The team at AXA XL, led by Chief Executive Officer (CEO) Scott Gunter, is looking to capitalise on rising prices in the current hardening market environment, in an effort to both enhance and increase the underwriting performance of the business, according to Thomas Buberl, CEO of AXA.
Today, French insurance and investment giant AXA held its virtual Investor Day, during which the company’s CEO outlined its latest strategic plan.
Within “Driving Progress 2023”, one of the main objectives is to improve underwriting profitability, most notably at AXA XL, the firm’s property & casualty and specialty risk division, established in the wake of AXA’s takeover of XL Group in 2018.
Like many of its peers, AXA XL’s performance through 2020 has been adversely impacted by the ongoing COVID-19 pandemic, major natural catastrophe events in the U.S. and other events around the world.
However, AXA noted during its 9M 2020 results announcement that the AXA XL operation continued to experience price increases in both insurance and reinsurance through 2020, a trend which is expected to persist at the upcoming Jan 1st renewals, and further into 2021.
Speaking this afternoon at a press conference, CEO Buberl emphasised that at AXA XL, the focus is on enhancing and increasing the underwriting performance, which will result in underlying earnings at AXA XL hitting a target of €1.2 billion in 2021.
“Scott, and his team are really in the driving seat and Scott immediately began, after taking over at the helm, to simplify the organisation, to be far clearer about local responsibilities. That is, we have a simpler organisation in place, it’s more accountable, and that’s already up and running and working on the portfolios to review all the books of business,” said Buberl.
Adding: “And, to use this magical moment, this period in which prices are rising to seize the necessary rate rises to boost the profitability of the book of business.”
As well as looking to take advantage of more favourable market conditions, Buberl said that the AXA XL team is also focused on better managing volatility of the portfolio.
“Better managing volatility means, no doubt, being less exposed in terms of maximum risk for contract. Moving from €50 million down to €25 million per contract. And, to be far more prudent on natural catastrophes. Previously, in the earlier plan, we had 4.4% as an estimate for natural catastrophes, and we’re now moving that to 6%, and that means being far more prudent,” he told the audience.
So, as part of its effort to reduce volatility, the firm is looking to halve its net retention limit on new risks across the portfolio, while at the same time raise its nat cat budget to what it views as a more prudent level.
It’s hoped that these efforts see AXA achieve the “absolute priority” of remedying the performance of AXA XL in order to reach the €1.2 billion performance target.
“This is now cast in stone. This is in execution and I have very high confidence in Scott and the team that we will get there next year,” said Buberl.
Once the underlying performance target has been met, Buberl explained that the next step will be to look at where are the opportunities to grow the lines of business deemed the most attractive, and where AXA XL also has the highest growth potential in the market, “and the best fit between our special competence of underwriting, and the customer demand.”