FILED BY PARTNERRE
LTD
PURSUANT TO RULE
425
UNDER THE
SECURITIES ACT OF 1933
SUBJECT
COMPANY: PARIS RE HOLDINGS LTD
COMMISSION FILE
NO.: 132-02692
ACQUISITION
SPECIAL SUPPLEMENT
July,
2009
LETTER
FROM THE CEO
Since the announcement of the
acquisition with PARIS RE on July 6, I and other members of the Executive
Committee have spoken with many of you in person to answer your questions with
the information that we have available. While we are not yet in a position to
provide a detailed picture of what our combined organization will look like, we
will continue to keep you updated as often and as openly as we can through the
Group video conference, the employee newsletter and PartnerRelink, as well as through informal meetings
in your locations.
While we recognize this is a long
process and that there will be more questions and uncertainty as we work towards
integration, I and other members of the EC will continue to keep you informed of
our progress and about the issues that affect you.
Employee Q&A
Here are some of the questions and
answers from recent employee Q&A sessions.
Q. PartnerRe is already a top 10
reinsurance company. Would we really have been at a disadvantage without this
acquisition?
As we have proved recently, we are not
at a disadvantage in the current environment. This transaction is less about
where we are today and more about ensuring the long-term future of PartnerRe. As
a result of the financial and economic crisis, it is better to be larger than it
was a year to two years ago. It’s also about differentiating PartnerRe from the
two major groups in the industry. This acquisition will make us larger than
other mid-sized companies in terms of capital and premium, but not as
slow-moving as the very large-scale players in the industry.
Q. Are there any downside risks to the
acquisition?
There are always risks, but we have
carried out a thorough due diligence and so we know and understand PARIS RE’s
book. There are no strategic or due diligence risks or history to indicate a
high acquisition risk. There is always risk around integration, but we’ve done
this before and we anticipate integration risk to be low.
Q. Why is the deal itself so
protracted?
This acquisition is different to others
in that PARIS RE has a complex shareholder base comprising both private and
public shareholders. Because of this, the acquisition will be completed in two
transactional phases – both subject to governmental and regulatory
approval:
• The first is the completion of a block
purchase for a majority stake (approximately 57%) of the company with the
private equity shareholders. This is a stock-for-stock transaction where
PartnerRe will give 0.3 shares of PartnerRe shares for each PARIS RE common
share.
• The second involves the public
shareholders. PartnerRe will complete a voluntary public exchange offer for the
remaining outstanding shares, subject to approval of the French regulator AMF.
When the acquisition is complete, the pro forma shareholder base of PartnerRe
will be approximately 69% PartnerRe and 31% PARIS RE
shareholders.
Q. Is there a possibility that the deal
won’t go through?
There’s always a risk that another
company might try to step in or that our shareholders will vote against it but
we think there’s a high probability that it will go ahead.
Q. What is the cost of the
integration?
There will be cost implications over the
next couple of years. We factored these into our initial discussions when we
were looking at whether or not the deal made sense.
Q. The renewal is important. Why couldn’t we complete this deal
before
1/1?
That would have been desirable, but the
discussions which started in December 2008 were very lengthy. We will also have
to seek regulatory approval as well as tender for the remaining
shares.
Q. If PARIS RE maps so well to PartnerRe in terms
of lines of business, how does this acquisition enhance
diversification?
There are opportunities for
diversification by geography, particularly in Asia and Latin America. PARIS RE also has a big facultative
operation, more non-proportional business, smaller clients and is in some lines
that we are currently not in.
Q. What are the implications of taking on
PARIS RE’s significant facultative portfolio?
A bigger facultative portfolio is
attractive to PartnerRe and we were in fact already looking into facultative
business before the acquisition to see if and how we could grow that
area.
Q. How much business do we expect to
keep?
While there is some overlap of business
between PartnerRe and PARIS RE, we won’t know what business will be affected
until the integration phase next year when PartnerRe has full
ownership.
Q. What will be the impact on the
Paris/Zurich locations balance?
That will be decided in the integration
phase after we achieve the block purchase and have 100% control of the company.
PARIS RE will be closely involved throughout the integration
process.
Q. Do we need to adjust our 1/1 2010
planning?
No. We will operate as two separate
companies until Q1 2010. It is too early to make projections and so the planning
process should be carried out as normal.
Q. A number of Bermudian companies are
moving to Switzerland. As PARIS RE has an office in Zug, are
there any plans to move headquarters from Bermuda?
No, there will be no change to our
domicile.
Q. Why are we paying such a large premium
(35%) over the trading price of PARIS RE shares?
There is very little liquidity in the
PARIS RE stock, with only a very small fraction of its total shares trading on
any day. This limited liquidity has resulted in the shares historically trading
below tangible book value. Tangible book value, rather than the trading price of
PARIS RE shares, is a much more relevant measure.
Q. When will PARIS RE carry PartnerRe’s
rating?
We will have one rating once we have the
majority shareholding and are one company.
Q. What will be the impact of the
acquisition on employees – both PartnerRe’s and PARIS RE’s?
This acquisition is not about cost
reductions but about building a structure that will ensure that PartnerRe
remains a successful company for the long term. While we believe that there will
be overlaps between the two companies, we don’t yet know to what extent and in
what areas they will be. So that we can be sure we make the right decisions
there will be no lay-offs for economic reasons for one year. Whatever the
outcome, our priority will be to ensure that this more difficult aspect of
integration is carried out fairly and with respect.
Q. Will there be any changes to PartnerRe’s
organizational structure? Will reporting lines change?
PartnerRe will continue to organize
itself around business units but we view this as a good opportunity to take a
fresh look at our organizational needs.
Q. Will PartnerRe’s share plans (options,
RSU, ESPP) be impacted?
We believe in employee ownership and
that will not change. PartnerRe is in the process of determining what impact the
transaction will have on employees’ equity plans but we don’t anticipate any
negative impact.
Q. Will integration mean a change in
workload?
Workloads will increase for those parts
of the organization that will be involved in the integration. Details will be
communicated as integration plans progress.
Q. Now that the intended acquisition has
been announced, are there any restrictions on selling my PartnerRe
stock?
If we are not already in our normal
black-out period there are no restrictions on selling your PartnerRe
shares.
Q. How will our IT infrastructure be
impacted?
PartnerRe will retain its IT
infrastructure. As part of the integration phase, PARIS RE’s IT systems will be
integrated with our own.
How will PartnerRe rank against our
competitors following the acquisition?
Companies are ranked in different ways
and so our position changes depending on the criteria used. Since our goal is
not necessarily to be a large scale reinsurer, how PartnerRe measures against
our competitors in terms of capital or premium volume, is somewhat irrelevant.
What this deal does mean is that we will be larger, stronger and in a better
position in the future. The additional capital and increased diversification we
will achieve will make us not only more resilient to shock losses, but more
likely to remain profitable in spite of them. While our earnings will always be
volatile we would expect to see fewer loss making years. For
employees that means a stable, profitable company.
What’s Next?
Before integration can take place, there
are some important transactional milestones coming up over the next few months
and into 2010:
July 6
• Acquisition
announcement
Q4 2009
• Awaiting approvals on
block purchase transaction from governmental and regulatory authorities required
before the block purchase begins.
• Block purchase
completes of approximately 57% of PARIS RE’s common shares outstanding from
private equity firms and their investment entities. As soon as regulatory
approval is granted, the block purchase will be executed and
completed.
• PartnerRe is majority
owner with majority representation on PARIS RE’s board and the ability to influence
their operations.
Q1 2010
• Exchange offer for
remaining PARIS RE common shares not owned by PartnerRe – subject to the
approval of the French Autorité des Marchés Financiers (French regulators), an
independent expert’s report and the listing of PartnerRe shares on Euronext
Paris.
• 100% ownership
– Merger takes place to acquire any
remaining shares once PartnerRe owns at least 90% of PARIS RE’s outstanding shares. At this point
PartnerRe will have 100% ownership of PARIS RE.
Q1 2010 / Q2 2010
• Transaction completes
– Integration begins of PARIS RE, together with its operating subsidiaries, into
PartnerRe’s existing operational and legal structures.
What You Need to
Remember
Until completion of the block purchase
transaction
• The companies are two
separate companies and bound by anti-trust rules.
• PartnerRe and PARIS
RE are competitors. Behave as competitors – no discussions on price, terms and
conditions, combination of participations, underwriting evaluations. No
discussions about internal operations.
• PartnerRe’s Executive and Management Board will
begin integration planning with due regard to anti-trust
law.
Once PartnerRe achieves majority
ownership
• Once PartnerRe
achieves majority ownership, PartnerRe will represent a majority of PARIS RE’s
board through the addition of PartnerRe designated nominees to the
board.
• While PartnerRe will
have strategic influence over PARIS RE, the companies will continue to operate
as two separate companies. There may be no discussions on price, terms and
conditions or combination of participations between PartnerRe and PARIS RE
employees.
• Any client or
broker-related business issues or conflicts between the two companies will be
managed through Hans Peter Gerhardt on PARIS RE’s side and the EC member in
charge on PartnerRe’s side.
• Integration planning
at PartnerRe will intensify but it will still respect the minority
shareholders’ rights.
Once PartnerRe has full
ownership
• Integration begins
once PartnerRe has full ownership (100%) of PARIS RE.
• Once integration is
complete, we will be one organization and all business will be written as
PartnerRe.
How integration Planning – Who’s
Who
Even though the integration of the two
companies will begin in Q1 2010, planning is already underway at PartnerRe led
by Bruno Meyenhofer as program sponsor and a steering committee consisting
of:
Costas Miranthis
CEO, PartnerRe
Global
Tad Walker
CEO, PartnerRe U.S.
Bill Babcock
Finance Director,
Group
Amanda Sodergren
Chief Legal Officer
Laurie Desmet
Chief Accounting Officer,
Group
Eric Gesick
Chief Actuarial Officer,
Group
Marvin Pestcoe
Head of Capital Assets, Capital
Markets
Abigail Clifford
Chief Human Resources
Officer
Mike Mitchard
Chief IT Officer
John Adimari
Chief Operations Officer, U.S.
Celia Powell
Chief Communications
Officer
Christoph Moggi
RMR Operational
Manager
Felix Grond
Head of Group IT Architecture and
Standards
Reporting to the steering committee is a
number of PartnerRe teams working on various aspects of the
project:
• Transaction and Legal Entity
Structure
• Global Business
• U.S. Business
• Investments
• Finance and
Accounting
• Human Resources
• Information
Technology
• Program Management
Office
PARIS RE at a Glance
|
Number of
employees
|
400
|
|
Company
information
|
• Formed in 2006
after AXA Group sold the reinsurance activities of AXA Re to a group of
investors
• Swiss-based
company with headquarters in Zug. The company structure is based on a
matrix organization with lines of business and territorial
managers
• Shares are
traded in France on the NYSE Euronext stock
exchange, symbol: PRI
|
|
Employee
distribution
|
The majority of employees are
based in Paris with 30 employees in Singapore, 30 in Montreal, 20 in Miami and the rest based in the smaller
offices in New
York, Washington and Zug
|
|
Lines of
business
|
Operates in all lines of
facultative and treaty reinsurance covering property, casualty, marine,
aviation/space, credit/surety, life, accident/health as well as a wide
range of other risks
|
|
Broker vs. direct
business
|
About 80% through brokers; some
direct in Credit
|
|
CEO
|
Hans-Peter
Gerhardt
|
|
Ratings
|
S&P A-
A.M.
Best A-
|
Where to Go for More
Information
As we go forward, Corporate
Communications will continue to post new or updated information on the
“Acquisition Information” community. If you have any questions, either use the
“Ask a Question” feature on that community, “Ask the CEO” on the portal home
page or send your question to:
corporate.communications@partnerre.com