AXA has changed beyond recognition over the last 30 years. A string of global acquisitions have turned it from a small mutual insurer in France’s Normandy to a global player. Despite its big ambitions, the firm still trades at a discount to the rest of the large-cap insurance conglomerates. Its price to book value before yesterday’s investor day was 0.9 compared to 1.7 for RSA and a peer average of 1.2.
Despite outperforming the rest of the sector so far this year, 2010 was an annus horribilis in which the firm’s shares shed 25 per cent. Yesterday, chief executive Henri de Castries claimed turbulence in the markets had hidden the insurer’s “inherent strengths”, but he must take some responsibility for its underperformance. He scrapped targets in the wake of the financial crisis and has waited too long to put new ones in place. Investors have grown understandably impatient.
Yesterday’s strategy day should go some way to addressing their concerns. The sale of its Canadian ops for $2.7bn comes just one month after the insurer, along with AMP, completed a $14.1bn purchase of Axa Asia Pacific. Together, the deals show it is serious about redeploying capital to the fast-growth tiger economies.
The other targets were sensible. Cut costs by $2.2bn in mature markets while making more acquisitions in emerging ones. Double revenue from property-and-casualty by 2015 while doubling the value of new life insurance business in high-growth markets. All being well, operating earnings should grow by 2.5 times over the next five years.
None of this is rocket science, however, and we wonder why it has taken de Castries so long to flesh out his vision. Yesterday he said he was aware “some [investors] could think that it has taken too long”. Still, better late than never.