LONDON--Reinsurance firm Catlin Group Ltd. (CGL.LN) said Wednesday it has received an approach, and is in advanced talks, for a cash and share offer by XL Group PLC (XL) which values the company at 2.53 billion pounds ($3.97 billion).

XL Group, a global insurance and reinsurance firm, is offering 410 pence and 0.13 of its own shares for each Catlin common share held, valuing each share at 699 pence. Shareholders will not receive a final dividend for 2014.

"Discussions are currently ongoing between both parties and the final terms of any possible offer are subject to the completion of mutual due diligence," Catlin said, cautioning that there can be no certainty the talks will lead to any deal, or certainty as to the final terms.

Catlin also said Wednesday that it is in advanced talks to sell its interest in Box Innovation Group Ltd. and that any money raised from the sale will be returned to shareholders.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

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