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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Arch Capital Group Ltd.    ACGL   BMG0450A1053

ARCH CAPITAL GROUP LTD.

(ACGL)
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Bermuda reinsurers Axis Capital, PartnerRe in $11 billion merger

01/26/2015 | 11:38am EST

NEW YORK/FRANKFURT (Reuters) - Axis Capital Holdings Ltd (>> Axis Capital Holdings Limited) and PartnerRe Ltd (>> Partnerre Ltd) have agreed an all-share $11 billion merger to create one of the world's largest reinsurers, responding to intensifying pressure in the industry to consolidate.

NEW YORK/FRANKFURT (Reuters) - Axis Capital Holdings Ltd (>> Axis Capital Holdings Limited) and PartnerRe Ltd (>> Partnerre Ltd) have agreed an all-share $11 billion merger to create one of the world's largest reinsurers, responding to intensifying pressure in the industry to consolidate.

Reinsurers are being squeezed by price competition and subdued demand from insurers for their products and consolidation in various forms is expected for companies that lack either global reach or a specialized focus.

The combination of the two Bermuda-based companies may displace France's Scor (>> SCOR SE) as the world's fifth largest property and casualty reinsurer. It will have gross premiums topping $10 billion, PartnerRe said in a statement.

"This is not a sale; we're not buying them, they're not buying us," Axis Capital Chief Executive Albert A. Benchimol, who will be CEO of the new company, told a conference call with investors.

"We are both contributing our operations, our potential and our tangible book value," Benchimol said.

The deal is the latest in a series of moves by reinsurance firms to seek greater heft by expanding product lines or geographical reach, with some looking to branch more into insurance and curb exposure to the tough reinsurance market.

Earlier this month, XL Group Plc (>> XL Group plc) said it would buy underwriter Catlin Group Ltd (>> Catlin Group Limited) for about 2.79 billion pounds ($4.2 billion), increasing the Dublin-based insurer's share of business written in the Lloyd's of London market to nearly 10 percent.

Analysts have frequently flagged a number of small-to-medium sized players among the global Top 40 reinsurers as potentially taking part in consolidation, including Everest Re (>> Everest Re Group Ltd), Arch Capital (>> Arch Capital Group Ltd.), Endurance (>> Endurance Specialty Holdings Ltd.) and Aspen <AHL.N>.

Reinsurers help insurers pay large damage claims, in exchange for part of the profit.

Partner Re's shares rose 0.6 percent by 1630, while Axis Capital's shares rose 4.9 percent.

COST SAVINGS

PartnerRe was the world's 10th largest reinsurer and Axis was ranked No. 22 by reinsurance premiums in 2013, according to data compiled by credit rating agency Moody's.

Benchimol said the merger would improve diversification and prospects for growth, including through acquisitions.

"We have overlapping offices in most key insurance centers and major markets," Benchimol said, without giving specifics on office closures or job losses.

The merger would achieve pre-tax cost savings of at least $200 million in the first 18 months and improve earnings per share for the shareholders of both companies, PartnerRe said.

"It's all about achieving scale in an industry where demand is declining and pricing is reducing," Canaccord Genuity analyst Ben Cohen said. "Scor has been active in M&A and may look to respond to consolidation in the market."

Partner Re has a market capitalization of about $5.6 billion, while Axis Capital's market cap is about $5 billion, according to Thomson Reuters data.

PartnerRe shareholders will get 2.18 shares of the combined company's common shares for each PartnerRe share. Axis Capital shareholders will get one share for each Axis share they own.

The terms mean PartnerRe shareholders will own 51.6 percent of the merged company and Axis holders 48.4 percent, the statement said.

Asked in the call whether anything would prevent a third party bidder from entering the process, Benchimol said: "I'm not going to go into hypotheticals."

The deal is expected to close in the second half of 2015.

($1 = 0.6663 pounds)

(Reporting by Luc Cohen in New York and Jonathan Gould in Frankfurt; editing by Jeffrey Benkoe and David Clarke)


© Reuters 2015
Stocks mentioned in the article
ChangeLast1st jan.
ALBERT INC. 1.24% 6510 End-of-day quote.-3.41%
ARCH CAPITAL GROUP LTD. -1.50% 34.69 Delayed Quote.-3.83%
AXIS CAPITAL HOLDINGS LIMITED -1.43% 50.92 Delayed Quote.1.05%
CLARKE INC. 2.03% 7.04 Delayed Quote.5.39%
E.ON SE -0.99% 8.806 Delayed Quote.-2.85%
EVEREST RE GROUP, LTD. -1.70% 231.2 Delayed Quote.-1.23%
LETS HOLDINGS GROUP CO., LTD. 1.58% 7.72 End-of-day quote.-0.77%
SCOR SE 1.50% 28.38 Real-time Quote.7.42%
SEEK LIMITED -0.73% 27.1 End-of-day quote.-5.01%
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Financials (USD)
Sales 2020 6 838 M - -
Net income 2020 847 M - -
Net Debt 2020 - - -
P/E ratio 2020 14,3x
Yield 2020 -
Capitalization 14 049 M 14 049 M -
Capi. / Sales 2020 2,05x
Capi. / Sales 2021 1,77x
Nbr of Employees 4 300
Free-Float 68,2%
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Mean consensus OUTPERFORM
Number of Analysts 11
Average target price 41,50 $
Last Close Price 34,69 $
Spread / Highest target 35,5%
Spread / Average Target 19,6%
Spread / Lowest Target 3,78%
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Managers and Directors
NameTitle
Nicolas Papadopoulo President & Chief Underwriting Officer
John M. Pasquesi Chairman
François Morin Chief Financial Officer, Treasurer & EVP
John L. Bunce Independent Director
John D. Vollaro Independent Director
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