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Swiss Re buying Life Re
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July 27, 1998: 10:06 a.m. ET
Zurich-based reinsurance giant paying $1.8B for U.S.-based reinsurer
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NEW YORK (CNNfn) - Who will insure the insurers? Zurich-based reinsurance giant Swiss Re Co. narrowed the pool of prospects Monday when it agreed to acquire Life Re Corp., of Stamford, Conn., for $1.8 billion.
Swiss Re, the world's second-largest reinsurer, with offices in more than 30 countries, reported gross premium volume of $11.9 billion in fiscal 1997.
The acquisition will immediately establish Swiss Re as a leader in North American life and health reinsurance, for which 1997 pro forma premiums are expected to reach $2.7 billion.
The purchase also is an important prong in the firm's strategy to firm up its worldwide life and health businesses. Pro forma gross premiums in these sectors totaled $4.9 billion in fiscal 1997.
The transaction is subject to regulatory approval and approval by Life Re's shareholders.
Despite their low profile, reinsurance companies play a big role in the multi-billion-dollar chain of insurance claims. When traditional insurers find risks spiraling beyond their means, reinsurers are the partners to whom they turn to fend off insolvency.
Life Re provides traditional life and administrative to a broad panoply of clients in the United States. In 1997, Life Re reported net income of nearly $50 million on revenue of about $646 million. Revenue grew 26 percent in the 1998 first quarter, while income rose 42 percent from the year-earlier period.
Swiss Re said Life Re's administrative reinsurance portfolio would bring a new line of business to the Swiss company.
On completion of the merger, Swiss Re said, Jacques Dubois, Life Re's current president and chief executive officer, will succeed Jeff Hart as CEO of Swiss Re Life & Health America. Dubois will report to John Coomer, a member of Swiss Re's executive board.
Coomer said he believed the combination of Swiss Re's life and health lines with Life Re's administrative reinsurance business would prove lucrative.
"There is also the ability to enhance value through the management of LRE's investment portfolio as part of the overall Swiss Re portfolio," Coomer said.
The transaction will be financed internally by Swiss Re, and is expected to contribute to earnings in 2000.
Life Re shares ended unchanged at 89 Friday on the New York Stock Exchange.
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