Axa is to acquire XL Group in a deal valued at $15.3bn, creating the leading global property and casualty (P&C) commercial lines insurer with €30bn ($37bn) in annual gross written premiums.
XL shareholders will receive $57.60 per share, a premium of 33% on the closing share price on 2 March. The agreement has been unanimously approved by the boards of Axa and XL.
"This transaction is a unique strategic opportunity for Axa to shift its business profile from predominantly L&S [life and savings] business to predominantly P&C business," said Axa chief executive Thomas Buberl.
He argued the deal offered "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."
Axa said it now expects to accelerate its exit from the US via the IPO of Axa Equitable Holdings, which is expected to comprise the Axa US L&S business and its interest in AllianceBernstein. Axa America Corporate Solutions is not expected to be part of the IPO.
Axa will fund the XL acquisition with €3.5bn ($4.3bn) of cash, €6bn from the planned US IPO and related transactions, and €3bn in subordinated debt.
XL chief executive Mike McGavick said: "Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension."
He said Axa had committed to maintaining the XL Group brand and culture, adding: "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."
XL took over Catlin in 2015 in a $4.2bn deal, creating at that time the eighth-largest P&C reinsurer. In 2017, XL generated $15bn in gross written premiums.
Greg Hendrick, president and chief operating officer of XL Group, will lead Axa Corporate Solutions - Axa's commercial P&C and specialty business - and Axa Art, as well as being chief executive of the combined entity. He will also join Axa Group's management committee, and report directly to Thomas Buberl.
Mike McGavick, XL Group's current chief executive, will become vice-chairman of the combined group's P&C commercial lines operations, and a special adviser to Buberl, on matters of integration and strategy.
The parties expect the deal to complete in the second half of 2018.
Axa expects its Solvency II ratio to be between 190% and 200% at the end of this year, down from 205% at the 2017 year-end, with the negative cost of the deal being mitigated by the operating return of the combined group and the US IPO.
The parties expect "substantial synergies" of about $400m in pre-tax earnings a year, made up 50% of cost synergies, and 25% each from revenues synergies and savings by reinsurance.
News of the deal comes on the back of record earnings in 2017 from Axa, which saw underlying earnings rise 7.5% and net income top €6bn.
Christopher Cundy, David Walker