AXA chief damps talk of bid for Generali’s German life arm

Axa chief executive Thomas Buberl has distanced himself from a bid for Generali’s German life insurance business.

There has been speculation that the French group could play a part in any break-up process that would follow the possible acquisition of Generali by Italian bank Intesa Sanpaolo. However, speaking to the Financial Times on Thursday, Mr Buberl said that “buying a traditional life insurance business in Germany would not fit” with his priorities.

Mr Buberl, who became chief executive of the group last year, said that Axa was interested in acquisitions of businesses worth €1bn-€3bn, adding that it would focus on health insurance, property and casualty insurance, and businesses in Asia. He said that the group’s M&A strategy excluded what he called “the extremities”.

“Small M&A makes no sense, but very large M&A makes no sense either, as we already have global scale,” he said.

Mr Buberl was speaking as Axa reported its 2016 results, with the group’s revenues passing €100bn for the first time.

Underlying earnings grew by 3 per cent to €5.7bn, which is at the lower end of the 3 to 7 per cent target range that Axa set out at an investor day last June but above the growth rate reported at the half year stage.

Small M&A makes no sense, but very large M&A makes no sense either as we already have global scale

“We’ve published very strong and solid results despite a very challenging environment . . . you have very low interest rates in Europe, and political uncertainty in the US and around Brexit, which creates volatility,” he said.

Earnings from life insurance grew 2 per cent. However, there was an 8 per cent fall in profits from Axa’s asset management businesses because of a one-off tax hit and lost business from Friends Life. The UK insurer was a client of Axa Investment Management until it was bought by Aviva in 2015.

Axa’s return on equity came in at 13.5 per cent, slightly below the 2015 level but still at the upper end of the 12 to 14 per cent target range.

Paul De’Ath, an analyst at RBC Capital Markets, said: “At an overall level these results look solid and are a good starting point for the five-year plan to 2020.”

The insurer said that its solvency ratio — a measure of capital available as a proportion of the minimum required — was 197 per cent at the end of December, up 6 percentage points on the position three months earlier. It also declared a 5 per cent increase in the dividend to €1.16 per share.

Mr De’Ath said: “The continued strength of the solvency position should give management confidence to continue increasing the dividend payout ratio but there is not yet scope for excess capital returns.”