Farmers Group Buys Auto Insurance Unit From AIG

In a $1.9 billion dollar deal, Farmers Group Inc. will buy 21st Century Insurance, AIG’s personal auto insurance group.

The deal between Farmers Group Inc., the Los Angeles subsidiary of Swiss insurance conglomerate Zurich Financial Services Group, and the struggling New York insurance Giant AIG, is expected to close in the third quarter.

The acquisition will make Farmers Group the nation’s third-largest personal lines insurer, which includes homeowners, auto and personal umbrella insurance.

“This will dramatically transform the insurance landscape by positioning Farmers as the leading multi-line, multi-channel insurer in the United States,” said Farmers Chief Executive Robert Woudstra in a statement.

The deal will also help AIG, who suffered massive losses during the economic downturn as a result of bad bets in guaranteeing mortgage securities affected by the meltdown in the real estate market. AIG has received over $100 billion in government aid, and the deal with Farmers Group will help the company repay some of these loans.

AIG is currently attempting to sell other businesses, including Los Angeles aircraft leasing company International Lease Finance Corp.