AXA XL replaces CEO and takes action as 2019 results fall below expectations

AXA XL says its new CEO, accelerating price rises and further de-risking will help boost profitability, after 2019 earning figures fell below expectations. AXA XL saw revenues increase 10% in 2019, helped by “extremely brisk” price rises. But the unit’s combined ratio stood at 101.5%, and the firm’s CFO Etienne Bouas-Laurent said €507m of underlying earnings were “slightly below” expectations as losses hit. During a results call, Mr Bouas-Laurent noted that 2019 earnings compare favourably to a loss of €233m in 2018, but were impacted by natural catastrophes, social inflation and large claims. “The level of expenses due to nat cats exceeded by €300m what we expected and what the models were telling us. The second issue is deviation of claims due to social inflation, especially in the US, and also high costs when it comes to large claims that we saw throughout the year,” said Mr Bouas-Laurent. But AXA XL’s revenues increased to €18.7bn last year. P&C insurance revenues were up 18% to €9.1bn. The insurer said this was mainly driven by “strong positive price effects” and volume growth in professional lines, “positive price effects” and new contracts in property business, and improvements in North American construction. Specialty insurance revenues increased 6% to €4.9bn, with political risk, accident and health, and fine art and species singled out as notable drivers. AXA said this was offset by “continued selectivity” in marine, London wholesale and energy business. AXA XL’s reinsurance revenues increased by 2% last year to €4.5bn, mainly driven by higher volumes on specialty lines, partly offset by selective underwriting in property cat. The unit’s revenues were helped by overall insurance price rises of 8% in 2019, with higher increases in each quarter. The fourth quarter saw an increase of 14%, following a rise of 11% in Q3, 8% in Q2 and 4% in Q1. During its results presentation, AXA executives said the hardening market is gaining further momentum in 2020. Mr Bouas-Laurent said the pricing dynamic is “extremely brisk”. “That rise is gaining momentum in the first quarter of this year,” he added. CEO Mr Buberl said AXA XL is seeing some “very strong growth in terms of higher prices” and added that further prices increases are one of three key strategies to improve profitability at AXA XL in 2020. “We want to continue with this approach in 2020 and we can certainly see in January that such price increases are continuing plus 10%... we will see the positive effects in 2020,” said Mr Buberl. The second strategy is to further tackle risk and volatility at AXA XL, after measures taken in 2019 to reduce exposure to property catastrophe business, shrink line sizes in casualty and boost reinsurance covers. These measures are expected to result in a €200m impact on 2020 earnings. “We have reduced our exposure to property nat cats, both with respect to primary and reinsurance. We also reduced our capacity across casualty, especially in US. The second measure we took is shoring up our reinsurance coverage in two areas – commercial property and to avoid cumulative impact of large losses above the threshold we experienced this year, which appeared to be very high to us,” explained Mr Bouas-Laurent. The shock move to replace AXA CEO Greg Hendrick with Scott Gunter, previously senior vice-president of Chubb and president of the insurer’s North America commercial insurance division, is the third key action. “We are moving now from a onboarding integration phase, which was successful, and in order to make AXA XL more profitable we have recruited someone who will help us to make this subsidiary even more profitable,” said Mr Buberl on the results call. AXA Group’s underlying earningsincreased by 2% to €6.5bn. P&C underlying earningsincreased by 49% to €3.3bn, or by 12% excluding AXA XL. Group net income was up 75% to €3.9bn, much of this driven by non-repeat of the €3bn goodwill impairment of Equitable Holdings in 2018. AXA group revenues increased by 5% in 2019 to €103.5bn. They rose by 5% in P&C lines to €48.8bn. Mr Buberl said AXA recorded “another strong operational performance in 2019”. “The group achieved a significant milestone in 2019 in its strategy to shift its profile away from financial markets and towards technical risk, by fully exiting the US life and savings market and integrating the XL Group, and at the same time reducing its debt gearing ratio. “At AXA XL, impacted again by adverse claims experience in 2019, we are recording strong price increases and taking further steps to reduce volatility. I am also very happy to welcome Scott Gunter to the AXA Group to drive the next phase of development of AXA XL,” he added. Meanwhile, repositioning its troubled Corporate Solutions unit, heavy natural catastrophe losses and rising claims in US casualty, proved to be a drag on Swiss Re’s full-year 2019 results.

AXA XL replaces CEO and takes action as 2019 results fall below expectations

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