Swiss re becomes top reinsurer with $6.8B acquisition of GE insurance.In a long-anticipated move, General Electric Co. is selling most of its insurance operations to Swiss Re Swiss Re is the world’s largest reinsurer, now that it has acquired GE Insurance Solutions (Ligi 2006). Founded in 1863, Swiss Re now operates in more than 30 countries. General Electric owns 8.9% of the firm. Group for $6.8 billion, a massive deal that will sec Swiss Re raise up to $7.5 billion in additional capital and give GE a 10% stake in the Swiss reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. giant. Swiss Re, the world's second-largest reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. , will acquire GE Insurance Solutions, except for the unit's U.S. life and health business. Excluding the U.S. life and health businesses, the GE unit had net premiums earned of $6.2 billion and total assets of $41.5 billion as of June June: see month. 2005. The move will bring to Swiss Re a lot of business that had been locked up by the company's competition with GE's Employers Reinsurance Corp., Swiss Re said. The move also will make Swiss Re the world's largest reinsurer, Swiss Re said. Under terms of the transaction, Swiss Re will pay $6.8 billion for the GE unit, a price which represents 76% of the approximate U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). book value of the businesses, or $8.9 billion. GE Insurance Solutions will provide about $3.4 billion pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern in additional reserves to the extent permitted by accounting rules, Swiss Re said. For Swiss Re, the acquisition is expected to yield about $300 million in pretax cost savings, and to be accretive to earnings per share and return on equity in 2007, Swiss Re said. The reinsurer also expects to save on reduced retrocessional cover. The combined entity will be more balanced between the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , and between life and property/casualty reinsurance, Swiss Re
said. Swiss Re will significantly gain life reinsurance business in
Europe, and property/casualty business in the United States through the
acquisition.In the U.S. market, Swiss Re expects to gain considerably, as most of GE Insurance Solutions' $3.8 billion in property/casualty premium is in the United States. Swiss Re expects the acquisition to add about 10% to its current gross premiums in Europe. German premiums for Swiss Re will rise 24%, and in the United Kingdom, Swiss Re will boost its premiums 63%. Premiums in Asia will rise 15% for Swiss Re. Swiss Re and GE Together, the two companies would have $4.9 billion in premiums. * Combined: U.S. P/C Reinsurance Clients Globals/nationals 71% Receptionists 21% Rest 8% Total = $4.9 billion * * U.S. unaffiliated premiums assumed based on schedule F, statutory accounts. 2003; direct business only Source: Swiss Re Note: Table made from a pie chart. |
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