French insurer, AXA, has agreed to buy Bermuda-based, XL Group, for $15.3 billion. The Monday announcement would reportedly make the company the world leader in property and casualty insurance.
AXA offered XL Group $57.60 for each company share, a 33 percent premium to Friday’s closing price of $43.30. Europe’s second-biggest insurer said that the deal would lead property and casualty insurance to rise by half of AXA’s earnings, from 39 percent. The acquisition will reportedly be the biggest insurance deal since 2015 and the biggest European purchase of a US insurer to data.
XL Group has agreed to AXA’s bid, which means that AXA will look to de-list XL’s shares. According to the insurer’s statement on Monday, the insurer plans to finance the deal with 3.5 billion euros of cash at hand, an expected 6 billion euros from the IPO of its US business and 3 billion euros of subordinated debt.
AXA ranks as Europe’s second-biggest insurer when it comes to market capitalization, right behind Germany’s Allianz.
Insurers such as AXA are resorting to large-scale takeovers as to strengthen their business and better prepare for tougher regulations and falling returns from financial market investments. This latest deal comes just a month after American International Group announced it would buy reinsurer Validus for approximately $5.6 billion.
Allianz was also considered as a possible buyer for XL, however, a source close to the German insurer said that Allianz was not rattled after they heard about AXA’s take over.
AXA’s share plunged 6.9 percent to 23.33 euros. According to the insurer’s Chief Executive Officer, Thomas Buberl, the deal will allow AXA to dominate the global property and casualty market, as well as reduce its exposure to the financial markets’ volatility.
“We will be number one in commercial insurance,” Buberl said.
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