The insurance business is facing interesting times, analysts say

Axa, Europe's second-largest insurance company, said it would pay cash to buy Winterthur, a division of investment bank Credit Suisse First Boston.

The deal should start having a positive effect on Axa's earnings from 2007.

Insurers are looking to merge, expand and cut costs in the face of increased competition and uncertainty about the size of future claims, analysts said.

Wider view

Moody's Investors Service was positive about a tie-up between Axa and Winterthur citing access to new markets and "sizable cost synergies".

Axa expects pre-tax savings of about 280m euros, and said it will take a restructuring charge of about 520m euros.

"This transaction is a unique opportunity to reinforce our leading position in our core European market and to increase our presence in high growth markets, notably in Central and Eastern Europe and in Asia," said Henri de Castries, Axa's chief executive.

Winterthur is the second-biggest firm in the Swiss insurance sector and operates in 17 countries.

Axa has stated in the past a willingness to expand via acquisitions and in 2004 bought Mony Group.