Axa raises profit targets in wake of $15 billion XL deal

(Reuters) — Axa SA expects its profitability to improve in the next two years thanks to U.S. business brought in by its new XL arm and said it would now focus on expanding in Asia.

The French insurer said profits should be boosted by its $15 billion acquisition of Bermuda-based XL earlier this year, which helped to broaden Axa’s range of business.

Axa also lifted its expected synergies from the XL Group Ltd. acquisition to €500 million ($564 million) from €400 million, and raised its dividend payout range to between 50% to 60% from 45% to 55%.

Following the XL deal and the stock market listing of its U.S. operations, Axa is now looking to develop more in Asia in areas such as China, health insurance and its branch network.

The company has already hired a series of leading managers in the region, such as Gordon Watson, chief executive officer for Asia.

“In just nine months, Gordon has attracted some of the best leaders in Asia with significant local expertise to propel Axa to become the next insurer of choice in the region,” Axa CEO Thomas Buberl said.

Mr. Buberl said last year that he wanted the company, the No. 2 insurer in Europe after Germany’s Allianz SE, to focus on six emerging countries, with four of them in Asia.

Even though Asia represents about half of the world insurance market’s growth, “Axa in Asia has underperformed over the past few years,” Mr. Buberl said during a presentation to investors.

Earlier this month, the company said it had agreed to buy the 50% stake it didn’t own in its Chinese unit Axa Tianping for €584 million.

Axa also raised on Wednesday its expected adjusted return on equity to between 14% and 16% in 2019 and 2020, up from a previous target of 12% to 14%.

It confirmed its target for underlying earnings per share to rise by 3% to 7% a year over the same period and expressed flexibility over possible future share buybacks.

Axa shares were up 1.3% in early trading, as analysts welcomed Axa’s latest financial targets.

“In our view, Axa are reassuring the market,” wrote analysts at Jefferies, which kept a “buy” rating on Axa.