Farmers Group, Inc. (FGI), a wholly-owned subsidiary of Zurich, has agreed to acquire three brokerage entities, as well as the flood program servicing arm of the Farmers Exchanges, for USD 760 million.
Ownership of the brokerages will ensure FGI maintains and broadens its position in supporting the Exchanges in meeting customers’ needs while generating an additional capital-light stream of earnings for FGI.
The brokerages (Kraft Lake Insurance Agency, Western Star Insurance Services and Farmers General Insurance Agency) will enable the Farmers Exchanges to create a more attractive customer proposition with a broader and more compelling range of products and services which are expected to improve customer retention and new customer acquisition. The brokerages offer alternative insurance options for the more than 7 million Farmers Exchanges quotes that are currently not taken up by customers.
The agreed purchase price represents approximately 18 times EBITDA for the existing business, an additional payment for the value of the tax attributes and a further payment related to the fee stream on the new alternative insurance options. The purchase is expected to have a positive impact on the Farmers Exchanges surplus ratio of 3 percentage points upon closing, while reducing Zurich’s SST ratio by 4 percentage points.
The transaction is subject to regulatory approval.
Waller Helms Advisors acted as the exclusive financial advisor to the Farmers Exchanges and provided a Fairness Opinion in connection with this transaction.