XL shares jump on takeover news

Shares of Bermuda-based insurer XL Group jumped following news that it is attracting interest from rivals including Allianz of Germany.

The news report was published on Feb. 7 by Bloomberg News citing “people with knowledge of the matter.”

The XL Group share price was up 12.45 percent in New York trading at 1pm UK time on Feb. 8. Allianz declined to comment after having been approached by Intelligent Insurer.

Interest from insurers in potentially acquiring XL, which had a market value of around $10 billion at Tuesday’s close, is preliminary and may not lead to a takeover, the people reportedly said. Allianz is looking at XL as a potential target to grow its casualty coverage business in the US, according to Bloomberg News.

XL Group made a net loss of $560.4 million in 2017 compared to a $440 million net profit it posted the year before.

The company blamed the loss on high levels of natural catastrophe losses as well as a non-recurring tax charge of $100.5 million related to the revaluation of the net deferred tax asset as a result of the reduced US corporate income tax rate enacted under the US Tax Cuts and Jobs Act.

Natural catastrophe pre-tax losses net of reinsurance, reinstatement and premium adjustments and redeemable non-controlling interest reached $2 billion for the full year 2017, compared with $636.3 million for the prior year.

Market observers have been speculating that the recent US tax change and the significant natural catastrophe losses that hit the market in 2017 will trigger consolidation in the re/insurance sector with a particular focus on Bermuda.

In a recent move, American International Group (AIG) is acquiring Bermuda-based Validus Holdings for $5.56 billion.

The transaction enhances AIG’s general insurance business, adding a reinsurance platform, an insurance-linked securities (ILS) asset manager, a presence at Lloyd’s and complementary capabilities in the US crop and excess and surplus (E&S) markets.

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