Due to Swiss Re's very strong capital position and operating cash flows, the company expects to increase its internal funding of the transaction to purchase GE Insurance Solutions by approximately $800 million to $900 million, with a corresponding reduction in planned equity raising.
However, the expected total consideration for the acquisition of GE Insurance Solutions after closing adjustments remains unchanged at $7.6 billion, the Swiss insurance giant said in a statement.
As previously announced, the total external capital funding will have both equity and hybrid debt components. Swiss Re had already raised CHF1.0 billion in mandatory convertible securities in December 2005.
Swiss Re and General Electric (GE) have agreed that the portion of the purchase price payable in Swiss Re shares is to be reduced to $2.4 billion. In addition, $500 million of mandatory convertible instruments are expected to be issued to GE, resulting in total ownership in Swiss Re by GE of less than 10%.
Further, Swiss Re expects to undertake a rights offering of $1.0 billion equivalent to existing shareholders at market, new shares will be offered to existing shareholders without a discount. Swiss Re expects to offer new shares on a 1-for-17 basis (ie. one new share for each 17 existing shares). Shares not taken up will subsequently be available in a global offering.
Hybrid debt securities, which are still planned at $2.0 billion equivalent, will also be launched in the second quarter of 2006.