XL Capital Ltd.'s (XL) acquisition of Winterthur International (WI) will help the company make inroads into the European market, says XL director Michael Butt.

Mr. Butt will be honoured with the 2001 Bermuda Market Leader of the Year Award at the Bermuda Insurance Institute (BII) Awards dinner tomorrow at the Fairmont Southampton Princess and he spoke with The Royal Gazette this week about XL's busy year.

Following a distinguished insurance career in Europe, Mr. Butt came to live in Bermuda nearly ten years ago after being appointed CEO of Mid Ocean Ltd. which he explained was the first of a second wave of insurance companies, namely property catastrophe companies, following the formation of companies such as ACE and XL in 1986.

In 1998 Mid Ocean was acquired by XL Capital Ltd. and Mr. Butt was appointed director of XL.

Mr. Butt was named as the winner of the BII award due in no small part to his role in XL's aquistion of WI and its successful integration into XL.

Mr. Butt said of the merger: “XL was a highly successful company in the areas in which it operated, namely high level excessive loss liability business, but as the company grew they filled that niche.

“In order to get to the lower end of risk, we had to find a vehicle that had that type of profile, i.e. an insurance company.

“XL was able to find a department of the Winterthur Group which was for sale which fitted XL's needs perfectly, namely it had an outstanding European based client list of major corporates, and excellent distribution system with offices in 40 countries around the world.”

Mr. Butt said this made a perfect fit for the XL account that was being put together, making a complete unit as opposed to two separate parts.

He said the unusual part of the acquisition was that the business mix was “perfect”.

Mr. Butt said WI were keen to do the deal with XL due to the synergy, and he said: “It really was one of those extraordinary sequences of events that if you planned for it, it wouldn't have happened, if you went looking for it again, it wouldn't happen.

“And the timing of course was superb.

“From the company's point of view, we acquired the business in July and the markets were hardening fast at that time and have hardened more since, so we were able to re-underwrite the portfolio in a very positive environment,” he said.

Assessing the success of the acquisition, Mr. Butt said it was early days but he thought it had gone well.

“Because of the timing with September 11, it' s been incredibly hard work for those people involved to do what they had to do by January 1.

“We retained all the business we wanted to retain at the first of January, so the client base didn't walk away, which is very important.”

Further inroads into the European Market were also made by XL's acquisition of French reinsurer Le Mans Re on January 1 which Mr. Butt said was very good timing in terms of the upturn of the market and looking at it from XL's point of view, the added value has been the European dimension.

“XL by definition was an Anglo-American, but particularly American company by background, and had relatively less advanced positions in Europe.

“We are now positioned with a very strong reinsurance and insurance franchise in the businesses we are in, and for our future as a company, that's vitally important.

“Obviously I am delighted about it.”

Mr. Butt said the acquisitions had given XL the opportunity to become a truly global company “as a fact as opposed to an idea”.

“Bermuda businesses have been largely focused on North America and the United Kingdom and are now spreading.

“Europe is the obvious place, but it is going to be much more than that.

“If these companies are going to be global, then we are going to have to accept a much greater diversity of culture and very different needs including languages, and a much broader base of cultural differences and be able to both absorb and get the best from it.

“I'm not an economic imperialist, and I believe that the successful companies will be those that don't just impose one culture, but absorb and create an amalgam of cultures within which clients and employees are happy.

“That is a challenge that still faces a lot of Bermuda companies.”

As far as being honoured for his achievements in 2001, Mr. Butt said: “It is a surprise!”

He said the award was usually reserved for CEO's and that he greatly appreciated the esteem of his peers.

He said: “I think Brian (O'Hara) must take a lot of credit for allowing this somewhat strange animal to coexist in his otherwise well structured and organised company.”

Peering into XL's future, Mr. Butt says of the company's next project: “I think digestion of what we have done.”

He said 70 to 75 percent of mergers fail but thought the WI merger would be the exception.

“Our absolute first priority is to successfully integrate and make the best of that which we have done.”