Canadian Underwriter

Munich Re to acquire Hartford Steam Boiler Inspection and Insurance for US$742 million

December 22, 2008   by Canadian Underwriter

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Munich Re has agreed to acquire specialty insurer HSB Group from American International Group (AIG) for US$742 million in cash.
The HSB Group, headquartered in Hartford, Connecticut, has been a wholly owned subsidiary of AIG since 2000. The core of the HSB Group is Hartford Steam Boiler Inspection and Insurance Company, an insurance and inspection company specializing in engineering risks in the United States.
HSB in 2007 posted an after-tax profit of US$158 million and the company’s average combined ratio since 2003 has been 73.8% (both figures based on consolidated statutory financial statements). The gross written premium income of HSB Group in 2007 amounted to US$904 million (based on US-GAAP).
Completion of the transaction is subject to regulatory approval and is expected at the end of the first quarter of 2009.
“The acquisition of HSB is a perfect fit for our US strategy,” said Peter Röder, Munich Re board member responsible for U.S. business. “It’s another step in developing our position in high return specialized niche segments. This is one of the declared aims of our Changing Gear programme for profitable growth.”
Röder added that HSB’s specific business model would help to reduce the volatility of traditional reinsurance business. Direct operating control of HSB will lie with Munich Re America after the acquisition.
Tony Kuczinski, Chief Executive Officer (CEO) of Munich Re America: “We extend a warm welcome to the clients and employees of HSB. HSB has built a tremendous reputation for underwriting highly technical machinery and engineering risks. We believe the strong underwriting culture of HSB and the company’s exceptional client focus makes it an excellent fit for Munich Re. We believe Munich Re’s clients will greatly value the addition of HSB’s products and services.”