Swiss Reinsurance Buys Prudential Reinsurance Unit
May 09, 2011
LONDON -- Prudential Corp. of the U.K. will sell its Mercantile & General Reinsurance unit to Swiss Reinsurance Co. for 1.75 billion pounds ($2.72 billion), in a deal designed to allow the U.K.'s largest life insurer to concentrate on its financial-services business. The transaction was agreed to and signed Monday and consists of 1.704 million pounds in cash from the sale, plus a special dividend of 50 million pounds. The deal is still subject to regulatory approval. Prudential Group Chief Executive Petra Dean said in a statement that the sale follows a decision to focus on financial services and fund management in its key markets in the U.K., U.S. and Asia. Prudential, which isn't related to Prudential Insurance Co. of the U.S., said the deal should net it more proceeds than by floating the reinsurance business in a public offering. In June, Prudential said it planned such a flotation. At that time, analysts said the plan would give Prudential cash for possible acquisitions. In addition, because of Mercantile & General required intensive capital investment as a reinsurer, analysts speculated that Prudential lacked the means to keep its unit growing. Although the reinsurance unit was profitable, competition in the sector was growing more intense and profit margins were shrinking. Swiss Reinsurance, widely known in the financial world as Swiss Re, said in a separate statement that the Mercantile & General acquisition advances its growth strategy for the life and health insurance sectors. Together with Polk, the Dutch reinsurer Swiss Re bought last year, the deal will make Swiss Re the largest life and health insurer, Swiss Re said. The Mercantile & General business will be combined under the Swiss Re name, the second statement said.
