Results Q&A: AXA UK chief exec Paul Evans

IT: Taking into account the profit improvement and the unprofitable motor combined ratio, how do you feel the company did in 2011 overall?

PE: “I’m really pleased with the results because every line of business achieved growth and every line of business improved its profitability. In current markets that a pretty good outcome.

“A 98.9% combined ratio on a current-year basis is an outstanding result. We are trading in very difficult markets. Commercial remains very soft, motor remains very competitive.

“I highlighted the motor result because there is an inference in the market that motor insurers are suddenly making profits because premiums have gone up so much. I’m not sure that is going to be universally true. Motor profitability has got much, much better than it was in previous years,  where practically the whole market was losing much more money. It is a vast improvement but it is still not there.”

IT: Can we expect an improvement in commercial lines this year?

PE: “Commercial is seeing rate improvements in motor and towards the end of 2011 we were starting to see some rate improvements in liability classes – though relatively small.

“I don’t honestly believe that we will see a significant shift in commercial property and liability classes this year. There is a lot of momentum building behind rate increases. Reinsurers had a god-awful year last year in catastrophes, capacity around the world was reduced as a result of that. It has been a long time coming.

“However,  we are also facing into recession. SMEs, which is the market we are in, are finding it very difficult. So it is a difficult environment  in which to increase rates.

“We will probably see some rate hardening the following year, but our plans don’t rely on rate increases. We are content that we can drive ongoing improvements to profitability predominantly through efficiency and increased scale without the market having to harden. If it hardens, that’s great news for AXA because we haven’t assumed it.”

IT: In addition to moving the personal lines business onto a common platform, where else have cost savings come from?

PE: “We started 2011 with a major restructuring. We took a large company, AXA Insurance, and broke it into two: commercial lines and personal lines. Within that we took out a whole layer of middle management which saved us roughly £20m. Across the board, all of our businesses have efficiency as one of their primary objectives.  

“That is a global objective for the AXA group. We are looking constantly for opportunities to do things more efficiently and leanly. With AXA Insurance we saw a significant saving from that split. It’s ironic because normally when you centralise you save money.

“I decentralised and saved money. That was a function of the centralised business model having got fat, so we found some opportunities to save money.”