Zurich to buy Sabadell insurance

By Sam Cage

ZURICH (Reuters) - Zurich Financial Services (ZURN.VX: Quote, Profile, Research) will buy the insurance business of Bancao Sabadell (SABE.MC: Quote, Profile, Research) for up to 900 million euros (719 million pounds), it said, strengthening its foothold in bancassurance.

The news comes just a day after Zurich pulled out of the auction for Royal Bank of Scotland's (RBS.L: Quote, Profile, Research) insurance business, in which it had been considered the frontrunner, a decision that helped boost Zurich shares some 7 percent on Friday ID:nL10428710.

"We have always said we wanted to increase our market position in this important market," Zurich Chief Executive Officer James Schiro said in a statement.

The acquisition is the Swiss insurer's largest since Schiro started slashing non-core assets and cutting costs from 2002, a period in which analysts often criticised his cautious stance on buying rivals.

The Swiss insurer will take 50 percent stakes and have management control of the jointly owned life insurance, pension and general insurance operations of Spain's Banco Sabadell, which will continue to hold the other 50 percent.

Markets welcomed Zurich's decision not to pursue RBS's insurance unit, announced after the close on Thursday, sending its stock up 7 percent to 269 Swiss francs, while Sabadell traded flat.

"The very big news of the day is the withdrawal from the RBS deal," said Landsbanki Kepler analyst Fabrizio Croce. "As the stock was heavily under pressure recently due to this transaction, we expect a logical rebound for the next few days reflecting the high rationality of ZFS management."

Mario Greco, Zurich's newly appointed life insurance head, said in May that bancassurance -- where an insurer uses a bank's branch network to sell policies -- was one of the areas the company would look to acquire to boost growth.