Axa’s streamlined Asia strategy could see disposals
August 18 2020 by Nick Ferguson
Axa may be moving forward with the sale of its operations in Singapore, India and Malaysia as it continues to simplify its footprint and integrate the XL business.
The cash could also come in handy after the company revealed €1.5 billion (US$1.78 billion) of Covid-related claims, cancelled a special dividend it had planned and withdrew some of its financial targets for 2020.
Singapore is the latest to be rumoured for sale, with Bloomberg reporting last week that the French insurer is looking for advisers to help sell the life and general insurance operation.
It could be a challenging sale. The business generated revenues of €615 million (US$731.1 million) in 2019, primarily from life and savings, but new business was down 46% during the first half of 2020.
Axa says that this is a consequence of the Covid-19 crisis, which is certainly true — premiums in Hong Kong fell by an even bigger amount — but it will nevertheless complicate the valuation of the business and make it difficult to reach a price that satisfies both sides.
Any Singapore sale wouldn’t include the Axa XL business, which is a separate unit within the overall Axa group.
In Asia, Axa says it is concentrating on its stronghold markets in Hong Kong and Japan, and what it sees as growth markets in China, Indonesia, the Philippines and Thailand.
While the motivation behind Axa’s potential disposals is ostensibly about a long-term strategic vision, chief executive Thomas Buberl has also spoken about improving the group’s solvency position and reducing debt.
An expected €1.6 billion (US$1.9 billion) from disposals this year would offer a welcome upside after the company paid US$15.3 billion for XL in 2018.
Review
The businesses in Singapore, India and Malaysia have all been classed as “smaller entities” since a strategic review in 2016, which placed them alongside disparate parts of the company’s international footprint, including operations such as Lebanon, Nigeria and Azerbaijan.
While this grouping isn’t officially a clearing house for unwanted businesses, many of them are expected to be sold. Indeed, several have already been offloaded this year. Operations in Poland, the Czech Republic and Slovakia were all bought by Vienna-headquartered insurer Uniqa in February.
In Asia, Axa says it is concentrating on its stronghold markets in Hong Kong and Japan, and what it sees as growth markets in China, Indonesia, the Philippines and Thailand.
The strategy is “to focus on countries where Axa has strong positions and where market potential is aligned with our high ambitions”, said the company in a statement to InsuranceAsia News (IAN), adding that close to 90% of its earnings are generated in these markets.
In China, for example, it completed the acquisition of the remaining 50% stake in Axa Tianping at the end of last year.
Sales
The joint ventures in Malaysia and India are both mid-size players with big enough businesses to be attractive to strategic buyers with the willingness to invest, but clearly lacking the potential of Axa’s favoured businesses.
The Paris-headquartered insurer has a 50% interest in Axa Affin in Malaysia and a 49% stake in Bharti Axa in India, which both comprise life and P&C units.
While unconfirmed, both businesses are already reportedly being offered to potential buyers. ICICI Lombard has recently been rumoured to be interested in the P&C arm of the Indian joint venture, with some analysts reckoning that the business could be valued at around US$360 million.
“Some smaller entities will continue to grow within the Axa group and may become ‘high potentials’.” Axa statement
In Malaysia, Great Eastern and Generali have both been rumoured as possible bidders for the Axa Affin business in a deal worth around US$650 million, according to Bloomberg, although that was before the pandemic.
Axa’s direct business in South Korea is also within the group of unfavoured units, but this doesn’t necessarily mean that it is on the chopping block.
“Some smaller entities will continue to grow within the Axa group and may become ‘high potentials’,” the company said about its strategy for the division.
Buying XL was also part of Axa’s strategic transformation, but 2020 was looking like a tough year even before Covid-19. The company issued a profit guidance in February, alerting investors that earnings at Axa XL would be €200 million (US$238 million) lower than target and replaced the chief executive of the unit.
Buberl will be hoping that the hardening pricing cycle in commercial lines will deliver a rosier result in the coming years.
-
‘Lifeblood of global trade’ under pressure amid rising tide of climate threat
- October 9
With Asia home to nine of the 10 busiest container ports in the world, a new report has found that 90% of the world’s 3,700 major ports are exposed to damaging climate hazards.
-
Eye in the sky expands tropical cyclone coverage across Australia, Japan to ‘fill the gap’ amid rising demand
- October 7
Finnish firm ICEYE is also close to launching an earthquake product in Japan, global head of insurance Stephen Lathrope tells InsuranceAsia News.
-
Closing growing US$2.5trn protection void ‘a matter of economic prosperity’, LIIBA chief says
- October 6
Report from the London & International Insurance Brokers’ Association (LIIBA) says specialty brokers are the innovation engine of the insurance industry, CEO Christopher Croft tells InsuranceAsia News.
-
Russian attacks in Ukraine underline precariousness of nuclear pools as gaps come to light
- October 3
A nuclear energy revival and geopolitical challenges put the (re)insurance sector in focus.
-
Peak Re | From climate modelling to market opportunity: Forging a new clarity on Southeast Asia’s climate risk
Southeast Asia's protection gap: a crisis of clarity, not just capital
-
BHSI WICare+ | Accelerating Payments, Empowering Recovery
Launched in cooperation with Steadfast’s Singapore network, WICare+ fills the gaps found in traditional coverage and keeps businesses and their workforce secure by covering up to SG$350,000 in medical expenses per claim.
-
BHSI | Managing non-Asian exposure in long-tail lines
While US-exposed business can look attractive to Asian carriers, managing the volatility around the long-term results and the ability to model those losses are crucial, say BHSI’s Marc Breuil and Marcus Portbury.
-
Allianz General | Allianz General combines innovative protection solutions while powering social good to lead Malaysian market
The insurer proactively addresses emerging risks and evolving customer protection needs while giving back to the community.
