The company will remain present in the U.S. reinsurance market through its Paris-based subsidiary AXA RE, and intends to focus on property-catastrophe non-proportional reinsurance.

AXA announced last week that it will cease underwriting and renewing contracts on life and non-life reinsurance businesses through its U.S. subsidiaries, AXA Corporate Solutions Reinsurance Co. and AXA Corporate Solutions Life Reinsurance Co. Further, it will cease U.S. financial guarantee reinsurance activities at AXA Re Finance.

AXA said marine, aviation, reverse-flow and space insurance will continue to be underwritten in the United States.

Philippe Donnet, CEO of AXA Corporate Solutions, said the unit will be organized around three main businesses “in order to allow better control and profitability of each line of business.” These are:

Large risks insurance, under the brand AXA Corporate Solutions Assurance.

Reinsurance, under AXA RE in Paris and its reinsurance subsidiaries in various parts of the world.

Run-off management controlled by AXA Liabilities Managers in Paris.

Christophe Dufraux, an AXA representative in Paris, indicated the decision by AXA Corporate Solutions to cease underwriting in the United States was an issue of the best allocation of capital to its most profitable core markets, which are in Western Europe and Asia.

“We want to allocate money where we can make money, but we also want to allocate money where it makes sense for our global strategy,” he said. Articulating that strategy, he noted that 90 percent of the companys business is in retail and small commercial insuranceboth life and non-lifeas well as asset management and wealth management.

He said AXA Re will continue to write reinsurance in the United States out of Paris, “because we have clients in Europe and elsewhere that have business in the United States.”

While reinsurance, until recently, had had good results, he emphasized, the large risks insurance account had lost money, similar to most of the industry. The position of the large risks account became clear in 1995 when AXA began viewing that account separately, and finally, in 1999, it combined this business with AXA RE into a separate profit center called AXA Corporate Solutions.

“Since then we have tried to be selective in underwriting and to be profitable globally,” Mr. Dufraux said. Although a turnaround of this business was well under way in the first half of 2001, he said the World Trade Center disaster and other major 2001 claims derailed the efforts.

As a result, about a year ago, there was a management shake-up at AXA Corporate Solutions when Philippe Donnet was named CEO, replacing Jean-Marie Nessi. (Mr. Nessi re-emerged last week as head of the property and casualty business unit for PartnerRe Global, succeeding Graham Dimmock, who was appointed executive for client relations, PartnerRe Global.)

Mr. Dufraux at AXA said the group made it clear to AXA Corporate Solutions that it must return to profitability without an increase in its current capital position of around 2 billion euros ($2.1 billion), leading to the decision to cease underwriting U.S. business.

The move to cease underwriting at AXA Re Finance shows the company is simply concentrating on its core strengths, because AXA Re Finance has always been profitable, he said. Since it is a small operation, it is unlikely to be able to compete head to head with the larger players and, therefore, the margins will be thinner in the future, he said.

Greg Carter, senior director for Fitch in London, said AXA Corporate Solutions is better utilizing the capital being devoted to reinsurance. He applauded AXA Groups moves of the last few years to make sure all its units are achieving, or getting close to achieving, their targets.

Andrew Goodwin, European insurance insurance analyst at Commerzbank Securities in London, said AXA has made it clear for a year that it was going to reduce its reinsurance exposure, which has been more volatile than expected. “On that basis, its not surprising that they pulled out of the United States, which they probably feel they have had less control and less influence over.”

It could be argued that AXA is getting out of this business at the wrong time, Mr. Goodwin said, speculating that its more of a long-term strategic move. “In essence, they want to be more geared toward the individual in terms of providing financial services, rather than being a significant player in the commercial lines business.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 20, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.