EXOR, the Agnelli family owned holding company, has reached an agreement with French insurance group Covéa over the sale of PartnerRe.
The pair have entered into a Memorandum of Understanding (MoU) under which Covéa has agreed to acquire PartnerRe for a total cash consideration of $9 billion, plus a cash dividend of $50 million to be paid before closing.
EXOR acquired PartnerRe in 2016 for a cash consideration of $6.72 billion, so the sale to Covéa represents a roughly 30% profit for the Italian holding company.
Since 2016, the operating performance of PartnerRe has enabled the reinsurer to pay EXOR a total of $661 million in dividends and to expand its book value to common shareholders by $510 million to $6.57 billion, explains EXOR. The firm notes that this was achieved in spite of the recent challenges witnessed across the reinsurance industry.
According to EXOR, including dividends received since 2016, the aggregate cash return to the holding company following the completion of the proposed transaction totals $3 billion.
John Elkann, Chairman and Chief Executive Officer (CEO) at EXOR, commented: “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, the 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.”
Covéa has said that the acquisition of PartnerRe enables it to consolidate its diversification and internationalism through the establishment of a top tier European insurance and reinsurance company. The French insurance group sees PartnerRe as a “natural partner” and notes that the two companies share the same objectives of “underwriting discipline, financial strength and long-term value creation.”
Thierry Derez, Chairman and CEO of Covéa, said: “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.”
After EXOR confirmed talks were ongoing regarding a potential deal in early February on the back of industry rumours, analysts said that while it could reduce asset diversity for EXOR, there exists a significant degree of continuity between PartnerRe and Covéa.
PartnerRe announced its results for the fourth-quarter of 2019 earlier this week, revealing a non-life underwriting loss of $188 million as result of Japanese typhoon losses and attritional losses on agriculture business.
The transaction is expected to close by the end of 2020, and remains subject to customary closing conditions, antitrust, regulatory, and other approvals. Goldman Sachs International acted as sole financial advisor to EXOR, and Sullivan & Cromwell LLP acted as legal advisor to EXOR on the deal.