AXA to Cut Costs to Boost Earnings -- Update
June 21 2016 - 4:43AM
Dow Jones News
By Matthew Dalton
PARIS--Insurance giant AXA on Tuesday released its strategic
plan for the next four years, saying it will cut costs, expand in
higher-growth regions such as Asia and use digital technologies to
offer more services to clients.
The announcement is part of a plan to boost growth after eight
years in which record-low interest rates have weighed on the
earnings of AXA and other insurers. The industry relies on bond
yields to generate a large chunk of its profit from reinvesting
huge stockpiles of cash.
The Paris-based company set out a number of targets for the
period through 2020. It aims to boost underlying earnings per share
by 3%-7% each year through 2020, generate free cash of between
EUR28 billion ($31.72 billion) and EUR32 billion and cuts costs by
EUR2.1 billion.
Investors were unimpressed with the plan in early trading
Tuesday, sending AXA's shares lower.
"Overall, the business plan had not quite met our expectation
but will be seen as realistic in the current yield climate,"
analysts at Jefferies Group wrote.
AXA said its targets assumed that interest rates would remain at
current historically low levels.
The company is pushing to use digital technologies to evolve
from a business that merely accepts premiums and pays claims. AXA
wants to use digital technologies help clients avoid health and
other risks, and sell more services to them after a payment is
made.
"It's still easier to buy a book on Amazon than buying
insurance, even from AXA," said Emmanuel Touzeau, AXA's director of
communication.
With new regulations in force requiring insurance companies to
hold more capital backing traditional insurance products, AXA said
it would be focusing on different products that require that firm
to put up less capital. These include so-called unit linked plans,
which simultaneously provide insurance coverage and allow the
holder to invest in stocks.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
June 21, 2016 04:28 ET (08:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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