Swiss Re said it has closed a deal to purchase GE Insurance Solutions, eight months after announcing its intentions to buy the carrier for $6.8 billion in cash and stock.
The Zurich, Switzerland-based reinsurer last Friday announced the closing of the deal to acquire the Kansas City, Mo.-based insurer from General Electric Corp., the financial services giant headquartered in Fairfield, Conn.
The deal likely makes Swiss Re the largest reinsurance carrier in the world, shifting reinsurer Munich Re to the number two spot.
“The acquisition of GE Insurance Solutions consolidates further Swiss Re's global leadership position,” said Swiss Re's chief executive officer, Jacques Aigrain, in a statement. “We will now move swiftly to integrate GE Insurance Solutions, adding new talents to our global workforce and building on the benefits of an enlarged client base and expanded product offerings.”
Swiss Re said the final cost of the deal was $7.4 billion, including $600 million in closing adjustments. The carrier said between Nov. 18, 2005 and the closing, the book value of GE Insurance Solutions increased by $1.7 billion through cash capital contributions from parent company GE, as well as earnings which Swiss Re reimbursed to GE on closing.
Swiss Re said financing of the deal involved cash, an at-market rights issue, mandatory convertibles and hybrid debt.
Financing included $2.4 billion equivalent in new Swiss Re shares at $72.07 a share issued to GE. The company said GE now owns 8.9 percent of Swiss Re's common stock. As a result of the issuance of new shares to GE, the number of Swiss Re shares entitled to dividends increases by 33.3 million shares to 358 million.
Swiss Re said it also issued $500 million in mandatory convertible instruments that will convert into Swiss Re shares in three years.
For its part, GE said in a statement that the deal also involved the assumption of $1.7 billion of GE Insurance Solution's debt.
GE said it received $5.4 billion in cash in addition to the 33.3 million shares in Swiss Re common stock.
In a statement, Swiss Re said the integration of GE Insurance Solutions would take 18 months. With staff reductions and merging of functions, Swiss Re said it expects to save $300 million per year by the end of 2007.
Swiss Re added that the acquisition is already accretive to 2007 earnings.
GE said GE Insurance operated with 2,500 employees in 50 offices across 22 countries. The operating companies included:
o Employers Reinsurance Corp.
o GE Frankona Reinsurance Ltd. (UK)
o GE Frankona Ruckversicherungs-Aktiengesellschaft
o GE Reinsurance Corp.
o Westport Insurance Corp.
o First Specialty Insurance Corp.
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