AXA: creation of a new business unit dedicated to innovation and new business models

(AOF) – Axa has announced the appointment of Joyce Phillips as General Manager of a new business unit dedicated to customer innovation and new business models, and as a member of the Axa Group Management Committee. This appointment will take effect on May 10th. She will refer directly to Thomas Buberl, CEO of the insurance company. Previously, she was CEO of the Private Wealth Division of Australia & New Zealand Banking Group Limited (ANZ).

By merging the Group’s initiatives, this new business unit will be responsible for expanding the value chain of insurance services thanks to new technologies and the Group’s innovation ecosystem. This structure will operate on an international scale thanks to dedicated resources such as AXA Partners, Axa Next, Axa Strategic Ventures, Kamet. It will also enable the development of new offers and service proposals in line with Axa’s Ambition 2020 strategy.

With an MBA from New York University’s Stern School of Business and fluent in Japanese, Joyce Phillips has worked in all areas of banking, financial services and insurance. During her 25-year career, she has held various regional and international positions of responsibility in the United States, Asia and Australia.

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The strengths of value

– Second European insurance company and world leader in life insurance and asset management after thirty years of growth based on targeted acquisitions;

– The portfolio is divided into four activities: life, savings and pension products for 58%, property and accidents for 33%, international insurance and then wealth management;

– Very solid financial position thanks to centralized liquidity management, which provides the necessary capital to comply with the Solvency II rules (solvency ratio of 191% at the end of September 2016);

Promotion of “high-growth” countries on which Axa has focused its investments since 2010: 4.2 billion euros for Asia, where the group is a leader, 0.7 billion euros for the Mediterranean, Africa and Latin America and 200 million euros for the former. Eastern Europe;

– Focus on digital both to increase competitiveness and to diversify the distribution networks;

– In the “life industry” the dominance of technical products (health, personal protection and unit-linked pensions), with better margins and less affected than pure savings products of the low interest rate level;

Demonstrated ability to generate record profits in an unfavorable environment – very low real interest rates and market volatility;

– Solid governance, with President Henri de Castries handing over the baton in 2016 to German Thomas Buberl as CEO and Denis Duverne as non-executive chairman;

Solid financial position rated “2 A” by the rating agencies.

Weaknesses of value

– The high sensitivity of the capital structure to the whims of the financial markets: prolonged low interest rates, hampering the service of guaranteed interest rates and maintaining the “life” margin; sharp rise in interest rates;

– Structural decline in the profitability of insurance companies’ savings products by a margin close to 0 for new contracts;

Negative impact of attacks and floods on operating profitability;

Cumbersome GSII rules on capital requirements;

– Investors’ mistrust of European finances.

How to follow the value

– Sensitivity, shared with other insurance companies, to natural disasters (hurricanes, floods, earthquakes), fires or terrorist acts;

Rumors of mergers in the insurance sector, eased by abundance of liquidity from central banks;

Execution of the Ambition 2020 “Focus and Transform” plan: growth in operating earnings per share of 3% to 7% per year on average, from 28 to 32 billion euros in cumulative free flow of cash flows from 2016E to 2020E, profitability equity ratio (ROE **) between 12% and 14% from 2016 to 2020, Solvency II ratio target is between 170% and 230%, € 2.1 billion in pre-tax savings by 2020;

– Benefits of launching Axa Partners, a structure dedicated to international partnerships, and of the global commercial partnership with the Chinese Alibaba;

Open but non-operating capital, AXA companies holding 14.13% of the shares (23.82% of the voting rights) in front of employees and agents (6.15%).

Finance – Insurance

In an environment of low interest rates, the profitability of European non-life insurance companies is threatened, according to Moody’s. The average decrease in their profits can be between 10% and 20% on average over the next three years, based on the prospect of a decrease in the return on their investments of between 10 and 35 basis points per year. this period. Nevertheless, non-life insurance companies can gamble on their prices. Moody’s estimates that most non-life insurance companies would have to pass interest rate hikes of less than 1% per year (and 0.5% on average). But in France, intense competition and weak economic growth limit the ability of insurers to raise their prices.

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