Munich Re US CEO: We Have Capital To Aid Buyouts By Insurers

By Lavonne Kuykendall
Dow Jones Newswire
December 2, 2008

CHICAGO (Dow Jones)--German reinsurer Munich Reinsurance Co. is in a good position to help U.S. insurers that might want to make acquisitions, the chief of its U.S. operations said.

"We have made it known we could be available to provide capacity" for a company that is planning to acquire either an insurance company or a book of business, said Tony Kuczinski, chief executive of Munich Re America, in an interview Tuesday.

As the largest reinsurer in terms of net premiums written, Munich Re could be in a good position to help generally well-financed insurers solve the capital availability problem by writing a reinsurance contract that would free up capital to do a deal. Kuczinski wouldn't name any companies Munich Re has made the offer to.

One of the biggest acquisition opportunities on the market is global insurer American International Group Inc. (AIG), which must shed businesses in order to pay back a $150 billion loan from the federal government. Several insurers have expressed an interest in some of the businesses, but weakened investments could make it difficult to come up with the money.

Munich Re itself has been reported to be a potential buyer for AIG's Asian life insurance operations, and Kuczinski said that Munich Re might be interested in acquisitions of its own but could also make some of its capital available to its customers, at a price.

The help might come in the form of a reinsurance contract that covers a portion of a client insurer's book of business, or part of a business it acquires, freeing up capital it could use to make an acquisition. Reinsurance has been used for such deals "for years and years," Kuczinski said.

At the end of 2007, Munich Re was the largest reinsurer as measured by net reinsurance premiums written, according to Standard & Poor's.

Munich Re wrote $30.3 billion in premiums, ahead of Swiss Reinsurance Co. (SWCEY), which wrote $27.7 billion, and Berkshire Hathaway Inc. (BRKA, BRKB), which wrote $17.4 billion.

Along with other insurers and reinsurers, Munich Re took a hit to third-quarter earnings because of heavy catastrophe losses so far this year. Munich Re said its third-quarter catastrophe-related losses were around $555 million. Kuczinski said he expected total 2008 U.S. insured catastrophe losses to top the current $35 billion estimates.

The heavy storm season, along with big investment losses, will lead to "substantial" increases in reinsurance prices next year, Kuczinski said.

He predicted that all the opportunities to deploy capital at attractive prices will help Munich Re weather the current financial crisis and stand "substantially stronger compared to its peers."

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