Zurich Expands Stake In Brazil

Zurich Financial Services Group said it has concluded a $241 million transaction to expand its Brazilian insurance market presence by purchasing one carrier and taking a majority stake in another.

The firm said the acquisition agreement with Banco Mercantil do Brasil S.A. and two private investors also includes a product distribution agreement with the bank.

Zurich said it acquired a more than 87 percent interest in Companhia de Seguros Minas Brasil (MB) and all of Minas Brasil Seguradora Vida e Previd?ncia S.A. (MBVP).

MB is an insurance carrier specializing in personal lines auto and a small amount of life insurance products, and MBVP is a carrier dealing exclusively in pension products, a Zurich spokesman said.

The acquisition was completed by Zurich Participac?es e Representac?es Ltda. and is subject to regulatory approval, the Zurich, Switzerland-based insurer said.

Zurich Participac?es also entered into a long-term exclusive distribution agreement with Banco Mercantil for the distribution of life and general insurance products of Zurich Brasil Seguros S.A. and the acquired companies. Zurich Brasil is a subsidiary of Zurich Participac?es underwriting life and general insurance products.

Zurich said the value of the transaction, subject to post-closing adjustments, amounts to 287 million Reais (U.S. $179 million) for the two closing companies. In addition, Zurich will pay close to 50 million Reais ($31 million) for the distribution agreement and the same amount in earn-out, or performance earnings.

The distribution agreement will be for a 20-year period and can be extended for an additional 10 years at the discretion of the parties.

In 2007, premiums written through MB amounted to $175 million and $22 million for MBVP, Zurich said. The deal gives Zurich access to a network of 4,000 independent brokers through 50 branches, plus the 167 branches and 30 service centers of Banco Mercantil.

“This transaction will allow Zurich to achieve visible market share in Brazil and offer high-quality general and life insurance products and services to a large number of customers, individual and corporate, throughout the country,” Jaime Paredes, chief executive officer of Zurich Latin America said in a statement.