Zurich confirms that its subsidiary Farmers Group is in discussions with MetLife regarding the sale of its U.S. P&C business
In an official communication from November 20, 2020, the Zurich Insurance Group confirmed it is in discussions with MetLife to purchase MetLife’s U.S. P&C business. According to Zurich, its subsidiary Farmers Group has made a proposal to acquire the P&C business which would be assimilated with the insurer’s Farmers Exchanges.
Zurich Insurance states, however, that it “…has no ownership interest in the Farmers Exchanges.” Farmers Group, Inc., is a wholly-owned subsidiary of the Group. Rather, the insurer, “…provides certain non-claims services and ancillary services to the Farmers Exchanges as its attorney-in-fact and receives fees for its services.”
No additional terms of the transaction or disclosure of negotiations were offered in the announcement. The terms of any transaction are subject to negotiations and there can be no assurance that a transaction will take place. Zurich also cautioned that “All of the reports stressed that there has been no official announcement nor official confirmation by MetLife as to the sale of this business.”
The sale could create a new top three U.S. P&C insurer
If, however, a potential sale of MetLife’s P&C business to Farmer’s Insurance does occur, it could have various implications for the U.S. Property & Casualty insurance marketplace. According to our latest NAIC Market Share Reports, MetLife is the 18th largest Private Passenger Auto Insurer in the U.S. with $2,467,219,347 in Direct Written Premiums in 2019 representing a 0.97% market share. Farmer’s Insurance, however, is the seventh-largest auto insurer with $10,533,343,298 in Direct Written Premiums representing a 4.16% share of the market. As for the homeowner’s marketplace, while MetLife is the 14th largest homeowners’ insurer in the U.S.with $1,112,254,566 in Direct Written Premiums representing a 1.07% market share, Farmers is the fifth-largest with $5,943,814,279 in Direct Written Premiums and a 5.71% share of the market. As a result, a merger of the two insurers would likely push Farmer’s into the top three for homeowners and the top five for auto insurance.
Overall, a sale to Farmer’s Insurance could catapult the insurer into the top five P&C insurers all lines in the US, where it currently ranks ninth with $20,643,558,551 in Direct Written Premium and a 2.92% share of the US marketplace.
At one point both Liberty Mutual and Travelers had been mentioned as potential buyers
In addition to Zurich’s announcement, earlier reports noted that Boston-based Liberty Mutual and Hartford-based Travelers expressed an interest in acquiring MetLife’s business, and with good reason. Liberty Mutual is currently the fourth-largest P&C insurer in the U.S. with $35,600,051,448 in Direct Written Premiums and a 5.03% market share while Travelers is the sixth-largest insurer with $28,016,965,959 in DWP and a 3.96% market share. In comparison, Progressive is the third-largest insurer with $39,222,879,284 and a 5.54 market share.
As a result, a purchase of MetLife’s P&C business by any of these insurers would easily increase that particular insurer’s market share. In the case of Liberty Mutual, moreover, it would likely propel the insurer into the top three largest-writer P&C writers in the country.
A potential sale is in line with MetLife’s “Next Horizon Strategy”
As noted above, MetLife”s P&C business has been deemed “non-core” by various analysts who follow the company. This comment also underscores MetLife’s own “New Horizon Strategy” as espoused by CEO Michel Khalaf in comments made earlier this autumn:
“And as a reminder we wanted a simple strategy that is focused on three pillars, focus, simplify, and differentiate. And at the core, this is about basing every decision that we make on three, you know, questions that we ask ourselves. The first one is, does this decision help accelerate our focus or strengthen our focus on value creation? Does it simplify the company and enhance the customer experience? And does it differentiate us vis-à-vis the competition?”
Part of that strategy included MetLife’s September acquisition of Versant Health in all-cash deal valued at $1.675 billion which essentially transformed the insurer into the nation’s third largest vision-care insurer.
Agency Checklists will keep our readers posted on any additional developments with regards to the sale of this agency.
