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Swiss Re to become world number one

Swiss Re has its headquarters in Zurich Keystone

Swiss Re has announced that it will take over the insurance division of General Electric to become the world's biggest reinsurer.

This content was published on November 18, 2005 - 12:27

The firm said on Friday that it would purchase American group GE Insurance Solutions for $6.8 billion (SFr9.01 billion).

The GE insurance division is the fifth largest reinsurer worldwide, with total assets of $41.5 billion. This does not include the United States company's life and health business, which are not part of the deal.

In a statement, Swiss Re estimated that the transaction would give the company combined revenues of SFr46 billion and assets of SFr265 billion.

"This is both strategically and financially a very attractive transaction that creates significant value for our shareholders," said John Coomber, Swiss Re CEO.

The company will pay cash, shares and convertible securities for Kansas-based GE Insurance Solutions, and General Electric, the financial and media conglomerate, will own more than 10 per cent of Swiss Re's stocks following the sale.

Swiss Re shares were suspended from trading before the announcement.

Richard Schreuder, an analyst at Barclays in London, told swissinfo that Swiss Re would benefit from the deal.

"Swiss Re is not in a bad financial situation, but they have been struggling when it comes to growth in earnings and profits and this deal is potentially a source of further growth for them," he said. "The business was not really growing fast before they announced the deal."

Time to buy

Schreuder added that there was room for consolidation in the reinsurance industry and that one of the benefits for the companies involved is a more diversified portfolio.

Analysts said the acquisition made Swiss Re interesting for investors.

"Now is a good time to buy reinsurers," Florian Esterer, a fund manager at Swisscanto in Zurich told the financial news agency, Bloomberg.

"They are very cheap and we know that premium prices will rise over the next two years," he added.

Shares of Swiss Re have gained 15 per cent this year.

However, the company said earlier this month that claims for this year's extraordinary hurricane season in the US would mean the concern would not meet its profit target of ten per cent earnings per share.

It added at the time that it would have to use "equalisation reserves to mitigate part of the claims".

swissinfo with agencies

Key facts

Swiss Re will acquire GE Insurance Solutions, the insurance division of General Electric, for $6.8 billion.
The deal will propel the number two in the reinsurance business worldwide into the top spot, ahead of Munich Re.

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