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© Reuters. FILE PHOTO: The emblem of insurer and financial institution AXA Belgium S.A. is seen in Brussels, Belgium February 25, 2023. REUTERS/Yves Herman/File Photograph
By David French and Pablo Mayo Cerqueiro
NEW YORK/LONDON (Reuters) -One of many world’s prime insurers is mulling offloading its property reinsurance enterprise in a bid to chop its publicity to pure disasters like hurricanes, in accordance with three individuals conversant in the matter.
French insurer AXA SA (EPA:) has been discussing strategic choices for its XL Re unit, together with a potential personal sale or inventory market itemizing, stated the individuals, who spoke on situation of anonymity.
The discussions, described by the sources as preliminary in nature and which can not in the end result in a transaction, come two years after the enterprise was reported to have attracted curiosity from French mutual insurer Covea.
AXA declined to remark.
Reinsurers tackle a few of the dangers that major insurers underwrite in alternate for compensation. The rewards for offering cowl for pure catastrophes could be excessive, however so can the losses.
Occasions resembling Hurricane Ian final yr – the third costliest storm in U.S. historical past – have prompted some reinsurers to cease this line of enterprise, significantly as local weather change makes it tougher to judge dangers.
However these nonetheless open for enterprise have been in a position to dramatically enhance the charges they cost for his or her providers.
Costs for U.S. property disaster reinsurance rose by as a lot as 50% at a key July 1 renewal date, dealer Gallagher Re stated in a latest report.
AXA has been attempting to scale back the publicity of its AXA XL property and casualty (P&C) division – which homes XL Re – in an effort to make earnings extra predictable.
This has prompted the reinsurance enterprise to shrink, with revenues dropping by almost a 3rd final yr to $3.2 billion, in accordance with AXA’s 2022 accounts. The Bermuda-based unit had a guide worth of round $2 billion on the finish of December.
The excessive pricing atmosphere, together with a latest bout of offers within the sector, may present the required tailwinds for AXA to exit the enterprise altogether.
In Could, American Worldwide Group (NYSE:) agreed the sale of its reinsurance arm Validus Re for roughly $3 billion, or about 1.4 occasions the unit’s guide worth.
In the meantime, each Skyward Specialty and Fidelis Insurance coverage Holdings have accomplished preliminary public choices (IPOs) in New York for the reason that begin of the yr.
Sources informed Reuters final month that Hamilton Insurance coverage Group was additionally contemplating strategic choices.
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