Swiss Re raises capital for GE Insurance purchase

Swiss Re has successfully completed the book-building process for a 1-billion Swiss franc (US$761 million) offering of mandatory convertible securities due 2008.
The securities are mandatorily convertible into ordinary shares of Swiss Re in December 2008. The securities will be issued by a wholly owned subsidiary of the Group and guaranteed by Swiss Reinsurance Company.
Net proceeds of the private offering will be available to fund the acquisition of GE Insurance Solutions. Last month, Swiss Re announced it had agreed to acquire GE Insurance Solutions, the fifth largest reinsurer worldwide, from General Electric Company (GE) in a US$6.8-billion transaction.
According to Reuters, Swiss Re plans to raise up to $7.5 billion in capital to fund the purchase of GE Insurance Solutions and displace Munich Re as industry leader in terms of revenue.
“Swiss Re’s offering benefited from strong demand,” the company said in a press release. “Key terms of the securities include a 6.0% coupon and a minimum conversion price of 95.60 Swiss francs.
“The mandatory convertible securities will automatically convert into Swiss Re shares in three years. Swiss Re will retain the upside on any future share price appreciation up to 120% of the minimum conversion price and a fraction of any further upside thereafter.”
Swiss Re said in a release that the mandatory convertible securities are expected to receive strong capital treatment from rating agencies. “The private offering is being made to institutional investors only, outside the United States, Canada, Japan, Australia and Italy,” the company reported.