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Content - Swiss Re attracts Japanese investors

  • October 10, 2017

Swiss Re attracts Japanese investors

Tokyo (SCCIJ) – Swiss Re, the world’s leading reinsurer, and the Japanese insurance group MS&AD have reached an agreement about an investment into ReAssure, the closed book business of Swiss Re. The Japanese are to invest up to CHF 1 billion (GBP 800 million) in order to strengthen ReAssure's ability to pursue future transactions in line with previous communications. ReAssure is a market-leading British closed life book consolidator within the Swiss Re Life Capital Business Unit. The partnership between MS&AD and Swiss Re goes back for over 100 years. MS&AD was created in 2010 by the merger of Mitsui Sumitomo Insurance with its two Japanese competitors Aioi and Dowa, which also explains the acronym.

New and old Swiss Re headquarters

Investment and capital partner

The insurer Swiss Re has found what it has been looking for quite some time, writes the Swiss financial biweekly “Finanz und Wirtschaft”: an investment partner for the capital-intensive diversification of life capital. The Japanese MS&AD complements the Swiss corporation's equity capital of $34 billion with up to $1 billion. The partners want to use this to buy further fixed portfolios of life insurance policies (so-called run-off portfolios). In this business, Swiss Re acquires existing life insurance policies from primary insurers at a certain price. It then takes over the management of the contracts and the creation of the assets.  

MS&AD has agreed to acquire a 5 percent stake in ReAssure for GBP 175 million, which values ReAssure at GBP 3.5 billion. MS&AD has committed to invest, for up to a three-year period from closing, GBP 800 million in total into the equity of ReAssure, with a maximum shareholding of 15 percent. The MS&AD minority investment is consistent with Swiss Re's previously communicated strategy to provide ReAssure with enhanced financial flexibility to support its future growth.  

From a Japanese perspective, the investment brings diversification and refreshing growth prospects that are becoming less and less prevalent in the land of the rising sun, the Swiss paper “Neue Zürcher Zeitung” explains. In compliance with Tokyo stock exchange rules, the Japanese have stated in detail that they expect an internal return rate of 11 percent when ReAssure concludes new transactions.

Swiss Re opened its new headquarter office building in Mythenquai, Zurich on October 3, 2017 (© Swiss Re)

Swiss Re opened its new headquarter office building in Mythenquai, Zurich on October 3, 2017 (© Swiss Re)

“Like-minded, long-term investor”

The commitment to invest the additional GBP 625 million will be satisfied through the issuance of primary equity to MS&AD (based on the same valuation formula) as ReAssure undertakes transactions in the future. Once the 15 percent shareholding threshold is reached, both Swiss Re and MS&AD will subscribe to any further equity injection into ReAssure on a pro-rata basis.  

Thierry Léger, CEO of Life Capital, said: "I am delighted that we partner with a like-minded, long-term investor that will invest with us side by side. The closed book business is a core component of Swiss Re's overall strategy. Swiss Re remains committed to supporting ReAssure with their strong team, great platform and excellent growth prospects."  

Matt Cuhls, CEO of ReAssure, said: "This is a positive step and gives us greater capacity for future deals. The UK closed book market is expected to offer significant consolidation opportunities in the near future. Thanks to this commitment from MS&AD and given our proven acquisition and integration capabilities, we are well-positioned to seize these opportunities while delivering attractive returns."  

The acquisition of the initial 5 percent stake is subject to regulatory approval, and closing is expected to occur in the first quarter of 2018. No further regulatory approvals are expected to be required for the additional MS&AD investments.  

New headquarter office building

After ten years of planning and construction, Swiss Re is opening one of the most modern office buildings in Switzerland at its head office on Mythenquai in Zurich: Swiss Re Next. With the new building, realized by Diener & Diener Architects, Swiss Re underlines its commitment to Zurich, where the company was founded more than 150 years ago.  

The new offices set a milestone on the path towards Campus Mythenquai, where employees based in Switzerland will eventually be brought together. Swiss Re Next employs a new and agile workplace concept that fosters collaboration, dialogue and flexibility.    

 

Text: SCCIJ partly material of Swiss Re; Photos: Swiss Re

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