Bermuda firms set to gain global platform from $15.3bn deal

While the year started with a potential M&A trend that provided diversification for those buying Bermudan firms, the American global investment bank and securities firm Jefferies today highlighted that it is the Bermudan firm broadening its platform in the case of the AXA-XL Group deal.

In recent analysis, Jefferies equity research analyst Mark Cathcart outlined that the Bermudan reinsurers lacked the diversity of their European peers and that XL’s market position would be positively impacted by AXA.

Cathart said: “We have long considered the Bermudan industry structurally disadvantaged compared to European peers, because it lacks global diversification and the high credit rating necessary to be competitive in its core markets over the long term.”

He continued: “However, the backing of AXA’s balance sheet dramatically alters the market position of XL, giving the group a global platform from which to compete against the top tier reinsurers. This should, on our assessment, lead to higher earnings than the standalone XL consensus had been factoring in prior to the deal, thereby supporting AXA’s 10% ROI target.”

AXA-XL Group joins a string of big-ticket deals involving Bermudan firms and is the second this year.

AIG announced plans to buy Validus Holdings for $5.56bn in January – though the $15.3bn price tag for XL Group far surpassed this.

 

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