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AXA turnaround: growth andacquisitions top priorities

By Serge Therrien | September 18 2006 08:06PM

Long considered a sleeping giant, AXA Canada is now on the warpath. The insurer is turning to solid organic growth to pump its sales to $2 billion by 2010, property and casualty (P&C) and life insurance combined. As for upcoming acquisitions, targets valued at $100 million to $2 billion are considered fair game!

AXA’s new business plan, Ambition 2010 reflects a lengthy planning process and a rallying of the troops, explains Jean-François Blais, president and CEO of AXA Canada as he shared his vision of AXA’s future with The Insurance Journal in an exclusive strategic interview.

AXA is determined to capture a larger slice of the Canadian market. The insurer is targeting annual organic growth of five per cent of sales in P&C insurance by 2010. Yet discipline will guide this growth. This means resisting the temptation of aggressive writing that eats into shareholders’ equity, contrary to a rumour making its way through brokerage circles.

Even though Quebec currently accounts for 50% of Canadian sales, the AXA report points to stronger growth in the rest of Canada, especially in the western provinces with their vigorous economies. Ontario also figures in the insurer’s strategies.

Price is no object

“Any target compatible with our requirements, whether it be valued at $100 million or $2 billion, will be carefully examined,” Mr. Blais confirms. “It’s our priority to be among the five leaders in the Canadian market. It is not just a question of ranking. Most importantly, we need the means – the financial capacity and expertise – to be able to follow the leaders.”

Does Mr. Blais have a war chest to acquire a player that could be double the current size of AXA in Canada?

Paris controls the purse-strings, but in June, Henri de Castries, president of AXA’s Management Board, told an audience of 100 or so employees and managers in Montreal that he would grant the Canadian subsidiary the capital it needs to finance an acquisition of this scale.

“Boréal was twice our size,” Mr. Blais retorts to those that scoff at an acquisition of this size. “We can easily replicate this transaction.”

What is AXA looking for? An insurer active from coast to coast specializing in both individual and business insurance, operating in a sector that AXA knows, and whose compatible culture can ease integration. “I am absolutely willing to look at every opportunity,” Mr. Blais says, adding that even the bearish cycles in the industry will not deter him.

Mr. Blais does not consider annual organic growth of five per cent an aggressive objective in P&C insurance. “It all depends on the way you look at this increase. It does not rest solely on new business. The generalized rise in insurable values, particularly housing, and the addition of more adequate protection for clients play a big role, even if the rates drop. I repeat: we have no intention of sparking a price war. Because success is not driven by sales growth alone, it is also fuelled by long-term profitability of our insurance activities.”

Asked to respond to brokers that complained to The Insurance Journal about the price war AXA is waging in business insurance, sometimes at ING Canada’s expense, Mr. Blais quickly underlined his aversion to succumbing to less severe writing and more liberal pricing.

“We’re not slashing prices,” he says. “But we have changed our approach. We have asked our writers to be more sensitive to prospecting, not only to service. To help them, we have stepped up sales training. If a writer wants to look for an account with a broker, we will discuss the best ways to do this. Our philosophy is to get closer to brokers. We want to become their preferred insurer.”

As part of the insurer’s global-scale project Ambition 2012, Mr. de Castries has set the objective of doubling AXA’s sales and tripling earnings by 2012. To help achieve this goal, AXA expects its subsidiaries to maintain an annual average return on shareholders’ equity of 15%. AXA delivered 21% last year.

National Bank Insurance has been integrated in AXA’s growth scenario. Shared equally with National Bank, this direct insurer has posted robust sales growth.

National Bank Insurance’s incursion into home insurance is riling some brokers. For one thing, the insurer launched a promotion that offers free home coverage under certain conditions.

The insurer is unfazed. “The business plan is up to the subsidiary,” Mr. Blais explains. “It must be competitive. All the same, we have an agreement that prohibits any solicitation of our clients,” Mr. Blais points out. “As soon as [National Bank] learns that they have contacted one of our clients they refuse to quote.

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