Axis Capital Holdings Ltd and PartnerRe Ltd have agreed to merge, the companies announced last night.

The deal — between two of the five biggest companies in the Bermuda insurance and reinsurance marketplace — will create a group with a market capitalisation of nearly $11 billion and the world’s fifth-largest property and casualty reinsurer.

The combined entity will boast $10.7 billion in annual gross premiums, an investment portfolio of $33 billion and total capitalisation of some $14 billion.

Axis chief executive officer Albert Benchimol will lead the enlarged company, while PartnerRe chairman Jean-Paul Montupet will serve as its non-executive chairman. The combination has been described as a “merger of equals” and the deal is expected to close in the second half of the year.

Costas Miranthis stepped down yesterday as CEO of PartnerRe and as a member of the reinsurer’s board, in connection with the deal.

PartnerRe director David Zwiener will assume the position of interim CEO of PartnerRe until the completion of the transaction.

The companies said they expect to make annual savings of at least $200 million, suggesting that jobs are likely to go. The companies’ headquarters are in neighbouring buildings on Pitts Bay Road and the statement confirms that the combined company will be based on the Island. Both also have offices in London, New York, Zurich and Ireland.

PartnerRe shareholders will own about 51.6 per cent of the combined company, while Axis investors will hold 48.4 per cent, the companies said. PartnerRe shareholders will receive 2.18 shares of the combined company’s common shares for each share of PartnerRe they own, while Axis shareholders will receive one share of the enlarged entity for each of their Axis shares. PartnerRe writes only reinsurance, while Axis writes primary insurance too. The new company will derive around two-thirds of its premiums from reinsurance.

“This transformational combination will leverage the complementary strengths of both companies and create an organisation with the size and breadth to enhance product and service offerings, maximise growth opportunities, optimise portfolios, and deliver both economies of scale and capital efficiencies,” Mr Benchimol said in a joint statement from the two companies last night.

“The combined company will have three strongly positioned businesses — a top-five global reinsurer, a $2.5 billion specialty insurance underwriting business, and a highly successful and growing life, accident and health franchise — all with increased strategic flexibility.

“As a top five global reinsurer with leading positions in a number of specialty lines, we will be strongly positioned to turn the challenges presented by the structural changes in the reinsurance market into opportunities.”

The deal is the latest in a string of huge merger deals in the industry, following RenaissanceRe’s agreement to buy Platinum Underwriters and then XL Group’s $4.2 billion takeover of Catlin.

The mergers have come about in challenging market conditions. Reinsurance rates have fallen because of lower-than-normal catastrophe losses and an influx of competing third-party capital. Meanwhile, investment returns have also been squeezed by low interest rates.

PartnerRe was formed in 1993, after a spike in reinsurance rates prompted by the 1992 Hurricane Andrew. Axis was formed in late 2001 after the September 11 terrorist

attacks of that year also caused insurance rates to rise.

Mr Benchimol has worked in senior roles for both companies. Before he joined Axis in January 2011, he had served as chief financial officer at PartnerRe for ten years.

Last night’s joint statement adds: “Given the similar disciplined underwriting cultures of both organisations, the combined entity will draw on the talented group of leaders from both companies.”

Some of the top positions have already been decided. Emmanuel Clarke will be CEO, Reinsurance, while Peter Wilson will be CEO, Insurance. Chris DiSipio will be CEO, Life, Accident and Health; and John “Jay” Nichols will be responsible for strategic business development and capital solutions.

Joseph Henry will be chief financial officer and Bill Babcock will be deputy CFO and lead integration officer. Mr Babcock will assume the role of CFO on Mr Henry’s retirement in July 2016.

PartnerRe chairman Mr Montupet paid tribute to the company’s exiting CEO. “On behalf of the entire board of directors, I want to express my appreciation to Costas Miranthis for successfully leading PartnerRe for the past four years and positioning the company to be able to move into this exciting new phase.

“PartnerRe has benefited greatly from his leadership and guidance and we wish him well in his next endeavour. This is an exciting opportunity that offers tremendous potential with many benefits for PartnerRe, our clients, brokers and shareholders.”

Axis chairman Michael Butt, who will continue to serve on the board of the combined company as chairman emeritus, said: “I have for a long time, since 1993, been an admirer of PartnerRe and what it has achieved. I am delighted therefore that we can now combine our businesses and people to create an even more exciting future.”

Shortly before the merger statement came out last night, both companies gave preliminary estimates of fourth-quarter results. Axis, which is due to announce earnings on February 3, said it made operating income of between $117 million and $123 million, or between $1.15 and $1.21 per share, compared to the consensus estimate of $1.21 per share of analysts tracked by Yahoo Finance.

PartnerRe, which will report on February 4, said its operating earnings were between $210 million and $230 million, or between $4.20 and $4.60 per share, easily beating the Wall Street expectation of $3.04 per share.