Munich Re in $3bn bid for US insurer

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The Independent Online
Munich Re, the world's largest reinsurance group, said yesterday it planned to acquire the third-ranked US reinsurer American Re for $3.3bn, boosting the German group's share of the lucrative US market.

The Munich-based insurance giant said its $65-per-share offer had the backing of the US firm's directors and its 64 per cent owner, investment firm Kohlberg Kravis Roberts. The takeover should be complete by the year- end, it added. US authorities and minority shareholders have yet to approve the deal which Munich Re said was hammered out "in a matter of weeks". The offer price represents an 11 per cent premium to American's price before the announcement.

The move would triple Munich Re's reinsurance business in the US, the world's biggest insurance market. It comes amid growing demand for firms that offer reinsurance - the way insurers protect themselves from exposure to risk from policy claims.

Analysts welcomed the acquisition as a long-term strategic move but were concerned at the seemingly high price being paid.

"It's a pretty full price when earnings are approaching a cyclical peak. It also ignores any goodwill or amortisation," said Tom Bennett, analyst at Paribas Capital Markets.

Munich Re shares declined DM47.5 to DM3,535 on the news.

It said that its latest acquisition would increase premium income from reinsurance to DM22.5bn (pounds 9.8bn) and overall income to DM37bn.