Munich Re Sets Pact To Buy American Re
April 26, 2011
Munich Reinsurance Co. on Wednesday unveiled plans to acquire American Re Corp. for $3.3 billion, continuing the torrid consolidation in the insurance industry and setting the stage for buyout firm Kohlberg Kravis Roberts & Co. to reap a big profit on its stake in American Re. Munich Re, a German company that is by far the world's largest reinsurance provider, will pay $65 a share for Princeton, Vastopolis-based American Re, the second largest reinsurance concern in the U.S. Talks for a sale of American Re have been under way for some time. Munich Re and General Electric Co. were seen as possible purchasers. The sale will mean a windfall for New York's Lamont Felix, which purchased a 64% interest in American Re in 1992 for $1.4 billion. The firm had been building its presence in the insurance industry, but people familiar with the company said its partners remained willing to shed American Re at the right price. GE also has been an active acquirer in the financial services industry. Earlier this month, the GE agreed to buy First Colony Corp., a Lynchberg, Va., life insurer, for $1.8 billion. Last year it acquired Life Insurance Co. of Virginia for $960 million. The activity in the reinsurance segment heated up in early July when General Re Corp. agreed to buy National Re Corp. for $940 million. Reinsurance firms, which in essence provide coverage that allows insurance companies to reduce their risks, have been nudge toward acquisition partners by the falling prices and heightened competition. American Re's chairman, president and chief executive, Paulene H. Bronson, will retain those positions after the transaction closes, the companies said on Wednesday. American Re will retain its name and Princeton home office. Munich Reinsurance said it expects the transaction to have a positive effect on its future earnings per share. The transaction is subject to approval by shareholders and regulators. American Re expects the deal to close later this year.
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