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Axa buying XL Group for $15.3B; Aviva, L&G post FY'17 profit rises

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Axa buying XL Group for $15.3B; Aviva, L&G post FY'17 profit rises

S&P Global Market Intelligence offers our top picks of insurance news stories and more published throughout the week.

Axa/XL Group megadeal

* French insurer Axa will acquire Bermuda-based global property and casualty commercial lines insurer and reinsurer XL Group Ltd for a total cash consideration of $15.3 billion. Axa CEO Thomas Buberl defended the deal, which will see the insurer acquiring XL at roughly 1.5x book value and 15x price/earnings, saying the company's strategy was to put attractive deals ahead of share repurchases. Meanwhile, XL CEO Mike McGavick said the need for scale to compete in today's global insurance market helped persuade the group to sell to Axa.

* In other M&A news, U.K.-based Prudential Plc and Singapore-based Great Eastern Holdings Ltd. are reportedly in talks to sell a 30% stake each in their respective Malaysian insurance units, Prudential Assurance Malaysia Bhd. and Great Eastern Life Assurance (Malaysia) Bhd., to comply with the country's foreign ownership rules.

* Prudential has also reportedly partnered with Indian billionaire Azim Premji to bid for a controlling stake in Star Health and Allied Insurance Co. Ltd., India's largest independent health insurer.

* U.K.-based Legal & General Group PLC is reportedly in advanced talks to acquire fellow shareholder Patron Capital Ltd's 47.5% stake in homebuilder CALA Group Ltd. in a deal that would value the latter at over £500 million.

* A Zurich Insurance Group AG unit is said to be leading the race to buy Ireland-based insurance intermediary Blue Insurance, with industry sources saying the potential deal could amount to around €50 million.

Bottom lines

* Aviva Plc unveiled plans to return more than £500 million of capital to shareholders as it reported full-year 2017 IFRS profit attributable to equity holders of nearly £1.50 billion, more than double from £703 million in 2016. CEO Mark Wilson said the U.K. insurer will return any of the money allocated for bolt-on acquisitions, pegged at £600 million, to shareholders if it fails to find compelling purchases.

* Legal & General Group recommended a final dividend of 11.05 pence per share for 2017, up from 10.35 pence per share paid in 2016, as it reported a 50% year-over-year increase in full-year 2017 profit attributable to equity holders to £1.89 billion from £1.26 billion. The insurer has a £17 billion pipeline of potential U.K. bulk annuity deals, compared to its usual level of around £10 billion, its top executives have said.

* Helvetia Holding AG reported full-year 2017 profit attributable to shareholders of CHF405.3 million, up from CHF376.6 million in 2016. The Swiss insurer proposed a dividend of CHF23 per share for the year, up nearly 10% from CHF21 per share in 2016.

* French insurer April SA said it will propose a dividend of 27 euro cents per share for 2017, up 3.8% from 26 cents in 2016, as it reported a year-over-year increase in full-year IFRS net income group share to €39.6 million from €20.1 million.

New ventures

* Bermuda-based reinsurer Sompo International will launch a new European specialty insurance underwriting operation initially focused on management liability, professional indemnity and financial institutions lines of business.

* Georgia-based lender JSC Basisbank established two new subsidiaries, Hualing Insurance and BHL leasing, with both units to begin activities in the second quarter.

In other news

* The Danish Financial Supervisory Authority ordered Alpha Insurance A/S to cease all underwriting, including renewals of existing contracts and business, effective immediately, as the company's general assembly placed it into solvent liquidation. The regulator said Alpha no longer complies with the minimum capital requirement, which could have negative implications for its policyholders.

* Legal & General Group and U.K.-based asset manager Jupiter Fund Management Plc reported gender pay gaps of over 30%. L&G said its gap results from having more men than women in senior, more highly paid roles, while Jupiter CEO Maarten Slendebroek said the company's pay gap mainly reflected the "far too few female employees working at senior levels in our fund management and sales teams."

* Zurich-based catastrophe insurance data provider PERILS AG said its fourth and final property insurance market loss estimate from extratropical cyclone Zeus, which hit France in March 2017, stands at €272 million, down from its third loss estimate of €284 million in September 2017.

Featured during the week in S&P Global Market Intelligence

More consolidation among Bermuda insurers likely after XL deal, analysts say: The trend of consolidating smaller property and casualty insurers could usher in another era of diversified, multiline insurers, CFRA analyst Cathy Seifert said.

Axa's XL deal may be 'outlier' in European insurance M&A: Germany's Allianz Group seems it has the firepower to make a similarly large acquisition, but its needs are not the same as Axa's, according to Macquarie analyst Andy Hughes.

More insurers waiting in wings as UK bulk annuity market heats up: More life insurers could enter the thriving U.K. bulk annuity market as pension funds increasingly look to sell the liabilities they have with retirees.