Zurich Financial Services has agreed to sell half of its United States life insurance and annuity operation, Zurich Life, to Chicago's Bank One.
Zurich - Europe's fifth largest insurer by premiums - said the sale was consistent with its plan to move capital to non-life businesses.
The Zurich-based insurer noted that it would keep some life insurance assets of Zurich Life, including Kemper Investors Life Insurance Co. It valued the assets it would retain at SFr645 million.
"We consider [SFr645 million for half of Zurich Life] a very good price. It contained some good will that was also acquired by Bank One," spokesman Daniel Hofmann told swissinfo.
Zurich's CEO, James Schiro, said the sale was a "positive move" for the Zurich Life companies.
"Bank One's strong distribution channels will leverage Zurich Life's existing distribution and its capability in manufacturing high quality life insurance and annuity products," Schapiro commented in a statement.
Chicago-based Bank One, the sixth-largest US bank, said it expected the acquisition to be wrapped up in the third quarter of this year and would add four cents a share to earnings in 2004.
Weak markets have battered Zurich Financial Services, with the insurer reporting a SFr4.6 billion net loss for 2002.
The plunging value of Zurich's equity portfolio led to a 24 per cent reduction in net investment income to SFr6.45 billion. It also announced earlier this year that it was slashing its dividend from SFr8 in 2001 to SFr1.
"We're [not] selling businesses to shore up losses," said Hofmann.
"The whole [insurance] industry closed last year with significant losses - it wasn't just Zurich. What we're trying to do now is to use our good footing in markets where we have a strong position to strengthen this position even more."
And that, Hofmann added, is the non-life business.
The money derived from the sale of parts of Zurich Life will be invested in the profitable non-life sector in the US.
While Hofmann denied Zurich was thinking of abandoning life insurance, he said the non-life business was the insurer's key strength.
"It contributes more than two thirds to our total business and currently there is a very good market in non-life and we would like to benefit from this market as much as possible," he said.
Zurich hopes the sale will put it on track towards meeting its goal of generating $1 billion in risk-based capital through divestments.
Zurich Cantonal Bank analyst, Georg Marti, said Zurich's restructuring programme was proceeding quickly as planned.
"In addition to the positive news-flow, the valuation [of the share] remains attractive." He rated the share "market outperformer".
Zurich shares rose slightly in trading on Friday to close at SFr158.
Zurich agreed to sell half of Zurich Life to Bank One for about $500 million.
The insurer said the sale was in line with its plan to move capital to non-life businesses.
CEO Schiro said he hoped the transaction would help Zurich generate $1 billion in risk-based capital through divestments.
Zurich posted an historic SFr4.6 billion net loss for 2002.
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