Swiss Re presses ahead with flotation of $4.5 billion British unit

June 7, 2019

By John Revill and Carolyn Cohn

ZURICH/LONDON (Reuters) – Swiss Re is pressing ahead with a flotation of British subsidiary ReAssure on the London Stock Exchange, the world’s second largest reinsurer said on Friday, a business that analysts value at around 3.5 billion pounds ($4.45 billion).

ReAssure, Britain’s sixth largest life insurer, plans to list at least a 25% stake, it said in a statement.

The insurer has 68.7 billion pounds ($87.3 billion) of assets under administration and focuses on so-called closed book policies that are shut to new customers.

Under the flotation plans, Swiss Re would cut its stake to below 50% from 75% at present. Japan’s MS&AD Insurance Group Holdings intends to keep its holding at 25% after the initial public offering (IPO).

Swiss Re wants ReAssure to have access to new capital to acquire additional closed books of policies, which are paying out to existing members but are no longer being actively sold.

Scale is increasingly important in an industry where insurers are struggling to pay guaranteed returns for life insurance policies due to record-low interest rates.

Swiss Re, which said in August it was examining a possible flotation of ReAssure, has not said what it plans to do with the money it raises from the IPO, nor when it might tale place.

ReAssure’s publication of the registration document for the IPO will be the first step toward a listing, Swiss Re said. The document is due to be published later on Friday.

Georg Marti, an analyst at Zuercher Kantonalbank, said based on the price paid by anchor shareholder MS&AD for its stake, the total value of ReAssure was around 3.5 billion pounds.

“However, the current value of ReAssure and also the price for its IPO will ultimately also be determined by stock market conditions, which have not been so favorable in recent times, so it could be slightly lower,” he said.

“The IPO makes sense because it could allow Swiss Re to deploy capital to more higher yielding businesses like life and non-life reinsurance,” he said.

ReAssure Chief Executive Mark Hodge said he saw growth opportunities through further consolidation of closed life and pension books in the UK.

“A potential IPO would provide us with additional flexibility to take advantage of the opportunities we see.”

The CEO told reporters ReAssure would pay 265 million pounds in dividends to investors over a five-year period.

Swiss Re said it and MS&AD, would inject 481 million pounds in new capital into ReAssure ahead of the IPO.

Morgan Stanley, Credit Suisse and UBS are the joint global coordinators, while BNP Paribas and HSBC will act as joint bookrunners in the flotation.

(Reporting by John Revill, additional reporting by Carolyn Cohn, Editing by Riham Alkousaa and Mark Potter)

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