Last October’s bid by Apollo Global Management and CVC Capital Partners Ltd. for Brit Insurance Holdings NV was priced at about 1 times book value.
The joint venture will double the contribution of Latin America to about 8% of the company’s total revenue and furthers Zurich strategy of expanding into emerging markets where people are taking out auto or life insurance for the first time. Zurich and Santander would have produced 3.9 billion USD in gross written premiums plus 2.9 billion USD in pension contributions in 2010, the Swiss insurer said.
“Santander’s Latin American insurance operations offer a rare combination of high growth potential and strong cash flow generation,” Zurich Chief Executive Officer Martin Senn said in today’s statement. The insurer expects to complete the agreement in the first half of this year.
The Swiss company aims to increase the contribution of new business from Asia, the Middle East and Latin America to 30% of the life insurance total by 2013 from the current 15% to 20%, Zurich told investors on December 2.
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