A ReAssure IPO and subsequent sell down to a level where the remaining stake is treated as a pure equity risk would generate between $3 billion and $4 billion of excess capital for Swiss Re, according to Deutsche Bank analysts.
Swiss Re had previously stated intentions to reduce its stake in ReAssure in order to reduce its exposure to UK credit risk, which consumes a disproportionate level of capital under Swiss Solvency Test (SST) regulations.
In addition, the global reinsurance giant’s Board of Directors proposed plans last month to introduce a new public share buy-back program consisting of two tranches of each up to CHF1 billion (US$995,000), effectively doubling the amount it would return to shareholders.
The proposal, due to be put forward at Swiss Re’s upcoming Annual General Meeting of shareholders (AGM) on April 17, is dependant on the successful reduction of the company’s holding in ReAssure to below 50%.
Swiss Re reducing its stake in ReAssure to 30% could lead to around $2 billion in capital relief, whilst a reduction to 10% would raise that figure to above $4 billion, DB analysts say.
Analysts state this influx of capital would allow for a mix of buy-backs, M&A and re-risking.
