On Monday, Axa confirmed it has entered into an agreement to acquire 100% of XL Group, a Bermuda-based global Property & Casualty (P&C) commercial lines insurer and reinsurer.
The deal, which is expected to close in the second half of 2018, is for a total cash consideration of $15.3bn (£11.1bn, €12.4bn).
Under the terms, XL Group shareholders will receive $57.60 per share, a premium of 33% on the group’s closing share price on Friday 2 March.
The acquisition announcement saw Axa’s share price fall during the day, with one analyst telling newswire Reuters that the “price looks quite high”.
As of 4pm GMT on Monday, Axa’s share price was down 9.78% at €22.61 (£20.19, $27.86).
Life & Savings (L&S)
Axa chief executive Thomas Buberl said of the acquisition: “This transaction is a unique strategic opportunity for Axa to shift its business profile from predominately L&S business to predominately P&C business.”
He added that it will “enable the group to become the number one global P&C Commercial lines insurer based on gross written premiums”.
The company said the acquisition is aligned with its Ambition 2020, which involves favouring product lines with high frequency customer contacts, quality service and superior technical expertise.
What does it mean?
For Acuity Consulting’s Simon Willoughby, the decision “is not a huge surprise and sees them return to their original, core business”.
“It is easy to forget that ‘Axa’ is only a little over 30 years old and was originally created by the forced merger of a range of insurance companies in northern France by the French Government.
“Along the way it has acquired many companies around the world, life and non-life, but at its heart it was and always will be a general rather than a life insurance company,” the Axa alum told International Adviser.
“At the time of its 30th anniversary, Axa was present in approximately 65 markets globally, but only had life licences in only 15 of those markets, the oldest of which was Axa Isle of Man Limited, a company at the time that was a little more than 20 years old.”
Industry upheaval
The news comes during, what has already been, a busy period for the international life insurance market.
On 23 February, Standard Life Aberdeen announced the sale of its UK, Irish and German businesses to Phoenix Group, which will see the industry heavyweight depart the life sector.
The firm will hold a 20% stake in Phoenix Group and distribute the Standard Life International Bond, which will still be available through the closed book consolidator.
A week later, closed book insurer Equitable Life confirmed it had approached Goldman Sachs to explore potential sales opportunities.
The Axa deal also comes a year after Axa Wealth International was sold to closed book consolidator Life Company Consolidation Group (LCCG). The business was rebranded Utmost Wealth Solutions and continues to run as an open book.
Continuity for advisers
One theme that emerged after the Standard Life announcement was the impact on the advice community.
Canada Life International managing director Sean Christian said that acquisition can “be an issue for adviser firms”.
It is a sentiment with which Old Mutual International managing director Peter Kenny agrees.
He told IA: “When we see lots of corporate activity taking place in the market, particularly changes in strategic direction by significant players, we typically see advisers become unsettled, and look for providers who they know are committed to the offshore advice market, and who will offer them the continuity and ongoing service they are looking for.”
