AXA seeks 5% commercial P&C top line growth despite AXA XL’s caution
Re/insurer AXA expects some 5% top line growth per year in commercial P&C through 2026, including from selective growth in mid-market and emerging risks, while expecting its core corporate unit AXA XL will have to navigate the upcoming market cycle more carefully, a new 3Y corporate strategy has indicated.
AXA will seek to guide top-line growth above GDP growth levels, “driven by structural portfolio growth reflecting continued demand from corporates, and leveraging its global scale, product capabilities, and diversified distribution,” management said in introducing the new 3Y strategy.
Commercial P&C growth will include plugging white spots on maps in UK, Italy & Spain, expanding leadership in France, Switzerland, Germany and Belgium plus “selective” market building in the US. AXA will pursue new opportunities in cyber and energy transition.
The outlook for the major corporate unit AXA XL sounds very closely tied to expectations of strong cycle management, despite assurances that a “repriced and repositioned” portfolio, including new casualty limits and lower nat cat exposure, is now more balanced and less cycle sensitive.
Over the strategy period, AXA XL will be working against an expected moderation in pricing in many lines and will be expected to show flexibility as those pricing conditions change, management indicated.
Margins should consolidate some across lines from today’s dispersion. Professional lines should pull out of their softening over time, while high-flying segments should tame, a graph of projected market trends indicates. Marine could be a trouble point.
The tool box may be tech-heavy. Data analytics will improve SME pricing, risk selection and enhanced nat cat management, AXA believes. Expect wonders including geospatial AI property and nat cat management, added satellite imagery for property, increased integration of the digital platform and more.
Commercial P&C business growth won't change the overall business mix. AXA appears pleased with its current business balance, a roughly 50-50 split between commercial and retail and with an overall 35% weighting for commercial P&C. AXA considers itself "at scale in all core markets".
Elsewhere in the AXA universe, the group expects above nominal GDP revenue growth in employee benefits and health with a focus on its highest-margin work for SME, international private medical insurance, and individual customers.
In retail P&C and L&S, AXA should match GDP growth on its own top line in mature markets, then grow faster in P&C non-motor and retirement. Growth is expected to be driven by expanding distribution capabilities and increased cross-sell. Retail P&C margins should improve following repricing.
For equity investors, those core business targets are likely to be overlooked in favour of new financial targets and a boost to the shareholder remuneration policy.
AXA said it is expecting 6 - 8% CAGR growth in underlying earnings per share through 2026 and a ROE of 14-16% across the period. Some €21 billion in cumulative cash upstreaming will enable a jump to a 75% shareholder payout ratio, including a 60% dividend payout plus 15% via buybacks.
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