According to reports, EXOR, the Agnelli family owned investment and holding company, is back at the negotiating table with French insurance group Covéa over the possible sale of reinsurance firm PartnerRe.
Discussions between EXOR and Covéa are reported to have resumed in recent weeks, with Italian business newspaper Il Sole 24 Ore citing multiple sources over its claim.
The two companies are said to be discussing a valuation for global reinsurance firm PartnerRe, which had previously been the subject of negotiations between the two.
The two had previously entered into a Memorandum of Understanding (MoU) in March 2020, under which Covéa would acquire PartnerRe from EXOR for a total cash consideration of $9 billion, as well as a cash dividend of $50 million.
But the acquisition of PartnerRe by Covéa was later abruptly called off in May 2020, after the owner of the reinsurer, EXOR, declined to renegotiate the price in the context of the Covid-19 pandemic.
Later, in August 2020, EXOR and Covéa entered a €1.5 billion agreement that saw Covéa agreeing to a €750 million investment cooperation with EXOR and a €750 million reinsurance cooperation agreement with the Bermuda-based reinsurer, PartnerRe.
But it seems Covéa’s appetite to own a reinsurance entity persists and so negotiations are said to have been rekindled, with the focus naturally on a valuation for PartnerRe.
In the time since the peace agreement between EXOR and Covéa, of course reinsurance rates have continued to rise and are now forecast to rise further in 2022, meaning prospects for PartnerRe are perhaps even brighter at this time and reinsurer valuations have also been buoyed by market forces.
Reports suggest the valuation will be “close” to the previously agreed one, but it seems possible that the $9 billion sale price from early 2020 would need revisiting and could even be raised, given market conditions and prospects for PartnerRe, if any new sale agreement is to be agreed and announced.
Il Sole 24 Ore reports that there is no certainty a deal will be agreed, or how long the reported talks could persist.
EXOR stood to earn a $3 billion profit on PartnerRe, at the $9 billion valuation and has waived penalties it could have received when the previous deal fell apart.
So should these discussions prove serious again, it will be interesting to see what valuation can be reached this time around.
Another consideration is that the previous break agreement saw Covéa agreeing to allocate €750 million over a five year period in numerous special purpose reinsurance vehicles managed by PartnerRe, with these investments to be made in property catastrophe and other short-tail reinsurance contracts.
If Covéa can agree another acquisition attempt for the reinsurer, it seems these agreements may also need to be taken into account in determining any valuation.
It might also be worth thinking about whether Covéa could just take a significant stake in PartnerRe, with EXOR retaining an interest as well, something that could also be an appealing option for all parties by keeping the investment holding company involved.
It’s also notable that Covea had more recently also reportedly pursued an acquisition of AXA XL Re, the global reinsurance operation of AXA.
That attempt was also reported to have failed, with valuation said the main factor.