Zurich Transferring UK Subsidiary Runoff Business To Swiss Re

NU Online News Service, June 15, 2:44 p.m. EDT

Zurich Financial Services Group says that one of its non-core subsidiaries in the United Kingdom, Zurich Specialties London Ltd, will transfer its runoff insurance business to Swiss Re at book value.

Zurich says the transaction is part of its strategy to divest most of its non-core businesses in order to release and redeploy $1.5 billion of capital and focus on its chosen target markets.

The runoff business being transferred to Swiss Re is predominantly comprised of U.S. and U.K. broker-placed commercial casualty policies written on both a direct and assumed basis, Zurich says.

According to Zurich's first-quarter results report on May 5, some of its runoff, largely comprised of U.S. life insurance and annuity portfolios, reported decreased business operating profit of $36 million, primarily because of the positive market-driven reserve development in the first three months of 2010, achieved before the implementation of the dynamic hedge in March 2010.

Zurich Specialties London Ltd. has not underwritten new policies since 2005, the company says, noting that Zurich and Swiss Re have signed a reinsurance agreement which transfers the benefits and risks of this portfolio as of April 1, 2011 from Zurich to Swiss Re until the transfer is completed. Zurich will transfer about $950 million in gross assets and liabilities to Swiss Re.

It is expected the transaction will allow repatriation over time of regulatory capital from Zurich Specialties London Ltd. to its parent of about $360 million, according to the company.

The completion of this transaction is subject to certain conditions including regulatory review and court approval. None of Zurich Specialties London Ltd.’s customers will be materially affected by the transaction and their terms and conditions will continue to apply, Zurich says.