Zurich Insurance coverage in talks over $4bn deal for MetLife arm

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Zurich Insurance coverage is in talks to purchase the US property and casualty insurance coverage unit of New York-based MetLife, in accordance with a press release from the Swiss firm.

The deal might worth the enterprise within the vary of $4bn, in accordance with an individual conversant in the negotiations, the most recent in a collection of contemplated transactions that’s reshuffling the worldwide insurance coverage trade.

MetLife is primarily a life insurer, however has traditionally touted its property and casualty enterprise for including diversification and smoothing out its general efficiency. In 2019, P&C accounted for six per cent of MetLife’s whole revenues and 14 per cent of adjusted earnings.

In a notice to shoppers, Elyse Greenspan, Wells Fargo insurance coverage analyst, wrote {that a} $4bn price ticket could be equal to 14 instances her estimate of 2021 earnings from the enterprise — in the direction of the excessive finish of the vary of costs which were contemplated out there.

MetLife was the 18th largest P&C insurer within the US, and Zurich’s US subsidiary, Farmers, is the seventh largest, she wrote, including that “we might view this transaction favourably as MetLife . . . has by no means gotten full credit score for its P&C enterprise”.

If MetLife used the proceeds for a inventory repurchase, it will be accretive to the corporate’s earnings subsequent yr, in accordance with Wells Fargo calculations.

Requested about the potential of promoting the P&C enterprise on a convention name with analysts earlier this month, Michel Khalaf, MetLife chief govt, known as it “a well-run, good enterprise” that had been “persistently worthwhile . . . and it does have an vital strategic connection to our group enterprise”. However he wouldn’t touch upon a sale.

MetLife shouldn’t be the one diversified US insurer seeking to simplify its product providing. Final month, AIG introduced that it deliberate to separate its life insurance coverage enterprise from its bigger property and casualty arm, a transfer lengthy urged by traders. UK’s Prudential can be searching for to separate off Jackson, its US life insurance coverage enterprise, below stress from the activist investor Daniel Loeb.

Met Life shares have fallen 11 per cent thus far this yr, as traders have shied away from the finance sector as rates of interest have fallen. Zurich shares have fallen eight per cent.

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