Zurich Financial Services Group (“Zurich”) announced on February 22, 2011 that it plans to buy a majority stake in the insurance operations of Banco Santander SA (“Santander”) in Latin America for $1.67 billion.

Under the executed memorandum of understanding, Santander’s insurance operations will become part of a newly-established holding company, Zurich Santander Insurance America, which will be based in Madrid. Zurich will own 51% of the new entity, while Santander will own the remaining 49%. Some highlights of the deal will include:

  • 25-year strategic distribution agreement with Santander (each local insurance company will enter into exclusive bank distribution agreements with Santander’s respective local banking unit)
  • up-front price of $1.67 billion for 51% stake plus performance-based earn-outs payable over 25 years
  • transaction funded primarily from internal resources
  • balance financed through the issuance of hybrid debt

Zurich expects the deal will make it the #4 insurer in Latin America by giving it access to insurance operations in Brazil, Mexico, Chile, Argentina and Uruguay.

To see Zurich’s press release, click here.