AXIS Capital Holdings is cutting 100 jobs and winding down its retail insurance business in Australia, two months after cancellation of its planned merger with PartnerRe.
The Bermuda-based specialty lines insurer and reinsurer said both moves are intended to boost shareholder value and profitability, as part of a broader, ongoing revamp effort dating to August 2014 designed to improve efficiency, information technology capabilities and service. AXIS President and CEO Albert Benchimol said its Australia and job reduction moves are not connected to the canceled merger deal.
“While we did learn much about the strength of the organization through our merger integration planning earlier this year, today’s announcement is an extension and acceleration of previously announced goals in August 2014 of more efficiently serving clients globally,” Benchimol told Carrier Management in a telephone interview.
AXIS had planned to merge with PartnerRe in a deal first announced in early 2015. Italian investment firm EXOR stepped in last spring, fielding an unsolicited bid for PartnerRe. After much back-and-forth, EXOR finally sealed an agreement in early August to buy PartnerRe for $6.9 billion. AXIS walked away with a $315 million break-up fee from its former merger partner-to-be.
Benchimol denied that dissolution of the planned AXIS/PartnerRe merger accelerated any reorganization efforts.
“Certainly, as part of the merger, we had good ideas [that] we would put to paper,” Benchimol said. “The fact that the merger does not happen does not mean we should not do good ideas we were uncovering during this self-evaluation process.”
Benchimol said almost half of the layoffs are related to closure of the AXIS Australia retail operations. AXIS said in its announcement that job reductions will take place primarily in its corporate and select insurance operations, as part of a broader effort to reduce expenses. AXIS employed 1,254 people overall as of its most recent annual report.
While AXIS is winding down its retail operations in Australia, Benchimol said the insurer will remain active in there, through its international wholesale insurance and global reinsurance platforms.
Both actions will lead to a pre-tax reorganization charge of $51 million, or $0.51 per share in the 2015 third quarter to cover staff severance and related costs as well as the write-off of information technology assets and lease cancellation costs. As well, AXIS will recognize an impairment of certain customer-based intangibles after closing its Australia retail insurance operations.
AXIS said the cuts will lead to $30 million in annual pre-tax cost savings that will be realized in 2016.
In other actions intended to boost shareholder value, AXIS announced in early August that it had begun a $300 million “accelerated share repurchase program” designed to be finished by the end of 2015.
AXIS booked net income of $63 million for the 2015 second quarter, or $0.63 per diluted common share. That compares with $191 million, or $1.79 per diluted common share, for the second quarter of 2014. The drop in net income came in part from a decline in investment income, and also high marine losses.