France’s AXA Group has concluded a definitive agreement to cede its reinsurance operation – AXA Re and its subsidiaries – to Paris Re Holdings Limited. As previously reported (See IJ Website April 6 and10), AXA had recieved a definitive off from the new capital venture. The deal will produce around €120 million ($154 million) in capital gains.
Paris Re Holdings is a newly-created company with a capitalization of approximately $1.5 billion sponsored by a consortium of international investors led by Trident III, L.P., a fund managed by Stone Point Capital LLC. Trident III was originally established as an investment vehicle by MMC Capital – a unit of Marsh, Inc. Other lead investors include Hellman & Friedman, Vestar Capital Partners, Crestview Capital Partners, ABN Amro and New Mountain Capital. AXA will take a stake of approximately 4 percent in Paris Re Holdings.
“Under the terms of the agreement, the business of AXA RE is expected to be ceded in 2007 to Paris Re Holdings, with the risks and corresponding net income related to AXA Re’s 2006 claims experience accruing to Paris Re Holdings,” said the announcement. “AXA will continue to manage underwriting and claims for 2006 and prior years.”
AXA will also “guarantee the reserves pertaining to losses incurred on or before December 31, 2005. The corresponding accounting results will be reported in the Other International Insurance segment starting June 30, 2006.”
Completion of the transaction is subject to the satisfaction of various closing conditions including obtaining required regulatory approvals. During the transition period a subsidiary of Paris Re will enter into an issuance and quota share agreement with AXA RE, permitting Paris Re to write business on AXA RE paper.
In a separate bulletin, from its Greenwich Conn. headquarters, Stone Point Capital said: “Paris Re Holdings will continue to pursue the successful strategy implemented by the current management team of AXA RE. The Company will be led by Hans-Peter Gerhardt as President and CEO. Mr. Gerhardt has 24 years of experience in the reinsurance industry and has served as President and CEO of AXA RE since 2003. Prior to joining AXA RE, Mr. Gerhardt served as Executive Vice President and member of the Executive Committee of General Re Group.”
Stone Point’s CEO Charles A. Davis commented: “The AXA RE management team, led by Peter Gerhardt, has successfully repositioned this company over the past few years. Under Peter’s leadership, AXA RE generated an average ROE of 12 percent over the past three years despite unprecedented hurricane activity. We believe this is a unique international reinsurance franchise that is well positioned in today’s market.”
Gerhardt stated: “We are eager to become an independent company with the financial backing of several leading international private equity firms. AXA Group has been an excellent owner, and we look forward to its continuing support of the company as a minority shareholder.”
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