AXA has agreed to acquire 100 percent of XL Group Ltd, a global property and casualty commercial lines insurer and reinsurer with a strong presence in North America, Europe, Lloyd's, and Asia-Pacific.
The merger agreement was unanimously approved by the boards of AXA and XL Group. Total consideration for the acquisition amounts to US$15.3 billion, to be fully paid in cash.
Under the terms of the transaction, XL Group shareholders will receive US$57.60 per share. This represents a premium of 33 percent to XL Group closing share price on March 2, 2018.
Thomas Buberl, the chief executive officer of AXA, said in a statement, "This transaction is a unique strategic opportunity for AXA to shift its business profile from predominantly L&S business to predominantly P&C business, and will enable the group to become the #1 global P&C commercial lines insurer based on gross written premiums. The transaction offers significant long-term value creation for our stakeholders with increased risk diversification, higher cash remittance potential, and reinforced growth prospects. The future AXA will see its profile significantly rebalanced 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. 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. 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."
Mike McGavick, the chief executive officer 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."
According to AXA, the opportunity to acquire XL Group has led AXA to review its exit strategy from its existing U.S. operations, which AXA said it "now expects to accelerate." AXA added that, together with the planned IPO of its U.S. 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."
Upon completion of the transaction, AXA said, 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 Mr. Buberl. Mr. Hendrick will work 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, Mr. McGavick, XL Group's current CEO, will become vice-chair of the combined P&C commercial lines operations and special adviser to Mr. Buberl, AXA Group CEO, to advise on integration-related and other strategic matters.