Zurich Insurance Group has signed an agreement to buy the Latin American operations of Australian insurer QBE Insurance Group for $409m, a move that will make the Switzerland-based company a leading player in Argentina and Ecuador.

Zurich CEO for Latin America Claudia Dill said: “This transaction positions us as the leading insurer in Argentina, a market that is demonstrating strong growth, a stable economy and a positive environment for insurance.

“It deepens our capabilities in the retail and commercial businesses and supports our strategy to become the preferred retail and commercial insurer in the region, protecting our customers and helping them to reach their full potential.”

The acquired business had gross written premiums of $790m last year, with Argentina representing about 50% and the rest coming from Ecuador, Mexico, Brazil and Colombia.

The insurer aims to achieve an overall return on investment beyond 10% within the first full year of completion of the deal.

Completion of the transaction is expected by the end of 2018 following regulatory approvals. Zurich will fund the acquisition from internal resources. It expects to post a pre-tax profit of around $100m after the divestment.

The deal will almost double Zurich’s property and casualty (P&C) business in Argentina and enable it to scale up distribution and product capabilities, especially for small and medium sized commercial customers.

This transaction comes as QBE reduced dividends to shareholders after posting a full-year loss of A$1.25bn ($1.59bn) in 2017.

QBE Group chief executive Pat Regan Regan, who took over the new position in January, has also lined up a slew of plans such as making the business more customer-centric and less complex structure to provide better returns to shareholders over the next two years.

QBE will continue to retain Puerto Rico portfolio to service claims resulting from Hurricane Maria. This unit will become part of QBE’s North American operations.