Swiss Reinsurance Co., the world's second-largest reinsurer, agreed to buy General Electric Co.'s reinsurance business for at least $6.8 billion in cash and stock, in the company's biggest acquisition.

Swiss Re, which also is assuming $1.7 billion of debt, will sell as much as $7.5 billion of securities to fund the purchase of GE Insurance Solutions, the Zurich-based company said in a statement yesterday. General Electric will own more than 10 percent of Swiss Re's stock after the sale.

The acquisition gives Swiss Re an additional $6.2 billion of annual net premiums, vaulting it ahead of Munich Re as the world's biggest reinsurer. It also coincides with an increase in insurance rates after a record U.S. hurricane season. Insurers buy reinsurance from companies including Swiss Re to help limit losses.

"Now is a good time to buy reinsurers," said Florian Esterer, a Zurich-based fund manager at Swisscanto Asset Management AG, which oversees $43 billion, including about 1.8 million Swiss Re shares. "Premium prices will rise over the next two years."

Swiss Re employs about 1,100 workers at its domestic headquarters in Armonk. Company spokesman Steve Dishart said it is too early to speculate about the job or operational impact of the acquisition on Swiss Re in Armonk or GE's reinsurance operations. In Connecticut, GE reinsurance employs 135 people in the Hartford area but none in Fairfield County.

General Electric Chief Executive Officer Jeffrey Immelt is selling insurance businesses to focus on faster-growing areas such as consumer finance. The Fairfield, Conn.-based company today raised its earnings forecast, boosted the quarterly dividend and increased a share buyback program following the sale.

Shares of Swiss Re rose 1.15 francs, or 1.2 percent, to 94 Swiss francs in Zurich, giving the company a market value of 30 billion francs ($23 billion).

The purchase of Kansas City, Mo.-based GE Insurance Solutions, the world's fifth-biggest reinsurer, will increase earnings per share and return on equity beginning in 2007, Swiss Re said. The takeover also will add assets of $41.5 billion, giving Swiss Re a total of 265 billion francs.

"Scale does matter in our business," said Jacques Aigrain, 51, who takes over as CEO of Swiss Re from John Coomber on Jan. 1. "A strong balance sheet and absolute scale allows us to serve the industry and to serve the final clients better and with more capital efficiencies, especially in view of major catastrophes."

Swiss Re expects annual pretax savings of $300 million from the takeover, beginning 18 months after the purchase is closed by mid-2006. The company expects a charge of $250 million tied to the acquisition and there will be "some" job cuts, Aigrain said.

Swiss Re, which last month said it will miss a 2005 profit target after the hurricanes, in August picked Aigrain, a former mergers banker at JPMorgan Chase & Co., to help revive earnings growth. Swiss Re, which helps insurers shoulder risk, had losses in 2001 and 2002 after claims from the Sept. 11 terrorist attacks and as declining stock markets eroded the value of investments.

Hurricanes that battered the Gulf Coast this year will probably lead reinsurers to raise catastrophe premium rates by an average of 20 percent to 30 percent next year, according to Michael Huttner, an analyst at JPMorgan Chase & Co. Swiss Re said on Nov. 4 there's a "clear expectation in the U.S. that prices will go up."

Swiss Re may end up paying as much as $7.6 billion for the GE unit, assuming the business generates additional earnings of $800 million by the time the deal is completed, Aigrain said. The acquisition price would be equal to book value, compared with the average of 1.27 times book value for the world's 34 largest publicly traded reinsurance companies tracked by Bloomberg.

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