Global reinsurance giant Swiss Re is set to take an £800 million investment from Japanese insurance holding company MS&AD Insurance Group Holdings Inc (MS&AD) into ReAssure, its UK closed life book consolidator.
MS&AD will purchase a 5% stake in ReAssure for £175 million, through an investment in ReAssure Jersey One Limited, valuing the UK closed life book consolidator £3.5 billion.
MS&AD has then committed to make further investments into the equity of ReAssure, for up to a three-year period, totaling £800 million, to give it a maximum shareholding of 15%.
Swiss Re said the investment by MS&AD is consistent with the “previously communicated strategy to provide ReAssure with enhanced financial flexibility to support its future growth.”
The added capital will strengthen ReAssure’s ability to enter into large closed life insurance book transactions, and the arrangement has been designed to ensure this growth by connecting the future investments with ReAssure’s deal-flow.
Swiss Re said that the additional investment of £625 million will be made via the issuance of primary equity to MS&AD as ReAssure undertakes transactions in the future.
Once a 15% shareholding threshold is reached, both companies will subscribe to further equity injection into ReAssure on a pro rata basis, which will ensure Swiss Re’s stake isn’t diluted.
Thierry Léger, CEO of Life Capital, commented on the deal; “I am delighted that we partner with a like-minded, long-term investor that will invest with us side-by-side. The closed book business is a core component of Swiss Re’s overall strategy. Swiss Re remains committed to supporting ReAssure with their strong team, great platform and excellent growth prospects.”
Matt Cuhls, CEO of ReAssure, added; “This is a positive step and gives us greater capacity for future deals. The UK closed book market is expected to offer significant consolidation opportunities in the near future. Thanks to this commitment from MS&AD and given our proven acquisition and integration capabilities, we are well-positioned to seize these opportunities while delivering attractive returns.”
The initial 5% stake acquisition remains subject to regulatory approval, and closing is expected in the first quarter of 2018. The future investments are not expected to require any additional approval.
For Swiss Re this transaction adds capital where it needs it, to grow the life consolidator business, without impacting its own funds and does so without overly diluting its own holding in the ReAssure business.
It positions ReAssure for growth, with capital available to help it enter into more transactions. This ultimately benefits Swiss Re as a group, by enlarging its overall footprint.