AXA Switzerland, the largest re/insurer of small-to-medium enterprises (SMEs) in the Swiss market, has announced plans to convert the business model of its main occupational benefits foundations from a full-value insurance model to a semi-autonomous model.
From 2019, the foundations will be responsible for asset allocation and investment returns to policyholders, while AXA will continue to cover death and disability provisions and administration services, and AXA Group will continue to offer investment management services.
The remodel comes as low interest rates and strong regulatory requirements in Switzerland mean full-value insurance offers corporate clients and their employees less value for money.
Swiss life re/insurers who continue to offer full-value insurance must maintain capital coverage for their entire pension obligations, including the minimum interest guarantees, and this framework necessitates a very cautious investment strategy.
AXA already has a reputation for offering successful semi-autonomous business model solutions, which currently make up around 60% of its new occupational benefits insurance business, and this latest transformation will see AXA become the largest provider of semi-autonomous solutions for SMEs in Switzerland.
Thomas Buberl, Chief Executive Officer (CEO) of AXA, said: “This model transformation, initiated and managed by our local teams, is a further important step in our ongoing in-force management program, systematically reassessing customer needs and taking proactive actions, to create value for our customers and shareholders at the same time.
“The transformation is in line with our Ambition 2020 strategy to focus on growth in our preferred segments and reduce our sensitivities to financial markets, and with our vision to empower people to live a better life.”
Additionally, Antimo Perretta, AXA’s CEO Europe, commented: “In the prevailing environment, this re-orientation should enable us to offer our Swiss SME clients more attractive occupational benefits solutions creating prospects of higher pensions on retirement, at lower costs.
“The growing semi-autonomous occupational benefits segment will become our core Group Life Insurance business in Switzerland which we will continue to develop together with our partners, to further strengthen our existing leadership position in the Swiss insurance market.”
As part of the remodel, AXA will transfer most of its €26 billion in-force General Account Reserves backing the pre-retirement savings benefits in its Group Life portfolio to the foundations.
The transition is also expected to result in temporary reductions in AXA Group underlying earnings, and the reduction of guarantee’s on AXA’s balance sheet will likely lead to a release of €2.1 billion of local risk capital requirement in 2019.
