Reinsurance News

Swiss Re says “no certainty” SoftBank deal will be consumated

23rd February 2018 - Author: Steve Evans

Swiss Re said this morning that while it’s board is carefully assessing a potential transaction with Japanese tech and telecoms giant SoftBank, there is “no certainty” a common ground will be found and a deal proceed.

Swiss Re SoftBankSwiss Re confirmed recently that it has been in talks with SoftBank about the Japanese tech giant taking a stake in the reinsurer, with up to a third of the company potentially at stake.

The potential investment by the tech firm in a globally diversified reinsurer has sparked the imagination of the industry, journalists and analysts alike, with a potential deal cited as a transformational move, if it comes off.

This morning, when announcing its results, Swiss Re reiterated that talks with SoftBank are at an early stage, but the statement makes it clear that the transaction is definitely under serious consideration at the reinsurer.

Swiss Re said that SoftBank Group approached it about a potential partnership and minority investment stake, which is interesting as the first-mover had not been clear till now.

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SoftBank clearly sees synergies between risk, finance, its technology investments and Swiss Re’s investment portfolio, and the conglomerated approach between two companies with very different focuses does make sense, analysts and rating agencies believe.

Swiss Re said that its Board of Directors is, “carefully assessing the strategic and financial implications of such a partnership, having in mind the best interests of the company and its shareholders.”

The company also said that it would not be raising any new capital at this time, which we assume refers to how it could provide the equity necessary for SoftBank to buy into the reinsurer.

But the company also noted that there is, “No certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction.”

CEO Christian Mumenthaler said during Swiss Re’s analyst call this morning that, “It’s very preliminary, with no certainty of outcome, therefore there’s not much I can say.”

He reiterated that the company does not plan to issue any new equity at this time, to support a transaction, responding to rumours that suggested the company would issue new shares.

He called the potential deal, “A collaboration, coupled with a minority investment,” that he and the Board of Swiss Re are, “Carefully assessing for the strategic impact.”

When asked about whether Swiss Re felt it needed a major technology partner, to enable the firm to navigate the challenges of digitalisation and disruption, Mumenthaler said, “I don’t think so. Our strategy cannot be dependent on any particular partner.”

He also said that, “We’re not just going to do M&A for no reason, it has to add value.”

So no greater certainty on the potential for a deal between Swiss Re and SoftBank today, cards are being firmly kept against chests.

But it is notable that Mumenthaler highlighted that SoftBank, and its ilk, are looking at every major tech investment globally, saying, “Why wouldn’t we find that attractive.”

So it’s perhaps clearer today that Swiss Re recognises the potential for a deal with SoftBank to be transformative, or at least to have the ability to set it on a road that could lead it to transformation.

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