Swiss company Zurich Financial Services' recently announced acquisition of a majority stake in the Latin American insurance units of Spanish banking giant Santander (NYSE: STD) is a "credit positive deal" for both companies, ratings agency Moody's said in a press release.
According to the deal's terms - subject to regulatory approval - Santander will sell 51% of its general and life insurance business in the region to Zurich for US$1.67bn. Zurich will have management control of the company, while Santander's banks and brokers in the region will benefit from a 25-year distribution license.
For Moody's, the deal reinforces Santander's balance sheet, which itself is credit positive. The sale will not negatively impact the group's results, "given the marginal contribution of this franchise to [Santander's overall] results," the agency noted.
In the case of Zurich, Moody's noted that the deal boosts the company's presence in the life insurance business in Latin America, as well as its business diversification and product distribution. It also noted that it is a "relatively small acquisition within the context of the overall group."
To read the full report from Moody's, go to this link