Swiss Re Completes GEIS Acquisition

June 12, 2006

Swiss Re and General Electric have announced the completion of the sale of GE’s reinsurance business, GE Insurance Solutions, including Employers Reinsurance Corp. (ERC), to Swiss Re for between $7.4 billion, according to Swiss Re, or $7.8 billion, according to GE, in cash and securities plus the assumption of $1.7 billion in GEIS debt.

Swiss Re noted that the “acquisition creates the world’s largest and most diversified global reinsurer.” It plans to integrate GEIS operations into its own divisions over the next 18 months.

“The acquisition of GE Insurance Solutions consolidates further Swiss Re’s global leadership position,” stated CEO Jacques Aigrain. “We will now move swiftly to integrate GE Insurance Solutions, adding new talents to our global workforce and building on the benefits of an enlarged client base and expanded product offerings.”

Swiss Re’s version of the financing of the acquisition states it paid: “$6.8 billion plus closing adjustments of $0.6 billion for a total of USD 7.4 billion. Between 18 November 2005 and closing, the book value of GE Insurance Solutions further increased by $1.7 billion through cash capital contributions from General Electric and earnings which Swiss Re reimbursed to GE on closing.”

GE’s version states that it sold GEIS for “$7.8 billion in cash and securities plus the assumption of $1.7 billion in GE Insurance Solutions Corporation debt.”

Swiss Re also noted that the new shares it issued to GE as part of the sale have an equivalent value of $2.4 billion, based on a share price of CHF 87.58 ($72.07). “GE now owns 8.9 percent of Swiss Re’s share capital,” said the bulletin. “As a result of the issuance of new shares to GE, the number of Swiss Re shares entitled to dividends increases by 33 300 957 shares to 358 212 933 shares. In addition, Swiss Re issued mandatory convertible instruments (MCI) for $500 million to GE. The MCI will automatically convert into Swiss Re shares in three years.”

Concerning how it will integrate GEIS into Swiss Re, the Company’s bulletin said only that it plans on “building on its talents, franchise and client base. Functions and teams will be merged, leading to an overall reduction of office locations as well as staff reductions in a number of locations. Through the organizational streamlining Swiss Re expects to capture cost synergies of at least $300 million per year, to be realized by the end of 2007. Overall the acquisition will be accretive to earnings already in 2007.”

The integration will be a complex task. As GE’s bulletin notes, GEIS “operated with 2,500 employees in 50 offices in 22 countries. The operating companies among those included in the transaction are: Employers Reinsurance Corporation, GE Frankona Reinsurance Limited (UK), GE Frankona Ruckversicherungs-Aktiengesellschaft, GE Reinsurance Corporation, Westport Insurance Corporation and First Specialty Insurance Corporation.”

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