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Munich Re and Axa XL among losers from Tokio Marine-Pure deal

Pure’s reinsurance partners and reinsurance brokers are likely to lose out on business in the aftermath of the high-net-worth (HNW) specialist’s takeover by Tokio Marine, according to analysis from sister publication Inside P&C.

Last week, the Japanese big-three carrier announced that it was to acquire the HNW specialist for $3.1bn.

Pure currently cedes the majority of its risk to the reinsurance market. However, with a $200bn balance sheet, Tokio Marine is likely to retain a significant portion of Pure’s $666mn of 2018 ceded premium net – generating financial synergies from the deal.

Pure’s biggest reinsurance backers include Munich Re, Everest Re, Partner Re and Axa XL.

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As the graphic above shows, Munich Re accepts the largest amount of ceded premium, at $131mn, which ran at a 48 percent loss ratio last year.

This is followed by the reinsurance operations of Axa XL, formerly Catlin Re, with $107mn, and Everest Re, with $90mn.

The findings are part of a full analysis into the takeover by Inside P&C.

The other key findings from this report are:

  • In line with prior transactions by Tokio, this is a simple bet on business quality. Pure has scarcity value and a higher-quality earnings stream from its fee-based business

  • Tokio Marine is also partly making a bet on HNW as a market niche

  • Given the growth estimates outlined by the company, Tokio Marine appears to assume that Pure’s market-share gains can continue in a growing market

  • This is largely an additive and strategic transaction rather than a cost-driven consolidation, although there are also financial synergies to be gained from the deal.

For the full pdf analysis on the Tokio Marine-Pure deal, click here.

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