This move comes on the heels of Zurich’s recent majority stake acquisition in Kotak Mahindra Bank’s casualty business, underscoring the company’s concerted efforts to expand its presence in the Indian market.
In addition to these developments, Zurich reported a noteworthy uptick in its property-and-casualty insurance gross written premiums, which experienced a 9% year-on-year increase in like-for-like terms, reaching $34.59 billion for the nine months ending on September 30. Simultaneously, the life arm of the insurer saw a substantial surge in new business premiums during the same period.
The news comes after the insurance giant announced a wave of layoffs and restructuring. According to a report by AP, Farmers Insurance made 2,400 employees redundant following industry-wide struggles involving increased risks and rising operating costs. The cuts affect roughly 11% of the California company’s workforce across all lines of business.
The acquisition is part of FGI’s commitment to maintaining and enhancing its role in supporting the Farmers Exchanges in meeting the diverse needs of their customers. Additionally, this strategic move is expected to generate an additional capital-light stream of earnings for FGI.
The brokerages set to become part of the Farmers Group umbrella include Kraft Lake Insurance Agency, Western Star Insurance Services, and Farmers General Insurance Agency. This development positions FGI for an expanded and more comprehensive role in the insurance landscape, aligning with its goal of providing robust support to the Farmers Exchanges and ensuring continued customer satisfaction.
The mutually agreed-upon acquisition cost of $760 million reflects an approximate valuation of 18 times the existing business’s EBITDA. This comprehensive sum includes an additional payment accounting for the value of tax attributes, along with a further payment tied to the fee stream associated with the new alternative insurance options.
The impending transaction is poised to yield a positive impact for both Farmers Exchanges and Zurich, contingent upon regulatory approval. Upon the completion of this deal, Farmers Exchanges are projected to experience a surplus ratio increase of 3% points, underscoring the financial benefits derived from the strategic move. Conversely, Zurich’s SST ratio is expected to decrease by 4% points, marking a consequential aspect of the transaction’s financial dynamics.
Waller Helms Advisors, who acted as the exclusive financial advisor to the Farmers Exchanges, stated: “[The brokerages] will enable the Farmers Exchanges to create a more attractive customer proposition with a broader and more compelling range of products and services which are expected to improve customer retention and new customer acquisition.
“The brokerages offer alternative insurance options for the more than seven million Farmers Exchanges quotes that are currently not taken up by customers.”
Author: Joanna England
