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Zurich to buy Australian life insurer‍

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Zurich to buy Australian life insurer?

(Reuters) – Zurich Insurance Co. has agreed to buy Melbourne, Australia-based ANZ's OnePath Life insurance businesses for 2.85 billion Australian dollars ($2.14 billion), the latest and largest foray by the Swiss company into the Australian market.

The deal, announced on Monday, is the third purchase by Zurich in Australia over the past two years as the insurer doubles down on a region where a robust economy and low insurance penetration rates have proved attractive.

Zurich has focused on Asia-Pacific as a major growth driver in its life insurance business, previously picking up Macquaries' retail life insurance business for $300 million in 2016 and the Cover-More Group for $554 million in April this year.

The ANZ deal – Zurich’s biggest since 2011 – would be immediately accretive to the Swiss company’s earnings, and would increase return on equity and shareholder returns, the company said.

It would increase cash flows by around $225 million over the 2017-2019 planning period, Europe’s fifth largest insurer added. “The existing portfolio provides a highly cash-generative business that will add to our cash remittances, increase our business operating profit after tax return on equity target by 50 basis points and support dividend growth beyond that implied by our existing plan,” Zurich CEO Mario Greco said in a statement.

As part of its 2017-2019 targets, Zurich has promised to pay shareholders 75% of its net profit. With the ANZ deal expected to be completed by the end of 2018, the full benefit of the acquisition will become apparent in the 2019 dividend. Following the deal, Zurich will have around 19% of the Australia retail life insurance market, making it the biggest provider in the market, it said. Mr. Greco also highlighted how the purchase would build  Zurich’s distribution of insurance products through ANZ's branches and digital distribution channels.

As part of the deal, Zurich would get access to ANZ's 6 million customers through a 20-year distribution agreement to sell life insurance.

Zurich said it said it would fund the deal from cash and senior debt.

On a pro-forma basis, the operations to be acquired reported net earned premiums for the 12 months ended Sept. 30, 2017, of $1.1 billion and a net profit after tax of $142 million.

The deal is the largest since Mr. Greco took over at Zurich last year. The executive brought in from Generali to engineer a turnaround for the troubled group has promised to make Zurich leaner and more efficient.