Swiss Re buys insurance unit from Barclays
Swiss Reinsurance, the world’s largest reinsurer, announced an agreement Tuesday to buy the life insurance unit of Barclays for £753 million in cash, even as it wrote down more credit assets.
Swiss Re said it would acquire about 760,000 life insurance and pension policies and annuity contracts, for which Barclays had stopped writing new business since 2001, representing £6.8 billion, or $13.3 billion, in invested assets. The deal bolsters its Admin Re unit, which buys life insurance portfolios after other insurers have stopped writing new business.
It shows that Swiss Re was strong enough to take advantage of tough markets, the chief executive, Jacques Aigrain, said.
“The difficult market environment also creates new opportunities,” he said. “Swiss Re has the execution capability and capital strength to seize these opportunities.”
The strategy of adding top-line growth through the Admin Re unit is one of the reasons why Swiss Re says it will grow faster than other reinsurers as markets stall.
“The acquisition and the price paid fits into the strategy and is good news,” said an analyst at Landsbanki Kepler, Fabrizio Croce.
Swiss Re separately said that its profit fell 53 percent after 362 million Swiss francs, or $343 million, of write-downs related to credit-default swaps.
Net income fell to 564 million francs in the second quarter from 1.19 billion francs a year earlier. Earnings missed the 773 million franc median estimate of 11 analysts as premium income fell 23 percent, to 6.11 billion francs.
The sale of a noncore asset will help Barclays’ balance sheet, which is under strain from the impact of the credit crunch, and will add to the bank’s capital after it raised £4.5 billion last month.
Swiss Re - unlike many other reinsurers, which reinsure risk for other insurance companies - has been hit hard by the credit crisis. It has had total write-downs of about 2.7 billion francs in its financial services unit.
Swiss Re, which had previously expected a further 350 million franc write-down in the second quarter, said it expected 2008 and probably 2009 to be challenging years for the whole insurance industry, but maintained its targets. The reinsurer now has less than 500 million francs in remaining exposure to risky mortgage assets, the chief financial officer, George Quinn, said.
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