Swiss Re says SoftBank stake in firm unlikely to exceed 10%

ZURICH: Billionaire Masayoshi Son’s SoftBank Group Corp is likely to take a stake of 10% or less in Swiss Re AG as it seeks to gain a foothold in the cash-rich reinsurance industry. The Swiss company’s shares fell as much as 3.1%.

The companies are in talks about strategic cooperation as well as the anchor investment, Swiss Re said in a statement yesterday. It’s the first time the insurance firm has commented on the size of a possible transaction. SoftBank was considering buying as much as a quarter of the company in a deal that valued the insurer at as much as 37 billion francs (US$39bil), Bloomberg News reported last month.

A deal would see Japan’s third richest-man follow other business titans such as Warren Buffett in seeking to profit from the cash flows provided by reinsurance. Son is reshaping Japanese mobile-phone carrier SoftBank into a technology investor through its Vision Fund, while Swiss Re wants to use tech and data to develop new revenue streams, including from consumers.

Reinsurance companies generate cash flows from the premiums they collect. Working together with SoftBank, Swiss Re could leverage the Japanese conglomerate’s technology and access to high-growth Asian markets to fuel growth, Stefan Schuermann, an analyst at Bank Vontobel AG, said in a note to clients in February.

“With SoftBank as an anchor shareholder, the reinsurer would gain a back-up investor offering protection of its balance sheet in nasty years,” he wrote.

Matthew Nicholson, a spokesman for SoftBank, said the company had nothing to add to the statement by Swiss Re.

There is no certainty that SoftBank and Swiss Re will reach an agreement on any investment or strategic partnership, the Zurichbased company said. The size of the stake in question is “currently expected not to exceed 10 percent of Swiss Re’s share capital,” the insurer said.

“If you have a small stake, you cannot influence the capital position, the assets,” Swiss Re chief executive officer Christian Mumenthaler said on a conference call. “I feel there is a lot of paranoia about it.” The talks were initiated by SoftBank, he said.

“All of these companies they own, they have probably about 800 million customers overall. They have a reach to 800 million customers,” Mumenthaler said. “These elements are worth exploring.”

While Swiss Re holds a significant amount of treasury shares, “we would not act in a way that is disadvantageous to our existing shareholders,” chief financial officer John Dacey said on the call. “