UK among the markets making £1.3bn in savings for AXA over next four years
AXA’s ambitious plans revealed this week – to achieve a combined operating ratio of 96% by 2015 – are already under way, according to intermediary and partner sales managing director Mike Keating.
Group chief executive Henri de Castries told investors in Paris that mature markets, including the UK, will have to deliver E1.5bn (£1.3bn) in savings over the next four years. The UK and Ireland make up 15% of AXA’s E27.4bn general insurance market.
Including Ireland and healthcare, AXA’s UK COR was 103% in 2009. This figure was dragged down by the personal lines book, which in 2009 made an underwriting loss of £66m and a COR of 122%. The COR target excludes prior years’ reserve strengthening or releases.
But Keating insisted that AXA was working towards saving money by using an integrated IT system. The company is in the process of transferring the low-cost Swiftcover IT system across to broker and affinity markets in personal lines.
“We have to have a sustainable low-cost model that’s able to change rates quickly,” Keating said.
A key driver of growth will be direct business, and AXA has promised that there will be “selective acquisition activity”. The UK is the insurer’s biggest success in the direct space, with around 1.1 million policies.
Meanwhile, in commercial AXA has vowed to take action on any unprofitable business. Investors at the Paris presentation heard that AXA had saved 15% on its commercial COR last year by cancelling unprofitable broker schemes.
The company also believes that price increases will bolster its UK COR, with 2010 showing an 11% increase in retail and 3.5% in commercial. In the first quarter of this year, AXA UK achieved a 13.2% increase in retail and 2.2% in commercial.
De Castries has labelled the four-year plan to turn around the insurer’s fortunes as Ambition AXA.
He said: “Ambition AXA is about three main priorities: selectivity, acceleration and efficiency. Selectivity involves mainly mature markets, where we will concentrate our efforts on developing higher-margin offers with lower capital consumption to address our customers’ needs. This should allow us to generate sustainable growth of earnings and operational free cash flows.
“Acceleration mainly refers to high-growth markets, where the group already benefits from a strong footprint worldwide – recently boosted by the AXA-Asia Pacific Holdings transaction – and where we want to grow further and allocate a larger share of our capital.
“This will allow us to double our size and more than double our profitability organically by 2015, and to continue to attract leading partners in insurance distribution.”
Earlier in the week, AXA announced the appointment of eight mangers for its branches throughout the UK. They are John Maguire (Glasgow), Andy Halstead (Leeds), Simon Hodgin (Manchester), Barrie King (Birmingham), Martyn Grime (Ipswich), Ed Pugh (Reading), Linda Courtney (London) and Darrell Sansom (Bolton).
AXA commercial lines chief executive Amanda Blanc said: “I am determined AXA will become the insurer that builds strong local relationships with brokers supported by empowered local decision-making.”
? AXA UK has Amanda Blanc to run commercial and Steve Hardy for personal lines. If they can’t turn around AXA’s fortunes, who can?
? Blanc’s decision to get close to brokers through regional underwriting is a well-proven formula.
? AXA wants Swiftcover to help grow revenues and lower COR. Personal lines and motor are heading for 20% rises in 2011, but what if the market eases in 2012? Is there a plan B?