PARTNER RE'S WINTERTHUR BID SHOWS COMPANIES' DIFFERENCES

WINTERTHUR, Switzerland -- Partner Re Ltd.'s proposed $750 million acquisition of Winterthur Group's reinsurance operations illustrates the two companies' diverse strategies in the international insurance and reinsurance markets.

On the one hand, Winterthur Group is exiting the capital-intensive reinsurance market to concentrate on primary insurance, while on the other hand, Partner Re is continuing its expansion beyond property catastrophe reinsurance.

The deal will give Partner Re a significant presence in the European reinsurance market with the purchase of a successful reinsurer, said Rafael Villarreal, an analyst at Moody's Investors Service in London.

And the decision by CS Group, the parent of Winterthur, to sell the reinsurance operations signals an intensification of the consolidation pressure among reinsurers, he said.

"Winterthur was not struggling, and it was an important group in reinsurance, so for them to pull out is a sign that consolidation is taking more of a toll than most of us expected," Mr. Villarreal said.

Winterthur last month also sold its majority stake in HIH Winterthur International Holdings Ltd. in Australia, which wrote a significant amount of liability business. The two sales seem to indicate that CS Group has decided to withdraw from capital-intensive areas of the insurance market, Mr. Villarreal said.

By contrast, Partner Re is increasingly looking to make use of its excess capital in a competitive market, said Susan Spivak, vp at Donaldson, Lufkin & Jenrette Inc. in New York.

"When the company was formed with its monoline approach, it didn't know that for the next five years there wouldn't be any major catastrophes of the size of Hurricane Andrew, so it built up excess capital and now it has to satisfy its shareholders," she said.

Partner Re, which was one of the last of the Bermuda catastrophe reinsurers to diversify, began that process last year with the purchase of Societe Anonyme Francaise de Reassurances which gave it about $700 million in gross premiums in mainstream proportional reinsurance business.

Winterthur Re will bring Partner Re $837 million in gross premiums, which would rank the company among the world's largest reinsurers (BI, Aug. 31).

Winterthur Re's "specialty orientation in the non-life and life business ideally complements our underwriting teams and book of business, both geographically and in highly specialized areas such as agricultural risks, credit/surety, engineering, aviation and marine," Herbert N. Haag, president and chief executive officer of Partner Re, said in a statement.

Winterthur Re's premiums consist of $582 million in property and casualty reinsurance and $255 million in life reinsurance. It has operations in Switzerland, the United States, Canada and Singapore.

With the purchase, Partner Re will compete more with Swiss Reinsurance Co., which owns more than 20% of Partner Re. However, the deal is unlikely to have gone through without the approval of Swiss Re, as the reinsurer has close links with CS Group. Lukas Muhlemann, CEO of CS Group, previously was CEO of Swiss Re and CS Group has a minority share holding in Swiss Re.