Sunday, June 24, 2018

AXA's Accelerated Transformation Carries Bigger Risks

France's AXA (OTCQX:AXAHY) has never been afraid to do things its own way, and the company's past efforts to shift away from more capital-intensive savings-oriented life products in favor of protection-oriented products made it an early mover in what proved to be a sound strategic shift. More recently, management has been working to strip administrative costs out of operations, grow its P&C and health insurance products, shift more capital towards faster-growing regions like Asia, and begin selling down its U.S. operations. The biggest move, though, has also been the most controversial - the $15 billion-plus acquisition of XL Group (XL).

I don't fault the reasoning for making a large acquisition in P&C insurance/reinsurance, and I can see the positive leverage opportunities in acquiring a Bermuda-based reinsurer like XL Group. I'm not sure this was the right company, though, and I think at least some of the share price weakness has been a reasonable reaction to those concerns. While AXA does appear to trade at a double-digit discount to fair value, I'd just as soon own a company like Prudential plc (PUK) or Aviva (OTCPK:AVVIY) at this point.

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AXA's Accelerated Transformation Carries Bigger Risks

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