Axa feels pain from low interest rates

21st June 2016, Comments 0 comments

France's biggest insurer Axa has lowered its earnings target for the next few years and is seeking to cut costs as low interest rates take their toll on the industry's profits.

Axa, which is to unveil its new strategic plan Tuesday, said it now eyed an average annual increase in underlying earnings per share of between 3 and 7 percent for 2016 to 2020, compared to 5 to 10 percent in the previous five years.

The company said its new target range "reflects cautious assumptions for interest rates".

It also said it wanted to cut costs by 2.1 billion euros ($2.4 billion) before taxes by 2020 as it presses on with plans for growth in commercial insurance, Asia and its digital business.

"The first priority is a continued and immediate focus on sustainable earnings growth over the plan based on selective growth, cost efficiencies, technical margin improvement and an active management of capital and cash," it said in a statement.

"These initiatives will position Axa to grow earnings and increase dividends, even in a context of continued low interest rates."

"At the same time, Axa will accelerate the transformation of its business model based on initiatives related to meeting rapidly evolving customer expectations in the digital world...," it added.

Banks and insurance companies are feeling the pinch from low interest rates which make it difficult for them to offer attractive returns on investments to customers.

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© 2016 AFP

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