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Hannover Re Purchases Scottish Re's ING Life Reinsurance Portfolio


Posted on 23 Jan 2009

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Germany's second-largest reinsurer, Hannover Re, agreed to take over Scottish Re Group’s business of reinsuring U.S. life-reinsurance policies written by ING Groep NV. 
 
Hannover Re will also “acquire the policy administration systems of Scottish Re as well as other assets supporting the U.S. mortality reinsurance business,” it said today in a statement. The acquired business “is estimated to generate a premium volume of about $1.2 billion,” Hannover Re said. 
 
The reinsurer has said it wants to expand its less volatile life-reinsurance business through acquisitions to limit the profit swings that follow property and casualty claims from natural disasters. Hannover Re appointed Ulrich Wallin, 54, on Jan. 21 to succeed Wilhelm Zeller, 64, as chief executive officer in July. 
 
“In the mid-term we aim for a 50:50 mix of our premium income for life and non-life reinsurance business,” Zeller said at an analyst call, adding that following the transaction the reinsurer’s capital position “is at least as good as at the end of 2007.” 
 
Hannover Re abandoned its 2008 profit target of Oct. 21 after impairments on equity investments and high catastrophe claims led to a net loss of 142.8 million euros ($184.7 million) in the first nine months. The company may report its first full- year loss since it was founded in 1966. 
 
Bermuda-based Scottish Re had to be bailed out by a buyout group including Cerberus Capital Management LP in 2007. 
 
“We have agreed to assume Scottish Re’s commitments in return for certain investments of the underlying business which we evaluated and selected carefully,” Hannover Re spokeswoman Gabriele Handrick said. 
 
Hannover Re won’t need external funding to complete the acquisition, which it expects to be accretive to net income from 2009 and to be completed in the first quarter, it said. The reinsurer expects additional annual profit of more than $30 million per year from the transaction for the next five years, it said in a presentation filed on its Web site.


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