Chicago — Taking a step toward putting its financial house in order, New York-based American International Group (AIG) has sold its specialty insurance subsidiary HSB Group to Munich Re for $742 million in cash. The transaction marks the first major divestiture for beleaguered AIG after it agreed to accept a bailout from the U.S. Treasury.

Hartford, Connecticut-based HSB Group is the parent company of Hartford Steam Boiler Inspection and Insurance Co. (HSB), which provides machinery/plant and equipment breakdown insurance, inspection, certification and engineering consulting services. Financially healthy, HSB posted an after-tax profit of $158 million on $ 904 million in gross written premium in 2007.

For Munich Re, the planned purchase is a step in the company’s stated strategy to expand into high-return, niche segments in the U.S. insurance market. Munich Re contends the specific business model offered by insurers such as HSB will help it offset the volatility of the traditional reinsurance business.

“HSB has built a tremendous reputation for underwriting highly technical machinery and engineering risks,” says Tony Kuczinski, CEO of Munich Re America, which will assume direct operating control of HSB after the acquisition. “We believe the strong underwriting culture of HSB and the company’s exceptional client focus makes it an excellent fit for Munich Re.”

Completion of the transaction, which is funded entirely from existing resources, is subject to regulatory approval and is expected to be completed by the end of the first quarter of 2009.

HSB, which was founded in 1866, has been a wholly owned subsidiary of the AIG since 2000.



Sources: Munich Re, INN Archives


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