Swiss Re has agreed to sell its subsidiary ReAssure Group plc to Phoenix Group Holdings plc.
As part of the agreement, which values ReAssure at GBP 3.25 billion, Swiss Re will receive a cash payment of GBP 1.2 billion and shares in Phoenix representing a 13 percent to 17 percent stake and will be entitled to a seat on its board of directors.
ReAssure's minority shareholder, MS&AD Insurance Group Holdings Inc., will receive shares in Phoenix representing an 11 percent to 15 percent stake. The respective number of shares Swiss Re and MS&AD will receive will depend on Phoenix's share price at closing of the sale, while the total shareholding of both companies is fixed at approximately 28 percent.
Christian Mumenthaler, Swiss Re's group chief executive officer, said, "We believe this transaction maximizes long-term value for Swiss Re shareholders. Swiss Re's goal has been to deconsolidate ReAssure, and we are pleased to have found a strong buyer for the business. The strategic rationale for the combination of the businesses is compelling, and we look forward to working together with Phoenix and to sharing the financial benefits of the combination."
Swiss Re said that the transaction would reinforce Phoenix's position as Europe's largest life and pensions consolidator with GBP 329 billion of assets under administration and more than 14.1 million policies.
Thierry Léger, the chief executive officer of Swiss Re's life capital business unit, said, "The expertise of ReAssure's team combined with that of Phoenix will create a very powerful closed book consolidator. At the same time, the sale will accelerate the transition of Life Capital towards a dynamically growing digital B2B2C business that leverages technology and data."
As part of the transaction, Swiss Re will reacquire the 25 percent stake in ReAssure currently held by MS&AD. The consideration for this purchase will be Phoenix shares with value of up to GBP 1.0 billion at signing. This represents a GBP 0.1 billion premium to MS&AD's cost base for its holding in ReAssure, according to Swiss Re.
Swiss Re pointed out that the financial impact of the transaction on Swiss Re is subject to movements in Phoenix's share price prior to closing of the sale. Swiss Re has estimated that the transaction would in a 12 percentage point increase in Swiss Re's group SST ratio and generate economic profit of US$0.3 billion. An estimated US GAAP pre-tax charge of approximately US$0.3 billion in the fourth quarter 2019 mainly reflects the higher consolidated book value of ReAssure, driven by historically low interest rates. The impact of the reacquisition of shares from MS&AD will be reflected in the group's shareholders' equity, Swiss Re said.
Swiss Re said that it expected the transaction to close in mid-2020, subject to approvals by Phoenix's shareholders, regulators, and antitrust authorities.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].