Axis CEO Says Deals on Horizon; Speculation Focuses on XL

By | September 4, 2008

John Charman, chief executive of Bermuda-based Axis Capital Holdings Ltd , said Wednesday that his eyes are open for acquisitions, both large and small.

“We would consider acquiring any company that substantially enhances earnings potential,” Charman said at an insurance conference held by investment firm Keefe, Bruyette & Woods in New York.

Charman named Bermuda peer XL Capital Ltd as one company that the industry is actively poring over as a potential takeover target.

He said XL is attractive because it is the first global property-casualty insurance franchise to come on the market since Cigna Corp’s property-casualty unit was sold to Ace Ltd nearly a decade ago.

Charman stopped short of saying that Axis was interested in acquiring XL, saying investors would have to draw their own conclusions.

XL Capital recently hired a new CEO, former Safeco Corp chief Michael McGavick. McGavick has said he could look at alternatives for XL’s life business, a small part of its operations, including a possible sale, but he has not indicated the entire company is on the block.

Speculation has swirled around XL since last year, after it posted large losses from its investment in bond insurer SCA Capital, now known as Syncora Holdings Ltd .

An XL spokeswoman was not immediately available for comment.

XL recently brokered a deal that essentially severed all ties with Syncora, which it spun off several years ago in an initial public offering.

Insurers are grappling with how to boost business in the midst of more than two years of softening rates, and a slump in investment returns over the last year.

The market conditions — along with an excess of capital since insurers have posted strong profits over the last two years — are giving rise to the view that there will be a surge in acquisitions.

“Without a lot of organic growth opportunities, the industry feels right for deals,” Cliff Gallant, a KBW insurance analyst, said at the conference.

Axis is also looking at small acquisitions, Charman said, along the lines of its purchase last year of MediaPro from Aon Corp

“We expect to add one or two of these opportunities every year,” said Charman. “Certainly something is in the pipeline.”

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