GE sells off insurance arm
Cutting and pruning. That's what GE is doing as it sells off most of its remaining insurance and reinsurance business to a specialist, the Swiss Reinsurance Company. (Reinsurance, as you may know, is the insurance that insurance companies buy to limit their exposure to liability.)
The deal is for $6.8 billion, involving cash, debt assumption, and stock. GE will end up with around 12% of Swiss Re's stock. . The business has been sold off at a loss for GE.
Swiss Re is the world's #2 reinsurer, while GE Insurance Solutions is #5. The purchase will put Swiss Re in a position to compete more effectively with #1 in its industry, Munich Re.
GE has been steadily unloading all its insurance assets over the past few years. GE Chairman and Chief Executive Jeffrey Immelt is reported as calling the insurance a "tough strategic fit." That business has been a major money loser over the past five years for GE. The company will, for reasons not explained, hold on some of its North American life reinsurance assets.
A New York Times story ("G.E. Completes Its Exit From Insurance Industry", 11/18/05), quotes one analyst as saying:
Reinsurance has been G.E.'s problem child….Although this move resets G.E.'s earnings base modestly lower, it will be a faster growing more capital efficient company off this base.
