The Chief Executive Officer (CEO) of insurer Axa, Thomas Buberl, has told the Financial Times that when discussing the firm’s takeover of insurer and reinsurer XL it was evident the market wouldn’t respond positively, but that he remains confident of convincing investors.
It was announced in early March that Axa would acquire XL for $15.3 billion, and soon after the French insurer’s share price fell by a tenth.
In response to the deal ratings agencies turned negative on Axa, placing the firm on negative watch while at the same time suggesting that XL’s positive ratings could even be upgraded as a result of the deal.
According to reports, some investors had expected Axa to make smaller acquisitions and fund share buybacks using capital from the planned listing of its U.S. business, as opposed to completing larger deals.
Speaking with the Financial Times, Buberl explained that he understands “the disappointment of investors from two perspectives,” noting that a lot of investors believed there would be share buybacks.
“On the deal size we did indicate that we were looking at smaller deals and when we indicated that . . . we clearly did not have XL in mind. It was a year or more ago. But when your ideal hits the reality, you sometimes have to take a strategic decision,” he explained.
The Axa CEO remains confident that he can convince investors that acquiring XL was the right decision, and said that it would probably take 12 – 18 months to prove people around.
Buberl also explained that the takeover was in line with the company’s strategy to grow its property and casualty insurance business, with XL boosting its position in the commercial sector, most notably in the U.S. and in reinsurance. Buberl feels this is important in light of the changes happening across the risk transfer space.
“Many risks will move from an individual, frequency-based risk to a commercial, more severity-based risk,” said Buberl.
Following news of the acquisition XL sent a letter to its reinsurance brokers, to explain that they should expect continuity in the way it operates and its trading after its acquisition by AXA is completed.
While Buberl also suggested previously that the company will reduce the risks attached to the newly acquired XL by buying more reinsurance.
