SoftBank Group Corp.'s focus on technology investments and high-growth markets are attractions to Swiss Re AG as it ponders selling a minority stake to the Japanese company, the reinsurer's CEO, Christian Mumenthaler, said during an earnings call.
Swiss Re announced Feb. 7 that it was in preliminary discussions with SoftBank about selling it a minority shareholding. The news surprised the market because it could not see an obvious fit between the traditional reinsurer and SoftBank, whose portfolio includes mobile network Sprint and microchip manufacturer Arm.
In its full-year earnings announcement Feb. 23, Swiss Re provided some additional details, saying it is "carefully evaluating" the financial impact of the deal and that it would not issue new shares to accommodate SoftBank's desired stake, rumored to be up to a third of the reinsurer.
Mumenthaler told journalists the same day that the discussions are "very preliminary," so he would not be able to comment much further. But when pressed for more details on the rationale, he noted a parallel between Swiss Re's strategy and SoftBank's, saying that at Swiss Re's investor day in 2017 its corporate solutions primary insurance business, its life capital business and high-growth markets around the world were identified as its main expansion areas.
"In terms of the essential platform we need to have, one component for the future is around [research and development], so the Swiss Re Institute and the combination of data and knowledge," he said.
"The second is technology — it is highly strategic to be strong there. The third one is people and culture. SoftBank call themselves an ecosystem. They are a heavyweight in Asia and high-growth markets, and they are looking at all the big technology investments in the world — all the winners. I leave it at that. If you ask me why we would be open to that, I don't need to say much more."
He added: "With any potential investor that approaches us we need to think about the pluses and minuses, the merits, and discussions are at a really early stage."
Strong anchor shareholders 'attractive'
While not referring to SoftBank specifically, Mumenthaler said Swiss Re could benefit from having an anchor shareholder.
"Our business is slightly more challenging than some others because you have some good phases and the occasional year with high volatility, which doesn't really fit the quarterly reporting mentality you see in typical capital markets," he said.
"Our time frames are always longer than most of what is there in terms of reporting, and so having some strong anchor shareholders is something we would always think attractive — under certain circumstances."
But the CEO also said Swiss Re would not necessarily need a big partner to help it navigate the technological disruption in the insurance market, where startups are vying to replace parts of the insurance value chain with newer, faster alternatives.
Highlighting the firm's IptiQ offering, which provides a digital platform to allow clients to sell Swiss Re-backed life insurance under their own brands, Mumenthaler said: "As a reinsurer our benefit is that we have a lot of data, we have less people, we have no legacy systems and we have the contact with all the primary companies, so we are in a very good position to potentially profit from that digital revolution by helping our clients to get there."
He added: "We will always scan the market if there are people who can help us on that, [but] our strategy cannot be dependent on a particular partner."
