AXA Raises Dividend and Launches Another Buyback, Strategy Stays

We think the market has been hesitant on the ability of AXA CS to meet expectations because Feb. 23′s EUR 3.08 in underlying earnings per share, while in line with FactSet consensus estimates, has resulted in a 4% pop in AXA shares. We maintain our EUR 29.8 fair value estimate and our no-moat rating.

Ever since AXA acquired XL and embarked on a transformation to generate more profits from technical sources—that is, underwriting—and move away from its traditional bulky weighting to long-term savings, the business has impressed investors with the way it has stuck to its guns and made this a long-term move. The orientation continues to be away from natural catastrophe and general account savings, toward property-casualty insurance, health, and protection. AXA is joining the “payer to partner” evolution that is taking place within insurance, and the establishment of its Digital Commercial Platform confirms this. Our opinion is that this will only serve the business well because deeper entrenched relationships can only be a good thing. This isn’t just lip service because we see supporting moves. Property and casualty commercial revenue has risen 5% over the year, health is up 16%, natural catastrophe revenue down 27%, and life and savings down 5%. The business is now among the largest providers of property and casualty commercial insurance, and including retail that division delivered a 94.6% combined ratio. So far so good given the backdrop of rising claims. AXA also has one of the leading employee benefit solutions, and that is driving health. Though the closure of two group contracts last year in France have not been renewed this year. For AXA’s life and savings business, the EUR 1 billion in net flows were driven by protection with unit-linked savings in Japan.

AXA announced a EUR 1.7 per share dividend Feb. 23, a 10% rise on last year, and also the launch of a EUR 1.1 billion share buyback program. Solvency remains solid at 215%, besting its peer.