Swiss insurer Zurich Financial Services said Tuesday it had reached a $1.67 billion deal with Banco Santander to buy 51 percent of the Spanish bank’s insurance and pension business in Latin America.
The deal will see Zurich acquire the stake in Santander’s life insurance, pension and general insurance operations in Brazil, Mexico, Chile, Argentina and Uruguay, the insurer said in a statement. The two companies also signed a 25-year strategic distribution agreement, giving Zurich access to Santander’s network of 5,600 branches and an additional 36 million customers in the region.
“This alliance with Banco Santander is another milestone in the implementation of Zurich’s emerging-market strategy… (and) significantly expands our presence in Latin America with a well-established insurance business,” Zurich CEO Martin Senn said in the statement.
Zurich said it expects to pay for the stake mostly using existing cash, and that it will finance the balance through borrowing. However, it assured investors that the transaction will have a “minimal impact” on its solvency. Santander’s Latin American insurance operations posted a net profit of $328 million in 2010, with insurance premiums growing about a third to $1.9 billion in 2010.
During the same year, the pension business in Brazil recorded assets under management of $10.5 billion. Analysts largely welcomed the deal. Bank Vontobel noted that the acquisition is “in line with ZFS’ focus to grow Asian and Latin American operations and improves the growth profile.” Bank Wegelin’s analysts also assessed that the transaction conforms to the bank’s strategy of growing in emerging markets.
Investors however appeared less enthusiastic. In morning trade, the stock was down 0.59 percent at 268.60 francs, in line with the weak Swiss Market Index, which was also down 0.99 percent.
Zurich, Feb 22, 2011 (AFP)
