Deutsche and Zurich in huge swap deal

GERMANY/ SWITZERLAND / UK / US – Major German financial group, Frankfurt based Deutsche Bank (DB) is to acquire for US$ 2.5bn (€2.7bn) the entire shareholding of New York based Zurich Scudder Investments from Zurich-based Zurich Financial Services (Zurich). Zurich Scudder Investments has some US$ 278bn in assets under management.

However, the deal, a heads of agreement deal for the transfer of business and mutual distribution between the two groups, does not include London based asset management firm, Threadneedle, which, with US$ 67bn under management, will remain an integral part of the Zurich group.

The strategic distribution partnership between the two groups means that Zurich will distribute DB’s asset management products, whilst DB will distribute Zurich’s life and non-life insurance range, leaving Zurich’s customers with full access to DB’s asset management and other financial services and products, as well as continued access to Zurich Scudder Investment’s fund range.

The terms of the agreement will leave DB with over €1trn in assets under management, making it the world’s fourth largest asset manager, and will give Zurich a major presence in the German and wider European insurance market, as it will acquire an initial 75.9% holding in DB’s insurance subsidiary group, Versicherungsholding der Deutschen Bank (VDHB), which includes Bonn-based insurance group, Deutscher Herold and 100% of DB’s life insurance activities in Italy, Spain and Portugal. The value of these non German insurance activities and 100% of VDHB is put at €1.5bn.

DB has over 10m retail and private banking customers for insurance products spread over 2,000 branches throughout the latter countries and Germany, for which Zurich will become the exclusive provider. In addition, it will be DB’s preferred partner for all other European countries.

Furthermore, the recent reforms to German pensions law will mean that Zurich will stand to gain from the growing pensions market in Germany, since Deutscher Herold holds a leading position in the German unit-linked fund market.

The chairman of the new combined asset management group, as yet unnamed, will be Edmond D. Villani, current president and chief executive officer (CEO) of Zurich Scudder Investments, whilst its CEO will be Tom Hughes, DB’s chief operating officer for asset management.

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