AXA puts its weight behind lift in commercial lines for 2011

AXA Insurance, the UK general insurance arm of French group AXA, is repositioning itself for growth in commercial lines after revenues dropped 18% in the first half of the year.

Chief executive Philippe Maso explained that 10 points of the 18% resulted from a decision at the beginning of last year to exit some large MGA relationships – which accounted for about 20% of the insurer’s book – as well as some unprofitable broker business. It had taken until now for the policies to start running off.

Maso said that he expected 65% of the exited MGA business to run off in 2010, 25% in 2011 and the remainder in 2012.

He attributed the remaining eight percentage points of the decrease to the effects of the soft market and refusing unprofitable business.

Although noting that the decision had “significantly” improved the loss ratio for the remainder of the commercial book, Maso said: “You can pursue such a strategy for a certain time but there is a limit to it. We are now thinking about re-expanding, so we have been much more aggressive in the best part of Q2 in terms of putting in place the right commission deals with our key partners for new business and for renewals.”

However, he added that given the continuing soft market in commercial lines generally, the company was not yet ready to embark on its growth strategy.

“I expect commercial lines to stabilise from where it is today in terms of run rates and ideally we will start to regain market share by the latter part of the year to enter 2011 with a more ambitious dynamic.”

While AXA Insurance’s commercial lines revenues shrank in the first half, revenues from its personal lines book grew 19%, resulting in a 1% increase in revenue for the company overall.

The main driver behind the growth was a 71% revenue increase in the insurer’s direct motor book, which comprises Swiftcover and, more recently, AXA Car Insurance, launched in January.

The company’s overall combined ratio fell 2.3 percentage points to 104.9%. Maso said that he counted AXA’s break-even point as 102% because investment returns could compensate for this level of underwriting loss. But he added: “I hope that we can be sub-100% in 2012.”