Axa extends focus on smaller businesses to increase sales

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Axa is doubling down on midsized businesses to drive growth, betting that demand for products such as cyber insurance and climate advice will allow the French insurer to increase sales and payouts to shareholders.

The company said it would raise payouts to shareholders to 75 per cent of underlying earnings with higher dividends and annual stock buybacks as it unveiled a three-year strategy alongside full-year earnings on Thursday. It will return close to €6bn to investors in 2024 under that policy.

Chief executive Thomas Buberl told the Financial Times the group would ratchet up sales to businesses with fewer than 1,000 employees, pushing traditional products such as property insurance and specialist lines such as cyber.

“We are not going to launch a new revolution,” he said. “We are just going to scale what works already across the whole of Axa.” Focusing on organic growth rather than taking risks on acquisitions was a “great pitch” for investors, he said.

Europe’s second-biggest insurer, which cemented its focus on property and casualty insurance with the $15.3bn acquisition of XL in 2018, said it would prioritise dividend growth and annual share buybacks before acquisitions under its new plan.

It is targeting annual compound growth in earnings per share of 6-8 per cent, higher than a previous 3-7 per cent range and above the average growth of closer to 4 per cent expected by some analysts, including those at Jefferies.

Shares in the group, which has a market value of more than €70bn, rose 3.5 per cent in morning trading.

In 2023, Axa’s net income rose 8 per cent to €7.2bn but slightly missed analysts’ forecasts. The group said it would launch a €1.6bn share buyback and raise its dividend by 16 per cent compared with the previous year.

In recent years Axa, like its rivals, has begun to roll out new services linked to climate change, advising clients on how to best prevent the fallout from harsher weather conditions or adjust their operations to build factories in certain areas.

Axa’s new strategy and bet on rising commercial insurance prices marks a shift from the group’s last three-year plan, which focused on building up health insurance sales.

Some health costs have since spiralled. In the UK, doctors have demanded higher rates. Buberl said Axa had raised prices in response to these challenges and would “help our customers more to find the right doctor”.

Axa’s health premiums fell 7 per cent in 2023, as two contracts with large corporate clients in France were not renewed, the company said.

Rising commercial insurance prices also lifted rival insurance group Zurich, which reported on Thursday a record adjusted operating profit of $7.4bn, topping analysts’ expectations. It was also boosted by a particularly strong performance by its life division.

Zurich said it now expected more than 10 per cent compound annual growth in its earnings per share between 2023 and 2025, two percentage points above the original target. Its shares were up 2.5 per cent in morning trading.