24 February 2022Insurance

AXA claims 3-year integration has commercial unit AXA XL in shape for growth

AXA’s commercial insurance and reinsurance unit  AXA XL has come out of its over three-year integration with the French group ready to capture the market, top officials of the French group have argued.

“We are very satisfied with the integration … we consider the bulk of it behind us,” AXA group deputy CEO Frederic de Courtois (pictured) told the media briefing following publication of Q4 financial results.

AXA XL is extremely well positioned to generate sustainable, profitable growth,” group CEO Thomas Buberl added.

That leaves the unit, bought in 2018 and center of AXA growth hopes, lingering between alternating management comments about “business as usual mode” and assurances “it doesn’t mean we don’t have anything to do.”

Still ahead, a technology investment plan for AXA XL and “a plan to expand the range of service on and around AXA XL,” de Courtois said. And a restructuring and de-risking of the reinsurance portfolio continues apace.

AXA XL delivered €1.2 billion in underlying earnings in 2021. AXA XL took a 15% price increase (calculated on renewals) in commercial primary insurance and 9% on the reinsurance book, a presentation showed. Management assured that the latest count meets their ambition.

“We largely re-underwrote the insurance portfolio and we are confident that it will bear results,” de Courtois said. “We are confident that there is room for growth here,” in part given renewals rate hikes baked into the upcoming earning stream, he said.

Rate hardening will continue to be a part of the earnings growth story. With caveat for unknown unknowns, “we believe the cycles will remain favorable for 2022 and 2023 at least.”

The integration may be complete, but the portfolio restructuring is not. The reinsurance portfolio has been repositioned for reduced volatility thanks in part to a 40% cut to property cat exposure on the January 1, 2022 renewals, officials said.

“We are in the midst of restructuring our exposure, cutting back in exposure to nat cat in reinsurance and increasing our exposure in parts that are not related to nat cats,” CEO Buberl said. “This is being done with strong determination and resolve.”

Separately, AXA will rejig its HQ holding company to be the group’s internal reinsurer, absorbing the group’s current captive internal reinsurer AXA Global Re. The move is designed to funnel cash back to the parent company at a faster rate, management said in its statement. The group expects above €2 billion in additional cash back at the parent by 2026 as a result of the move, including a one-off cash boost from the merger.

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