Insurer AXIS Capital Holdings Ltd. said one of its founding shareholders, a J.P. Morgan subsidiary, on Monday sold off 7.8 million shares, in a block trade handled by Morgan Stanley & Co.

J.P. Morgan Partners, the private equity arm of J.P. Morgan Chase & Co., and several related entities, will get the net proceeds from the sale of 7.8 million shares, which carried a selling price tag of $29.50 a share. Morgan Stanley said it would sell the AXIS shares, worth a combined total of about $230 million, to public investors.

Two other J.P. Morgan units ? J.P. Morgan Capital, LP and J.P. Morgan Corsair II Offshore Capital Partners, LP ? continue to hold 3.8 million AXIS shares. The sale on Monday reduced J.P. Morgan's stake in the company to less than three percent.

Linda Ventresca, AXIS corporate development officer, said the J.P. Morgan sale of AXIS shares was a "private equity strategy", indicating the decision was likely one based on market conditions.

In March, Marsh & McLennan Risk Capital Holdings, Ltd., a subsidiary of the world's biggest insurance broker Marsh & McLennan Cos. Inc., sold 3.7 million AXIS shares, reducing its stake in AXIS by about half to less than three percent. Like J.P. Morgan, Marsh was a founding shareholder.

Other founding partners that have since sold their stakes in AXIS are Thomas H. Lee Partners, The Blackstone Group and Credit Suisse First Boston. Marsh's March sale followed months of speculation it may reduce any significant ownership it had in insurance or reinsurance companies.

Brokerage firms with insurance stakes came under regulatory fire late last year because of the potential conflict in being invested in insurance and reinsurance companies that were also recommended to clients.

Marsh & McLennan was AXIS' lead investor in 2001, putting money into the start-up venture through its private equity arm, Trident II, L.P., and through Marsh Risk Capital. Trident continues to be an AXIS investor, although from May it has been managed by Stone Point Capital, after Trident's controlling entity, MMC Capital, was, acquired from Marsh by management and renamed.

Through the years, MMC Capital raised more than $3 billion to back insurance, employee benefits and financial services firms.

In total, it sponsored more than fifteen insurance companies including Bermuda figurehead companies ACE Limited and XL Capital, which were founded in the 1980s.

AXIS was one of a dozen highly capitalised insurance and reinsurance ventures to be set up in Bermuda following a severe void in insurance capacity, after some $32.5 billion in claims from the September 11, 2001 terrorist attacks. Some of AXIS' peers have also seen founding investors sell off their shares, while others have returned capital to their shareholders as the insurance cycle begins to soften. In a soft market, the opportunities to sell policies for a profit constricts, as increasingly cut-throat competition reduces the market rates for many types of insurance.

AXIS was initially capitalised by its founding shareholders with $1.6 billion. Less than four years later, shareholders' equity in AXIS tops $3.1 billion, according to the company's second quarter figures through the end of June.