Business | General
German reinsurer to purchase AIG unit for $742m
Reinsurer Munich Re yesterday said it would pay $742 million to buy Hartford Steam Boiler (HSB) from its embattled parent company, American International Group (AIG).
- AP
- Published: 21:01 December 22, 2008
Berlin: Reinsurer Munich Re yesterday said it would pay $742 million to buy Hartford Steam Boiler (HSB) from its embattled parent company, American International Group (AIG).
The purchase price is considered well below HSB's value - estimated at between $1 billion and $2 billion by the Financial Times - as AIG is forced to sell off units to pay back a US government bailout loan.
"These are financial conditions that we wouldn't have dreamed of a short time ago," Munich Re's chief financial officer Joerg Schneider told reporters in a conference call.
Munich Re said it plan-ned to complete its purchase in the first quarter of 2009.
HSB, based in Hartford, Connecticut, is a specialty unit focused on engineering insurance and inspection. Peter Roeder, a Munich Re board member responsible for US business, said HSB was an attractive, low-risk investment because of its specialised business.
"The acquisition of HSB is a perfect fit for our US strategy," Roeder said.
"It is another step in developing our position in high return specialised niche segments."
The US government is forcing AIG to shed or sell some interest in units globally as a means to pay back the US government's $150 billion rescue package announced last month to help it pull through the credit crisis.
Survival
That bailout had replaced a previous $85 billion loan from the US Federal Reserve as it became apparent the struggling insurer needed more funds to survive.
Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses.
Munich Re also operates Ergo, one of Germany's biggest insurers, and Munich Reinsurance America.
Shares of Munich Re were down 0.2 per cent at 106.16 euros in Frankfurt trading on Monday.
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