MetLife Inc. has agreed to sell Metropolitan Property and Casualty Insurance Co. and certain wholly owned subsidiaries to Farmers Group Inc. for $3.94 billion in cash.
The insurance operations will be sold to the Farmers Exchanges. Farmers parent company Zurich Insurance Group AG will contribute $2.43 billion and Farmers Exchanges $1.51 billion.
As part of the transaction, the Farmers Exchanges are entering into a 10-year exclusive distribution agreement with MetLife. Under the agreement, Farmers and MetLife plan to offer personal lines products on MetLife's U.S. group benefits platform, which reaches 3,800 employers and approximately 37 million eligible employees. Farmers will also have access to MetLife’s network of 7,700 independent agents.
The announcement follows reports that Zurich was eyeing MetLife's P&C operations. MetLife expects to report its property and casualty business as a divested business in the first quarter of 2021.
Acquiring the property and casualty business MetLife Auto & Home will allow Farmers to become the sixth-largest personal lines insurer in the U.S. on a pro forma basis. The business to be acquired had 2.4 million policies in force and $3.6 billion net written premiums in 2019.
Farmers will also gain access to additional independent agents and to about 250 affinity groups. The acquisition will also bring about 3,500 MetLife employees to Farmers.
The acquisition is expected to contribute to Zurich's earnings from the first full year after completion and is expected to deliver a return on investment of approximately 10% from 2023.
Zurich expects to fund Farmers' portion of the acquisition through a roughly equal combination of internal resources and hybrid debt. Following the transaction, Zurich's capital position is expected to remain strong with the pro forma Swiss Solvency Test ratio as of Sept. 30 at about 190%.
MetLife and Farmers are looking to close the transaction in the second quarter of 2021, subject to customary closing conditions, including regulatory approvals.
Rothschild & Co acted as financial adviser and Debevoise & Plimpton LLP served as legal counsel to MetLife in connection with the transaction.
Separately, MetLife announced that its board approved a $3 billion common share repurchase program.