Suncorp, Chubb circle Zurich’s general insurance arm as final bids loom

The Brisbane-based insurance giant and Chubb are among potential buyers of Zurich’s local general insurance unit, after emerging in the final furlong of an auction.

Suncorp, which reports profits on February 8, is jostling to buy Zurich’s local general insurance arm.

Bancassurer Suncorp and global firm Chubb are among potential buyers of Zurich’s local general insurance unit, after emerging in the final furlong of an auction for the business amid a land grab for assets.

The sale process – which may see $400m to $600m paid for the division – is well into the second round and is expected to wrap up within the next four weeks, sources close to the auction told The Australian.

While Suncorp and Chubb are separately through in the sale process, QBE Insurance is among other potential suitors that fell away from it in recent weeks.

The mooted divestment by Zurich comes amid immense change in the general insurance market as the big banks have exited the sector. Last year, Commonwealth Bank agreed to offload its general insurance arm to Hollard Insurance, while Westpac completed the sale of its general insurance unit to Allianz.

Sources said Macquarie Capital was advising Chubb in its bid for Zurich’s general insurance book, which comes after the New York-listed company was said to have looked at CBA’s general insurance unit when it was up for sale.

Brisbane-based Suncorp – which is a banking and insurance player – is using adviser Barrenjoey for its tilt at Zurich’s division.

Investment bank Goldman Sachs and accounting and advisory firm PwC are tending to Zurich on the divestment and an information memorandum for the sale emerged in the final months of 2021.

A Zurich spokeswoman said the insurer didn’t comment on market speculation.

The Australian foreshadowed Suncorp’s and Chubb’s interest in the Zurich division in October.

The Zurich Australian Insurance entity swung to a loss of $47.3m for the year ended December 31 2020, according to the latest accounts lodged with the corporate regulator. That compared to a profit of $61.04m in 2019.

Given Zurich originates the majority of its premiums through brokers, buyers are understood to be mindful of the potential for customer churn. The local insurance arm has also exited some distribution arrangements and writes some business for global Zurich customers, which may shift to a new owner.

An acquirer may be seeking to extract cost synergies by combining Zurich’s business with its own.

Sources said while Zurich’s total general insurance premium and reinsurance revenue dropped last year, from $1.24bn in 2020, the division is now profitable again. The commercial motor fleet business has several hundred million in premiums.

The auction excludes Zurich’s travel insurance arm after it markedly bulked through the acquisition of ASX-listed Cover-More Group, which was completed in 2017. Data lodged with the prudential regulator for the year ended June 30, put Zurich’s gross earned premium for general insurance – including travel – at $1.26bn.

Separate to general insurance, Zurich is a large player in the domestic life insurance market after it acquired ANZ’s business in a deal that completed almost three years ago.

Chubb, a publicly traded property and casualty insurance company, has operations in 54 countries and territories.

Suncorp’s investors will be watching the Zurich sale process with interest in the lead up to the banking and insurance group’s earnings result on February 8.

Locally, the commercial insurance sector is also still navigating the issue of pandemic business interruption insurance, which saw a series of test cases hit the courts last year.

As Zurich’s local sale process draws to a close, Allianz’s interest in the general insurance book can’t be ruled out, while Insurance Australia Group is said to have side stepped the sale process.

The federal government this week flagged the insurance sector would be included in the next tranche of the Consumer Data Right, which gives customers more control over their data, after the telecommunications industry. The banking and energy sectors already sit within the regime, which makes it easier to switch products.

The government said an open finance category including general insurance, superannuation, merchant acquiring and non-bank lending service providers, would be next under the Consumer Data Right.

Morgan Stanley analysts this week said the changes were a risk to the nation’s largest personal insurers IAG and Suncorp, as “they could expose data” on more profitable customers to competitors.

“It may also allow price comparison websites or fintechs to make comparisons and switching easier,” they said.