EXOR has agreed to sell PartnerRe to French mutual insurer Covéa, a move that is turning out to be a very profitable thing for the Italian investment firm.

EXOR bought the Bermuda-based reinsurer in March 2016 for $6.72 billion in cash. Four years later, it expects to get $9 billion in cash from Covéa for PartnerRe, plus a $50 million cash dividend upon closing. EXOR’s aggregate cash return: about $3 billion.

The proposed sale is expected to be completed by the end of 2020, pending customary closing conditions, antitrust, regulatory and other approvals.

EXOR Chairman and CEO John Elkann said that his company is selling PartnerRe as a much stronger, more complete and efficient company than it was four years ago. He added that the sale to Covéa should help PartnerRe grow and expand even further.

“We have now been presented with an outstanding chance for PartnerRe to further strengthen its competitive advantage while providing important new opportunities for its people under Covéa’s ownership,” Elkann said in prepared remarks. “We are proud to have fulfilled EXOR’s purpose of building another great company and are grateful to PartnerRe’s board, leadership and people for all they have done to make this possible.”

Emmanuel Clarke, PartnerRe’s CEO, said the reinsurer’s evolution under EXOR’s ownership has been a healthy one.

“Over the past four years, under EXOR’s ownership, we have strengthened PartnerRe’s position as a global, diversified reinsurer, thanks to a continuous focus on enhancing our client and broker franchise, our underwriting and investments portfolios and our operational efficiency,” Clarke said in prepared remarks. “I’m confident we are in a very good position to further evolve under our new ownership.”

EXOR Said that it has worked with PartnerRe’s management during its ownership tenure to strengthen and grow its overall business. The company also helped it create a larger presence in the Life & Health reinsurance space, both through organic growth and its acquisition of Aurigen. As well, EXOR takes credit for boosting PartnerRe’s capital and operating efficiency and helping it to develop new specialties such as life financial solutions and third-party capital.

According to EXOR: PartnerRe’s operating performance since 2016 helped it to pay EXOR a total of $661 million in dividends and to grow its book value to common shareholders by $510 million to $6.57 billion.

EXOR said that this achievement was noteworthy, in part, because 2017 and 2018 were particularly challenging years for reinsurers.

Ultimately, EXOR said that the sale matters because reinsurers have increasingly depended on scale “as their primary insurance clients consolidate and then seek counterparties with greater capital strength when reinsuring their risks.”

EXOR said that following the acquisition by Covéa, PartnerRe will enter the top tier of reinsurers globally by balance sheet size.

S&P Offers Favorable Evaluation

S&P Global Ratings affirmed Covea’s “AA-” ratings on news of the proposed acquisition. S&P revised its outlook for PartnerRe to positive from stable, and affirmed its “A+” long-term insurer financial strength and issuer credit ratings for PartnerRe’s core subsidiaries.

“The outlook revision reflects our view that, subsequent to the acquisition, PartnerRe could benefit from stronger support as part of a higher-rated group with a strong balance sheet,” S&P said.

Sources: EXOR, Standard & Poor’s