Farmers Group Inc (FGI) is a subsidiary of swiss insurer Zurich and provides certain non-claims services to the Farmers Exchanges in return for a fee for its services. Farmers Exchanges is not in any way owned by Zurich.
Through the acquisition, the Farmers Exchanges will gain a nationwide presence in the US, having access to MetLife’s distribution channels to 3,800 companies for 10 years - Farmers Exchanges will be able to offer their personal lines products on MetLife’s US Group Benefits platform. The business to be acquired includes 2.4 million policies, $3.6 billion net written premiums in 2019 and 3,500 employees.
CEO of FGI Jeff Dailey noted: “MetLife’s distribution channels complement the Farmers Exchanges’ existing strength in the exclusive agent channel, deepen their presence in the fast-growing independent agent channel and provides entry into the worksite marketing channel via a leading platform, with the 10-year exclusive distribution agreement through MetLife Group Benefits.”
Strengthening Zurich’s market position
The Farmers Exchanges will contribute $1.51 billion to the deal, while Zurich will contribute $2.43 billion through the FGI.
Not only will this deal help boost Zurich’s overall earnings (the acquisition is expected to contribute to Zurich’s earnings from the first full year after completion and is expected to deliver Zurich a return on investment of approximately 10 per cent from 2023), but it will also reposition company as a key market player.
“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 CEO Mario Greco said.
Setting itself up for success in 2022
“The acquisition significantly increases the potential for growth at the Farmers Exchanges and will further boost the share of Zurich’s profits linked to stable fee-based earnings,” said Greco. “Together with the continued increase in rates in commercial insurance, this transaction will strengthen our ability to achieve our 2022 targets.”
Takeovers and mergers seem to be a key part of insurance in 2020. Back in November, Intact Financial Corporation and Tryg took over 300-year-old insurer RSA.