By Silke Koltrowitz and Carolyn Cohn
ZURICH/LONDON (Reuters) -Zurich Insurance and Farmers Exchanges have agreed to buy MetLife's U.S. property and casualty business for $3.94 billion, the insurers said on Friday, after the COVID-19 pandemic made motor and home insurers more profitable.
Motor and home insurers have had a windfall as government lockdowns to curb the spread of infection have reduced the number of claims for road accidents and burglaries.
Insurers, such as Zurich, by contrast have faced hefty claims from event cancellation and business interruption and premium rates are rising.
"It is an acquisition that complements very well...what we see on the commercial side where the market is hardening," Zurich Chief Executive Officer Mario Greco told a media call.
The Swiss insurer will contribute $2.43 billion to the deal through its Farmers Group Inc (FGI) unit, while the Farmers Exchanges will contribute $1.51 billion, Zurich said.
Reuters was the first to report on Nov. 20 that Zurich was in talks to buy the MetLife business.
The deal will give Farmers Exchanges, to which FGI provides certain administrative and management services, a nationwide presence in the United States and access to new distribution channels, Zurich said.
It will also help Zurich deliver its growth targets for 2022. Chief financial officer George Quinn told the call that the insurer's targets did not depend on acquisitions, but they "can accelerate what we are looking to achieve".
MetLife President and CEO Michel Khalaf said the sale would allow the life insurer "to focus on our core strengths".
The deal is the latest in the sector.
Denmark's Tryg and Canada's Intact Financial are buying British home and motor insurer RSA, and Finland's Sampo and South Africa's Rand Merchant Investment is buying Britain's Hastings.
Shares in Zurich were down 1.3% at 0825 GMT in a 0.8% lower European insurance market. KBW analysts called the transaction a "great strategic deal," but reiterated their underperform rating on the stock.
The MetLife business to be acquired includes 2.4 million policies, $3.6 billion of net written premiums in 2019 and 3,500 employees, Zurich said.
Zurich said it wanted to fund FGI's portion of the deal through a roughly equal combination of internal resources and hybrid debt.
Completion of the transaction is subject to regulatory approvals and is anticipated to occur in the second quarter of 2021.
(Reporting by Silke Koltrowitz in Zurich and Carolyn Cohn in London; editing by Aditya Soni, Mark Potter and Barbara Lewis)