The FINANCIAL — Munich Re has agreed to acquire specialty insurer HSB Group from AIG. The planned purchase is a further step in Munich Re’s strategy for the US insurance market, decided on last year. The agreed purchase price is US$ 742m (€531m), funded entirely from existing resources.
According to Munich Re, the HSB Group, headquartered in Hartford, Connecticut, is a wholly owned subsidiary of the American International Group (AIG). The core of the HSB Group is Hartford Steam Boiler Inspection and Insurance Company (HSB), one of the largest insurance and inspection companies specialising in engineering risks in the USA. HSB is a market leader in providing machinery/plant and equipment breakdown insurance, inspection, certification and engineering consulting services. In 2007, HSB posted an after-tax profit of US$ 158m and the company’s average combined ratio since 2003 has been an outstanding 73.8% (both figures based on consolidated statutory financial statements). The gross written premium income of HSB Group in 2007 amounted to US$ 904m (based on US-GAAP).
Munich Re is acquiring 100% of HSB for US$ 742m (€531m) in cash. Munich Re will finance the purchase price from internal resources. Completion of the transaction is subject to regulatory approval, which is expected to be completed at the end of the first quarter of 2009.
“The acquisition of HSB is a perfect fit for our US strategy: It is another step in developing our position in high return specialised niche segments. This is one of the declared aims of our Changing Gear programme for profitable growth,” said Peter Röder, Munich Re Board member responsible for US business. He added that the specific business model offered by insurers such as HSB helps to reduce the volatility of traditional reinsurance business. Direct operating control of HSB will lie with Munich Re America after the acquisition. Tony Kuczinski, Chief Executive Officer (CEO) of Munich Re America: “We extend a warm welcome to the clients and employees of HSB. HSB has built a tremendous reputation for underwriting highly technical machinery and engineering risks. We believe the strong underwriting culture of HSB and the company’s exceptional client focus makes it an excellent fit for Munich Re. We believe Munich Re’s clients will greatly value the addition of HSB’s products and services.”
CFO Jörg Schneider: “With HSB, we are acquiring a company that has an exceptional track record of underwriting expertise and sustained profitability. Owing to our strong capital base, this acquisition will not affect our share buy-back programme or the planned dividend of €5.50 per share for the financial year 2008.”
Douglas G. Elliot, President and Chief Executive Officer of HSB Group, welcomed the agreement with Munich Re. “Munich Re offers HSB new opportunities to grow our business profitably and expand our offerings in North America and globally,” said Elliot. “With Munich Re’s outstanding financial strength behind us, we can offer our clients the reassurance that they’re looking for in today’s uncertain market environment,” he added.
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