AXA unveils Asia commitment

Financial services provider plans to double its enterprise value by 2008.

Axa Asia-Pacific Holdings has outlined its future commitment to the region by announcing that it plans to expand its business in Asia, and by 2008, double it enterprise value to A$8 billion ($6.13 billion).

At its annual strategy briefing to analysts, the Melbourne-based financial services provider listed six targets that it aims to achieve by 2008 as well as the challenges that may impede those projections..

Known as its Asia 6 strategy, the first point of the projection sends the message that it plans to more than double the value of new business to $230 million, which it claims will ensure a focus on pricing, product design and profitability.

Secondly, it plans to grow total inflows by 2.5 times to around $3.1 billion by 2008. In 2004, gross inflows from Hong Kong and South East Asia and China totalled $1.2 billion, consisting of total premium income for all lines of insurance business, gross inflows into wealth management products and services and gross flows into its advice businesses.

The third point focuses on growing its new business index (100% of new premium sales plus 10% of single premiums) from the present figure of A$270 million to A$700 million by 2008. While the fourth step relates to cost efficiency and by 2008, reducing the management expense ratio (the same criterion as the third strategy point) to below 5% for Hong Kong and below 20% for China and South East Asia.

The final pieces of medium term strategy stresses the improvement of 13-month persistency ratios, an aggregate lead indicator of overall performance across the regional portfolio, to 80% from the current 77%, and finally, to build upon staff quality.

According to Mark Pearson, regional chief executive, Asia offers significant growth opportunities in the short and long term, a fact seemingly backed up by the relative immaturity of the financial services industry in less developed markets in the region and the firm’s close to 37% year-on-year growth in total premiums for China and South East Asia in 2004.

“We've repositioned ourselves and strengthened over the last four years and are well placed to benefit from these growing opportunities,” he says.

The challenges it faces include recruiting, developing and retaining high quality local managers, operating profitably in markets where regulators control product pricing and building scale in emerging wealth management markets.

However, Axa also highlights maximizing value of existing distribution channels, growing bancassurance capabilities and gaining scale in the emerging wealth management markets as aiding the process and making the targets a closer reality.  

The new direction unveiled by the financial services firm comes several months after French parent company Axa SA launched a failed takeover attempt for the remaining shares Asia-Pacific arm, using the justification that Asian investments were being negatively influenced because of the constraints of its Australian listing. At the time Axa SA held 51.8% of the regional arm and bids to require the remainder fell apart when Axa Asia-Pacific rejected its parent’s final offer of A$4.05 per share.