No 2 global reinsurer Swiss Re has agreed to buy the world’s fifth-largest reinsurer, GE Insurance Solutions, for $US6.8 billion ($9.28 billion).

Swiss Re will pay for the acquisition in a mixture of cash and shares, and as a result GE will hold between 10-13% of Swiss Re and will appoint one of its executives to the Swiss Re board.

GE Insurance Solutions hasn’t been popular with the people who run GE, which is the world’s largest company. It makes everything from jet engines to power stations and medical equipment. Not only did Chairman and CEO Jeffrey Immelt stated three years ago that the reinsurance operation isn’t an easy fit with GE’s business plan, it has had to be bailed out by GE to the tune of $US3.2 billion ($4.37 billion) over the past five years.

Perhaps the last straw for Mr Immelt was the $US377 million ($514.6 million) in claims incurred from this year’s gulf state hurricanes. He told analysts in a conference call on Friday that “a tremendous drag that has been eliminated from this company going forward”.

Mr Immelt says the sale is part of a strategy begun three years ago “to redeploy capital to faster-growth and higher-return businesses”. In such an environment, insurance couldn’t compete with other divisions.

GE has sold five insurance businesses in recent years as part of its strategy to acquire major portions of the healthcare and entertainment industries.

The implications for the Australian and New Zealand operations of GE Reinsurance and wholly owned subsidiary Employers Re are not known at this stage. Regional CEO Peter Nickerson was travelling in NZ yesterday and was not available for interview.

GE expects to incur a post-tax loss of around $US2.8 billion ($3.82 billion) from the disposal, which includes a loss on book value, goodwill write-off and taxes. It will retain the US life reinsurance operations of GE Insurance Solutions, but will downsize it.

Swiss Re CEO John Coomber says the deal is “both strategically and financially a very attractive transaction that creates significant value for our shareholders”.