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Goldman Wraps Up Global Atlantic

Zacks Equity Research

The Goldman Sachs Group, Inc. (GS) has completed the private offering of shares of Global Atlantic Financial Group, formerly known as the Goldman Sachs Reinsurance Group. Goldman retains a minority stake of approximately 25% in the company.

The step comes as the U.S. banks’ make efforts meet the regulators’ demands of maintaining a capital cushion. Goldman sold the reinsurance through a private offering of shares to high net worth clients and institutions.

Founded in 2004, Global Atlantic functions through 2 segments. One is a U.S.-focused life and annuity reinsurance segment, including the Commonwealth Annuity and Life Insurance Company. The other is a global property and casualty reinsurance segment operating in London and Bermuda under the brand name of Ariel Re.

Global Atlantic provides a diverse range of solutions to clients for losses caused by natural disasters and other calamities. This segment generated $1.08 billion in revenues in 2012, which marked a 23% rise.

In January, the U.S. banking major declared that it was considering selling a major stake in Global Atlantic under pressure from international regulators, who have made it mandatory for banks to maintain higher capital. Even after its separation from Goldman, the management team operating Global Atlantic will remain the same.

Most of the major banks are currently struggling with the gloomy macroeconomic factors and the eurozone crisis. Moreover, stricter capital norms have worsened the situation. Therefore Goldman, like many other global banks, are rightsizing its business to improve profitability and do away with risky ventures.
Goldman currently carries a Zacks Rank #2 (Buy). While we prefer Goldman, other banks worth considering include State Street Corp. (STT), JPMorgan Chase & Co. (JPM) and Fifth Third Bancorp (FITB). All these stocks carry a Zacks Rank #2.

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