Japanese insurance holding company MS&AD Insurance Group Holdings Inc (MS&AD) has made its first investment commitments to buy in global reinsurance firm Swiss Re’s UK closed life book consolidator ReAssure.
A deal was announced in October that would see MS&AD making investments into the equity of ReAssure, across up to a three-year period, totaling £800 million, which would result in a maximum shareholding of 15%.
The start of that process was set to be a £175 million initial acquisition of shares, which has now been completed yesterday giving MS&AD a 5% stake in ReAssure.
Also yesterday, MS&AD made a further investment through equity subscription for another 8.2% stake in ReAssure, a £330 million investment that will take its holding in the life consolidator to 13.2%.
So now £505 million of the promised £800 million has been invested, with the rest slated for investment during the remainder of the three-year term discussed in the original deal.
After that has been reached, MS&AD may actually expand its investment in ReAssure, but it says this will be on a pro-rata basis with Swiss Re, meaning both will expand the capital base of the company as opportunities allow, it is assumed.
MS&AD also highlighted the recent deal that saw ReAssure acquiring 1.1 million life insurance policies from Legal & General in a deal worth UK £650 million.
It is these kinds of large, life consolidation transactions that will be capital-intensive at first, hence the investment from MS&AD is a valuable way for Swiss Re to expand the life units ability to consummate these deals, while for MS&AD it’s a way to gain access to UK life insurance returns.