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PartnerRe, Axis Capital agree to $11 billion merger

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PartnerRe, Axis Capital agree to $11 billion merger

Axis Capital Holdings Ltd. and PartnerRe Ltd. say they will merge to establish a specialty insurer and reinsurer with gross written premiums of more than $10 billion in a nearly $11 billion stock-swap deal.

In a statement Sunday, the Pembroke, Bermuda-based companies described the deal as a “merger of equals” with combined capital of more than $14 billion and putting the company among the five largest reinsurers in the world.

The deal would establish a company with gross written premiums totaling about $7 billion in reinsurance, $2.5 billion in specialty insurance, and $1.5 billion in life, accident and health business.

Under terms of the deal valued at about $11 billion, which the companies said both boards of directors have approved unanimously, PartnerRe shareholders will receive 2.18 shares of the combined company for every PartnerRe common share they own, while shareholders of Axis Capital will receive one share of the combined company's common shares for each Axis common share they own.

On completion of the deal, which is expected to close in the second half of the year, PartnerRe shareholders will own 51.6% of the company and Axis Capital shareholders will own 48.4%, the companies said.

“This transformational combination will leverage the complementary strengths of both companies and create an organization with the size and breadth to enhance product offerings, maximize growth opportunities, optimize portfolios, and deliver both economies of scale and capital efficiencies,” Axis Capital CEO Albert A. Benchimol, who will retain that title in the combined entity, said in the statement.

Jean-Paul L. Montupet, chairman of PartnerRe who will be nonexecutive chairman of the combined company, said Monday in a conference call with analysts that PartnerRe had been aware of the need for reinsurers to have scale because, in part, of the increasing trend for cedents to consolidate their reinsurance buying and had been exploring ways “as a pure reinsurance play” to enter the primary property and casualty market.

The tie-up with Axis Capital, he said, “ticks the two boxes for us.”

“Both our companies are adding diversifying business to their portfolios,” said Axis Capital's Mr. Benchimol.

Mr. Benchimol said that while the deal would increase the proportion of Axis Capital's book that is reinsurance to about 62% from the current 50%, the combined company's greater scale as the fifth largest reinsurer in the world would better position it to meet the challenges currently facing reinsurers.

The combined company will have a 14-person board of directors made up of seven directors from each company.

In connection with the deal, there will be several executive changes. They include:

• Costas Miranthis will step down as CEO of PartnerRe and as a member of the PartnerRe board with immediate effect.

• David Zwiener, a director at ParterRe, will be interim CEO of PartnerRe until the deal is completed.

• Michael A. Butt, currently chair of Axis Capital, will become chairman emeritus of the combined company.

The deal is expected to produce at least $200 million in annual pretax cost synergies in the first 18 months of operations, the companies said in the statement.

Separately, Axis Capital said it expects operating income of $117 million to $123 million for the fourth quarter of 2014, and it will release its final 2014 results after the markets close on Feb.3.

Meanwhile, PartnerRe said it expects operating earnings of $210 million to $230 million for the fourth quarter of 2014, and will release its final 2014 results after the market close Feb. 4.

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