Bermuda-based reinsurers Axis Capital Holdings Ltd. (AXS) and PartnerRe Ltd. (PRE) agreed Sunday to a near $11 billion merger of equals amid a wave of consolidation in the industry. The merger of two of the five largest insurance groups is expected to create a broadly diversified global specialty insurance and reinsurance company with expanded market presence.
"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," Axis Capital CEO Albert Benchimol said in a statement.
The combined entity will also be a strong rival to Warren Buffett's Berkshire Hathaway, Inc. (BRK-A, BRK-B) Lloyd's of London and Munich Re. PartnerRe currently has a market capitalization of $5.59 billion, while Axis Capital has a market value of $5.04 billion.
The companies noted that the combined entity will have gross premiums in excess of $10 billion, total capitalization of more than $14 billion, as well as total cash and invested assets of more than $33 billion.
The deal will see PartnerRe shareholders receiving 2.18 shares of the combined entity's common shares for each share of PartnerRe common shares they own, while Axis Capital shareholders will receive one share of the combined company's common shares for each share of Axis Capital common shares they own.
Following the closure of the merger of equals, PartnerRe shareholders will own about 51.6 percent of the merged entity, while shareholders of Axis Capital will own 48.4 percent of the combined company.
The deal, which has the unanimous approval by the boards of directors of both companies, is expected to close in the second half of 2015. However, the closure of the deal remains primarily subject to approval by the shareholders of both companies and regulators.
The merger is expected to achieve at least $200 million in annual pre-tax cost synergies in the first 18 months of operations and to add to earnings per share and ROE for the shareholders of both companies.
The combined entity will be led by Benchimol as CEO, while PartnerRe Chairman Jean-Paul Montupet will serve as its non-executive chairman and current Axis Capital Chairman Michael Butt will remain on the 14-person Board of Directors as Chairman Emeritus. The new board will consist of seven Axis Capital directors and seven PartnerRe directors, including Montupet and Benchimol.
Meanwhile, PartnerRe CEO Costas Miranthis will step down from the position and as a member of the PartnerRe Board, effective immediately. Current PartnerRe Director David Zwiener will assume the position of interim CEO of PartnerRe.
The combined entity will have its headquarters located in Bermuda, and it will have a strategic presence on five continents in 39 distinct geographic locations worldwide.
"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," the outgoing PartnerRe CEO Miranthis stated.
XL Group Plc agreed earlier in the month to acquire Catlin Group Ltd. (CGL.L), a Lloyd's of London underwriter, in a cash and stock deal valued at about $4.1 billion cash and stock deal. Earlier in November, RenaissanceRe Holdings Ltd. (RNR) agreed to acquire smaller peer Platinum Underwriters Holdings, Ltd. (PTP) for $76.00 per share in stock and cash deal valued at about $1.9 billion.
AXS closed Friday's regular trading session at $49.33, down $0.16 or 0.32% on a volume of 0.41 million shares, and PRE closed at $114.14, down $0.85 or 0.74% on a volume of 0.28 million shares.
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