Swiss Re, the world's largest reinsurer, has agreed to buy Barclays' life assurance portfolio for £753 million (€965 million) in cash, even as it wrote down more credit assets.
Swiss Re said yesterday it would acquire about 760,000 life insurance and pension policies and annuity contracts, for which Barclays had stopped writing new business since 2001, representing £6.8 billion in invested assets.
The deal, boosting its Admin Re unit, which buys life insurance portfolios after other companies have stopped writing new business, showed that Swiss Re was strong enough to take advantage of tough markets, chief executive officer Jacques Aigrain said.
"The difficult market environment also creates new opportunities," he said. "Swiss Re has the execution capability and capital strength to seize these opportunities." The strategy of adding top-line growth through the so-called Admin Re unit is one of the reasons why Swiss Re says it will grow faster than other reinsurers as markets stall.
"The acquisition and the price paid fits into the strategy and is good news," said Lanksbanki Kepler analyst Fabrizio Croce.
Swiss Re, which also reported second-quarter net profit below expectations, said it made a mark-to-market loss on structured credit default swaps (CDS) of 362 million Swiss francs (€222.3 million) in the second quarter.
"There are still uncertainties over its CDS exposure," said Vontobel analyst Viktor Dammann. "The profit forecasts could still be cut."
Barclays said the unit was not core and it expected a post-tax gain of about £330 million on the sale.
Excluding that gain, the transaction is not expected to have a material impact on its earnings per share, and Barclays will continue to sell life insurance products from third party providers.
Unlike many other reinsurers - which reinsure risk for other insurance companies - Swiss Re has been hit hard by the credit crisis, having now notched up total writedowns of some 2.7 billion francs in its financial services unit, which creates products to transfer risk to capital markets.