Strategy

AXA Buys XL for $15B to Boost P&C Business

The deal is a "unique strategic opportunity" for the French insurance giant to diversify away from life and savings products.
Matthew HellerMarch 5, 2018

French insurance giant AXA has agreed to buy XL Group for $15.3 billion, making a major move into property and casualty products as it shifts away from a primarily life and savings business.

The deal, as Reuters reports, continues a wave of consolidation in the insurance industry, with carriers “turning to takeovers to strengthen their businesses as they face tougher regulation and falling returns from financial market investments.”

“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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AXA said Monday that XL had accepted its $57.60 offer, a 33% premium to Friday’s closing price. XL generated $15 billion of gross written premium in 2017 and, according to AXA, the combined companies will be a world leader in property and casualty insurance.

“This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business to predominantly P&C business,” AXA Chief Executive Thomas Buberl said in a news release.

AXA ranks as Europe’s second-largest insurer in terms of market capitalization behind Germany’s Allianz, which had also been seen as a possible suitor for XL.

The Wall Street Journal said the acquisition of XL “marks another step in AXA’s plan to cut its exposure to financial markets and focus more on insurance products that aren’t sensitive to swings in interest rates and stock prices. XL, however, presents AXA with a different type of risk: It is heavily exposed to the business of insuring against disasters.”

The French firm had not been hit as hard as some by natural catastrophes in 2017, due to reinsurance contracts and a diversified business model, and last month reported higher-than-expected 2017 net profits of 6.2 billion euros.

Buberl said AXA and XL’s combined P&C Commercial lines operations “will have a strong position in the large and upper mid-market space” and the two companies “share a common culture around people, risk management and innovation, positioning AXA uniquely for the evolving future of the P&C industry.”

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