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AXA targets stronger underwriting performance, accelerated efficiency

1st December 2020 - Author: Luke Gallin

Global insurer AXA is targeting a stronger underwriting performance, notably at AXA XL, over the next few years as part of its strategic plan “Driving Progress 2023”.

growthOutlined this morning at the insurer’s virtual Investor Day, AXA’s new strategic plan and key financial targets for 2021-2023 have a focus on improved underwriting, a simplified customer experience and accelerated efficiency, expanding health and protection, sustaining its climate leadership position, and growth in cash-flows across the Group.

At AXA XL, the company’s property & casualty and specialty risk division, underlying earnings of ca. €1.2 billion are expected in 2021 with a combined ratio of ca. 96%. For both metrics, this is assuming a more prudent, annual natural catastrophe load of ca. 6 percentage points of gross earned premiums, against ca. 4 percentage points previously.

Looking further ahead, and the insurer is targeting a Group P&C all year combined ratio of 93% by 2023.

So far in 2020, and excluding the impacts of the pandemic, the firm’s AXA XL unit has experienced an elevated level of catastrophe losses, including the likes of Hurricanes Laura, Isaias, and Sally in the U.S., alongside the derecho event, California wildfires and other smaller events.

For the first nine months of the year, AXA saw its revenues decline 2% to just shy of €80 billion. Within P&C, the firm reported a 3% rise in revenues at AXA XL Insurance from continued favourable pricing effects, although this was largely offset by a 6% reduction in revenues at AXA XL Reinsurance from further exposed reductions in the property cat arena.

“Bold and strategic choices have been made over our previous Ambition 2020 plan, as we successfully
transformed our Group, shifting AXA’s profile towards insurance technical risks, simplifying the organization and scaling innovation in services. At the same time, we delivered consistent strong financial performance.

“Our group is now reshaped to a simpler and more focused organization, closer to its customers and with the right scale across our geographies and preferred segments, Health, Protection and P&C Commercial lines. With a unique profile, AXA is very well positioned to capture post Covid-19 growth, and to cater to the new insurance needs of customers and society,” said Thomas Buberl, Chief Executive Officer (CEO) at AXA.

As well as strengthening its underwriting performance, AXA is also looking to expand health and protection across all of its geographies, notably through innovative services. AXA is targeting health revenue growth of > +5% CAGR 2020E – 2023E.

The French insurer is also looking to simplify the customer experience and accelerate efficiency, notably in France and across Europe. In fact, by 2023, AXA is targeting a €500 million absolute cost reduction against 2019, across the Group.

AXA is one of the global insurers that is often praised for its actions around climate change, and the firm looks set to continue this via its latest strategic plan.

By taking further actions to shape the climate transition, the firm is targeting a further 20% reduction in the carbon footprint of its G/A assets by 2025.

On cash and capital, the carrier said that it is aiming for a Solvency II ratio of around 190%. AXA is also targeting €14 billion cumulative cash upstream over 2021E to 2023E, and a dividend payout ratio of 55%-65% of underlying earnings per share.

Additionally, AXA is looking to produce an underlying return on equity of between 13%-15% over 2021E to 2023E.

“Our strategy is designed to deliver sustained earnings growth, driven by all our geographies, and a clear path to dividend growth, supported by enhanced cash generation, a strong balance sheet and disciplined capital management.

“AXA’s earnings are expected to be materially adversely impacted in 2020 in the context of Covid-19, as previously communicated. At the same time, 2020 has shown the relevance of AXA’s strategic vision, its solidity, and the tremendous engagement of our people and partners. Together we are entering a new chapter for AXA in a strong position to bring even more value to all our stakeholders in line with our purpose: Act for human progress by protecting what matters,” said Buberl.

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