December 20, 2018 / 6:58 AM / 6 months ago

MS&AD ups stake in Swiss Re's ReAssure ahead of expected IPO

The logo of the world's second largest reinsurer Swiss Re is seen inside the company's offices in Zurich, Switzerland, February 23, 2018. REUTERS/Moritz Hager

ZURICH (Reuters) - Reinsurer Swiss Re (SRENH.S) has agreed a deal with Japan’s MS&AD Insurance Group (8725.T) under which MS&AD will invest a further 315 million pounds ($398 million) into Swiss Re’s closed-book business ReAssure.

The deal will increase MS&AD’s stake in the British closed-book business to 25 percent from currently 15 percent, Swiss Re said on Thursday, as the world’s second-largest reinsurer prepare ReAssure for a possible initial public offering (IPO) next year.

“As we continue to work toward the potential IPO of ReAssure in 2019, the increase of MS&AD’s stake to 25 percent is a strong vote of confidence from our minority shareholder and long-term partner,” Swiss Re Life Capital head Thierry Leger said in a statement.

“We are delighted to have them as investors alongside us and together we remain committed to supporting ReAssure in its strategy of leading the way in UK life and pensions consolidation.”

Hit by a 17 percent fall in net profit for the first-half of 2018, Swiss Re in August announced it was exploring a possible 2019 listing for ReAssure on the grounds that the business needed access to new capital to acquire additional closed books.

ReAssure has about 45 billion pounds in assets under management and 3.3 million policies.

MS&AD and rival Japanese property and casualty insurers have been aggressively acquiring and investing in overseas assets as they seek to diversify their risk portfolio.

MS&AD in October 2017 said that by taking a stake in unlisted ReAssure it aimed to build know-how of the closed-book life business, where firms buy policy portfolios from other firms instead of underwriting new ones.

The deal between Swiss Re and MS&AD values ReAssure at 3.5 billion pounds, or $4.4 billion, but analysts have said ReAssure could achieve a market capitalization of about $3 billion, or roughly half its book value.

Reporting by Brenna Hughes Neghaiwi; Editing by Maria Sheahan and Rashmi Aich

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