Munich Re to Buy Hartford Steam Boiler from AIG for $747 Million

Munich Re has agreed to acquire specialty insurer Hartford Steam Boiler (HSB) Group from American International Group for €531 million ($747.34 million – $742 million according to AIG’s announcement).

Munich Re will acquire 100 percent of HSB for €531 million ($747.34 million) in cash. Munich Re said it would finance the purchase price from internal resources. Completion of the transaction is subject to regulatory approval, which is expected to be completed at the end of the first quarter of 2009.

AIG acquired HSB as a wholly-owned subsidiary in 2000 for approximately $1.2 billion (See IJ web site – https://www.insurancejournal.com/news/national/2000/08/18/11305.htm).

The main unit within HSB Group is Hartford Steam Boiler Inspection and Insurance Co., which specializes in providing machinery and plant and equipment breakdown insurance, inspection, certification and engineering consulting services.

Munich Re praised HSB’s performance. In 2007, HSB posted an after-tax profit of $158 million and the company’s average combined ratio since 2003 has been 73.8 percent. The gross written premium income of HSB Group in 2007 amounted to $904 million.

The reinsurer’s press bulletin described the acquisition as a “further step in Munich Re’s strategy for the U.S. insurance market, decided on last year.”

HSB Group’s President and CEO Douglas G. Elliot expressed his confidence that “Munich Re offers HSB new opportunities to grow our business profitably and expand our offerings in North America and globally.”

Elliot and his senior management team will remain with HSB, reporting to Anthony J. Kuczinski, CEO of Munich Re America.

Sources: Munich Re – www.munichre.com and American International Group – www.aig.com