NETHERLANDS – Rabobank’s insurance subsidiary Interpolis is to merge with Eureko’s insurance group Achmea in a deal that builds on an existing agreement between the two firms.

They have signed a letter of intent that builds on a cooperation in the health insurance field which was announced in 2004.

Under the terms of the new deal, Rabobank’s shareholding in Eureko will increase from five percent to 37%. Standard & Poor’s said there would be no cash payment for the stake.

S&P said the deal “reflects Rabobank's search for opportunities outside of its traditional core businesses”. It saw increased competition and limited growth prospects in the Dutch financial services industry.

“This transaction will result in an insurance group, which consists of a very large Dutch insurer, and with significant activities in a number of other European countries,” Rabobank said in a statement.

It said their cooperation had proved “so successful” that they decided on the further step. The statement also said that both companies would continue to pursue their own development strategies.

“Eureko retains the possibility of pursuing an IPO, whilst focusing on the Dutch market and on developing its insurance operations in other European territories.

“This new step fits well with Rabobank’s aim to become a market leader in the provision of financial services in the Netherlands.”

Rabobank will remain the principal insurance distribution channel for Interpolis.

The merger is subject shareholder and regulatory approval.