The deal, expected to close by midyear 2006, was certainly no surprise, as reports about ERC/GE being shopped surfaced from time to time. GE's chairman and CEO, Jeff Immelt, conceded that “Insurance Solutions has been a tough strategic fit for GE,” noting the reinsurer had lost some $700 million over the last five years and bled GE of $3.2 billion in capital infusions. Mr. Immelt lamented that “by its nature, reinsurance is volatile and consumes capital to grow.”

Jacques Aigrain, CEO-designate of Swiss Re, expressed confidence in the financial health of his new acquisition. “We are not driving in the night without headlights,” he said, adding that “we know what are appropriate reserves and adequacy, and we have learned some hard lessons. We believe the reserves are adequate at closing.”

The deal appears to be a nice fit as there is little redundancy in the business written by the two firms, with GE Insurance doing mostly smaller regional accounts, while Swiss Re focuses on global and national business. Still, Swiss Re expects to lose about 30 percent of the acquired book in the transition–enough to make the race next year with Munich Re a close one.

Swiss Re indicated that GE Insurance will be fully integrated into its new parent and will not continue as a separate, autonomous U.S. subsidiary.

The acquisition of GE Insurance Solutions, the fifth-biggest global reinsurer, will give number-two Swiss Re a leg up to leapfrog over Munich Re into the top spot.