Oligopoly profile: AXA
AXA, a French-based company, is the third largest insurance company in the world. It has grown in twenty years from a small French property casualty insurance company to a truly global financial empire, with a major presence in the UK, Germany, US, Australia, Japan, and China. Like most insurance companies, AXA combines actual policy writing with financial and investment services. In spite of a major indemnity due to the World Trade Center collapse, the company is expanding its operations, most latterly with an offer to purchase US insurer MONY (Mutual of New York).
How it grew
The company has its origins in the early nineteenth century, from a couple of Parisian insurers, In 1986, after adding a few more French insurers, the company adopted the name AXA. The company continued to acquire other European insurers, then in the 1990 it went on a buying spree.
- In 1992 AXA bought out several major US companies: the Equitable Life Insurance company, Alliance Capital Management, an asset manager (in which it has a majority stake), and Donaldson, Lufkin & Jenrette (DLJ), the investment bank
- In 1995 it bought out major Australian insurer National Mutual.
- In 1996 is bought out UAP, an amalgamation of German insurer Colonia, the UK's Sun Life, and Belgian insurer Royal Belge.
- In 1997 it acquired Anhyp, the #2 Belgian savings bank
- In 1998 it acquired Guardian Royal Exchange (UK), a property and casualty insurer. It also bought Albingia (Germany), making the company the #2 insurer n Germany
- In 1999 it established AXA-Minmetals, a joint venture with Chinese company Minmetals Group/ Ita laso took control of Japanese insurer Nippon Dantai.
- In 2000 AXA (through Alliance Capital Management) acquired asset management firm Sanford C. Bernstein
- In 2001 It got out of the US investment bank business by selling Donaldson, Lufkin & Jenrette (DLJ) to Credit Suisse
- In 2002 AXA acquired Banque Directe in France, its first foray into retail banking
By 2002 its revenues (around $70 billion) were ten times what they were in 1990. Only 21% of its revenues are now from property casualty insurance, down from 50% ten years ago. Its biggest growth has been in the area of asset and brokerage services, mostly for businesses and pension funds, as well as wealthy individuals. It manages employee insurance and benefits for a variety of companies, and is involved in the reinsurance market, annuities, and mutual funds.
It is the number three insurer in the world, by most reckonings, after German-based Allianz and Dutch ING. (American AIG is also in this group, a bit behind AXA.)
The pending target, as noted above, is the MONY Group Inc. That company is the oldest American mutual life insurance company (1842). It now includes subsidiaries Enterprise Capital Management (mutual funds), MONY Brokerage, MONY Life Insurance, MONY Securities, U.S. Financial Life Insurance (life and disability insurance), and asset manager The Advest Group. It also operates a real estate investment trust (REIT).
AXA is bidding around $1.5 billion for MONY, and is in the midst of working out a deal with stockholders who want more. Analysts think that the offer will succeed, because MONY, a relatively small company in an industry full of big players, can't compete with bigger rivals, and it lost a lot of money when the Internet bubble burst. Also, the AXA offer is the only one on the table. The takeover would make AXA the US's largest provider of variable life insurance and the fourth-biggest provider of variable annuities.
Branding insurance
A Wall Street Journal article ("AXA Pursues Global-Brand Strategy, " (1/26/ 2004), noted that AXA is aiming to imitate Citibank, American Express, and Visa in creating a global financial brand. According to the article, AXA is "the first insurer to try to sell personal life- and property-insurance policies everywhere under a single name."
Some critics object that insurance is a local phenomenon, and that the idea of a global brand adds nothing. Other insurance companies act as holding company for national insurance brands.
But AXA is convinced that by standardizing its brands, along with its operations and advertising, it can become the McDonald's, the Coca Cola, the Disney of insurers. It has already started to get rid of some of the industry's most famous national brand names (Equitable, Guardian, Colonia). Presumably MONY would be the next to go. This consolidation is modeled after the trend for consumer brands to go global with enormous revenue enhancement for the companies involved; now the tide is turning even in the traditional-bound insurance industry.
As the WSJ aticle put it,
"The decentralized model of the past has been replaced by a more centralized approach," says Jim Schiro, CEO of Zurich Financial Services in Switzerland. Zurich Financial recently named a number of executives to new positions with groupwide responsibilities. Last June it rolled out a new compensation package for top executives, pegging pay to groupwide targets.
While other global insurers are not yet going as far as AXA, they are managing much more closely their national subsidiaries, something they had not seen a need to do in the booming 1990s. They are applying global benchmarks, much like a Procter & Gamble or a Toyota, to squeeze out maximum profit from each operation, making every branch perform as efficiently as the best in the company.
One other thing that has gone global with AXA is procurement. If you want to supply copier, paper clips, office furniture, legal services, real estate, auditing services, or toilet paper to AXA, you'd better have a global reach and the ability to negotiate face-to-face at the top. That cuts out small suppliers and forces mid-size suppliers to expand globally. This accelerates, as we have seen, the consolidation of other industries and gives enormous leverage to oligopolies.
