Zurich Financial Plans to Sell Unit

Zurich Financial Services said Monday that it would sell its wholly owned Universal Underwriters Group to a consortium of investors led by San Francisco-based private equity firm Hellman & Friedman.

Zurich Financial, Switzerland’s largest insurer, said the transaction involving the property-and-casualty unit was valued at about $1.1 billion and was subject to regulatory approval.

Universal, which is based in Overland Park, Kan., provides specialized insurance and financial services to franchised car, truck, motorcycle and equipment dealers. It generated $1.5 billion in gross written premiums and fees in 2004.

Zurich Financial said it would focus on its domestic market.

Hellman & Friedman is buying the unit with Farallon Capital Management, GIC Special Investments and the division’s management.

The transaction represented “an attractive price,” the insurer said in a statement.

Zurich Financial has sold $1.3 billion of businesses under Chief Executive James Schiro, who said the U.S. unit no longer was a fit for the company “and our unified operating model.”

Schiro took over the Swiss insurer three years ago and returned it to profit in 2003 after a record loss in 2002 and after cutting 5,000 jobs.

The transaction, which is expected to close in the third quarter, would be the biggest divestiture by Schiro, who has shed dozens of units.

Universal Underwriters was founded in 1922 and was acquired by Zurich Financial in 1982. The company employs about 1,800 people, with a sales force of about 400 people.

Hellman & Friedman would invest more than $450 million for more than a 51% stake in Universal Underwriters. The buyout firm last year purchased Windsor, Conn.-based Vertafore Inc., a provider of software and services for property and casualty insurers, and Bermuda-based insurer Arch Capital Group in 2001.

“We’re buying a company with a great business, a great franchise which fits in with our other purchases in the insurance sector,” said Hellman & Friedman managing director David R. Tunnell.

Hellman & Friedman manages more than $8 billion in assets. Gross returns on an annual basis have averaged more than 35% a year.

Tunnell said about 25% of the total cost of the Universal Underwriters purchase would be funded with debt and the rest in cash.

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Bloomberg News was used in compiling this report.