AXA XL to reduce cat exposure, lifts synergies

AXA XL, the property/casualty (P&C) and specialty risk division of the AXA group, is targeting higher synergies than previously announced from the combination of the XL Group and AXA businesses while also planning to further reduce the natural catastrophe (nat cat) exposure.

In March 2018, AXA revealed plans to acquire property/casualty commercial lines re/insurer XL Group for $15.3 billion (€12.4 billion) in cash.

At that time, AXA said that the combination of the businesses would generate cost synergies totalling around $0.4 billion pre-tax per year through rationalization, capital synergies, reinsurance synergies and revenue synergies.

In a Nov. 28 Investor Day presentation, the group has now updated the guidance for synergies to $0.5 billion pre-tax per year. The additional savings are to come from higher than expected cost synergies.

In addition, the group plans to further reduce the nat cat exposure at legacy XL Catlin. AXA and XL Group have already reduced potential catastrophe impacts by around 40 percent relative to 2017 ahead of the merger of the two entities.

In order to reduce potential negative earnings impacts from natural events, the companies have taken underwriting actions and purchased incremental reinsurance protection at XL.

The firm bought tailor-made aggregate protection for both AXA and XL.

The group is now planning for further reductions in the nat cat exposure in 2019, according to the presentation. In addition, AXA XL wants to increase the use of alternative capital to match the appropriate risk to the group’s appetite, working with strategic partners such as pension funds and sovereigns and enhancing the insurance-linked securities (ILS) capacity in the market.

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