AXA Continues the Transformation to Technical Risks

Equity Analyst

Henry Heathfield

AXA’s takeover of XL changed the business from one fundamentally focused on life and savings, particularly in France and Europe, to a business with a much heavier exposure to nonlife insurance in United States and large-scale commercial and specialist lines of business. While nonlife insurance previously accounted for under half of new capital, this part of the business now takes over half of this metric. While protection and health maintain their current share of management focus and investment, there has been a small reduction in life and savings. AXA is being transformed into a business that relies more heavily on technical sources of profitability that are less dependent on the performance of financial markets.

From a geographical perspective, management breaks the business into current engines and high potentials. The first of these is mainly made up of developed Europe and also includes Japan and Hong Kong. High potential holds Brazil, China, Indonesia, Mexico, Philippines, and Thailand. These are AXA's growth engines but make up a small amount of earnings. Eighty-five percent of earnings are derived from current engines with the residual coming from smaller entities spread across a little more than one tenth of the world's countries. AXA also operates AXA Investment Management and AXA Corporate Solutions.

The three largest regions are France, which contributes around a fifth to underlying earnings. This is followed by Europe, which makes up a little over a third. Asia adds the difference. The business is led by Thomas Buberl as chief executive officer, and local leaders include Jacques de Peretti for AXA France; Antimo Perretta for Europe; Gordon Watson for Asia; and Benoit Claveranne for international and new markets.

Business Strategy & Outlook

We assign AXA a no moat rating.

In general, insurance companies are not moaty. From the perspective of building a moat we focus on internally generated assets that lead to maintainable competitive positions. These translate to cost advantage or intangible assets. A cost advantage can be achieved by either superior underwriting by focusing on particular risks that have a lower cost of claim. With intangible assets a business can become the dominant operator in a particular set of risks and are able to underwrite more effectively by building institutional knowledge, capabilities, proprietary technology and data.

A cost advantage can also come via lower expenses either through distribution or scale.

AXA demonstrates superiority in few of these sources.

None

Economic Moat

AXA SA

Earnings data Q3 2024

Earnings data Q4 2024

AXA SA operates as a holding company, which engages in the provision of insurance and asset management services. It operates through the following segments: France, Europe, Asia, AXA XL, International, and Transversal and Central Holdings. The France segment consists of Life & Savings and Property & Casualty activities, AXA Banque France and France holdings. The Europe segment consists of Life & Savings and Property & Casualty activities in Switzerland, Germany, Belgium, United Kingdom & Ireland, Spain and Italy. The Asian segment consists of Life & Savings activities in Japan, Hong Kong and Asia High Potentials as well as Property & Casualty activities in Hong Kong and Asia High Potentials. The AXA XL segment consists of Property & Casualty activities at XL Group, as well as AXA Corporate Solutions Assurance and AXA Art. The International segment consists of Life & Savings and Property & Casualty activities in 14 countries within Europe, Middle East, and Africa & Latin America as well as in Singapore, in Malaysia and in India. The Transversal & Central Holdings segment includes transversal entities namely AXA Investment Managers, AXA Assistance, AXA Liabilities Managers, AXA Global Re, AXA Life Europe, as well as AXA SA and other Central Holdings. The company was founded in 1985 and is headquartered in Paris, France.

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