PartnerRe Closes ParisRe Deal

PartnerRe Ltd. (PRE - Analyst Report) has successfully closed its previously announced block purchase of the common shares of ParisRe Holdings Limited (PRI), the French-listed, Swiss-based diversified Re-insurer. As on Oct 2, 2009, PartnerRe had acquired approximately 71% of the outstanding ParisRe shares, with an additional 6% of the outstanding ParisRe shares subject to physical settlement in the coming days. 

Following the settlement of these trades, PartnerRe’s total shareholding of ParisRe will increase to 83%, which includes PartnerRe’s previously announced acquisition of 6% of the outstanding ParisRe shares. With this new level of ownership, six directors from the existing PartnerRe management will be appointed to the ParisRe Board. 

This Board majority will allow PartnerRe a greater role in setting policies and monitoring risk aggregation. However, there is no change in strategy for Jan 1, 2010 renewals and both the companies will renew their business separately, under their current plans and guidelines. PartnerRe chose a merger vote instead of an exchange offer, as the amended structure is expected to accelerate PartnerRe’s acquisition of ParisRe. 

However, the consideration granted to ParisRe shareholders will remain unchanged. As planned, the acquisition process has gone more quickly and smoothly than initially anticipated and is expected to complete by the end of 2009. 

In connection with the closing of the block purchase, PartnerRe has received all necessary approvals of insurance and competition regulatory authorities. ParisRe is expected to call a meeting of its shareholders to vote on a proposal to effect a merger, governed by the Swiss law, of ParisRe into a wholly-owned subsidiary of PartnerRe. 

Upon successful completion of the merger, ParisRe together with its operating subsidiaries will be fully integrated into PartnerRe’s existing operating structure. The acquisition will strengthen PartnerRe’s balance sheet and financial flexibility by creating a greater market presence, risk diversification, capital strength and scale in the face of uncertain and volatile financial and reinsurance markets. As such, we maintain our Outperform recommendation on the shares of PartnerRe.