Posted on Feb 23, 2011 by Sergio Ulloa
Zurich Financial Services, the Swiss based multi-national insurer, has announced plans to increase its presence in the Latin America insurance market by entering into an agreement with the major Spanish financial services group, Banco Santander.
The deal will involve Zurich paying an initial US$1.67 billion for a 51 percent share in the Banco Santander's Latin American insurance arm; which covers operations in Argentina, Brazil, Chile, Mexico and Uruguay. This with make the Swiss based insurer the fourth biggest insurance company operating in Latin America.
The agreement will mean Zurich gains access to Santander's extensive distribution network covering 5,600 of the bank's outlets, with a total of over 36 million customers in Latin America. The distribution agreement will last for 25 years between the two parties, with Zurich paying the agreed fee to Santander plus annual performance payments over this period subject to targets being reached. The transaction is expected to be fully completed in the first half of 2012.
The newly formed partnership between the Swiss insurer and Spanish bank will create a new company called Zurich Santander Insurance America S.L with the holding company based in Madrid; Zurich will be responsible for the management of the Latin American business.
Zurich will acquire a 51 percent share of Spain-based Banco Santander's existing non-life, life insurance and pension business in the five Latin American countries covered by the agreement.
"This alliance with Banco Santander is another milestone in the implementation of Zurich's emerging-market strategy in both Global Life and General Insurance. It significantly expands our presence in Latin America with a well-established insurance business." said Martin Senn, CEO of Zurich.
Brazil, a member of the renowned BRIC group of countries consisting of Brazil, Russia, India and China, has one of the largest developing economies in the world, and with the number of people living in the country standing at over 200 million, has the fifth largest population on earth. The new trading link will provide Zurich with access to this young, vibrant and increasingly wealthy population. Also Santander's distribution network in Latin America is primarily through its banks in Brazil.
Latin America has become increasingly attractive to insurers since the global recession in 2007-2008 as the region did not suffer the same adverse impact on its economy as the USA and Europe, and because it offers huge potential for growth with a total population of around 590 million people and a market with low penetration.
The Latin American alliance creates a key strategic distribution channel for Zurich and Santander's operations in the Latin American region, subject to the merger and would have delivered some US$3.9 billion in gross written premiums in 2010 on a combined basis plus US$2.9 billion in pension contributions.
The strategic benefits from the extensive insurance product knowledge that Zurich is able to contribute to the partnership combined with the comprehensive distribution channels provided by Santander is clearly a recipe for expansion of the business previously dealt with as single entities.
The new business will conducted through exclusivity agreements between Zurich's local insurance units and Santander's individual branch outlets.
Insurance Company Mentioned:
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.