Zurich Financial and Deutsche Bank are in advanced negotiations of a deal in which Deutsche Bank would acquire the Swiss insurance giant’s mutual fund arm, Zurich Scudder Investments, and Zurich Financial would pick up Deutscher Herold and other European insurance companies held by Deutsche Bank.

Under the negotiations, Zurich Financial’s U.K.-based investment manager, Threadneedle, would remain part of the Zurich Group of companies, the companies announced in a statement.

"An integral part of the negotiations is a cooperation and distribution agreement between the two companies in the fields of insurance, asset management and banking to provide a full range of financial services to their respective customers," the statement said. Both companies declined to offer further comment.

In April, Zurich hired Goldman Sachs and Morgan Stanley Dean Witter to broker a sale of Zurich Scudder Investments. Last month, Mutual Fund Market News reported that Deutsche Bank had emerged as the front-runner in final negotiations for the asset management arm. Other firms that are believed to be finalists in the deal include U.K.-based AMVESCAP Plc, the parent of U.S. fund groups INVESCO and AIM Management, and First Union Bank. ( MFMN 8/17/01).

A deal is expected to be announced in the middle of September, a source close to the situation said last month.

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