An agreement on the sale of PartnerRe has been reached between EXOR, the Agnelli family owned holding company investor, and French insurance group Covéa.
Covea will acquire reinsurance firm PartnerRe for $9 billion, delivering a healthy return on the investment made by Exor, the Italian holding company and investment entity of the Fiat owning Agnelli family.
The price tag of US $9 billion, represents a roughly 30% profit on the $6.9 billion that Exor paid for PartnerRe in 2016.
That acquisition followed a three-way tussle that also involved Bermudian specialty player AXIS Capital (which also wanted PartnerRe at the time).
EXOR, run by Agnelli family member John Elkann, acquired PartnerRe as it sought diversification of its business model, seeing reinsurance as a solid way to reduce its reliance on profits from its holdings in entities such as the Fiat car manufacturing group.
It seems PartnerRe is not as core as Exor has previously made out, or the opportunity to make a profitable sale and return on its investment in the reinsurer is too much to turn down.
Covéa said late yesterday that it has entered into a Memorandum of Understanding with Exor related to an all-cash acquisition of Bermuda headquartered reinsurance company PartnerRe.
Thierry Derez, Chairman and CEO of Covéa, commented, “This acquisition project comes at a time when the insurance sector is undergoing fundamental transformation, with emergence of new risks and new lifestyles, and increasing new participants entering insurance markets. It perfectly fits our growth strategy, our ability to adapt, the necessary complementarity of expertises and the importance of risks mutualization on a global basis. It would consolidate the future of PartnerRe and our mutual Group, serving the interests of our members and clients, as well as of our employees and partners.”
The French insurer said it has targeted a reinsurance entity as a way to enable “the development of strong positions across the entire insurance value chain.”
Covéa calls PartnerRe a “natural partner” thanks to its “global franchise, its brand, its renowned teams and expertise, and its reinsurance pure player model.”
It’s expected the transaction will allow Covéa to create “a top tier European insurance and reinsurance Group,” with a leading position in property and casualty insurance in France, a globally diversified reinsurance entity.
Covéa said the acquisition of PartnerRe will increase its strength and development potential, supporting a profitable growth strategy of PartnerRe, by keeping its brand and management team.
Meanwhile Exor said that the terms of the deal will see it receive a total cash consideration of $9 billion and a cash dividend of $50 million to be paid before closing.
EXOR said in the years it has owned PartnerRe it has worked closely with the management team to strengthen and grow its business.
The holding company specifically highlights PartnerRe’s third-party capital activities as one area of growth.
The coming together with Covea to create a much larger group with access to risk from across the market chain could present new opportunities for PartnerRe to put third-party reinsurance capital to work, as well as new opportunities for the investors it works with.
EXOR also said that PartnerRe’s operating performance since 2016 has enabled it to pay EXOR a total of $661 million in dividends, while growing its book value by $510 million to $6.57 billion, despite the loss heavy years faced by reinsurers.
EXOR also said the aggregate cash return from its PartnerRe investment will be an impressive $3 billion.
Commenting on the transaction, John Elkann, Chairman and Chief Executive of EXOR stated, “PartnerRe today is a stronger company, with a more complete and efficient business. We have now been presented with an outstanding chance for PartnerRe to further strengthen its competitive advantage while providing important new opportunities for its people under Covéa’s ownership. We are proud to have fulfilled EXOR’s purpose of building another great company and are grateful to PartnerRe’s Board, leadership and people for all they have done to make this possible.”
Emmanuel Clarke, CEO of PartnerRe added, “Over the past four years, under EXOR’s ownership, we have strengthened PartnerRe’s position as a global, diversified reinsurer, thanks to a continuous focus on enhancing our client and broker franchise, our underwriting and investments portfolios and our operational efficiency. And I’m confident we are in a very good position to further evolve under our new ownership.”
EXOR notes that scale is key in today’s global insurance and reinsurance marketplace, saying that, “Following the acquisition by Covéa, PartnerRe will enter the top tier of reinsurers worldwide also by balance sheet size.”
The acquisition is expected to close by the end of this year.