Alternative capital access cited again as XL shareholders approve AXA deal


The shareholders of Bermudian insurance and reinsurance player XL Group Ltd. have given their approval to the 100% acquisition by insurance giant AXA, and access to alternative forms of reinsurance capital has again been cited in a statement.

AXA is acquiring 100% of the shares of XL in a transaction with a total consideration of roughly $15.3 billion, which will be fully paid in cash.

XL shareholders will receive $57.60 per share, which represents a 33% premium to XL Group’s closing share price on March 2nd, just before the deal was originally announced.

XL Group’s diversified reinsurance platform and access to the capital markets, through XL initiatives, its catastrophe bond issuances and of course its stake in specialist ILS investment manager New Ocean Capital Management, have all been cited as positive for AXA and the resulting combined entity.

Today, in a statement on the shareholder vote, XL again highlights the benefits of the transaction, one of which is broad access to alternative capital.

The firm said that with the acquisition, AXA is set to benefit from, “A premier specialty platform complementing and diversifying AXA’s existing commercial lines insurance portfolio, and reinsurance capabilities that will allow AXA an access to enhanced diversification and alternative capital.”

As we wrote just yesterday, large re/insurance firms like AXA stand to show increasing interest in acquiring their own ILS or alternative capital operations, not just for the benefits of catastrophe portfolio management and the potential to earn fee income, but also for the enhanced access to efficient capital which in a pressured re/insurance market can help them to optimise their own costs-of-capital.

With AXA’s acquisition of XL Group now passing the all important shareholder vote, the combined entity will have broader diversification across insurance and reinsurance lines, as well as established alternative capital markets access.

XL Group CEO, Mike McGavick, commented, “We are pleased with our shareholders’ vote of confidence in supporting all matters, including the AXA transaction. In AXA we have found a like-minded partner committed to innovation and moving our industry forward. Becoming a part of AXA provides unrivalled opportunity to accelerate our strategy with new strength and dimension. Based on today’s vote, it is clear that our shareholders share this same vision and opportunity for XL Group.”

XL’s executive team will now be able to put their expertise and experience in reinsurance and alternative capital to work in optimising the combined operations, once the deal is closed, which is expected to be in the second half of the year.

The combined units of XL Group, AXA Corporate Solutions and AXA Art will be led by Greg Hendrick, currently President and Chief Operating Officer of XL Group, who will become the CEO of the newly combined entity and alos take a place on the AXA Group’s management committee. Hendrick will report directly to AXA Group Chief Executive Officer Thomas Buberl.

After the transaction closes, McGavick will transition to Vice-Chairman of the combined P&C Commercial lines business and also play a key role as a special adviser to AXA Group CEO Buberl, advising on integration-related and strategic matters.

These key XL execs have forward-looking views on how to operate large commercial insurance and reinsurance businesses, with the capital markets and alternative capital placed at their hearts. It will be fascinating to watch how the combined entity develops its market presence and strategy going forwards.

Even more interesting though will be how important a role the capital markets and ILS can play, in the enlarged and combined operating group as it positions itself for the future.

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