UK in the firing line as Axa seeks Euros 1.5bn cost savings in 'mature markets' - updated

The group has admitted that it is seeking Euro 1.5bn pre-tax cost savings in 'mature markets' by 2015, of which two thirds is set to come from the property and casualty side of the business.

Among the other main financial objectives for 2015 are underlying earnings per share compound annual growth rate of 10%; cumulative Euro 24 bn of group operating free cash flows from 2011 to 2015, of which Euro 11bn will come in life & savings; and 15% adjusted return on equity in 2015.

Commenting specifically on the property & casualty business, Axa declared that the objective is to improve "profitability through technical excellence and efficiency", mostly in mature markets, to actively grow the direct business and to accelerate the development in high growth markets.

This will translate into the following objectives of an all year combined ratio below 96% in 2015; current year combined ratio at 100% in 2011 and below 97% in 2015; a reduction of the enlarged expense ratio (including claims handling costs) by 4 pts by 2015, notably through Euro 1.0bn pre-tax cost savings in mature markets.

Axa's UK and Ireland property and casualty business represents 15% of its global Euro 27.4bn revenues, making it the third largest contributor after MedLA (25%) and France (21%); and ahead of Germany (15%).

"The long term potential of insurance and asset management is more promising than ever, addressing global needs for risk and life-style protection, underpinned by long term demographic trends and the rapid advent of emerging economies", said Henri de Castries, chairman and CEO of Axa.

"Through 'Ambition Axa', our new strategic plan for the next 5 years, we reaffirm today our objective to become the industry's preferred company, building on customer centricity and a culture of trust and achievement for our teams."

He added: "'Ambition Axa' is about three main priorities: selectivity, acceleration and efficiency. Selectivity, mainly in mature markets where we will concentrate our efforts on actively developing higher margin offers with lower capital consumption which address our customers' needs. This
should allow us to generate sustainable growth of earnings and operational free cash flows.

"Acceleration, mainly in high growth markets where the group already benefits from a strong footprint worldwide which has been reasserted by the recent Axa APH 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."

Mr de Castries added: "Efficiency everywhere with a specific focus on mature markets, where we expect to deliver Euro 1.5 bn of cost savings by 2015 whilst continuing to improve customers' experience with Axa.

"We will fulfil our ambition by building on our key differentiating assets, such as our brand, our unique distribution mix, our capital management agility and our deep international talent pool. This is our ambition, and we are committed to deliver on it."

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