In light of the suspension of the planned initial public offering (IPO) of ReAssure, parent Swiss Re has said that it remains committed to reducing its ownership in order to de-consolidate the business.
The reinsurance giant announced in early June that it was to go ahead with plans for an IPO of shares in ReAssure, its UK closed life book consolidator business.
The firm said at the time that the IPO would facilitate increased flexibility and growth of the group, while confirming that the IPO would go ahead in July, 2019, and that ReAssure will be valued at £3.3 billion in its IPO, which was scheduled to be listed on the London Stock Exchange.
However, a lack of demand driven in part by adverse market conditions and the ongoing and uncertain political situation, resulted in Swiss Re suspending the IPO.
Swiss Re has today reported its financial results for the first-half of 2019 and when discussing the ReAssure business, said that it “retains the objective to reduce its ownership in order to de-consolidate ReAssure.”
Speaking during the reinsurer’s H1 2019 media call, Chief Executive Officer (CEO) Christian Mumenthaler noted that as the firm proceeded with the IPO, it became clear that generally, the primary market was very, very dry.
The firm decided not to go back in the second window as it felt this would have been highly risky as market conditions and the political landscape remain challenging, and management explained during the call that it would not proceed with an IPO in the second-half of 2019.
Management reiterated during the media call that the mid-term goal is to de-consolidate ReAssure, noting that the firm has full confidence in the business and that it will support it as a majority investor.
It was announced at the end of last year that MS&AD Insurance Group Holdings was to invest a further £315 million into ReAssure, increasing its stake in the business by 10% to 25%. Swiss Re notes that as a result of this investment and proceeds from the sale of subordinated bonds issued by ReAssure, the firm’s Life Capital unit recorded gross cash generation of $460 million in H1 2019.
Overall, net income in the Life Capital segment totalled just $5 million in H1 2019, which reflects a strong investment performance which was offset by expense related to growth of the open book businesses, and also the separation of ReAssure into a standalone group.