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AXIS Capital Adds Novae Group, Ramps up Lloyd's Presence

Zacks Equity Research

AXIS Capital Holdings Limited AXS took over Novae Group plc for 715 pence per share. However, the integration will take effect from Oct 18, once European Commission approves the transaction.

In July, AXIS Capital announced to buy Novae Group plc for $605 million or 700 pence in cash to ramp up the acquirer’s Lloyd’s presence. Subsequently in August, the insurer raised the offer price to 715 pence in cash per Novae share.

London-based Novae Group is a diversified property and casualty insurer, operating through Syndicate 2007 at Lloyd’s. With this takeover, AXIS Capital will consolidate its Lloyd presence.

Lloyd’s platform has become an attractive destination for buyouts by companies to enhance product and service portfolio. A strong financial position backed by a sustained solid operational performance propels AXIS Capital to pursue growth initiatives.

With Novae Group’s acquisition, AXIS Capital will become an insurer worth $2 billion in the London specialty market. This positions the acquirer among the top 10 insurers at Lloyd’s. The transaction will be accretive to the acquirer’s bottom line and return-on-equity in the first year, post closure.

Conversely, Novae Group can benefit from AXIS Capital’s strong financial positon as well as compelling resources to expand underwriting businesses.

AXIS Capital eyes strategic acquisitions to gain competitive advantage. Last November, the company had announced to acquire the general aviation insurance and reinsurance leader, Aviabel, to leverage status in the global aviation market. With the A&H (Accident & Health) business gaining traction, AXIS Capital bought Ternian Insurance Group to brace A&H retail distribution in the United States.

Shares of AXIS Capital have underperformed the industry year to date. The stock has lost 12.3% against the industry’s rally of 11.3%. Nonetheless, we expect the company’s sustained efforts to expand capabilities and accelerate growth to drive the shares higher.

AXIS Capital presently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here..

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