So far the signs seem favorable for the outcome of the merger between Swiss Re and GE Insurance Solutions. Late last month, A.M. Best affirmed the financial strength ratings for both Swiss Re and GE's rated subsidiaries two months after the mega-deal was completed.
"In A.M. Best's view, Swiss Re's risk-adjusted capitalization remains very strong following the acquisition of GE Insurance Solutions, despite higher capital requirements from increased exposure of the combined group to natural catastrophes and other acquisition effects," the agency wrote.
Best also said the acquisition provides Swiss Re with better access to the U.S. broker market and diversifies its portfolio.
In addition, the first six months of Swiss Re's financials--which included 21 days combined with GE Insurance Solutions--showed an improvement of three points in the property-casualty combined ratio to 93.
On the negative side, Best said the newly combined group continues to face uncertainties regarding future claims reserve developments of its U.S. book of business.
"In particular, Employers Reinsurance Corp. had experienced significant adverse developments in the past, although the additional reserve strengthening at year-end 2005 alleviated some of the concerns," Best wrote.
Swiss Re said in July that it will reduce 250 positions at the management level this year, which will lead to an overall reduction of 2,000 positions next year. The Zurich-based company said the acquisition of the Kansas City, Mo.-based GE should result in savings of $300 million by the end of next year.
The $6.8 billion transaction between the world's second-largest and fifth-largest reinsurers was announced last November. At the time, GE Chairman Jeffrey Immelt said that GE Insurance Solutions' business had been fundamentally repositioned over the past five years, and as a result would make a good fit with Swiss Re.
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