Fri, Feb 09, 2018 - Page 10 News List

Softbank in talks to buy Swiss Re stake

DIVERSIFICATION:The Japanese company plans to buy as much as a third of the Swiss giant reinsurer’s shareholdings, but the talks are still at a very early stage

Bloomberg

Softbank Group Corp CEO Masayoshi Son gestures during a news conference to announce the company’s financial results in Tokyo on Wednesday.

Photo: AFP

Softbank Group Corp chief executive officer Masayoshi Son is warming to an industry that has long been a favorite of billionaires looking to diversify their business empires.

Softbank could purchase as much as a third of Swiss Re AG, one of the world’s largest reinsurers, according to people familiar with the discussions who asked not to be identified because no agreement has been reached.

The transaction could be valued at more than US$10 billion.

Swiss Re confirmed the talks and said they are at a very early stage.

The company may try to offer Swiss Re’s insurance products directly to consumers, including to people who drive for Uber Technologies Inc or utilize office space from WeWork Cos, two of its investments, said the Wall Street Journal, which reported the discussions earlier.

Softbank shares yesterday closed up 0.97 percent at ¥8,773 in Tokyo. Swiss Re closed at about 90 Swiss francs on Wednesday, for a market value of 31 billion francs (US$33 billion).

Its American depositary receipts soared 8.7 percent to US$25.75 in New York.

“There is no certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction,” Zurich-based Swiss Re said in a statement.

A spokesman for Softbank did not immediately respond to requests for comment.

Reinsurers help insurers shoulder the costliest risks, like claims from hurricanes and earthquakes. However, the industry has recently 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.

Still, reinsurance has remained attractive to big-money investors.

Billionaire 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,” Imperial Capital analyst David Havens 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,” Havens wrote.

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