Reinsurer Swiss Re has announced that it is going to sell off its U.S. Admin Re® business for $600m in cash as it seeks to unlock capital that is tied up in it. Total cash proceeds from the sale will be $900m after a pre-closing dividend. Admin Re provides risk and capital management solutions by which Swiss Re assumes closed books of in-force life and health insurance business, entire lines of business, or the entire capital stock of life insurance companies.
The deal see’s Swiss Re sell their Admin Re holding company, Reassure America Life Insurance Company (REALIC), to Jackson National Life Insurance who interestingly are owned by longevity risk transfer stalwart Prudential. The deal is expected to close in the second half of the year and remains subject to regulatory approval. Swiss Re says that it will retain certain books of business.
Swiss Re Executive Committee Member and Chairman of Admin Re David Blumer said; “After conducting a thorough review of the Admin Re portfolio and evaluating the level of capital allocated to the Admin Re US business, we concluded that we should redeploy the capital in other parts of our business.”
Swiss Re Group Chief Executive Michel M. Liès says: “We consistently said the Group’s 2011-2015 financial targets are our top priority. Redeploying the funds freed up through this transaction within the Swiss Re Group will have a beneficial impact on all three of our financial targets in the future, that is to say return on equity, earnings per share and economic net worth growth.”
Swiss Re intend to continue their Admin Re business in the UK and continental Europe where it says they see more opportunity, attractive growth potential, more active insurance deal-flow and higher profit potential.
“Swiss Re is committed to being a recognised force in the closed life book business through the Admin Re Business Unit. By executing transactions in select markets that meet our strict hurdle rates, Admin Re can continue to extend its global market presence, while further strengthening its class-leading asset and capital management disciplines,” said Michel M. Liès.
Europe is definitely where the opportunity is for taking on large books of life and health business right now. It will be interesting to see whether a renewed focus on Admin Re business in Europe could lead to Swiss Re turning to the capital markets for risk transfer again as the Admin Re business model involves them assuming significant life insurance, longevity and mortality risks which could be offloaded via insurance-linked securities.