AXA is adjusting the focus of its global insurance business, beginning with the $20 billion acquisition of a global property and casualty commercial lines insurer. It's a move away from its dominant life business.
AXA has entered into an agreement to acquire 100% of Bermuda-based insurer and reinsurer XL Group for a total consideration of $19.7 billion, to be paid in cash.
AXA offered US$57.60 for each XL share, a 33% premium on the company's closing price on 2 March 2018.
AXA chief executive Thomas Buberl described the transaction as a strategic opportunity for AXA to shift its business profile from a predominantly life and savings business to being largely property and casualty focused.
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Currently, life and savings accounts for 33% of AXA's overall earnings; this will decrease to about 18%. Meanwhile, property and casualty insurance will rise from 39% to 50%.
He added the deal will see AXA become the top global property and casualty insurance provider by gross written premiums, as its profile is significantly rebalanced toward insurance risks and away from financial risks.
"The transaction offers significant long-term value creation for our stakeholders with increased risk diversification, higher cash remittance potential and reinforced growth prospects," Buberl said.
Buberl said the two companies share a common culture around people, risk management and innovation.
"XL Group has the right geographical footprint, world-class teams with recognized expertise and is renowned for innovative client solutions. 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 segment."
XL Group chief executive Mike McGavick said the agreement marks and unrivalled opportunity to accelerate its own business strategy.
"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," he said.
A drop in AXA's share price followed the announcement, dropping from €23.55 to €22.62 at market close.
It is yet to be seen how the change in strategy will impact the IPO of its US operations, as announced in November 2017. The IPO is expected to occur in the second quarter of this year.