French insurance company Axa to sell insurance as commodity in GCC
The French insurance major Axa can lay claim to what the majority of its global counterparts with Middle East exposures cannot - double-digit growth on both the top- and bottom-line during 2012. An emphasis on organic growth — as opposed to acquiring marketshare at any cost — sure is paying off for Axa.
“Competing on price is not a long-term solution, nor is it healthy to develop a brand,” said Henri de Castries, chairman and CEO of AXA group, which recorded revenues of â¬90.1 billion for underlying earnings of â¬4.3 billion last year.
“The different GCC markets are cluttered with stiff competition where insurers try their best to increase their market share. Some of these have escalated into a price competition, especially on certain lines of business which could have impacted some of the players.”
That is saying it mildly. While numbers are hard to come by, the informed comment in the marketplace is that last year was a trying one for the region’s insurance marketplace. It was particularly telling for some of the regional operations of global insurers, given their preoccupations with trying to widen their exposure and thus adding to their costs.
In comparison, Axa, having had a feel of these markets for decades now, has had smoother sailing, gong by the 2012 numbers. UAE pulled in revenues of more than $200 million, Saudi Arabia came next at $110 million plus, Qatar fetched another $110 million, while Bahrain and Oman contributions were $40 million and $30 million.
“As for the lines of business, motor is still the main contributor to our profits [and] all this allowed us to reinforce our leading non-life international insurer position across the GCC,” said de Castries.
“Although the sector in the GCC is cluttered, there is a huge potential for growth. Today, Axa in the Gulf does not sell investment and annuity products and we will look at it when we feel it is the right time to do so.
“Today, the life insurance penetration is still around 0.1 per cent of total GDP and, therefore, volumes remain low. However, we always need to be aligned with the market and so we will conduct due diligence before venturing into it.
“We see consolidation happening in the insurance industry for efficiency gains and economies of scale. This will go a long way in providing opportunities for other players, both regional and international, to enter the market through acquisitions.”
As for the present, the focus will be to keep developing its protection and P&C (property and casualty) line of business, which the CEO states as still having significant upside possibilities. But he is pushing the company to prepare itself for the time when key insurance lines get commoditised.
“P&C insurance products will be dealt more and as commodities notably with the digitalisation of the sector,” said de Castries. “Therefore, the number of products per habitants could increase and this could be a first area of growth. AXA Gulf now has an e-commerce website where the customers can buy their individual products fully online.
“Furthermore, we have seen insurance penetration in high growth markets remains very low. I think it is the role of international insurer to leverage their global expertise and work closely with the local partners to educate the population and the companies towards risk awareness which should at the same time support the development of the local economies. These two areas will be the key growth drivers of the global insurance market.”