Axa To Acquire Winterthur, Putting U.S. Book In Limbo

Paris-based insurer Axa announced it plans to acquire Winterthur Group from the Zurich-based banking firm Credit Suisse Group in a cash deal for some $10 billion, while leaving the ultimate fate of the carrier's U.S. property-casualty book to be determined.  
 
The deal includes Axa's refinancing $1.3 billion of Winterthur's outstanding debt, of which $895 million of internal loans would be redeemed to Credit Suisse Group at closing.  
 
"This transaction is a unique opportunity to reinforce our leading position in our core European market and to increase our presence in high-growth markets-notably in Central and Eastern Europe and in Asia," said Henri de Castries, Axa Group chief executive officer, in a statement. "The complementarity of our organizations and the strong cultural fit between our teams will facilitate the integrations of Winterthur, and will drive value creation for our shareholders."  
 
For its part, Credit Suisse Group Chairman Walter B. Kielholz said the sale would allow his company to concentrate on its core banking activities.  
 
Winterthur CEO Leonhard H. Fischer said the sale put the insurer in the best position for future growth. He said the company feels both clients and employees will benefit in the long term.  
 
The sale, which is still subject to regulatory approvals, is expected to close at year end, Credit Suisse said.  
 
While Axa said it has great expectations for growth or reinforcement of markets in life, savings and property-casualty businesses throughout Europe and Asia, it is reviewing whether it will hold onto the U.S. business, according to an Axa representative, Clara Rodrigo.  
 
In the United States, Axa's business is exclusively life and savings, while Winterthur's business is property-casualty. According to Winterthur's annual report, for 2005 the company's p-c business amounted to some $1.5 billion in gross written premium.  
 
Winterthur's total portfolio of business is 38 percent p-c and 62 percent life and savings, Axa said, with some $124.5 billion of assets under management. AXA reported assets under management of some $1,343 billion for 2005.  
 
Among its p-c business, Winterthur "provides a wide range of personal and commercial liability insurance products," according to its Web site, including auto, property insurance, environmental liability and business interruption coverage.  
 
Standard & Poor's revised Axa's rating from positive to stable, noting that while the acquisition will bring it new markets in Switzerland and Central and Eastern Europe, as well as consolidation in other countries, the company faces challenges in growing the life market in some places. It is also waiting to see what effect the integration will have on the company's finances.  
 
Moody's is reviewing Winterthur's financial strength rating of "A1" for possible upgrade, while affirming Axa's "Aa3" financial strength rating.  
 
Moody's called the deal a "good strategic fit," and said Axa's strong earnings would make up any capital weakening the company might experience as it moves ahead with the integration.  
 
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