5 March 2018Analysis

AXA to acquire XL Group for $15.3bn in second half of 2018

French Insurer AXA has agreed to acquire Bermuda-based XL Group for $15.3 billion (€12.4 billion) in cash.

The transaction is expected to take place during the second half of 2018, and represents a shift in AXA's business profile from life and savings (L&S) to property and casualty.

XL Group subsidiary XL Catlin has numerous captive insurance clients globally, including multinational companies, large single-nationality companies, and both public and private companies. It offers captive fronting programmes for a range of lines including general liability, employer’s liability, workers compensation, property damage and business interruption, energy, marine cargo, professional indemnity, construction, fine art and specie and environmental.

AXA suggested this deal will enable the group to become the largest global P&C commercial lines insurer with combined 2016 revenues of around €30 billion and total P&C revenues of around €48 billion. Furthermore, it stated it diversifies the business, and enables higher cash remittance potential and reinforced growth prospects, rebalancing the profile towards insurance risks and away from financial risks.

“XL Group has the right geographical footprint, world-class teams with recognized expertise and is renowned for innovative client solutions,” said AXA CEO Thomas Buberl.

“Our combined P&C commercial lines operations will have a strong position in the large and upper mid-market space, including in specialty lines and reinsurance, and will complement and further enhance AXA’s already strong presence in the SME (small and medium-sized enterprise) segment. 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."

The opportunity to acquire XL Group has led AXA to review its exit strategy from its existing US operations which AXA now expects to accelerate. Together with the planned IPO (initial public offering) of AXA’s US 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.

Once the deal is complete, the combined operations of XL Group, AXA Corporate Solutions (AXA’s large commercial P&C and specialty business) and AXA Art will be led by Greg Hendrick, currently the president and chief operating officer of XL Group, who will be appointed CEO of the combined entity and join AXA Group’s management committee, reporting to Thomas Buberl.

Greg Hendrick will work closely with Doina Palici-Chehab, AXA Corporate Solutions’ executive chairwoman, and Rob Brown, AXA Corporate Solutions’ CEO, to build an integrated organization and leadership team for this new company. Following the closing, Mike McGavick, XL Group’s current CEO, will become vice-chairman of the combined P&C Commercial lines operations and special adviser to Thomas Buberl, AXA Group CEO, to advise on integration-related and other strategic matters.

Mike McGavick, CEO of XL Group, said: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension. With every confidence in how we have positioned XL Group for the future, it is a substantial testament to AXA’s leadership and commitment to maintaining the XL Group brand and culture that we have come to an alignment.

“We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward,”