Zurich closes acquisition of AIG's US Personal Auto Group

Zurich, July 2, 2009 – Zurich Financial Services Group (Zurich) announced today that its subsidiary Farmers Group, Inc. has completed the acquisition of 100 percent of AIG's US Personal Auto Group, which includes "21st Century Insurance" (comprising the former "AIG Direct" and "21st Century Insurance"), as well as AIG's "Agency Auto". The transaction positions the Farmers Exchanges as the third largest traditional direct writer of insurance in the US and the third largest US personal lines insurer overall¹. The purchase price amounts to approximately USD 1.9 billion, of which USD 1.7 billion (previously indicated at USD 1.5 billion) was paid in cash and USD 0.2 billion (previously indicated at USD 0.4 billion) in Euro denominated Capital Notes ("Capital Notes"). The purchase price implies a Price to tangible Book multiple of 1 times.

As part of the transaction, Farmers Group, Inc. immediately sold the portion of the acquired business that was comprised of regulated insurance businesses to the Farmers Exchanges, which Zurich manages but does not own, for approximately USD 1.4 billion in cash, resulting in a net purchase price for Zurich of approximately USD 0.5 billion.

In addition, Zurich has provided increased underwriting capacity to the Farmers Exchanges through an increase of the existing quota share reinsurance from the Farmers Exchanges from 25% to 37.5% (previously indicated at approximately 40%). The resulting increase in Zurich's capital requirement to support the acquisition and the additional business assumed has been financed through the sale of Zurich ordinary shares in April 2009 in the equivalent amount of USD 1.1 billion as well as the issuance of the Capital Notes in the equivalent amount of USD 0.2 billion. The Farmers Exchanges' strong solvency position allowed for limiting the increase of the quota share reinsurance treaty to 37.5% (instead of 40%). As a result, Zurich's capital requirements have reduced so that a lower amount of Capital Notes could be issued (equivalent of USD 0.2 billion instead of USD 0.4 billion), reflecting Zurich's strong commitment to a prudent and efficient capital management. The transaction is expected to be accretive to Zurich's earnings per share in the first year, and demonstrates how the Group balances its prudent approach to risk and capital management with its aspiration to grow profitably, even in challenging economic times.

The US personal lines market, the largest in the world, continues to offer attractive opportunities, particularly as part of Zurich's globally diverse portfolio of insurance businesses. In addition, the acquisition provides Farmers opportunities to achieve further benefits of scale, and to leverage both talent and technical capabilities throughout Zurich's global direct sales distribution platform.

After having announced the acquisition on April 16, 2009, all necessary antitrust and regulatory approvals to close the transaction have now been obtained.