Reported first by L’Argus de L’Assurance on Friday, any deal would see Thierry Derez’s mutual insurer Covéa finally realising its ambition to acquire a large, global reinsurance operation.
Covéa has previously tried to acquire global reinsurance company PartnerRe, but that deal, which had at one stage been approved by all parties, in the end fell through after attempted renegotiations over the price with seller EXOR in the wake of the Covid-19 pandemic failed to find an agreement.
Then, last August, Covéa injected €750 million of capital into special purpose reinsurance vehicles managed by PartnerRe, as a way to generate returns from reinsurance business, as part of a settlement of sorts with EXOR.
But the mutual insurance group does not have its own reinsurance operation of any significance, so a new target such as AXA XL Re is perhaps not surprising.
L’Argus said that Covéa is “examining the potential” of an acquisition of AXA’s non-life reinsurance operation.
The media reports also suggest that an approach has already been made, although both Covéa and AXA declined to comment.
L’Argus also reported that any approach Covéa makes to buy AXA’s reinsurance unit would see the insurer working alongside the Rothschild & Cie investment bank, which also supported Covéa during the attempted PartnerRe takeover.
It’s noted that AXA XL has consolidated its reinsurance operations under AXA XL Re, which could make the unit an easier one to offload, should that be a target for AXA.
Covéa had also previously wanted to enter into a transaction with French reinsurance firm SCOR, so its appetite for owning a global reinsurance entity is clear.
Global footprint and diversification away from its home base in France are two of the core drivers for Covéa.
Of course, AXA XL has a well-established alternative capital and insurance-linked securities (ILS) practice, that sits within the reinsurance function.
It’s not clear how much appetite AXA would have to see its reinsurance operations at this stage in the market cycle, when it has put significant effort into turning around AXA XL’s performance and fortunes.
But for the right price and under the right terms it’s likely any approach would be seriously considered at least.