Swiss Re Ltd., the world’s second- biggest reinsurer, will invest as much as $425 million in Richard Li’s FWD Group as it pushes for growth in Asia.
The company will buy 12.3 percent of FWD from Pacific Century Group, also owned by Li, a son of Asia’s richest man, as part of the agreement and invest in the insurer’s expansion across the continent, Zurich-based Swiss Re said in an e-mailed statement today. The transaction, expected to close in the first quarter of next year, reflects “commitment to high growth markets” in Asia and elsewhere, it said.
Swiss Re is seeking to bolster its primary insurance business with acquisitions in countries such as China, India and Brazil.
Pacific Century Group bought ING Groep NV’s life insurance assets in Hong Kong, Macau and Thailand, and the general insurance and pensions business in Hong Kong, renaming the operations FWD in August.
“The transaction is a financial investment and proof of a sound capital base at the group holding level being invested into the promising Asian life and health growth market,” Stefan Schuermann, a Zurich-based analyst with Vontobel who recommends clients buy Swiss Re shares, said in an e-mailed report to investors. “We expect Swiss Re to report a solid third quarter 2013, further enhancing cash generation and prospects in regard to the dividend.”
Swiss Re fell 0.3 percent to 76.6 Swiss francs at 11:42 a.m. in Zurich, valuing the company at 28.4 billion francs ($31.1 billion). The share has risen 16 percent this year.
The stake Swiss Re will finally own in FWD will depend on the amount of committed capital deployed, the company said.
“FWD is an exciting new regional player which will bring attractive insurance products to help address the rapidly growing needs of consumers and significant protection gaps across Asia,” Swiss Re Chief Executive Officer Michel Lies said in the statement.
Pacific Century bought the insurance and pension units of ING last year in a sale that valued the life businesses at 24.3 times estimated 2012 earnings and 1.9 times estimated book value of 865 million euros, ING said at the time.
“As we look to build FWD for the long-term, Swiss Re’s commitment to Asia is entirely consistent with our aspirations to create a leading life insurer across the region,” Richard Li said in an e-mailed statement. “I am excited at the prospects for FWD to pursue opportunities that the insurance industry has not yet been able to realize.”
–Editors: Mark Bentley, Jon Menon