A.M. Best Comments on Zurich Financial Services' 50% Share Acquisitions of Life and Non Life of Banco Sabadell

Business Wire,  July 15, 2008  

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OLDWICK, N.J. -- A.M. Best Co. has commented that the ratings of Zurich Financial Services (ZFS) (Switzerland) and its rated operating subsidiaries remain unchanged following ZFS' announcement of its intention to acquire a 50% share of BanSabadell Vida SA de Seguros y Reaseguros (BanSabadell Vida) (Spain), BanSabadell Pensiones E.G.F.P., S.A. (BanSabadell Pensiones) and BanSabadell Seguros Generales, S.A. de Seguros y Reaseguros (BanSabadell Seguros Generales) for EUR 750 million (USD 1.177 billion), plus an earn-out component of EUR 150 million (USD 235 million).

A.M. Best expects ZFS' risk-adjusted capitalisation to remain supportive of the current rating despite the substantial goodwill generated by the acquisition, which is to be financed by the company's own funds. ZFS would substantially increase its market share, mainly in the life (traditional life and pensions) business lines traditionally dominated by bancassurance, with EUR 1.45 billion (USD 2.275 billion) of additional life gross premiums written and EUR 177 million (USD 277 million) of new business annual premium equivalent. The 25-year exclusive distribution agreement with Banco Sabadell follows two recent agreements with Caixa Sabadell (life and non life) and Caja Navarra (non life) earlier this year, and would potentially bring ZFS group within the top five companies as a life and general insurer and the second largest insurance group in the Spanish market. A.M. Best expects ZFS to generate synergies from these acquisitions in the rapidly expanding life and pensions market in Spain. The acquisition would also increase the geographical diversification of ZFS' life portfolio and is part of the company's plan to meet its ambitious life new business value target of USD 1.2 billion in 2010.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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