AXA SA, France’s largest insurer, plans to increase profitability through 2020 by seeking 2.1 billion euros ($2.4 billion) of cost cuts and growing digital investments to tap rising demand for policies protecting savings and health. The firm may also seek acquisitions to boost growth.
AXA is targeting an adjusted return on equity, a key measure of profitability, of 12-14 percent between this year and 2020, the Paris-based company said in a statement on Tuesday. Underlying earnings per share are expected to rise 3-7 percent annually over the period, the insurer said.
“AXA’s earnings target is rather ambitious, given the strong decline in interest rates,” said Andreas Schaefer, an analyst at Bankhaus Lampe with a buy rating on the insurer. “However, the insurer has a good track record of reaching its cost saving goals.” The shares were up 0.4 percent at 10 a.m. in Paris trading.
The insurer may spend about 1 billion euros annually on acquisitions “balanced across mature and emerging markets,” the company said in a presentation on its website. AXA is targeting 900 million euros of underlying earnings in Asia in 2020, up from 551 million euros last year, the company said.
Management Reshuffle
AXA in March picked Thomas Buberl as its next CEO after 61-year-old Henri de Castries made the surprise decision to leave the group. Under de Castries, AXA grew into one of the world’s biggest insurers through acquisitions in Switzerland and, more recently, in faster-growing markets like China and Colombia. Denis Duverne, currently deputy CEO, will become chairman.
“We have an excellent starting point to pursue our transformation and to adapt and grow in a challenging economic environment,” Buberl, 43, said in the statement. “We will further grow our operations in selected areas, such as commercial lines, capital light savings products and in Asia.”
Growing earnings is increasingly difficult for big insurers like AXA as competition for premiums intensifies and quantitative easing limits returns from investments such as bonds. Underlying earnings per share at the French firm have risen 7 percent on average annually over the past five years. Allianz SE, Europe’s largest insurer, has said it wants to achieve annual earnings per share growth of 5 percent on average from 2016 to 2018.
AXA’s net income last year rose 12 percent to 5.62 billion euros, and the company has said it met its 2015 financial targets. Buberl, formerly CEO of Switzerland at Zurich Insurance Group AG, joined AXA four years ago to lead its German business and joined the insurer’s top management committee last year. Buberl, a German citizen who already lived in France as a student, will become CEO at the start of September, marking the first time a foreigner leads a major French financial institution with global presence.
AXA has dropped 18 percent in Paris trading this year, trailing the 35-member Stoxx Europe 600 Insurance Index.
AXA last month sold its SunLife unit in the U.K. to Phoenix Group Holdings and is also divesting its traditional investment and pension business in the U.K. as the company aims to grow there in property/casualty, health and asset management. The sale of SunLife, together with earlier disposals of its Elevate business to Standard Life Plc and an offshore bond business, will cut net income by 400 million euros.
Buberl already reshuffled his top management team. Paul Evans will replace him as head of the life & savings business and also head of the global health business, AXA said last month. Gaelle Olivier will be in charge of the global property/casualty business, replacing Jean-Laurent Granier, a veteran at the insurer who decided to leave. Nicolas Moreau, head of AXA’s French unit, is leaving for unspecified reasons, and Jacques de Peretti is succeeding him in the role.