The integration of Bermuda headquartered insurance, reinsurance and alternative capital management specialist XL into the AXA group of companies is “progressing well” according to AXA’s CEO, with a strong half-year of revenues a sign of what may be to come.
AXA has reported that revenues at its now combined AXA XL unit, that brought together the corporate, commercial, insurance and reinsurance underwriting arms of AXA and XL Capital, have risen by 9%, or €802million to an impressive €10.436 billion for the first-half of 2019.
AXA CEO Thomas Buberl explained, “The integration of AXA XL is progressing well. The new entity had a very good first half of the year in terms of financial performance. We are also beginning to see the full potential of combining AXA XL’s expertise in commercial risks with the power of AXA’s distribution.”
Buberl explained that one of the AXA Group’s key business areas now is property and casualty commercial lines, sitting within AXA XL, which experienced 6% organic growth in the first-half.
“These results are the fruits of our strategy, which is to focus on segments with future growth and promising geographies,” Buberl said.
He said that AXA has, “created the world’s leading platform for P&C Commercial insurance,” which reflects the importance of the XL acquisition for his firm.
AXA XL saw revenues increase 15% in P&C insurance, 2% in P&C reinsurance and 6% in P&C specialty lines of underwriting business.
In property and casualty insurance, AXA XL experienced volume growth and rate increases across most lines of business, while growth in reinsurance was largely in specialty and London business, offset by some further reduction in catastrophe appetite at AXA.
Premiums underwritten in property catastrophe risks declined in the quarter for AXA XL, reflecting the Group’s reduced natural catastrophe exposure.
But it’s likely that some of the catastrophe premiums written have flowed into AXA XL’s third-party capital vehicles and insurance-linked securities (ILS) funds under the New Ocean Capital Management brand.
Part of the integration work at AXA is on establishing precisely how ILS activities fit into its overall operations, with it expected that New Ocean will play a key role in structuring portfolios of risk to be shared with third-party investors.
Commenting further on AXA XL’s half-year, Buberl said, “AXA XL had a great first half with continued and disciplined growth in revenues and a solid contribution to the Group’s earnings. Synergies are materializing well, and AXA XL should benefit from the increasingly positive pricing context.”
On AXA’s performance and prospects in general he explained, “AXA continued to deliver strong operating performance, with a +4% growth in revenues and a +10% increase in underlying earnings per share in the first half of 2019.
“AXA’s earnings benefitted from a virtuous double dynamic, both growing volumes and improving profitability across all our geographies and preferred segments.
“AXA is very well advanced on its transformation journey. The Group has reduced its sensitivity to financial markets, created the #1 Global P&C Commercial lines insurance platform and strengthened its position as a world leader in Health insurance.”
Clearly the acquisition from XL is bedding in well and adding incremental business and revenue to AXA’s earnings, while also providing it with increased specialism and diversity.
The alternative capital operations are also likely providing a valuable lever, as the Group reduces its own exposure to natural catastrophe risks. Giving AXA a way to earn fee income and a profitable share of some of the nat cat business, while leveraging third-party capital partners for capacity.