Bloomberg News

Axa Targets EU6 Billion Operating Profit Amid Asian Growth

June 01, 2011

(Adds CEO comment from first paragraph, updates shares from second paragraph.)

June 1 (Bloomberg) -- Axa SA, Europe’s second-largest insurer, aims to reach operating profit of more than 6 billion euros ($8.6 billion) in 2015 as it expands in Asia and scales back in Britain and Canada, Chief Executive Officer Henri de Castries said.

Axa rose 1.5 percent in Paris trading after the company set profit goals and agreed to sell its Canadian business to Intact Financial Corp., the country’s largest property and casualty insurer, for C$2.6 billion ($2.7 billion).

“We have the ability to transfer know-how” to accelerate growth in emerging markets, de Castries said at a Paris meeting with investors broadcast on Axa’s website. “Market turbulences too often have hidden the inherent strengths of Axa.”

Axa will aim for 10 percent annual growth in operating earnings per share through 2015, the company said. Total operating profit should reach at least 6 billion euros in 2015, de Castries told journalists at a meeting today. That compares with 3.88 billion euros last year.

To fund expansion in faster-growing Asian economies, Paris- based Axa is seeking to lower costs and cut business in some developed markets, including the U.K. Axa said today it expects to reduce costs by 1.5 billion euros by 2015 “in mature markets.”

De Castries, 56, who at the height of the global financial crisis had to drop the firm’s 2012 earnings goals, is counting on growth in Asia. The insurer, along with AMP Ltd., completed in April a A$13.3 billion bid for Melbourne-based Axa Asia Pacific Holdings Ltd. to take control of businesses in a region where wealth is growing at the world’s quickest rate.

Faster Growth

Axa aims to double property-and-casualty revenue and double life-insurance new business value in high-growth markets by 2015, the company said in a presentation on its website. Operating earnings should grow by 2 1/2 times over the same period.

“We have got no intention to make a capital increase to finance our growth,” de Castries told journalists. In high- growth markets outside of Asia, Axa may look at possible acquisitions in Brazil, de Castries said today, without naming any takeover targets.

Axa rose 1.5 percent to 15.06 euros in Paris, giving the company a market value of about 34.9 billion euros. Axa has risen 21 percent in 2011 while Allianz SE, Europe’s largest insurer, has gained 6.5 percent. Axa shares are rebounding after a 25 percent drop in 2010.

“They’ve got every interest to go toward high-growth markets like Asia,” said Valerie Cazaban, who helps manage 100 million euros at Stratege Finance and doesn’t own Axa shares. “Axa, as all the insurance industry, is undergoing a complicated transition with turbulent markets and savings declines in developed countries.”

Asia, China

The French insurer last year sold most of its U.K. life- insurance businesses at a loss, while clients at its fund- management units withdrew 64 billion euros of assets as U.S.- based Axa Rosenberg Group LLC suffered a coding error.

Axa’s profit dropped 24 percent in 2010. BNP Paribas SA, Europe’s largest bank by assets and owner of a 5.2 percent stake in Axa, booked a 534 million-euro impairment in the fourth quarter of 2010 on its holding because the insurer’s stock had often traded below book value since the start of the financial crisis.

Axa, by completing the deal on Axa Asia Pacific, gained direct control of its operations in Asian countries stretching from India to Indonesia.

The French insurer is also seeking growth in the Chinese market. De Castries flew to Beijing in October to seal a life- insurance partnership with Industrial & Commercial Bank of China Ltd. ICBC bought a 60 percent stake in Shanghai-based AXA- Minmetals Assurance Co., while the French insurer holds 27.5 percent and China Minmetals Corp. owns 12.5 percent.

Ending Outflows

In asset management, Axa had 13 billion euros in outflows in the first quarter, mostly at New York-based AllianceBernstein LP, the company said May 5.

Overall, Axa expects a “turnaround of net flows” this year at its fund-management business, which should be able to attract 4 percent to 5 percent of net new money as a percentage of assets under management between 2012 and 2015, the company said.

Axa also expects adjusted return on equity, a measure of profitability, of 15 percent in 2015, it said. Axa’s adjusted ROE was at 12 percent last year, up from 11 percent in both 2008 and 2009. That measure of profitability stood at 20 percent in 2007, before the worst global financial crisis since the 1930s took hold.

--Editor: Frank Connelly, Dylan Griffiths

To contact the editor responsible for this story: Fabio Benedetti-Valentini at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net;


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