Swiss Re finalizes GE acquisition

Swiss Reinsurance Co. has acquired GE Insurance Solutions for US$7.4 billion.
The acquisition, through which GE will be integrated into Swiss Re over the next 18 months, will allow Swiss Re to grow past Munich Re to become the world’s largest resinsurer.
Swiss Re announced plans to purchase GE Insurance Solutions on Nov. 18, 2005 from which time, until the deal closed, the value of GE increased by US$1.7 billion. Swiss Re reimbursed GE for this increase through “cash capital contribution” and earnings GE made prior to closing.
Swiss Re financed the transaction through cash, an at-market rights issue, mandatory convertibles and hybrid debt.
The financing included US$2.4 billion equivalent in new Swiss Re shares at a share price of US$72.07 issued to General Electric (GE).
GE now owns 8.9% of Swiss Re’s share capital.
As a result of the issuance of new shares to GE, the number of Swiss Re shares entitled to dividends increases by 33,300,957 shares to 358,212,933 shares.
In addition, Swiss Re says it issued mandatory convertible instruments (MCI) for USD$500 million to GE. The MCI will automatically convert into Swiss Re shares in three years.
With the transaction now closed, Swiss Re says it will commence the integration of GE Insurance Solutions by merging “function and teams.” Swiss Re says this wil lead to an overall reduction of office locations as well as staff reductions in a number of locations.
Swiss Re says it expects to capture cost synergies of at least US$300 million per year, to be realised by the end of 2007. Overall the acquisition will be accretive to earnings already in 2007, according to the Zurich-based reinsurer.