Europe’s sec­ond big­gest in­surer to ex­pand in Asia

The Gulf Today - Business - - FRONT PAGE -

PARIS: AXA, Europe’s sec­ond-big­gest in­surer, ex­pects its prof­itabil­ity to im­prove in the next two years thanks to US busi­ness brought in by its new XL arm, and said it would now fo­cus on ex­pand­ing in Asia.

The French in­surer said prof­its should be boosted by its $15 bil­lion ac­qui­si­tion of Ber­muda-based XL ear­lier this year, which helped to broaden AXA’S range of busi­ness.

AXA also lifted its ex­pected syn­er­gies from the XL ac­qui­si­tion to 500 mil­lion euros ($564 mil­lion) from 400 mil­lion, and raised its div­i­dend pay­out range to be­tween 50-60 per cent from 45-55 per cent.

Fol­low­ing the XL deal and the stock mar­ket list­ing of its US life in­sur­ance and as­set man­age­ment unit Axa Eq­ui­table Hold­ings, AXA is now look­ing to de­velop more in Asia in ar­eas such as China, health in­sur­ance and its branch net­work.

The company has al­ready hired a se­ries of lead­ing man­agers in the re­gion, such as Gor­don Wat­son, chief ex­ec­u­tive of­fi­cer for Asia.

“In just nine months, Gor­don has at­tracted some of the best lead­ers in Asia with sig­nif­i­cant lo­cal ex­per­tise to pro­pel AXA to be­come the next in­surer of choice in the re­gion,” AXA CEO Thomas Bu­berl said.

Bu­berl said last year that he wanted the company, the num­ber two in­surer in Europe after Ger­many’s Al­lianz, to fo­cus on six emerg­ing coun­tries, with four of them in Asia.

Even though Asia rep­re­sents about half of the world in­sur­ance mar­ket’s growth, “AXA in Asia has un­der­per­formed over the past few years,” Bu­berl said dur­ing a pre­sen­ta­tion to in­vestors.

Ear­lier this month, the company said it had agreed to buy the 50 per cent stake it didn’t own in its Chi­nese unit AXA Tian­ping for 584 mil­lion euros. AXA also raised on Wed­nes­day its ex­pected ad­justed re­turn on eq­uity (ROE) to be­tween 14-16 per cent in 2019 and 2020, up from a pre­vi­ous tar­get of 12-14 per cent.

It con­firmed its tar­get for un­der­ly­ing earn­ings per share to rise by 3-7 per cent a year over the same pe­riod and ex­pressed flex­i­bil­ity over pos­si­ble fu­ture share buy­backs.

The company said it will use the pro­ceeds of ris­ing prof­itabil­ity and the re­main­ing shares it in­tends to sell in its US unit to cut its debt to be­tween 25 per cent and 28 per cent of its eq­uity, down from 29 per cent at the end of June. The funds will also finance div­i­dend pay­ments, ac­qui­si­tions and share buy­backs, Bu­berl said, with­out spec­i­fy­ing.

AXA shares were up 0.9 per cent on Wed­nes­day af­ter­noon, as an­a­lysts wel­comed AXA’S lat­est fi­nan­cial tar­gets. “In our view, AXA are re­as­sur­ing the mar­ket by rais­ing ad­justed ROE tar­get of 14-16 per cent and re­ward­ing in­vestors with a step-change in the pay­out ra­tio from the cur­rent 45-55 per cent to 50-60 per cent (we had fore­casted 51 per cent in 2020), more than ex­ceed­ing our base case for the in­vestor day,” wrote an­a­lysts at Jef­feries, which kept a “buy” rat­ing on AXA.


Peo­ple walk past the head­quar­ters of AXA in Brus­sels, Bel­gium.

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