AXIS & PartnerRe To Combine In $11B Merger
Two more Bermuda re/insurers are set to merge, with AXIS Capital Holdings Limited and PartnerRe Ltd. today announcing that they have signed a “definitive amalgamation agreement to create one of the world’s preeminent specialty insurance and reinsurance companies, with gross premiums written in excess of $10 billion, total capital of more than $14 billion, and cash and invested assets of more than $33 billion.”
This is the third merger of Bermuda re/insurers in recent weeks, following after the agreement by XL Group to acquire Catlin Group, and RenaissanceRe’s agreement to acquire Platinum.
The merger has been unanimously approved by the boards of directors of both companies, the announcement said, and the company headquarters will be located in Bermuda, and will have a “strategic presence on five continents in 39 distinct geographic locations worldwide.”
PartnerRe Chairman, Jean-Paul L. Montupet will be non-executive chairman of the combined company. AXIS Capital CEO Albert A. Benchimol will serve as CEO of the combined company.
The new company will have a 14-person Board of Directors, consisting of seven AXIS Capital directors and seven PartnerRe directors, including Messrs. Montupet and Benchimol. Current AXIS Capital Chairman, Michael A. Butt will continue to serve on the Board as Chairman Emeritus.
Mr. Benchimol stated: “This transformational combination will leverage the complementary strengths of both companies and create an organization with the size and breadth to enhance product and service offerings, maximize growth opportunities, optimize portfolios, and deliver both economies of scale and capital efficiencies.
“The combined company will have three strongly positioned businesses – a top-five global reinsurer, a $2.5 billion specialty insurance underwriting business, and a highly successful and growing life, accident and health franchise – all with increased strategic flexibility.
“As a top five global reinsurer with leading positions in a number of specialty lines, we will be strongly positioned to turn the challenges presented by the structural changes in the reinsurance market into opportunities.”
Mr. Benchimol continued, “For our clients and brokers, this transaction brings together two companies with outstanding underwriting talent and service to deliver more comprehensive solutions backed by the financial strength they have come to rely on from both companies. I look forward to working closely together to make this vision a reality, while achieving diversified and consistent earnings growth for our shareholders.”
In connection with the transaction, Costas Miranthis will step down as CEO of PartnerRe and as a member of the PartnerRe Board, effective today. At that time, current PartnerRe Director David Zwiener will assume the position of interim CEO of PartnerRe until the completion of the transaction.
Mr. Zwiener has been a director of PartnerRe since July 2009 and, prior to this transaction, was the Chairman of the PartnerRe Audit Committee. Mr. Zwiener has extensive executive level experience in both the insurance and financial services sectors.
Between 2000 and 2007, Mr. Zwiener was President and Chief Operating Officer of the property and casualty operations at Hartford Financial Services Group Inc. Most recently, he was CFO at Wachovia Corporation.
Jean-Paul L. Montupet, Chairman of PartnerRe stated: “On behalf of the entire board of directors, I want to express my appreciation to Costas Miranthis for successfully leading PartnerRe for the past four years and positioning the Company to be able to move into this exciting new phase.
“PartnerRe has benefitted greatly from his leadership and guidance and we wish him well in his next endeavor. This is an exciting opportunity that offers tremendous potential with many benefits for PartnerRe, our clients, brokers and shareholders.
Michael A. Butt, Chairman of AXIS Capital stated: “I have for a long time, since 1993, been an admirer of PartnerRe and what it has achieved. I am delighted therefore that we can now combine our businesses and people to create an even more exciting future.”
Costas Miranthis commented: “It has been my pleasure to serve as PartnerRe’s CEO as we continued to build upon its leadership position in reinsurance. This merger with AXIS Capital offers a unique opportunity to enhance PartnerRe’s scale in the reinsurance sector and to enter the primary insurance market with a high quality partner with a global franchise.
“This is the right step for PartnerRe at the right time – squarely addressing the strategic imperatives that today’s markets are demanding. I want to thank the PartnerRe Board and all of my colleagues for their support and contribution to our success. I am confident that the new company will enjoy an exciting future.”
Given the similar disciplined underwriting cultures of both organizations, the combined entity will draw on the talented group of leaders from both companies. A number of senior positions have been identified.
Emmanuel Clarke will be CEO, Reinsurance; Peter Wilson will be CEO, Insurance; Chris DiSipio will be CEO, Life, Accident and Health; and John (Jay) Nichols will be responsible for Strategic Business Development and Capital Solutions. Joseph Henry will be CFO and Bill Babcock will be Deputy CFO and Lead Integration Officer. Mr. Babcock will assume the role of CFO upon Mr. Henry’s retirement in July 2016.
Not good for Bermuda. One less company = fewer executives, fewer managers, fewer services needed, fewer rents paid and restaurant meals served.
These job losses were not driven by government, either PLP or OBA. The industry is maturing. Ultimately the surviving companies will be more competitive. But like most industries, they will require fewer people, and many of those that remain will be less well-paid, as there is now a surplus of talent on the island and in the industry. Diversification of the economy is more urgent than ever, lest displaced people depart.
Your analysis is correct, but it ignores the fact that these are not Bermuda companies exclusively, and that these mergers do not exclusively impact Bermuda.
The ultimate question with regard to Bermuda’s economy depends on how restructuring plays out around the world at these companies. It could well be the case that, on analysis, more jobs are required here, and less elsewhere. Take an example: the majority of Partner Re’s operations and jobs are in Zurich. Partner Re’s Switzerland operations are now, essentially, 30 percent more expensive following the SNB’s decision to remove the cap on their currency. Costs and regulatory ease of doing business in Bermuda are now a relative bargain compared to Switzerland, and, our currency, pegged at the U.S. dollar, is certainly more stable. There is, therefore, clear rationale for Partner are to move jobs out of Zurich and to Bermuda, and this merger may be the event which spurs them to make that decision. I find it of note, in particular, that explicit mention of the company’s headquarters in Bernuda is made. This is all of speculation, but so are your negative premonitions.
So, in sum, the impact to Bermuda of the merging of these major, *international* companies remains to be seen. Unquestionably, it is an interesting time for the Bermuda reinsurance market: it reminds me of the late ’80s, early ’90s, where the motto was “buy or be bought.”
I am not suggesting the 200 million of cost reduction is only coming from Bda. But much of what remains here is holding company activities, which are obvious sources of synergy. There will be fewer external auditors for example. Most underwriting is long gone so that impact would be negligible. And as I said, this will be a stronger company in the end.
The story says they will look to make $200 million in cuts/savings. While I take your point about the European bases, that is still a lot of money to save. Axis has offices in the same countries as PartnerRe so there is going to be an awful lot of duplication whether in terms of personnel or office space.
Do Axis and PartnerRe continue to have two offices in Bermuda?
I don’t want to be overly negative, but at the moment I do not see an upside in terms of employment, especially in the HR, admin sides ….
$200 million sounds like a lot, but is actually only 1.8% of the $11 billion merger. This is doable. Again, it depends on how restructuring goes. If I were the Bermuda government, then I would be working my hardest to reach out to AXIS and PartnerRe asking them how they can assist in perhaps facilitating the transfer of staff to Bermuda, mitigating job losses, and overall making the merger process as simple as possible. I may be optimistic, but there may be opportunities for us.
Regarding HR and administrative job losses, most of these jobs are based in Connecticut for PartnerRe, and, I think, in the United States as well for AXIS. Bermuda is an underwriting center for both companies (staff here produce the business), and these firms will look to maintain as much business as possible as a result of merger.
M+A in the reinsurance sector is not done as a move to cut costs; profits are still extremely good, and AXIS and especially Partner Re are extremely efficient firms already from a cost standpoint. Rather, the goal is to enhance scale to make it harder for new, emerging players in alternative capital to compete.
More jobs to be lost.
In simple, everyday terms, how many redundancies?
The continuing mergers in the IB sector provide a ‘reality check’ for Bermuda.
No one will be able to predict the exact impact in the long run but we should all be doing our best to position Bermuda as the jurisdiction of choice for the merged company.
I hope that the commons sense approach to regulation by the BMA continues in the first instance. Bermuda also needs to work on a bi partisan basis to assure the IB sector that irrespective of the party in power, there will not be any drastic changes in the regulatory environment.