After years of approaches and rejection, court cases in Paris and London and one of the most public bust-ups ever seen in French business, the boss of French mutual insurer Covéa finally landed his big deal this month.
When Thierry Derez agreed to buy Bermuda-based reinsurer PartnerRe, which is controlled by Italy’s billionaire Agnelli family, for $9bn he was fulfilling an almost decade-old ambition — but one which had brought him into direct and increasingly embittered confrontation with French reinsurer Scor.
Eight years ago, Covéa, which is owned by its customers and operates mainly in France, wanted to spread its wings. The Paris-headquartered group wanted access to a more global customer base and viewed a push into reinsurance — the cover that insurance companies buy to protect themselves from high payouts — as a way of gaining that international reach.
“We had a strategy to go towards reinsurance from exactly the month of December, 2011 . . . we decided from that point to work on the strategy of buying a reinsurance company of good size,” Mr Derez told the Financial Times in an interview.
His first choice was Scor, a group “in the arrondissement beside us” and a company in which Covéa was already a shareholder. However, Denis Kessler, chief executive of Scor, disagreed and Covéa’s approach was rebuffed in 2012.
Mr Derez pulled back but built up the stake in Scor and made a takeover offer in 2018. In doing so, he ignited a public fight between the two groups centring on allegations that he told his advisers about Scor’s own confidential plans to merge with PartnerRe, allegedly to kill the deal and help with his own merger.
Mr Derez, who has rejected the allegations, was on Scor’s board of directors until November 2018 when he resigned due to the conflict.
The dispute is still rumbling through the courts, with Scor accusing Covéa and Mr Derez of breach of trust. It remains the subject of regular gossip among French executives.
In private, Mssrs Derez and Kessler are like chalk and cheese.
Mr Derez, a tall, self-contained and cerebral man who took the reins at Covéa in 2008, is extremely private and sometimes terse. However, the trained lawyer is happy to discuss esoteric subjects such as the philosopher Immanuel Kant, robotics or a defence of pre-Socratic thought. The 63-year-old contrasts sharply with Mr Kessler, a charismatic and larger than life figure in Parisian business circles.
But Mr Derez has not waited for an outcome before making his next move. By buying PartnerRe, he has instead brought the episode full circle and made himself a direct competitor to Mr Kessler as well as helping bolster Paris’s reputation as an important centre in the reinsurance industry.
The move into the sector — a far cry from the sort of regular consumer and business cover that Covéa usually sells — was necessary, according to Mr Derez.
“The insurance market is evolving,” he said. “What was historically a relatively clear division of roles between insurers and reinsurers is fading away.”
Technological changes such as driverless cars will expose insurers to the sort of big risks usually covered by reinsurers, he argues. Not being able to sell reinsurance “risks being a weakness in the future, so we prefer to have a complete insurance chain”.
Before global markets began whipsawing due to the coronavirus pandemic and an oil price war, shares in reinsurers had been rising following years of declines. A surge in natural catastrophe claims has allowed them to charge more.
Shares in Swiss Re and Munich Re rose gradually through the second half of 2019, while Covéa has paid far more for PartnerRe than the $6.9bn paid by Exor, the investment company controlled by the Agnelli family, in 2015 following a bidding war.
Mr Derez justified the $9bn price tag by arguing that Exor had built up Partner’s life reinsurance business. He also brushed off concerns that Covéa’s mutual structure means its ability to raise capital is limited, pointing to its low debt levels.
Covéa does not intend to make huge changes to PartnerRe, which has little crossover with its existing businesses. Mr Derez said that Covéa supported its existing plans and that there were likely to be few cost savings from the acquisition. The PartnerRe name will remain in place.
While Mr Derez busies himself with his latest acquisition and answers questions from the French regulator about whether Covéa’s corporate governance model accords him too much influence, relations with Mr Kessler remain frosty.
Covéa is still Scor’s largest shareholder but says the stake will be managed as if it were any other shareholding, and that its strategic interest has ended.
Mr Kessler and Mr Derez last saw each other at a meeting in Paris just before the deal for PartnerRe was announced.
But when asked if the two men could one day in the future share a bottle of wine and reminisce about a period where they were both at each other’s throats, Mr Derez demurred. At his elbow, one of his lieutenants smiled and joked: “We’d need a taster for the wine.”