Although Exor had been looking at the insurance and reinsurance sector as a possible investment opportunity for some time, it was only when the Axis and PartnerRe combination was announced that the investment company of the Agnelli family, which has a 29% stake in Fiat Chrysler and a 64% stake in Juventus football club, decided to run a slide rule over PartnerRe, Exor CEO John Elkann said today.
Speaking to analysts in a conference call, Elkann repeated the points made by Exor yesterday in favour of the Exor offer compared with that of Axis Capital Holdings – that it was all cash, that it was at a 16% premium to the Axis offer, and that it offered certainty to PartnerRe shareholders.
"The Axis offer is uncertain and depends on realised synergies and retaining key clients and employees", he said.
From Exor's point of view, PartnerRe ticked the right boxes because it did not require a high level of capital investment and provided high cash-generation and capital distribution to shareholders. It offered diversification to the Exor portfolio.
From PartnerRe's point of view there was a benefit to private ownership because it permitted the flexibility to exercise underwriting discipline across market cycles. Exor ownership would also provide the financial resources "to grow the platform opportunistically".
Elkann emphasised the long-term nature of the planned investment and Exor's belief in the market cycle.
He added that the management team and employee base were strong. He also revealed that, although PartnerRe's agreement with Axis precluded any direct contact with the management team in the near future, "we know and believe that PartnerRe has a very strong bench of management. We have not been able to interview anyone from the PartnerRe management team but once permitted we plan to interview the internal management and we believe we will be able to find a CEO internal candidate."
The PartnerRe model would be maintained, without any shift to riskier asset investments. "We like the model. We like the brand", Elkann said.
On being questioned about the increase in leverage that the purchase would entail, Elkann said that Exor was committed to maintaining its grade with the rating agencies, and that it had held fruitful discussions with the agencies on this matter.
Referring to the scale of PartnerRe, Elkann said that scale was not a constraint. He noted that the biggest pure reinsurer globally, Hannover Re, had demonstrated what could be achieved through organic growth.
Elkann declined to answer a question as to whether Exor had a 'Plan B' in the event of PartnerRe rejecting the Exor offer. He said that he was confident that the PartnerRe board would "make the right decision". However, Elkann hinted that the offer made by Exor was as far as it would go. "Our proposal is very clear, and we see full value in our proposal. I cannot comment on what Axis might do, but we will remain disciplined about prices."