Zurich, Switzerland - Swiss Re has agreed to acquire GE Insurance Solutions, the fifth largest reinsurer worldwide, from General Electric Co. (GE) in a $ 6.8 billion (U.S.) transaction.The acquisition is designed to add a strong franchise to Swiss Re, complementing its own strengths. After the closing of the transaction, Swiss Re would have estimated combined revenues of CHF 46 billion (based on 2004 figures) and assets of CHF 265 billion (as of June 2005) and a highly diversified business globally.
Based in Kansas City, Mo., GE Insurance Solutions had net premiums earned of $ 6.2 billion (U.S.) in 2004 and total assets of $41.5 billion (U.S.) as of June 2005 (excluding GE Insurance Solutions' US life and health business which will not be part of the transaction).
Under the terms of the transaction, Swiss Re will purchase GE Insurance Solutions for $6.8 billion (U.S.), subject to closing adjustments. This represents 76% of the approximate $8.9 billion US GAAP book value (before additional reserves) of the businesses to be acquired.
As part of this transaction GE Insurance Solutions will provide approximately $3.4 billion (U.S.) 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 in excess of 10% of Swiss Re shares.
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 meeting to be held in January 2006.
Jacques Aigrain, who will succeed John Coomber as CEO of Swiss Re on January 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."
In connection with the transaction, Swiss Re plans to raise up to $7.5 billion (U.S.) in new capital. This includes up to $5.5 billion (U.S.) in shares and mandatory convertibles of which GE has agreed to take, based on certain provisions of the acquisition agreement, $3.0 to 3.8 billion (U.S.). Swiss Re also plans to raise $2.0 billion (U.S.) in hybrid debt securities.
The shares to GE will be issued without subscription rights to existing shareholders. In addition, Swiss Re plans to offer shares through a rights offering and mandatory convertibles to the capital markets. The actual mix of these securities will be determined based on market conditions. Exact terms will be announced at the time of these offerings.
Closing of the transaction is subject to regulatory approvals and other customary contractual closing conditions. Closing is expected to occur by mid 2006.
Source: Swiss Re
