To say that March has been a quiet month – negatively or otherwise – for insurance would be, well, a lie.
From the preference shares issue that has hounded Aviva to the introduction to Parliament of the Civil Liability Bill… and, yes, that mega merger between AXA and XL Group that rocked the market. Now AXA chief executive Thomas Buberl has come to the deal’s defence, shedding light on the announcement made three weeks ago.
“Many risks will move from an individual, frequency-based risk to a commercial, more severity-based risk,” he told the Financial Times, explaining the benefit of creating the top global property and casualty commercial lines insurer with the acquisition. “Take autonomous vehicles. Today, a car [insurance] contract is your personal contract… Tomorrow, it will be a manufacturer’s product liability, maybe focused on cyber risks.”
Buberl added that not only was the move aligned with AXA’s P&C strategy but also not an expensive buy in comparison to rivals’ valuations. The US$15.3 billion deal has been deemed pricey by analysts.
As for shareholders who weren’t too happy with what went on, the CEO said he knew where they’re coming from.
“I understand the disappointment of investors from two perspectives,” the publication quoted Buberl as saying. “Despite the fact that I have always positioned share buybacks as the last option, a lot of investors thought [there would be] share buybacks.
“On the deal size we did indicate that we were looking at smaller deals and when we indicated that… we clearly did not have XL in mind. It was a year or more ago. But when your ideal hits the reality, you sometimes have to take a strategic decision.”
For now it looks like AXA, whose shares fell sharply following the major development, will have a lot of convincing to do – a task Buberl has projected will take them 12 to 18 months.