Shareholders of Swiss Re on Monday approved the creation of additional capital to finance the group's acquisition of the reinsurance units of General Electric.This content was published on February 27, 2006 - 16:13
At an extraordinary meeting in Zurich, they endorsed company plans to raise $7.5 billion (SFr9.9 billion) to finance the transaction, which was announced last November.
After the deal is closed, which is expected by the middle of the year, Swiss Re - currently the world's second-largest reinsurance company - will have the biggest reinsurance volume in the world.
The company said it planned to raise up to $5.5 billion in shares and mandatory convertibles (convertible bonds) as well as $2 billion in hybrid debt to finance the acquisition.
Under the terms of the transaction, Swiss Re will buy GE Insurance Solutions, based in Kansas City, Missouri, in the United States for $6.8 billion, subject to closing adjustments, which will bring the total to an anticipated $7.6 billion.
"This is both strategically and financially a very attractive transaction that creates significant value for our shareholders," commented Swiss Re's outgoing chief executive John Coomber.
"The acquisition of GE Insurance Solutions provides a powerful business fit offering tremendous opportunities to strengthen our franchise."
General Electric will become Swiss Re's largest shareholder, owning between ten and 13 per cent of Swiss Re's share capital.
Katrina hits profit
In a related development, the group's chairman, Peter Forstmoser, told the meeting that Hurricane Katrina, which devastated part of the Gulf coast last year, would cost it a sum equal to about half of its annual profit.
"Katrina will cost us, very roughly speaking, a half year's profit. If we had already owned GE Insurance Solutions, it would have been three months [profit]."
A spokesman said the company's earlier assessment that Katrina would cost it $1.2 billion was still valid.
Swiss Re is due to announce its full-year figures for 2005 on Thursday. They are expected to show that the hurricane season that the costliest US hurricane season on record weighed heavily on results.
A Reuters poll of 24 analysts gives an average forecast of net profit at SFr1.72 billion, 30 per cent down on 2004.
swissinfo with agencies
Reinsurance is basically the business of insuring the insurers. Swiss Re insures large or very volatile risks for other insurance companies. Its major competitor is Munich Re of Germany.
Apart from being one of the world's leading reinsurers, Swiss Re is the world's largest life and health reinsurer.
Swiss Re has been in the business of reinsurance since it was founded in Zurich in 1863.
After the closing of the deal with General Electric Insurance Solutions, Swiss Re would have estimated combined revenues of SFr46 billion and assets of SFr265 billion (as of June 2005).