Any doubts about the viability of capital offerings by reinsurers was erased with the announcement that Swiss Re had placed all of the shares it offered for sale, including all the shares provided to cover over-allotments, a total of 24,785,848, which, combined with the sale of subordinated convertible bonds, raised over 6 billion Swiss francs, about $3.62 billion.
The new capital will be primarily used to fund the $ 2 billion purchase of Lincoln National’s reinsurance operations. The additional funds will be used to meet the anticipated upsurge in demand for reinsurance following the Sept. 11 attacks and for general corporate purposes.
Following the WTC disaster there had been speculation that Swiss Re might delay, or even cancel, the share offering, but the strong rebound in share prices, reflecting increased demand and the need for additional underwriting capacity, convinced the company to proceed.
It actually issued slightly less than the 28 million shares originally authorized, and increased its U.S. subsidiary’s subordinated convertible bond offering from $1 billion to $1.15 billion, raising $750 million more than it had originally estimated.
Swiss Re shares hit a low of around $69 a share following the Sept. 11 attacks, but have rebounded sharply, closing at $102.80 last Friday. The offering price for the shares had been set at Sw. Frs. 1
65.75 ($100.10).
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