PartnerRe subject of new talks between EXOR & Covéa: Report

Bermuda headquartered global reinsurance firm PartnerRe is once again said to be the subject of sale discussions between Italian investment holding company EXOR and French mutual insurer Covéa, according to a report.

Italian media is the original source, after the Il Sole 24 Ore newspaper reported this weekend that talks between EXOR and Covéa resumed in recent weeks after the pair returned to the negotiating table over a potential change of ownership of PartnerRe.

The valuation is said to be the main subject of the discussions, which is unsurprising given a previous deal between the parties fell apart over the how the reinsurance firm should be valued in light of the COVID-19 pandemic.

EXOR and Covéa had previously agreed to a deal that would have seen Covéa paying a price tag of US $9 billion for PartnerRe, a sum that represented a roughly 30% profit on the $6.9 billion that Exor paid for PartnerRe in 2016.

But that deal fell apart, after attempted renegotiations over the price faltered in the wake of the Covid-19 pandemic and the pair failed to find an agreement on how to value PartnerRe in the context of the situation in the first-half of 2020.

Later in 2020, Covéa and EXOR struck an agreement to cooperate on reinsurance-linked investments going forward, finding a way to settle with each other over the failed PartnerRe deal.

That agreement saw Covéa agreeing to inject €750 million of capital into special purpose reinsurance vehicles managed by PartnerRe, as well as another €750 million that would be allocated in other investment opportunities where Covea would sit alongside EXOR.

The reinsurance linked investment agreement featured a three- to five-year lock-up period with the €750 million to be invested into property catastrophe and other short-tail reinsurance contracts.

The first €500 million of that was to be allocated to special purpose insurance vehicles (SPV’s) managed by PartnerRe on January 1st 2021, with an additional €250 million investment agreed to be made before the January 1st 2024 renewals.

Which provided PartnerRe with a significant new chunk of short-tailed reinsurance capacity.

Since then, Covéa has also been reported to have targeted an acquisition of AXA’s non-life reinsurance operations, so the Bermuda headquartered AXA XL Re division.

Demonstrating that the French insurer’s appetite to acquire its own global reinsurance operation and add more diversification to its business persisted.

Reports suggest that the new discussions about PartnerRe between EXOR and Covéa are valuation focused.

Given the hardening of reinsurance markets over the last year and the fact further rate increases are anticipated for the upcoming January 2022 renewals, the opportunity in reinsurance remains strong but that could also imply a higher valuation, you might think.

But reports suggest the negotiations are around the same valuation as before, the US $9 billion.

But of course the reinsurance linked investment deal, between Covéa and PartnerRe, may also be a consideration here, especially as there was more capital to come as part of that agreement.

Since the deal fell apart in 2020, PartnerRe has continued to expand its business and grow its third-party reinsurance capital, perhaps also making it even more attractive and possibly boosting its valuation as well.

So there may be a lot to discuss here and negotiations could take time to work through the implications of any possible deal.

The Italian newspaper said that, as it understands things there is no guarantee of any deal being reached, or any understanding of how long talks may persist.