Swiss Re buys GE Insurance Solutions

Swiss Re today announced it has agreed to acquire GE Insurance Solutions, the fifth largest reinsurer worldwide, from General Electric Company (GE) for US$6.8 billion.
After closing of the transaction, Swiss Re estimates it will have combined revenues of 46 billion Swiss francs (about US$35 billion), based on 2004 figures, and assets of 265 billion Swiss francs (or roughly US$200 billion) based on 2005 figures.
GE Insurance Solutions’ US life and health business will not be part of the transaction. Based in the United States, GE Insurance Solutions had net premiums earned of US$6.2 billion in 2004 and total assets of US$41.5 billion as of June 2005 (excluding the life and health business).
“This is both strategically and financially a very attractive transaction that creates significant value for our shareholders,” John Coomber, Swiss Re’s CEO, says. “Over the past several months, we and our advisors have undertaken a thorough due diligence review of GE Insurance Solutions, including its reserves. This will enable us to incorporate this business in line with our own reserve standards.
“Swiss Re expects the transaction to be accretive to earnings per share and return on equity, beginning in 2007, the first full year after closing.”
As part of the transaction, GE has agreed that GE Insurance Solutions will provide approximately US$3.4 billion pre-tax in additional reserves to the extent permitted by accounting rules. The consideration to be paid to GE will consist of cash, Swiss Re shares, mandatory convertibles and notes. As a result, GE is expected to hold Swiss Re shares in excess of 10%.
Also under the terms of the agreement, Dennis D. Dammerman, vice chairman of the board of GE, will stand for election to the board of directors of Swiss Re at a general meeting to be held in January 2006.
Jacques Aigrain, who will succeed John Coomber as CEO of Swiss Re on Jan.1, 2006, added: “This transaction further enhances our client base and our product capabilities in attractive lines of business. Together, Swiss Re and GE Insurance Solutions will offer clients the security of the world’s largest and most diversified reinsurance provider. GE’s retention of an equity interest in our combined reinsurance business is a strong endorsement of our business expertise and strategy.”
Closing of the transaction is subject to regulatory approvals and other customary contractual closing conditions. Closing is expected to occur by mid 2006.