The French group would increase its exposure to the US market for life insurance by buying XL Group, headquartered in Bermuda. (Credits: Mick Tsikas) The French group confirmed Monday the takeover of its competitor based in Bermuda. A mega-acquisition making it the world leader in corporate property insurance but is freshly received by investors.
The transaction is expected to be the largest acquisition in the insurance sector since 2015 and the largest ever by a European on a US insurer. The French Axa announced Monday morning it has reached an agreement for the acquisition of insurance group and XL reinsurance, headquartered in Bermuda, to 15.3 billion dollars, 12.4 billion euros, in cash, confirming a report from Bloomberg weekend. Axa itself is worth 60.7 billion euros during Friday night. The agreement has received approval of the boards of both groups.
“This is a unique strategic opportunity that allows AXA to develop its activity profile of a company mainly present on the life and savings to an actor whose life insurance becomes the core business. With this transaction, Axa will become the world’s No. 1 non-life insurance companies in terms of premiums, “said Thomas Buberl, CEO, in a statement released Monday.
Axa outperforms on this ground Chubb American and German Allianz, which also looked at the XL file.
This mega-acquisition, paid for with a flirtatious premium of 33% over Friday’s closing XL is freshly received by investors: the Axa shares fell more than 9% on Monday in the Paris Bourse, signing by far the largest drop in the CAC 40 and wiping out 6 billion euros capitalization.
Struck by a year marked by natural disasters, including the United States, XL Group reported a net loss of 560 million in 2017 on revenues of 11.3 billion. The group, which employs 7,400 people, has developed over the past twenty years through acquisitions, including those of NAC Re, Winterthur International and the French Le Mans Ré in 2003, and more recently the company Catlin (listed in London, located in Bermuda) in 2015. The total assets amounted to 63 billion at end 2017. XL has generated 15 billion in premiums in 2017.
Biggest acquisition since 2006 for Axa
As for Axa, that would be its biggest acquisition since at least 2006 and that, from Credit Suisse Winterthur to 12.3 billion Swiss francs, or 7.9 billion euros at the time, he had sold the assets in the United States.
Less than two years after his appointment as CEO, succeeding Henri de Castries, Thomas Buberl its mark. He defined the fall the 16 key countries where it plans to focus its acquisitions, six emerging and developed ten, including the United States. It was 15 years ago, the French group had offered US Mony 1.3 billion euros.
A redemption XL Group enhance its exposure to the US market for insurance. Weakened by repeated natural disasters, several actors have become targets. In January, AIG announced the acquisition of Validus for more than 5.5 billion.
“The risk profile of the future AXA Group will be strongly rebalanced to insurance risks, with lower exposure to financial risks” Thomas Buberl also emphasizes in the press release announcing the acquisition agreement.
[Axa before and after the acquisition of XL (and out Axa US), distribution of profits before tax in 2016: the share of general insurance (Property & Casualty) from 39% to 50%, saving the decreases from 23% to 14%, that of asset management 10% to 4%. Credits: Axa]
AXA confirms its intention to rate Wall Street its US subsidiary AXA Equitable Holdings, which could be valued around 13 billion. The operation is scheduled for the second quarter of this year.
“The acquisition of XL Group Axa led to review its strategy with respect to its existing US operations, which it now plans to accelerate the disengagement,” says the French group.
The IPO of the US subsidiary and “associated transactions” have to bring him 6 billion euros that will finance part of the acquisition of XL (the rest will be financed by 3 billion cash and issuing 3 billion subordinated debt). The acquisition of XL Group “will also generate significant diversification benefits in capital under Solvency II and a high return on investment”, estimated at 10% by Axa.