Swiss Re Completes Sale of $776 Million of Mandatory Convertible Bonds

July 2, 2004

Swiss Re announced the successful completion for its offering of three-year mandatory convertible securities, which is expected to generate proceeds of 640 million euros ($776 million).

The transaction, which Swiss Re said would refinance maturing debt and further increase its financial strength, was made at the same time that the company announced plans to acquire the U.K.’s Life Assurance Holding Corp. (see previous article).

Swiss Re’s CFO Ann Godbehere commented: “With this successful EUR 640 million transaction, Swiss Re continues to improve its financial strength by moving from senior debt to hybrid capital.”

Standard & Poor’s Ratings Services announced that it had assigned a preliminary rating of “AA” senior unsecured debt rating to the issue. “The notes are to be unconditionally and irrevocably guaranteed by Swiss Re. The rating on the notes is based on preliminary documentation and subject to review once final documentation is received,” said S&P. “The rating on the notes reflects the guarantee, which constitutes a direct, unsubordinated, unconditional, and unsecured obligation of Swiss Re.”

Swiss Re said it had “experienced strong demand for the mandatory convertible securities from a diversified investor base and the issue was heavily oversubscribed. The exercise price was set at CHF 80.41 [$64.14]. The securities will automatically convert into Swiss Re shares in three years. The mandatory convertible securities will pay a coupon of 6.125 percent. Swiss Re will participate in any future share price appreciation of up to 20 percent of the exercise price.

“No additional Swiss Re shares will be required to support the mandatory convertible securities. Underlying shares previously committed to Swiss Re’s convertible bond issued in 2001 have been reallocated to support today’s transaction. The reallocation was made possible by the purchase of call options which offset the exposure to deliver Swiss Re shares under the 2001 convertible bond. The increase in conditional capital approved by the Annual General Meeting of Swiss Re in May 2004 has not been used for this transaction.

“The mandatory convertible securities will be issued by a non-Swiss fully owned subsidiary and will be fully guaranteed by Swiss Reinsurance Company. Trading on SWX Swiss Exchange is expected to begin around 23 July 2004.”

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