Analysis of AXA Insurance's Financial Performance and Future Outlook

This report provides a comprehensive financial analysis of AXA Insurance, examining its historical and current performance. It begins with an introduction to the insurance industry's changing landscape and AXA's strategic response, including its Ambition 2020 goals. The report then delves into AXA's background, global presence, and key financial figures, including revenue, earnings, and net income. A historical financial performance analysis covers key metrics like revenue growth, net income, dividends, and solvency ratios, comparing performance against targets. The current financial performance section examines recent developments, including the acquisition of AXA XL, and analyzes financial ratios such as liquidity, earnings, and solvency, and internal processes and strategies and risk management to assess the company’s performance. The report concludes with an evaluation of AXA's trajectory toward achieving its Ambition 2020 targets and providing strategic recommendations to expand the business.

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Introduction
The insurance industry has been experiencing a significant change in the course of the most
recent couple of years: a difficult budgetary condition with proceeded with low loan costs,
expanding rivalry from new contenders crosswise over business sectors, and stamped
changes as far as client desires (Fang, 2016). In parallel, the requirement for insurance and
related administrations are developing, driven by the present societal
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conduct changes, environmental change, just as the advancement of innovation, among
others (Koijen, 2016). So as to react to these improvements and seize these new chances,
AXA (organize in 1985) is continually re-examining and extending its value chain with the
desire of turning into a genuine accomplice for its customers. Moving from a methodology
based on risk supporting to a rational depending on biological systems, the Group is logically
broadening towards a universe of administrations: therefore, offering to expand reciprocal
administrations notwithstanding insurance coverage, empowering customers to acquire from
their association with their safety net provider (AXA, 2018).
AXA insurance is a leading brand across the world. The company is building its future
according to its clear strategic view. The group is leading the haul in the insurance industry
with its more than €100 million customers, €102.9 billion revenue, €6.2bn underlying earning
and with €2.1 bn net income. This report is going to assess the company’s historical financial
performance and also analyses its current financial performance and will make some
recommendations for future financial performance to expand the business and meet its
target for Ambition 2020 (AXA group, 2018).
AXA Insurance
AXA business insurance is a UK based insurance company and having a subsidiary
company in 61 different countries across the globe. The company provides services to 105
million customers and having 171000 employees in all over the branches (Press Release ,
2019).
The company established its market in Western Europe, Asia, and other Pacific markets and
also in North America. AXA group aims to strengthen its growth in the coming years by
increasing its presence in the high-growth market (AXA Financial protection, 2011). Its
revenue is around 102, 9 million gross revenue increment around 4% every year, all market
recorded strong growth. AXA’s total underlying earnings are 6.2bn, which includes
geographical underlying earning is: in France 1.6 billion, Europe 2.5 billion, and Asia 1.1
billion.
However after acquisition of AXA Xl the company Net income fell from 66 percent to 2.1
billion, the growth in adjusted earnings was more than offset by the deficiencies of goodwill
and AXA Inc. in group share (3.0 bn) and other intangible assets linked to conversion of its
Swiss group, as expected, higher restricting costs and exceptional charges, engaged to the
IPO of AXA equitable Inc. and the amalgamation with XL group, combined with the negative
effects from the changes in the fair value of financial assets and spinoffs (AXA group, 2018).
Historical financial performance
AXA is a leading brand across the world. The company is performing tremendously in
insurance sector. AXA By protecting organizations and clients from ordinary dangers, safety
net providers give the genuine feelings of serenity required for business enterprise and
advancement. Insurance arrangements help organizations oversee dangers, support
development and look for new chances. By pooling dangers and premiums to share the
favourable luck of the dominant part with the few confronting challenges, protection ensures
people and fortifies a feeling of network.
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Company is increasing its market performance day by day and working as per its target of
Ambition 2020 (AXA group, 2018). However, its performance reached nearby the target. As
its revenue 2016 was around 100,193 which decreased in 2017 was 98.5 bn which however
it increased by 4% as 1.02.9 bn in 2018. AXA’s net consolidated income in 2016 was 5829
which increases 6209 in 2017 (Thomas Buberl, 2018).
The proposed dividends of 2017 payable in 2018 have increased by 9% to 1.26 per share,
which is equal to 49% of the pay-out. The companies underlying earnings per share is
around 7 percent, achieved the estimated target, which was between 3% to 7% in 2015-
2020, Free cash flow in 2017 was 6.3bn which is far away from the target (28-32 bn) in
2015-2020. AXA’s estimated ROE in 2017 was 14.5 percent, achieved the estimated target
of 12%- 14%. Solvency ratio is around 205% in 2017 between the estimated targets of
170%- 230%, however, the solvency ratio decreased in 2018 by 12 percent (AXA group,
2018).
AXA acquired Maestro Health Inc. in 2017, which accelerating innovation at the company
and reflects the company’s intentions to new achieve new strategies. Further to its choice in
2016 to strip from the tobacco business, in 2017 AXA supported the world's first worldwide
speculator announcement in help of the World Health Organization Framework on tobacco
control and in help of related government activity. AXA additionally effectively propelled
health care and counteractive action items to serve the white collar class in developing
nations, achieving 8 million policies before the finish of 2017 (Businesswire, 2018).
Notwithstanding these critical achievements in AXA's change venture, the Group figured out
how to convey a strong act last year. In 2017, its profit went over the €6 billion limits without
precedent for the Group's history. Additional proof that its business needs are mirrored
organization's general execution is that few of its key portions have recorded solid
development figures for 2017, similar to medical coverage, which incomes developed at a
solid 6% a year ago. With hidden income per share up 7%, balanced profit at 14. 5%,
working free money streams at €6. 3 billion and a dissolvability proportion up 8, at 205%,
AXA have achieved several target and at some point AXA is nearby the target, and
somewhere the company overachieved its money-related targets, which affirms the direction
to accomplish its estimated target of 2020 (AXA group, 2018).
Analysing Current financial performance
In 2018 AXA’s IPO of US life insurance and the acquisition of AXA XL contribute to the
growth of the company and helps to achieve the objectives to reduce the financial risks and
manage the balance between financial risks and insurance, however after this acquisition
company’s net profit fell by 66bn (AXA.Com, 2019). According to its chief executive Thomas
Burbel AXA is experiencing a profound rebuilding gone for making the French gathering
progressively worldwide and more grounded on wellbeing and property and harm insurance.
The Acquisition of AXA XL helps the organizations to lead the haul and become the global
leader and extends its assortment of solutions and services to the big number of clients.
In the year 2018 AXA delivered operations according to its expectations and grow on its
Ambition 2020, its earnings increased as per the key geographical and segments, more than
6 bn for this second successive year. AXA’s business priorities leading it better performance
in the market. The annual financial report of AXA as demonstrating the strong growth figures
such as health insurance the revenues of which grew at a healthy 7%,
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P&C commercial areas increase by 4% (AXA, 2018). AXA maintained the target of
underlying EPS as the company recorded the rise of 3%, Earning raised 3mn in 2018, while
AXA likewise rose it's earning by 6pc to €1.34 per share. Adjusted ROE by 14.4%, and
operating cash flow 6.6 bn and its solvency ratio is reached the nearby target at 193%.
These data prove that the company delivered as per its financial targets and endorses its
trajectory to achieve the aim of Ambition 2020 (Independent ie 2019, 2019).
By utilizing upon its skill and associations with other driving players crosswise over
segments, AXA is structuring inventive administrations so as to fortify its relationship with its
customers, through high esteem included connections. This development rationality
prominently includes building, together with organizations, for example, Uber or ING,
bespoke arrangements custom fitted to customer needs. With the set-up of its new backup
AXA Next, the Group currently has a substance committed to making troublesome plans of
action to address tomorrow's issues.
AXA’s business performance in the UK and Ireland recorded at a strong growth (AXA.Com,
2019).
There are three types of ratios that can analyse an insurance company’s performance:
 Liquidity Ratio
 Earnings Ratio
 Solvency Ratio (Care Ratings, 2018).
Liquidity Ratio: A Better liquidity Ratio shows that how an organization meeting the
requirements of its policyholder’s promptly (Care Ratings, 2018).
Computation Liquidity Ratio
Current Assets
Current Ratio = _________________
Current liabilities
100624
________________ = €1.10 million
91119
(All the figures in Euro million) (AXA.Com, 2019).
AXA’s total payable and total current liabilities are around 91119 which included deferred tax
liabilities in 2018 and its current assets are 100624. The calculated liquidity ratio is around
1.10 AXA’s total and current Assets and liabilities are equal as expected according to its
balance sheet in the annual report of 2018. With 1.10 a good liquidity can helps AXA to meet
policy holder’s obligations (AXA.Com, 2019).
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Computation of Earnings Ratios:
Profit after Tax
Return on net worth = ____________________
Average Net worth
373
_____________________ = 15%
23.4
Average net worth based on shareholder’s equity per share. AXA’s return on net worth is
around 15% for the year 2018 maintained its target of Return on equity is between 14 to 16
percent in 2015-2020 (Harlin, 2018).
Solvency Ratio: Ampleness of solvency edge frames the essential establishment for
gathering policyholder commitments. All insurance agencies are required to consent to
dissolvability edge prerequisites of the controller as endorsed every now and then.
AXA’s solvency margin 193% as reported to IRDA compared to December 2017 while it was
around 205% and AXA’s target range of this ratio for future is around 170 to 220 percent
(Harlin, 2018).
Business performance
Internal process and strategies and risk management
AXA group implementing several internal process such as, a service endorsement process,
which involves risk controls on new services and products that supplement guaranteeing
rules what's more, item benefit investigations, enhancing of reinsurance techniques so as to
constrain the group's pinnacle exposures in this manner securing its solvency by decreasing
instability and to relieve chance inside the Group to advantage from expansion. Checking on
specialized reserves including a move forward investigation, observing rising dangers to
share aptitude inside the endorsing and chance networks. Technical entities ensure some
process an adequate number of components have been examined (counting contracts,
premiums and claims designs, cases' taking care of, and reinsurance effects), the
specialized presumptions and actuarial procedures are in accordance with expert practices
and affectability investigations are performed in any event for most noteworthy ones, a move
forward examination of stores including merit-rating (boni-mali) back-tests has been played
out, the administrative what's more, financial setting references are considered and material
deviations are clarified (AXA.Com, 2019).
Organizational capacity: AXA operates several benefits plan for its employees in the UK,
Germany, France, and Belgium. The characterized advantage annuity designs inside AXA
are for the most part last compensation annuity designs or dependent on a money balance
equation, which gives individuals, benefits as an ensured dimension of the single amount
payable at retirement age or benefits payable for life. The dimension of
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advantages is commonly founded on individuals' length of administration and their pay in the
last years paving the way to retirement (AXA.Com, 2019).
Conclusion
AXA, for over 20 years of service to the global market has indeed proved to be a very
successful company having been included in the top Fortune 500 list of companies in 2006.
2006, was a very strong year for AXA as it has managed to increase by 30% through
increased diversification and stronger local franchises in their key markets. This is way
ahead of their ambitious 2020 targets. The company is expecting more from 2019 especially
with the most recent acquisition, AXA XL.
Moreover, AXA’s business model entails fortifying, consolidating and developing organic
growth by retaining existing clients and acquiring new ones to ensure that the Group is able
to seize genuine opportunities for external growth. Also, AXA’s growth can be attributed to its
development efforts which are focused on the most profitable segments and seeks to
enhance its positioning in developed or high-growth markets.
Recommendations
However, AXA’s business performance recorded better from last some several years still
there are several areas where the company can perform in a better way. Here are several
recommendations to AXA which helps the company to make its performance better and
expand its business to the overseas market.
• Product line diversification and explanation
• Expansion of the policies in the overseas market
• Organizational and operational efficiency
• Forming long term relationship
Products line diversification and explanation: Product line diversification helps AXA to
reach that market where the company has not yet penetrated. Being a life insurance
company AXA has the largest area to provide more opportunities to customers such as life
and insurance. Product line diversification can help the company to sustain for the long term
in the market (Account learning, 2018). There are plenty of opportunities for the insurance
company to expand the business and introduce new policies which are differing from others.
AXA can introduce new and wide coverage insurance plan to the customer and broadly
identified policies, which can be easily understood by clients. The more they understand the
more they would buy its products and services.
Expansion in new polices: As the market of insurance is getting saturated and generally
perceived as similar product offerings by the different organization so for the progress and
growth of the organization, it shall be critically important for the organization that an
integrated policy of insurance is adopted with the combination of different promotional
options that are Pull, push and profile.
AXA has to be more unique and has to provide new insurance policies which must be
different from other insurance companies so the client can be influenced by new policies and
help AXA to achieve the target to world’s leading brand.
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Organizational and operational efficiency: Efficiencies drive costs down and implant a
mentality inside the working environment culture that makes individuals delicate to expenses
and approaches to streamline how the association conveys, works and comes to an obvious
conclusion of chances. This guarantees exercises inside the association are in arrangement
with the necessities of the business to make and support development.
The best way to create organizational efficiencies AXA needs assure that the workplace
culture supports the tools to drive efficiencies within the organization – by design – not by
accident. The strategies which were decided in order to achieve growth in the market are
well constructed or not, how they driven and to what extent they are successful for business
growth.
Also, AXA needs to revise and audit all the policies every year and made some new
changes to them.
Forming long term relationship: Good relationship with customers and clients helps an
organization to sustain for the long term. AXA has to go beyond market in its immediate
circle, and the area where they perform well, to contact and nurture a real relationship with
its investors, customer, and competitor. The next move is to look for relevant people from a
different organization, such as media and government. Effective relationship with investor
and customers in business need reciprocity – not a one-way half-hearted effort. Offer and
deliver help, connect employees with each other, or share industry’s information. Consider
the key points and areas, customer and employees and leaders who can make a successful
contribution to the organization in order to achieve the target. These relationships would
generate profit in the future for the long run.
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Referencing must be completed before submission
All sources must be referenced in the body of your answer as well as in your reference list. See
the 530 Specimen coursework assignment and answer for examples of how to reference
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References
Account learning, 2018. Product Line Diversification Strategy. [Online]
Available at: https://accountlearning.com/product-line-diversification-strategy/
[Accessed 22 04 2019].
AXA Financial protection, 2011. Annual ACTIVITY AND SUSTAINABLE DEVELOPMENT.
[Online]
Available at: https://group.axa.com/en/newsroom/publications/2016-annual-report
[Accessed 23 04 2019].
AXA group, 2018. Annual report 2017. [Online]
Available at: https://www-axa-com.cdn.axa-contento-118412.eu/www-axa-com
%2Fa3fd87ca-ce10-4c5a-8eab-dccc54d315c8_axa-ddr2017-en-pdf-e-accessible_02.pdf
[Accessed 23 04 2019].
AXA.Com, 2019. Registration Document. [Online]
Available at: https://www-axa-com.cdn.axa-contento-118412.eu/www-axa-com
%2F954ee0e3-7344-4114-bb3e-652df3371c37_axa-ddr2018-en-accessible.pdf
[Accessed 22 04 2019].
AXA, 2018. 30 years and beyond. [Online]
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[Accessed 23 04 2019].
AXA, 2018. Financial Data. [Online]
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[Accessed 22 04 2019].
Businesswire, 2018. Global Insurance Leader AXA Acquires Maestro Health. [Online]
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Insurance-Leader-AXA-Acquires-Maestro-Health
[Accessed 23 04 2019].
Care Ratings, 2018. Financial Ratios – Insurance Sector. [Online]
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%20Insurance%20Sector.pdf
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Fang, K. J. Y. a. S. M., 2016. Customer profitability forecasting using Big Data analytics: y A
case study of the insurance industr. Computers & Industrial Engineering, Volume 101, pp.
554-564.
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Harlin, G., 2018. Business. [Online]
Available at: https://www-axa-com.cdn.axa-contento-118412.eu/www-axa-com
%2F868bb23a-1d9e-4f9a-abfd-5aa57e67bc1b_axa_full_year_results_2018_press.pdf
[Accessed 23 04 2019].
Independent ie 2019, 2019. Axa reports lower profit for 2018 after IPO costs and natural
disasters. [Online]
Available at: https://www.independent.ie/business/world/axa-reports-lower-profit-for-2018-
after-ipo-costs-and-natural-disasters-37838400.html
[Accessed 23 04 2019].
Koijen, R. a. Y. M., 2016. Shadow insurance. Econometrical, 84(3), pp. 1265-1287.
Press Release , 2019. AXA Group unveils its new global brand positioning:. [Online]
Available at: https://www-axa-com.cdn.axa-contento-118412.eu/www-axa-com%2F0ff26d9f-
2c1f-4cf6-ad94-a9a71c214acc_01-02-2019+-
+axa+group+unveils+its+new+global+brand+positioning+know+you+can.pdf
[Accessed 23 04 2019].
Thomas Buberl, 2018. Full Year 2017 Earnings. [Online]
Available at: https://group.axa.com/en/newsroom/news/2017-full-year-earnings
[Accessed 23 04 2019].
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Glossary of key words
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