Amid Economic Turmoil, Axa Asia Pacific Sticks to Long-Term Growth Targets

SYDNEY, Australia, May 11, 2009 (A. M. Best via COMTEX) -- AXAPF | Quote | Chart | News | PowerRating -- Axa Asia Pacific Holdings Ltd. said 2009 continues to be a "challenging financial year" although the company believes it is still on track to achieve its long-term goal of doubling its business value by 2012.

To achieve 2012 goals, Axa Asia Pacific said its priorities include capital management, earnings preservation, promotion of tradition life and financial protection products and looking into opportunities amid the global financial downturn.

"Initially the challenges posed for financial services companies were of a capital and liquidity nature. Increasingly however, the implications are now flowing onto operating performance, sales and profits," said Andy Penn, chief executive and managing director at Axa Asia Pacific.

"I expect it to continue to be difficult for at least the rest of 2009," said Penn in a presentation at Axa's annual general meeting. Despite a negative financial environment, Penn said the "long-term fundamental characteristics" remain attractive for the industry.

Since the financial crisis, the insurer said it has undertaken a "very active" capital management program and has extended capital protection to ensure its capital is less sensitive to volatility in investment markets.

In its capital raising program last March, Axa Asia Pacific overshot its minimum target of A$600 million (US$507 million) after raising funds through an institutional placement, a share purchase plan to small shareholders and top-up offer to a small number of shareholders.

Through this capital raising, Axa Asia Pacific raised A$880 million of capital and repaid about A$430 million of senior debt. By March 31, the insurance group had A$1.1 billion of assets in excess of regulatory requirements and its gearing ratio dropped to about 34%.

Asia's economic growth potential, high saving rates, demand for financial protection and low insurance penetration rates are fundamental factors in the long-term attractiveness of the region's markets.

India and China are two important markets in which Axa continues to invest to fuel growth. In China, Axa Asia Pacific now has a presence in 11 cities, up from five in 2007.

India is a "tremendously exciting market" in which Axa has experienced robust growth by rapid branch and distribution expansion, said Penn. The number of branches increased to 200 in 2008 from 77 in 2007, and agent numbers rose 171% to 38,000.

However, Axa Asia Pacific said it will sell half of its 26% share in Bharti Axa Life Insurance [90259], a joint venture with Indian telecommunications company Bharti Enterprises, to its parent, Paris-based Axa S.A. [85085]. But Axa Asia Pacific retains full management control on the life venture.

"This provides us with an appropriate economic exposure whilst re-balancing the proportion of capital we are investing in this market relative to the rest of the region," said Penn. Axa Asia Pacific will focus on its existing infrastructure and concentrate on "productivity" this year in India, said Penn.

In Southeast Asia, Axa Asia Pacific continues to increase distribution forces in markets including Singapore, Thailand, Malaysia, Indonesia and the Philippines, as agent numbers rose 16% to 15,600 last year. Bancassurance penetration also rose 5%, to 2,400 branches in 2008.

In Australia, Penn said the country went into the current financial crisis with a strong, well regulated financial services industry and "world leading" superannuation system. The government-supported retirement savings scheme is one fundamental factor fueling insurance development.

Development of traditional life and capital protection products is key to the insurer's strength in the region's markets and to taking advantage of opportunities in the downturn, said Axa in the presentation.

(By Iris Lai, Hong Kong bureau manager: Iris.Lai@ambest.com)

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index