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AXA's next CEO seeks to reassure

Lorenzo Spoerry is a reporterwith S&P Global Market Intelligence. The views and opinions expressed in thispiece are those of the author and do not necessarily represent the views of S&PGlobal Market Intelligence.

's incoming CEO, Thomas Buberl,is due to take office Sept. 1, three months after the company unveils its new long-termbusiness plan.

The manhe is replacing, Henri de Castries, clearly hasn't finished making his mark. A patriarchof French finance, with 16 years in the top job at AXA, de Castries will detaila new business plan June 21, only three months before he is replaced by Buberl.

In astatement, AXA underlined that the new plan will be drawn up by Buberl togetherwith de Castries, along with Deputy CEO Denis Duverne. This should make it harderto engage in a "kitchen-sinking" exercise whereby a new CEO will declarehis predecessor's efforts to have been below par in many areas, requiring extensivechanges.

De Castrieshas just completed the company's last five-year business plan, "," with successon many fronts despite a tough operating environment. Its 2015 net income, at €5.62billion, was 12% higher than the year before. The new plan, de Castries has , will emphasize more investmentin the firm's digital offerings. Buberl has stuck to the same message.

DanielBischof, an analyst with Helvea, said in an interview that, going forward, AXA isunlikely to rely on the big acquisitions that were a hallmark of de Castries' regime.Although these served to give the French insurer a strong presence in some emergingmarkets — like Hong Kong, Singapore and Mexico, with the 2012 of HSBC Holdings Plc's P&C operations in those countries— they gave rise to a feeling that the company was overpaying in its rush to expand.More recent deals have expanded the French insurer's presence to Nigeria, China,Poland and Turkey.

"Thisis a company where we get the feeling it's about empire-building," Bischofsaid. "I feel they had this M&A machinery that was constantly pushing throughsome deals. Yes, this has gotten less significant in the past couple of years, but[historically] they acquired at high multiples and sold at low multiples."

In aninterview with London's Financial Times,Buberl reassured investors that AXA will henceforth take a more cautious approach.Between increasing the size of the franchise and focusing its efforts on increasingAXA's digital offerings, Buberl said "digital should be the focus," thoughhe suggested the company would consider smaller M&A deals.

Asialooks to remain in focus for the insurer. AXA's revenues from Asia-Pacific on areported basis increased by 19% year over year to €7.22 billion in 2015; de Castriessaid that "Asia certainly has delivered" for the firm.

Thishas also been true for other European insurers with a footprint in Asia.In its fourth-quarter 2015earnings presentation, PrudentialPlc tempered concerns that slowing growth in China andelsewhere would hurt European insurers in Asia as its APE sales in the region increasedby 28% year over year to £2.85 billion in 2015. This came in spite of a crisis inChinese equity markets; economic troubles in the region, CEO Mike Wells said, actuallycreate demand among risk-averse customers.

AXA isalso expected to reel back spending on some of its existing operations, Bischofsaid, noting that the last cost-cutting plan delivered above expectations. However,he said he expects the benefits of the cost savings to be outweighed by the costof further investment in AXA's businesses in high-growth markets.

He alsoexpects the company to announce efforts to shift its product mix away from capital-intensiveguaranteed products toward less capital-intensive offerings. In practice, this willmean unit-linked policies — which rise and fall with the market, demanding lessof an insurer's capital — and policies that sit somewhere between guaranteed andunit-linked.

Thatis no mean feat. Many customers in certain European countries, including Germany,are put off by the lower degree of certainty offered by unit-linked products. Bischofnoted, however, that in AXA's home market of France, customers are fonder of suchofferings. Still, with seemingly every insurer in Europe looking to shift its productmix away from guaranteed products into the unit-linked space, that might not beeasy. One of the keys, Bischof said, will be to educate the sales force.

Buberl told the FThe intends to spend the next few months touring the company to "get to knowit better" ahead of the presentation of the strategic plan in June. In hiswanderings, he may yet discover a lot he will wish to change. Doing so could requirestepping out of the long shadow cast by de Castries, who already occupied the topspot at AXA when Buberl was still completing university studies, based on the informationin the latter's LinkedIn page.