AXA weighs offloading $2 bln reinsurance arm to cut disaster risk - sources

Skyward Specialty Insurance

12/07/2023 06:30

(Repeats story first published on Tuesday with no change to
text)
    By David French and Pablo Mayo Cerqueiro
       NEW YORK/LONDON, July 11 (Reuters) - One of the world's
top insurers is mulling offloading its property reinsurance
business in a bid to cut its exposure to natural disasters like
hurricanes, according to three people familiar with the matter.
    French insurer AXA SA  AXAF.PA  has been discussing
strategic options for its XL Re unit, including a possible
private sale or stock market listing, said the people, who spoke
on condition of anonymity.
    The discussions, described by the sources as preliminary in
nature and which may not ultimately lead to a transaction, come
two years after the business was reported to have attracted
interest from French mutual insurer Covea.
    AXA declined to comment.
    Reinsurers take on some of the risks that primary insurers
underwrite in exchange for compensation. The rewards for
providing cover for natural catastrophes can be high, but so can
the losses.
    Events such as Hurricane Ian last year - the third costliest
storm in U.S. history - have prompted some reinsurers to stop
this line of business, particularly as climate change makes it
harder to evaluate risks. 
    But those still open for business have been able to
dramatically increase the rates they charge for their services.
    Prices for U.S. property catastrophe reinsurance rose by as
much as 50% at a key July 1 renewal date, broker Gallagher Re
said in a recent report.
    AXA has been trying to reduce the exposure of its AXA XL
property and casualty (P&C) division - which houses XL Re - in
an effort to make earnings more predictable.
    This has caused the reinsurance business to shrink, with
revenues dropping by nearly a third last year to $3.2 billion,
according to AXA's 2022 accounts. The Bermuda-based unit had a
book value of around $2 billion at the end of December.
    The high pricing environment, along with a recent bout of
deals in the sector, could provide the necessary tailwinds for
AXA to exit the business altogether.
    In May, American International Group  AIG.N  agreed the sale
of its reinsurance arm Validus Re for roughly $3 billion, or
about 1.4 times the unit's book value.
    Meanwhile, both Skyward Specialty  SKWD.O  and Fidelis
Insurance Holdings  FIHL.N  have completed initial public
offerings (IPOs) in New York since the start of the year. 
    Sources told Reuters last month that Hamilton Insurance
Group was also considering strategic options.

 (Reporting by David French in New York and Pablo Mayo Cerqueiro
in London; Additional reporting by Amy-Jo Crowley and Carolyn
Cohn in London, Echo Wang in New York and Silvia Aloisi in
Paris; Editing by John O'Donnell and Conor Humphries)
 ((Pablo.MayoCerqueiro@thomsonreuters.com;))