Global reinsurance firm Swiss Re is looking for growth within its commercial insurance book, the Corporate Solutions division, and is open to bolt-on type acquisitions to drive further growth in that area of its business.
Speaking to the media this morning, Swiss Re CEO Christian Mumenthaler said that the firm would be open to acquisitions to bolster its Corporate Solutions business, although suggested that so far the firm has failed to find any options it would deem attractive from a valuation point of view.
The Corporate Solutions business is an area that Swiss Re sees growth opportunities and it sits firmly within its strategic goals to expand that part of its diversified global re/insurance business.
With the outlooks for the re/insurance market improving, according to Swiss Re, as the firm foresees “increasing pricing” which it believes will benefit the Corporate Solutions unit.
In addition Swiss Re forecasts growth in reinsurance and insurance generally, with around 5% of premium growth per annum expected in developed markets and as much as 8% per annum expected in high-growth markets.
At the same time, Swiss Re believes that Corporate Solutions is, “well-positioned to benefit from the expected market improvements” explaining that the commercial insurance business has proved particularly attractive for the firm.
Swiss Re believes that investing for future growth in this division will continue to drive returns at above the group cost of capital and hence expansion is a key aim.
One of the effects of investing for commercial insurance growth is that Swiss Re’s Corporate Solutions division has higher expense margins than the peer average, which could go someway to helping to explain that the firm feels that a bolt-on acquisition for expansion could drive faster premium growth while not increasing expenses any further.
Further, Swiss Re notes that it is making investments into technology and process improvements for Corporate Solutions, which it says “are expected to lead to sustainable productivity improvements.”
The company said that it will focus on expanding the business where it is a primary lead and that Corporate Solutions would build on its technology platform as a key differentiator in the marketplace.
With these measures taken an expansion through acquisition may be timely, allowing the commercial insurance business to benefit more rapidly from the improvement steps taken, by bringing in a much larger pool of risk premium.
Mumenthaler said that acquisitions are now definitely an option in the commercial insurance sphere, which would also fit well with its eventual strategy if it enters into an arrangement with SoftBank in the end.
Swiss Re can be clever with the commercial insurance book, leveraging its reinsurance appetite as well to add efficiency, while benefiting from any distribution access that a SoftBank relationship could provide.
All of this would make an expanded Corporate Solutions an attractive prospect for the firm, hence the acquisitive focus at this time.
