SoftBank Group Corp. is in talks to buy as much as a third of reinsurance giant Swiss Re AG, according to people familiar with the discussions.
Swiss Re confirmed the talks and said they are at a very early stage. “There is no certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction,” the Zurich-based company said in a statement Wednesday.
People familiar with the talks said the deal under discussion would involve SoftBank buying Swiss Re’s shares at a premium that would value the stake at more than $10 billion. Swiss Re closed at about 90 Swiss francs Wednesday, for a market value of 31 billion francs ($33 billion). Its American depositary receipts soared 8.7 percent to $25.75 in New York.
The Wall Street Journal reported the discussions earlier. A spokesman for SoftBank didn’t immediately respond to requests for comment.
SoftBank Chief Executive Officer Masayoshi Son has been racking up a dizzying array of investments over the last year, as he reshapes Japan’s largest mobile-phone carrier and majority owner of Sprint Corp. into an unstoppable force in the technology world. SoftBank closed a $100 billion Vision Fund last year and has taken stakes in businesses including ride-hailing, chipmaking, office-sharing, satellite-building, robot-making, even indoor kale-farming.
Moving into reinsurance would be a way to tap into long-term cash flows. Reinsurers help insurers shoulder the costliest risks, like claims from hurricanes and earthquakes. Recently, however, the industry has faced some major challenges. A glut of capital — and new ways Wall Street dreamed up to transfer risk — has pushed down the prices that the companies can charge for coverage.
Even so, reinsurance has remained attractive to big-money investors. Warren Buffett has used the “float” — or premiums held by such businesses before paying claims — to fuel his stock picks and acquisitions at Berkshire Hathaway Inc. Exor NV, the investment company for Italy’s Agnelli family, bought control of Bermuda reinsurer PartnerRe Ltd. two years ago as a way to diversify holdings, which range from Fiat Chrysler Automobiles NV to the publisher of the Economist magazine. Hedge-fund managers from David Einhorn to Dan Loeb have also started reinsurers in recent years.
“Reinsurance, especially through a high-class outfit like Swiss Re is attractive for several reasons,” David Havens, an analyst at Imperial Capital, said in a note to clients. Higher interest rates could help boost earnings, the industry is generally uncorrelated to others, and “Swiss Re is a gem of a company with top-flight management, generally solid results, a strong balance sheet and global diversification.”
SoftBank may also try to offer Swiss Re’s insurance products directly to consumers, the Wall Street Journal reported, citing people familiar with the matter. SoftBank would use its technological expertise and network of companies, the newspaper said. The Japanese company has stakes in Uber Technologies Inc. and WeWork Cos., giving it access to workers who don’t get insurance through their employers.
SoftBank has already taken steps in the home insurance industry, investing last December in Lemonade Inc., a New York-based startup that uses artificial intelligence and bots to minimize paperwork and speed up the claims process for renters and homeowners.