Zurich has agreed to acquire QBE’s operations in Argentina, Brazil, Colombia, Ecuador and Mexico in a $409mn deal.
Approximately 50 percent of the acquired operations are in Argentina, which will almost double Zurich’s P&C business in the country, Zurich said in a statement.
The acquired operations had combined gross written premiums of around $790mn in 2017, with a highly diversified product offering and strong distribution.
Zurich said that the transaction will position it 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.
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.
QBE said that it expects to generate around $100mn of pre-tax profit from the sale. It added that the deal will positively impact the Group’s APRA PCA multiple and S&P capital position due to the profit on sale, lower risk charges and the disposal of approximately $42mn of goodwill and intangible assets.
Zurich’s CEO for Latin America Claudia Dill said: “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,”
“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.”
Meanwhile, QBE Group CEO Pat Regan said: “The decision to exit Latin America is consistent with our focus on simplifying the Group, reducing risk and improving the consistency of our results.
“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.”
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 deal is expected to close by the end of 2018, subject to regulatory approvals in each of the jurisdictions involved.