Potential purchase adds another piece to the Bermuda M&A puzzle

Allianz’ interest in acquiring Bermuda-based XL is further affirmation that 2018 could be a year of significant M&A for firms on the island, according to reports from FitchRatings.

Reports from Bloomberg last week outlined that XL Group was drawing interest from Germany’s Allianz SE, among others. Acquiring XL, with its $10bn price tag, would help Allianz grow its casualty business in the US.

According to FitchRatings: “The combination of continued competitive pressures, the effects of U.S. tax reform and catastrophe losses in 2017 is leading to speculation of more M&A among (re)insurers in 2018, especially in the Bermuda market.”

Global Reinsurance alluded to the likelihood of more Bermuda M&A in 2018 after the AIG-Validus deal, due to the diversification Bermuda firms offered. This has been supported by FitchRatings, who today acknowledged scale and diversification as key to the appeal of XL.

The ratings agency said: “Increasing scale and diversification resulting from mergers could increase the resilience of firms to market challenges, including intense price competition and low investment yields. However, merger execution and integration risks could pose risks to profitability.”