The profit hunter

It is difficult to get a straight answer from Henri de Castries when asking him anything personal. The question, “What are your hobbies?” is met with a playful laugh, followed by his own question, “Don’t you read the papers?”

The AXA boss, who hails from French nobility and was widely reported to have turned down the job of finance minister in the French government last year, is of course no stranger to the media. Eyes sparkling mischievously, the 53-year-old lets his assumed rhetorical question hang in the air before finally relenting: “I like hunting very much.”

The husband and father of three also likes to share his favourite pastime with his family.

“My second daughter shot a buffalo in Africa last year,” he boasts, speaking from AXA-owned Chateau Suduiraut near Bordeaux, during a recent media seminar. “She was 18 and she had good marks in school, so I took her to shoot a buffalo, which is an interesting experience for an 18-year-old girl.

“It’s very, very dangerous and you have to get close, within 30 to 40 metres. She did that and I was a proud father.”

But while hunting is often associated with the old world, at least in Europe, the aristocrat is nothing but modern in his beliefs when it comes to business and globalisation – a necessary trait for one leading a world-renown multinational company from France, where state employees continue to oppose the free market.

De Castries, a former paratrooper and civil servant whose family has played an important role in recent French history, could have chosen a very different life.

His father fought to liberate France and then served in Indochina, Korea and Algeria until 1962. His maternal grandfather was injured in combat and later joined the French government in exile in Britain in 1940. He was appointed by General de Gaulle as his military representative in the free territories.

De Castries performed his military service at the national military academy and then joined a paratrooper regiment.

He later studied business and obtained a law degree before becoming a top graduate of the Ecole Nationale d'Administration (ENA) – the finishing school of France’s governing elite.

After graduating from ENA, he began his career with the French finance ministry’s inspection office, where he audited government agencies. He then joined the Treasury where, in 1986, he played an active role in several privatisations initiated by the Chirac government, before being appointed to oversee foreign exchange markets and balance of payments for the Treasury.

“In my first three years as CEO, people said we wouldd be the first to lose money and increase capital. But we have never lost money, ever. We do not need to rebuild our capital base, so we have an opportunity to push our operating efforts.

Henri de Castries

But in 1989, after meeting AXA creator and former chief executive Claude Bebear, de Castries became interested in a move to the private sector. As it turned out, the faster-paced and more dynamic corporate world suited him well.

De Castries started in AXA’s corporate finance division and rose quickly through the ranks, becoming chairman of the insurer’s management board in May 2000.

It is clear he relishes his role with AXA, determined to see the company through to its 2012 ambition of tripling profits and doubling revenue since 2004. Having reached 2008, halfway to his goal, he is showing no signs of slowing down. And with profits already four times what they were in 2000, he says AXA is ahead of schedule – despite the shock departure of Peter Hubbard, the UK general insurance chief executive.

De Castries claims AXA’s position remains strong despite the credit crunch, and adds that with an eight-year plan, there was bound to be a market blip.

“At this stage, we do not think our 2012 numbers are in jeopardy. We know times are difficult but our management team is much more concentrated on operations since 2000. We’ve executed a number of the board’s operations, and the depths of management and operating plans are much stronger than before.

“In my first three years as CEO, people said we’d be the first to lose money and increase capital. But we’ve never lost money, ever. We don’t need to rebuild our capital base, so we have an opportunity to push our operating efforts. Of course the market has an effect but our engine is sound.”

While he sees ample opportunity amid the current turmoil, with more sellers than buyers, de Castries plans to stay disciplined.

Globally, AXA’s property and casualty business is humming along, having moved from a combined ratio of 114% in 2000 to 97% in 2007.

He admits the UK motor business – where AXA gets 11% of its total insurance revenues from, including Ireland – has been flat.

But he adds: “UK motor has not been very satisfactory over the past year. But we’re starting to see pricing increase significantly since the end of the first quarter. It is up 6% over the last two months, so the cycle is in the higher part of the U curve.”

He says commercial lines have been competitive, and that AXA has good products for SMEs.

“UK motor has not been very satisfactory over the past year. But we are starting to see pricing increase significantly
since the end of the first quarter.

Henri de Castries

In 2007, AXA UK’s commercial business grew by only 1.4%, but underlying earnings for the UK were up 15% to £354m. The company’s revenues in UK and Ireland general and health insurance increased by 8% to £3.5bn.

Despite last summer’s UK floods, De Castries remains optimistic about the risk.

“It makes insurance more necessary and makes people more aware of the fact they need good cover,” he says. “They become less sensitive to the last pound in the premium because they understand it’s better to have a good quality insurer with good quality of service. And if prevention is better, the claims will be lower.”

He concedes that AXA’s solvency ratio is not one of the best in recent years. However, he is confident that having a positive cash flow puts the business in a strong position.

De Castries is a firm believer in having a simple, creative and well diversified business model. The company has no universal banking and no reinsurance or related activities.

In 2007, its property and casualty and international insurance made up 30% of its revenues and 39% of underlying earnings. Life and health, and annuities and savings comprised 64% of revenues and 50% of underlying earnings, while asset management made up the remainder for both revenues and earnings.

De Castries is not a fan of the UK tax system because he says the rules keep changing. But he says AXA will remain open to acquisitions that suit its multi-distribution, open architecture model, which includes proprietary and non-proprietary banks, brokers, IFAs and retail stores.

He also sees Swiftcover – Britain’s only car insurance company without call centres and which AXA bought last year – as the way forward because of its full online capability.

Going forward, AXA is changing its brand slogan from Be Life Confident to Redefining Standards. This will be used with a new logo, a diagonal red stripe.

The giant insurer, which has 170,000 staff and 67 million clients, believes in longer term planning – which is where Ambition 2012 comes in.