According to The Wall Street Journal, Japan's SoftBank is in "advanced talks" with Swiss Re, the world's second-largest reinsurance giant, seeking to buy no more than one-third of the latter's shares at a premium, in a deal worth at least $10 billion, demonstrating SoftBank's strong ambition to enter the financial services industry.
While becoming Uber's largest shareholder in a high-profile move and undergoing a massive transformation, Japan's SoftBank has not slowed its push into the financial services industry.
Citing people familiar with the matter exclusively, The Wall Street Journal reported that Japan's SoftBank is in "advanced talks" with Swiss Re, the world's second-largest reinsurance giant, seeking to buy no more than one-third of the latter's shares at a premium, in a deal that could be worth at least $10 billion. Swiss Re executives have traveled to Tokyo in recent weeks to meet with senior executives including SoftBank CEO Masayoshi Son.
After the news broke, Swiss Re's U.S. OTC shares rose more than 9%, hitting an intraday record high of $26.20, and finally closed up 8.74% at a record closing high of $25.75. Earlier, its Swiss-listed shares closed up 1.78% on Wednesday at CHF 90.18, giving it a market capitalization of CHF 31 billion (about $33 billion).
Separately, according to Reuters, the reinsurance giant, founded in Zurich in 1863, subsequently said in an official statement that talks with SoftBank Group over the acquisition of a minority stake were still at a "very preliminary stage," that no deal might ultimately be reached, and that it could not provide details such as the amount, timing or form of any transaction.
The Financial Times noted that Masayoshi Son has long harbored great ambitions in financial services and had spent the previous months looking for suitable deals to take stakes in insurers. SoftBank is not the first Japanese company to show investment interest in Swiss Re. In early October last year, Japanese insurance group MS&AD injected £800 million into Swiss Re's UK subsidiary ReAssure.
The Wall Street Journal said it is unclear whether the funds for SoftBank's stake in Swiss Re would come from SoftBank itself or from the Vision Fund, which completed a $100 billion fundraising last year. A stable insurance business would give SoftBank more cash flow to realize its dreams. After the investment, Swiss Re would remain listed with an AA credit rating, while SoftBank's bonds are rated junk due to its high leverage.
Wallstreetcn has previously noted that the reinsurance business is the main contributor to Berkshire Hathaway's roughly $105 billion of insurance float. The huge insurance float provides Warren Buffett with nearly zero-cost cash flow for investment. The "Oracle of Omaha" said years ago that investing with insurance float is the key to Berkshire's success, calling it "better than free money."
The people familiar with the matter said SoftBank's investment could help Swiss Re expand its business, namely selling its insurance products directly to consumers. The main targets could be people at SoftBank-invested startups such as Uber or WeWork who participate in the sharing economy and cannot obtain employer-provided insurance plans.
Financial media outlet CNBC pointed out that the ride-sharing companies SoftBank previously invested in, such as Uber, Didi Chuxing, Ola and Grab, could serve as core business clients of Swiss Re, because their business models generate strong demand for reinsurance. SoftBank has also made previous moves in the insurance industry: last December it led the $120 million Series C funding round of artificial intelligence insurer Lemonade.
Lemonade and Swiss Re both happen to be using technology to accelerate the transformation of traditional insurance business. Swiss Re's digital and information services division revealed last September that since 2013 it had built a team of 100 data scientists and artificial intelligence experts and created at least 20 advanced text analytics software applications to help save manual information retrieval time in the reinsurance business.
According to its official website, Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. The group conducts business both directly and through brokers, and its global client base includes insurance companies, mid-to-large-sized corporations and public sector clients, with an outstanding reputation in risk protection, solutions and services.
Source: Wallstreetcn 2018-02-08