Axa agrees to buy Bermuda-based XL Group for $15bn

March 5, 2018

Axa, France’s largest insurance group, has agreed to buy XL Group, a Bermuda-based property and casualty insurance company for $15.3bn.

“This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly life and savings business to predominantly property and casualty business,” said Thomas Buberl, AXA chief executive.

The all-cash deal at $57.60 a share represents a premium of 33 per cent to XL Group’s closing share price on March 2, according to Axa.

The French insurer will fund the takeover, which was reported over the weekend, using €3.5bn of cash at hand, €6bn from the planned US IPO and related transactions and €3bn of subordinated debt.

The deal will push Axa into the number one position in the property and casualty commercial lines business measured by gross written premiums, according to the company, with combined 2016 revenues of €30bn and total P&C revenues of €48bn.

Axa recently launched a wide-ranging shake-up of its business, cutting costs and giving more autonomy to its local managers.

The French insurance company is gearing up for the initial public offering of its US life and annuity business. The flotation was announced last May and is likely to take place in the coming months. There had been debate around whether the cash raised would be used to fund acquisitions or for share buybacks.

“We had a very clear strategy to reorient the group and change the profile, to take on less financial risk and more towards the core insurance risk and with this in mind we announced the IPO of our US business in life,” said Mr Buberl.

“The big question was what do we invest in and how do we do the IPO. Everyone thought we would do share buybacks, but for me share buybacks are the last resort . . . they represent a lack of sufficient entrepreneurial ideas,” added Mr Buberl.

The transaction adds to a run of big insurance deals under way. Already this year, US insurance group AIG agreed a $5.6bn deal to buy Validus, a reinsurer launched by Jeff Greenberg in 2005, and Phoenix Holdings reached a deal to buy the insurance unit of Standard Life Aberdeen.

Meanwhile, Japanese conglomerate SoftBank is in talks to take up to a 30 per cent stake in SwissRe, a reinsurer that is also looking to participate in consolidation. Deal activity has been particularly strong in the reinsurance sector as the industry’s long-term profitability is being threatened by capital pushed into the sector by low interest rates.

The acquisition is expected to close in the second half of 2018.

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