XL Group says it will buy underwriter Catlin Group Ltd for about £2.79 billion (€3.6 billion), increasing the Dublin-based insurer's share of business written in the Lloyd's of London market to nearly 10 per cent.
The deal is the latest in a string of European insurance mergers as the region’s 5,000 underwriters face stricter capital rules. Mergers usually make it easier for companies to cut expenses relative to assets, helping them to raise capital.
“We are forecasting that we will, at a minimum, have about $200 million in cost savings across the two organisations when they are combined,” XL chief executive Mike McGavick, who will head XL Catlin, said in an interview. “That’s about 10 per cent of the combined expenses of the company,” he added.
It was too early to say how many jobs would be cut, he said. XL has offices in St Stphen’s Green in Dublin. Catlin writes about 7.5 per cent of all Lloyd’s premiums, making it the biggest syndicate on the market, while XL accounts for about 2 per cent.
The offer of 388 pence in cash and 0.13 new XL share values each Catlin share at about 715.3p – a premium of 8.3 per cent to the stock’s close on Thursday.
Shares in Catlin were trading at 708 pence in afternoon business in London yesterday, while XL shares were up 1.6 per cent in early trading in New York. Bermuda-based Catlin, which sells insurance for everything from flooding to kidnapping, said it would pay a final dividend of 22 pence, reversing a decision made in December to forego the payout after an approach from XL.
At the time, XL – which has a market value of more than $9 billion – had offered £2.53 billion for Catlin. – (Reuters)
