INSURANCE giant Zurich Financial Services signed a $1.67bn (£1.03bn) distribution deal with Spanish bank Santander yesterday to fast track its growth in Latin America.
The 25-year deal sees Zurich take a 51 per cent stake in Santander’s life insurance, pension and general insurance operations in Brazil, Mexico, Chile, Argentina and Uruguay.
The sale will free up valuable cash at fast-growing Santander to help it meet more stringent Basel III capital requirements coming into effect in 2013, and absorb recent acquisitions.
Zurich chief executive Martin Senn said the acquisition offered “a rare combination of high growth potential and strong cash flow generation”.
The price covers 80 per cent of the deal value, with Zurich paying Santander the remaining 20 per cent in installments every five years on a profit-share basis.
Santander’s Latin American insurance business is well-established with more than 5,600 branches, and the deal will make Zurich the region’s fourth-biggest insurer. Zurich generates 35 per cent of its life insurance new business value from emerging markets. The deal will be earnings-accretive immediately.
Santander expects to bank $1.21bn in capital gain from the sale, which is a non-core asset for it as it buys banking assets across Europe.
JPMorgan Chase advised Zurich on the deal, which should close by the first quarter of 2012.