Merger to lead to job losses
Combined firm's headquarters to be in Bermuda
Job losses will likely result from the planned merger of Axis Capital Holdings Ltd and PartnerRe Ltd, said the man who will lead the new combined company.
In a joint statement on Sunday night, the two companies said they had agreed to a “merger of equals” that will create a global insurer and reinsurer with a market value of about $11 billion.
The companies expect to cut costs by at least $200 million per year. In a presentation during a conference call with analysts yesterday morning, the companies said the principal sources of the savings included “staff redundancies, systems and infrastructure and holding company expenses”.
Class of 2001 start-up Axis employs 72 people in Bermuda of its global staff of 1,228. PartnerRe, founded in 1993, has 62 employees on the Island and 1,069 globally. The two companies' global headquarters are in neighbouring buildings in the Waterfront development on Pitts Bay Road.
Axis chief executive officer Albert Benchimol, who will lead the combined company, told The Royal Gazette in an interview yesterday: “I think that across our two companies, there will be some redundancies. For me that's the saddest part of this transaction.
“It's too early to be specific about where they will go and how we will do it, but we will try to move forward quickly.”
Where redundancies were made, he said, “we will be more than fair to our staff”.
PartnerRe CEO David Zwiener, who succeeded Costas Miranthis after he stepped down on Sunday, said he echoed Mr Benchimol's thoughts on redundancies.
In recent months, the Bermuda insurance market has seen brisk mergers and acquisition (M&A) activity, with RenaissanceRe's deal to buy Platinum and XL Group's agreement to buy Catlin the major deals. Mr Zwiener expects the consolidation trend to continue.
“We are probably in the middle innings,” Mr Zwiener said. “It's probably going to accelerate more in the coming months, as the pressure on some of the smaller players becomes more acute. My sense is that we will see some activity there.”
Mr Zwiener said the benefits of the deal were clear from PartnerRe's point of view. He said the company had been looking to get bigger in reinsurance and to acquire a primary business.
“Clearly this transaction ticks the two boxes in a very good way,” Mr Zwiener said. “It's a no-premium merger of equals between two great companies that know each other very well.”
Mr Benchimol said the Axis view was that the merger strengthened its three businesses — reinsurance, insurance and accident and health. Axis would go from being a top 15 reinsurer to the fifth-largest reinsurer in the world. The $14 billion of combined capital in the new company would provide greater capacity to meet the needs of clients and the scale would also be able to reduce expenses.
The new company will derive 62 per cent of its premium revenue from reinsurance, up from 50 per cent in the business mix that Axis currently has.
Asked whether this was a good thing with reinsurance rates under pressure from growing competition from insurance-linked securities such as catastrophe bonds, Mr Benchimol said the combined entity would be in a better position to compete in that market as a $7 billion reinsurer than Axis was as a $2 billion reinsurer.
The company would also be well placed to utilise third-party capital and the scale of the reinsurance business would also help the firm to grow its insurance book.
“I have a high level of confidence that within a reasonably short period of time, that balance of business will be likely to come back to what it is today — or whatever is the right balance,” Mr Benchimol said.
Mr Benchimol said no name had yet been decided for the new company. But Bermuda will be home to its headquarters. “We have been great supporters of Bermuda. It's been a great domicile for us and working with the BMA [Bermuda Monetary Authority] has been very positive.”
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