AXA: Higher Earnings Ahead And Buy Confirmed

The insurance giant AXA has emerged as a paragon of disciplined financial execution, delivering on its "Unlock the Future" strategy while rewarding shareholders through robust dividend hikes and a historic buyback program. With an 8% surge in underlying earnings per share (EPS) in fiscal year 2024 and a $5 billion+ capital return pipeline, AXA's combination of operational rigor and shareholder-centric policies positions it as a compelling investment opportunity.

Strategic Execution Delivers on Targets

AXA's FY24 results, announced in February 2025, underscore its ability to execute against its strategic goals. The 8% jump in underlying EPS to €3.59, driven by top-line growth and margin preservation, aligns seamlessly with the "Unlock the Future" plan's emphasis on sustainable premium expansion and capital efficiency. Gross written premiums rose 8% to €110 billion, with strong performances across key segments:

• Property & Casualty (P&C) Retail: Profitability improved through disciplined pricing and retention gains.
• UK Health: Maintained margins despite sector-wide challenges.
• P&C Commercial Lines: Delivered robust returns with minimal impact from natural catastrophe losses.
• Life Insurance: Improved trends supported by technology investments.

AXA's CEO Thomas Buberl highlighted accelerated volume growth as a key driver, fueled by customer retention and demand in commercial P&C and Life/Health segments. This execution discipline is critical in an industry where operational consistency often separates winners from laggards.

Shareholder Returns at the Forefront

AXA's capital management is equally impressive. The company aims to maintain a 75% total payout ratio—a balance between reinvestment and shareholder returns. In FY24:
- The dividend rose 9% to €2.15 per share, subject to shareholder approval.
- A €1.2 billion annual share buy-back program was launched.

But the real catalyst lies in the pending sale of AXA Investment Managers (AXA IM) to BNP Paribas. Once finalized in early July 2025, the transaction will unlock an additional €3.8 billion for buybacks, pushing total capital returns toward €5 billion+—a staggering figure for an insurer. This aligns with AXA's commitment to returning excess capital to shareholders while maintaining a Solvency II ratio of 216%, a robust buffer for risk.

The AXA IM Sale: A Catalyst for Capital Returns

The sale of AXA IM to BNP Paribas is a strategic masterstroke. Beyond the immediate capital infusion, it allows AXA to:
1. Focus on core insurance businesses with higher return potential.
2. Reinvest in growth initiatives such as technology and customer-centric products.
3. Deliver on shareholder returns without compromising solvency.

BNP Paribas' acquisition, valued at approximately €5.3 billion, underscores the strategic value of AXA IM's private assets expertise. For AXA, this transaction is a win-win: it monetizes a non-core asset while bolstering its balance sheet for future opportunities.

Investment Implications: Why AXA Deserves a Buy

AXA's performance and capital discipline make it a standout in an insurance sector often criticized for low growth and capital inefficiency. Key reasons to buy AXA shares:

1. Sustainable EPS Growth: The 8% EPS rise in FY24 is underpinned by structural drivers like disciplined pricing and volume growth, not one-off gains.
2. Capital Returns on Steroids: The €5 billion+ buyback pipeline and rising dividends offer a double-digit yield on cost for investors.
3. Balance Sheet Strength: A Solvency II ratio of 216% provides a margin of safety, even after aggressive returns.
4. Strategic Focus: AXA's divestiture of AXA IM and reinvestment in high-return areas signal long-term value creation.

Risks and Considerations

• Regulatory Headwinds: Insurance regulations, particularly in Europe, could constrain pricing power.
• Economic Sensitivity: Premium growth may slow in a recession.
• Buyback Timing: The €3.8 billion buyback hinges on the AXA IM sale closing smoothly.

However, these risks are mitigated by AXA's diversified global footprint, strong liquidity, and track record of execution.

Final Take

AXA's FY24 results and capital return plans are a testament to its ability to navigate a complex landscape while rewarding shareholders. With $5 billion+ in buybacks, dividend hikes, and a strategy focused on high-return businesses, AXA is primed for sustained outperformance. Investors seeking a blend of growth and income should consider initiating a position in AXA, especially as the AXA IM sale nears completion. This is a company that has mastered the art of execution—and its shares should reflect that discipline.