Swiss Re has announced an agreement to sell its subsidiary ReAssure Group plc to Phoenix Group Holdings plc. As part of the agreement, which values ReAssure at £3.25bn, Swiss Re will receive a cash payment of £1.2bn, shares in Phoenix representing a 13% to 17% stake and be entitled to a seat on its Board of Directors.
ReAssure's minority shareholder, MS&AD Insurance Group Holdings Inc, will receive shares in Phoenix representing an 11% to 15% stake. The respective number of shares Swiss Re and MS&AD receive will depend on Phoenix's share price at closing of the sale, while the total shareholding of both companies is fixed at approximately 28%.
The transaction will reinforce Phoenix's position as Europe's largest life and pensions consolidator with £329bn of assets under administration and more than 14.1 million policies, giving it an enhanced platform to pursue further growth opportunities.
As part of the transaction, Swiss Re will reacquire the 25% stake in ReAssure currently held by MS&AD. The consideration for this purchase will be Phoenix shares with value of up to £1.0bn at signing. This represents a £0.1bn premium to MS&AD's cost base for its holding in ReAssure.
The financial impact of the transaction on Swiss Re will be subject to movements in Phoenix's share price prior to closing of the sale. It is currently estimated that the transaction will result in a 12 percentage points increase in Swiss Re's Group SST ratio and generate economic profit of $0.3bn. An estimated US GAAP pre-tax charge of approximately USD 0.3 billion in the fourth quarter 2019 mainly reflects the higher consolidated book value of ReAssure, driven by historically low interest rates. The impact of the reacquisition of shares from MS&AD will be reflected in the Group's shareholders' equity.
The transaction is expected to close in mid-2020, subject to approvals by Phoenix's shareholders, regulators and anti-trust authorities. Swiss Re's Board of Directors will assess the optimal use of the proceeds of the sale, taking into account the Group's capital position as of the end of 2019, and will provide an update with the release of the full-year results.
In connection with the transaction, Swiss Re Ltd would expect to issue a guarantee in favour of the holders of the €750m 1.375% notes due 2023 of Swiss Re Finance Jersey (previously Swiss Re ReAssure Limited), which will remain a wholly owned subsidiary of Swiss Re.