Scor SE, France's largest reinsurer, agreed to purchase a unit of Assicurazioni Generali SpA for about $750 million to become the biggest U.S. life reinsurer.
Scor will buy Generali U.S. Holdings Inc. for cash, and also pay an "earnings adjustment," the Paris-based company said in a statement today. The company, which may issue debt to finance the acquisition, will book a gain of at least 100 million euros ($131 million) when the deal closes, it said in a presentation.
Scor is leapfrogging Zurich-based Swiss Re and Chesterfield, Missouri-based Reinsurance Group of America Inc. to become the largest life reinsurer in the U.S. The company will have a market share of more than 25 percent, based on Munich Re's preliminary 2012 survey for the Society of Actuaries, Scor said. The French company in 2011 expanded in the U.S. by buying mortality-risk businesses from Aegon NV's Transamerica Re unit.
"The seller's decision created an opportunity," Scor Chief Executive Officer Denis Kessler said on a call with journalists today. By buying Generali's business, Scor will have an "extremely satisfying position" in the U.S. life reinsurance market and is not seeking more purchases, he said.
Scor climbed 3 percent to 22.94 euros by 2:39 p.m. in Paris trading, giving it a market capitalization of 4.4 billion euros. Generali rose 1.4 percent to 14.54 euros in Milan, valuing the company at about 22.6 billion euros.
Generali, led by CEO Mario Greco, is seeking to boost profit and increase capital by disposing of certain assets, cutting costs and focusing on faster-growing emerging markets. The Trieste, Italy-based company, which set a goal of 4 billion euros in revenue from asset sales by 2015, is also selling Swiss asset-management unit BSI Group.
"We continue to make steady progress in our strategy of disposing of non-core assets and strengthening the group's capital position," Greco, 53, said in a separate statement.
The Italian insurer said it expects proceeds from the sale of $920 million, including the $750 million purchase price, $30 million of estimated profit and $140 million of released collateral, it said. The company will book a $150 million capital gain, boosting its Solvency I ratio by about one percentage point.
The acquisition is "very positive" for Scor, Michael Huttner, a London-based analyst JPMorgan Chase & Co. with a neutral rating on the stock, said in a note to investors.
Citigroup Inc. and Mediobanca SpA advised Generali on the transaction, while BNP Paribas SA and Deutsche Bank AG advised Scor, according to statements from both companies.
The French reinsurer, led byKessler, 61, is targeting total 2013 premiums of more than 10 billion euros, compared with 9.51 billion euros last year, it said last month. Generali's U.S. life-reinsurance business represented premiums of $925 million last year. Scor expects to complete the deal in the second half, according to its presentation today.
Generali's U.S. life-reinsurance business, which has about 120 employees, is run as an autonomous business from its European parent, helping smooth the planned combination with Scor's existing U.S. franchise, the French company said. Generali said that it will continue to operate in the U.S. property-and-casualty market through its New York branch.
Reinsurers help insurers shoulder risk, earning premiums that they can invest to make a profit. Generali's U.S. life-reinsurance business last year had about $64 billion in U.S. recurring new business, ranking No. 4, Scor said, according to Munich Re's preliminary data. Scor was No. 3 in 2012, with $77 billion in new business, it said.