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AXA to purchase XL Group

06 March 2018

It's the latest mega-deal in the insurance space.

European insurer AXA has announced that it is to purchase XL Group (XL), a property and casualty insurer based in Bermuda, for US$15.3 billion.

The price represents a premium of 33 percent to XL Group closing share price on March 2, 2018.

Upon completion of the transaction, the combined operations of XL Group, AXA Corporate Solutions and AXA Art will be led by Greg Hendrick, now the President and Chief Operating Office of XL Group, who will be appointed CEO of the combined entity and join AXA Group's management committee, reporting to Thomas Buberl.

Axa will be paying the whole sum in cash, using €3.5bn of cash at hand, €6bn from the U.S. initial public offering (IPO) and €3bn of debt. AXA's deal comes just over a month after American International Group AIG.N said it would buy reinsurer Validus for around $5.6 billion.

"P&C insurers' stocks fell during last year's natural disaster season and have attracted the attention of bidders as premiums are rising after several years of falling rates", Reuters added.

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Allianz had also been seen as a possible suitor for XL, but a source close to the German company said Allianz was not overly concerned by AXA scooping up XL.

"We will be number one in commercial insurance", Buberl told a news conference in Paris.

"In our view, the acquisition of XL fits AXA's strategy of growing in commercial insurance. It will allow AXA to change profile of its business in such a way that segment life, until now principal line of activity of insurer (51% of total income vs. 31% non-life), loses weight within its business", analysts of Bankinter value. The combination of AXA's and XL Group's existing position will propel the Group to the #1 global position in P&C Commercial lines with combined 2016 revenues of ca.

According to Axa the deal will propel it to being the global leader of P&C commercial lines business with the most GWP.

It added it expected the XL takeover to be cash accretive, and to result in cost synergies of around $400 million per year, based on pre-tax earnings. Together with the planned IPO (initial public offering) of AXA's U.S. operations (expected in the first half of 2018 subject to market conditions) and intended subsequent sell-downs, this transaction would gear AXA further towards technical margins less sensitive to financial markets.

AXA to purchase XL Group