Chief exec names Aviva as one top-end player trying to ‘defy gravity’ with unsustainable strategy

AXA UK chief executive Philippe Maso is warning that insurers “can’t defy gravity” and are playing a dangerous game by pricing too aggressively.

Maso said AXA had increased rates by around 5% last year and was unlikely to change its strategy.

He said the increases had put AXA on a good footing for the future, but other smaller insurers would face serious challenges during the next ‘trigger event’.

Maso said AXA’s historical database was excellent and had produced consistent results.

“When we say that people are underpricing the risk, we know what we are talking about and it’s meant to be quite a serious hint,” he said.

“It is what has been happening for the best part of three to four years. Who can sustain writing business at a loss and at no point have to crystallise these losses?”

At the top end, he said Aviva was aggressively pursuing business but that it would eventually have to stop.

“If you take AXA, Allianz and Zurich, you have serious players. Aviva cannot be significantly adrift from these players. So the logic is that, at some point in time, this game will stop.”

Maso was speaking following the announcement of AXA’s 2009 results. UK and Ireland underlying earnings were down by 18% from £288m in 2008 to £235m last year.

Lower investment returns from a derisked portfolio against a resurgent stock market and a group decision to release less reserves had affected the result, he said.

On a trading basis, combined operating ratio improved from 106% to 104% and there was a drop in claims frequency.

Maso believed the 13% fall in commercial lines volume, partly due to rate rises, would lead to an improved quality of book.

In personal lines, there was a slight reduction in volume from broker and corporate partnership business, but direct business – including Swiftcover and newly launched AXA Car Insurance – were growing rapidly.

Elsewhere, AXA is confident in the existing managing general agency arrangements, having cleansed the portfolio early last year.

“Towergate is expressing through [chairman] Peter Cullum the right focus on profitability, which allows us to maintain the relationship, because we speak the same language,” Maso said.

When asked about potential acquisitions, he said: “Given the strategy we have, we are totally unlikely to make any capital move of that kind. It’s not in our strategy; we don’t need it.”