By Julie Steinberg 

Swiss insurer Zurich Insurance Group AG will acquire MetLife Inc.'s U.S. property and casualty insurance business for $3.94 billion, the companies said Friday, the latest in a string of deals in the sector during the coronavirus pandemic.

Zurich, through its subsidiary Farmers Group Inc., will contribute $2.43 billion to the deal, while Farmers Exchanges, its U.S. partner, will pay $1.51 billion.

The Wall Street Journal earlier reported plans for a tie-up, which would expand Zurich's U.S. presence and give Farmers access to MetLife's 7,700 agents.

Insurers globally have been reconsidering their operations amid the pandemic. They are also grappling with the impact of low interest rates on their investment portfolios. Some are recognizing the need for scale, while others are pruning units where they can't make enough money to compete. Bankers say more deals are in the offing.

Last month a Canadian and Danish insurance consortium agreed to buy the U.K.'s RSA Insurance Group PLC for GBP7.2 billion, equivalent to $9.6 billion. Private-equity firm KKR & Co. in July said it would buy retirement and life-insurance company Global Atlantic Financial Group Ltd. for more than $4.4 billion.

MetLife Chief Executive Michel Khalaf said the transaction would allow the company to streamline and focus on its core businesses. The company plans to buy back $3 billion worth of common stock, it said Friday.

Zurich said the acquisition is expected to contribute to its earnings from the first full year after completion and generate a return on investment of around 10% from 2023.

Morgan Stanley analysts in a note Friday praised the deal, saying they believe it will be a positive for Zurich and increase its fee-based income stream from Farmers.

The transaction, which is subject to regulatory approvals, is expected to close in the second quarter of next year.

--Giulia Petroni contributed to this article.

Write to Julie Steinberg at julie.steinberg@wsj.com

 

(END) Dow Jones Newswires

December 11, 2020 05:29 ET (10:29 GMT)

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