On Tuesday, The Goldman Sachs Group Inc. (GS) completed the purchase of Ariel Reinsurance’s Bermuda-based insurance and reinsurance operations from Ariel Holdings Ltd. The terms of this deal were undisclosed.
Goldman will combine the acquired business with its existing Lloyd’s business. The combined entity will work as part of Goldman Sachs Reinsurance Group (GSRG) with the brand name Ariel Reinsurance (Ariel Re). GSRG covers the property and casualty reinsurance business in London.
Founded in 2005, Ariel Holdings Ltd. provides a wide range of property and casualty insurance and reinsurance products to companies and policyholders across the globe. It focuses on achieving above-average economic returns for the risks taken and maintains adequate financial availability to meet the requirements of underwriting businesses.
Managers at Ariel Re find the acquisition quite opportunistic. They look forward to the combined business with superior underwriting of track records at both. They also expect strong performance to continue. However, the deal excludes Ariel’s credit and surety business operated at the Zurich branch office, and Atrium Underwriting Group at Lloyd's (LYG).
As a part of deal, GSRG’s Lloyd’s syndicate will reinsure the current business of Ariel Reinsurance. In the combined structure, most of Bermuda-based Ariel Re’s staff will remain employed.
The acquisition will expand Goldman’s property and casualty coverage, and the name of Ariel franchise will help the company to serve its clients in a better way.
Through acquisitions and global expansions, Goldman is trying to grab every opportunity to leverage its strong reputation in corporate trust market. The expansion mode of the company is mounting since the beginning of 2012.
The acquisition spree of Goldman indicates that the company is moving ahead on the path of improving its financial position. Like other Wall Street biggies such as Bank of America Corporation (BAC) and JPMorgan Chase & Company (JPM), the company has been buckled under the weakness in the wider economy and the fundamental pressures on the banking sector. Completion of deals like this will enable the bank to enjoy a better position in the ongoing uncertain global economic scenario compared to its peers.
Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain our long-term Neutral recommendation on the stock.
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