- Reorganization costs $51 million before tax in third quarter
- Axis will wind down retail insurance business in Australia
Axis Capital Holdings Ltd. will cut about 100 jobs and scale back operations in Australia after the reinsurer lost a bidding war for PartnerRe Ltd.
Costs tied to the reorganization reduced third-quarter earnings by about $51 million before taxes, including expenses for severance and lease cancellation, the Bermuda-based company said Wednesday in a statement. The cuts represent 8 percent of the 1,250 jobs that the company had when it filed its annual report in February. Reductions will be focused in the corporate and select-insurance operations.
Axis is among reinsurers that have been pressured by falling rates amid increased competition from Wall Street money managers seeking weather-related bets. Chief Executive Officer Albert Benchimol was outbid this year by Italy’s Exor SpA, the investment vehicle for the billionaire Agnelli family, for PartnerRe. Benchimol said he has been reviewing the business since last year to improve profitability.
“While we did learn much about the strength of our organization through our merger-integration planning earlier this year, today’s announcement is an extension and acceleration of our previously announced goals to more efficiently serve our brokers and clients on a global basis and to drive future book-value-per-share growth,” he said in an e-mailed statement.
Axis said it would wind down its retail insurance operations in Australia while still serving that market through its international wholesale insurance and global reinsurance businesses. The reorganization is expected to save about $30 million annually before taxes, according to the statement.
Benchimol intends to boost the firm’s value through accessing a “broad range of capital” to complement its balance sheet, he said in the statement. Axis will also continue to work with third parties and generate fee income from providing tailored products to investing firms, he said.
“The company is looking at different avenues where it can generate alpha in a very difficult business, that may get more difficult in this hurricane season, and as the level of excess capital continues to build,” Amit Kumar, an analyst at Macquarie Group Ltd., said by phone. He said in a note to clients Tuesday that staff layoffs are “not necessarily a path to value creation.”
The reinsurer gained 19 cents to $53.50 at 4:01 p.m. in New York, extending its advance for the year to 4.7 percent. The company said its $300 million share repurchase program is expected to be completed by the end of the year and the board will review the stock buybacks and dividend policy at a December meeting. Axis is scheduled to report third-quarter results on Oct. 27.