German reinsurer Munich Re AG today said it would pay $742 million to buy Hartford Steam Boiler Inspection and Insurance Co. from its embattled parent company, American International Group Inc.
Munich Re said in a statement that it planned to complete its purchase in the first quarter of 2009.
Hartford-based HSB is a specialty unit focused on engineering insurance and inspection. Peter Roeder, a Munich Re board member responsible for U.S. business, said HSB was an attractive, low-risk investment because of its specialized business.
“The acquisition of HSB is a perfect fit for our U.S. strategy,” Roeder said. “It is another step in developing our position in high return specialized niche segments.”
An AIG spokesman could not be reached for immediate comment, but in a statement, HSB Group President and Chief Executive Officer Douglas Elliot said the deal will “offer our clients the reassurance that they’re looking for in today’s uncertain market environment.”
Hartford reportedly is home to 377 of HSB’s 2,469 employees worldwide.
The U.S. government is forcing AIG to shed or sell some interest in units globally as a means to pay back part of a bailout loan.
Last month, the U.S. government said it would provide a $150 billion rescue package to AIG to help it remain in business amid the worsening credit crisis.
That replaced an $85 billion loan from the U.S. Federal Reserve as it became apparent the insurer needed more funds.
Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses. Munich Re also operates Ergo, one of Germany’s biggest insurers, and Munich Reinsurance America Inc.
At 11 a.m., AIG shares traded at $1.67, up 7 cents, or 4.4 percent. (AP)
