AXA Stock: Changing Thesis On This French Insurer

The price of HJBC

Dear readers,

In this article, we’ll take a look at AXA (OTCQX:AXAHF) again. The company, like many funds, has been under significant share price and pricing pressure. Even if this meant we would have had more money, this This type of clairvoyance does not exist, and we have to deal with what we have today.

And what we have today is a financial crisis with great infrastructure and good numbers.

AXA – Let’s take a look at French funds

AXA is, as I wrote in my previous piece on the company, a good business in the financial sector. The company’s 200+ year history guarantees a stable quality, especially in the mind. The company is the market leader in the insurance market and is among the top/largest companies in the world. At the same time, it is one of the largest asset managers in the world, operating under AXA IM in Europe, and under AllianceBernstein (AB) in the USA.

Yields and highs are a battle cry for AXA investors like myself. The same valuation offers a good yield of over 7% and from one of the largest insurance companies in the world. The company’s distribution policy requires a fixed share of earnings, without much flexibility to establish sharing traditions or to continue in poor years, as we saw in 2019 when the company cut the share.

Although investors in AXA must accept the level of volatility that can occur – as evidenced by the company’s history – this volatility is still offset by a high level of protection. AXA has no distressed debt and is rated at or on par with every major corporation out there, and has a 2021 solvency II ratio of 217%.

AXA is, to put it simply, a multi-brand insurance company with many years in the industry.

AXA IR (AXA IR)

Its beginnings as a small French operation and its status as a world leader are a testament to the management skills of the last 40-50 years. The company has a strong tendency to focus on growing markets to achieve market share (which is low, but stable). At the same time, the company is not tied to any money and is quick to cut unprofitable work from its resources when necessary. The French giant has also acquired businesses in Colombia, Nigeria, Egypt, Azerbaijan, and Poland, one of the most attractive insurance markets in Central and Eastern Europe.

The price of AXA shares

AXA IR (AXA IR)

In this, AXA shares what is happening with other French companies, where the business meets the former French territories in Africa. This phenomenon is also found in the telecommunication, banking, and other sectors. France has many opportunities, and market interest in other parts of the African market. I see this as an opportunity for the future.

AXA is still, at the time of writing this piece, in the middle of a positive change that is coming to an end, which together with its competitors is the investment plan. What the company earns now is 90%+ payouts, which is access to the available space.

The company’s performance from 2021 was reported according to Property & Casual Insurance, Life & Savings, Health Insurance, and Asset Management. There is also a segment “Holdings & Other segment) Over the past few years, the company has gradually changed from focusing on life due to the interest in interest that comes from being identified in this segment. , and less than half of the income comes from the segment of Life, and the rest comes from Non-life and asset management.

AXA non-life and asset management

AXA IR (AXA IR)

Since all of the company’s segments showed high growth in 2021 (151% of P&C), the company started 2022 with a very good market. The RoE saw a significant improvement and is now at the lower end of the company’s target, around 15%, and the Solvency II ratio has increased by around 17% YoY. The company plans, starting in 2021, to reduce 27%, and to pay off one Tier 1 loan of $850M in early 2022, and to issue a new loan in early 2022, at a price that now seems to be the best price.

I wrote earlier that it is good to consider AXA the French answer to the largest insurance company in the world, Allianz (OTCPK: ALIZY). I still find such comparisons valid and make AXA an interesting investment.

The company’s rebalancing of its assets is paying off, with less reliance on savings products and interest-bearing Life insurance services. Sales in these areas remain strong, and the company has significant market leadership in France with around 9% of the total market, as well as 10% of the Swiss and around 8% of the Belgian market. It doesn’t have the German market that Allianz has – but we don’t want it. We have Allianz for this.

The price of AXA shares

AXA IR (AXA IR)

By investing in AXA we have an interest in strong European markets that we don’t get much of with Allianz.

Developments in Health insurance are driving the company’s share in this region. We are seeing a shift from individual issues/policies to collective policies due to the introduction of forced corporate health, although this still depends on the individual countries as development is not 1-1 everywhere.

Through the XL M&A, AXA is now the world’s leading P&C Commercial lines insurer and is integral to the industry’s transition from life to multi-product.

Although the asset management business may seem small, it generates more than €2B in revenue and has more than €804B in AUM. AXA is, because of this, among the 20 largest asset managers in the world. This branch of AXA needs to grow and develop, and Allianz is far ahead of AXA in this.

The company is also doing very well in other areas, such as making more money above the guidance of 2021, and €4.4B in cash in the fund, well prepared for the disaster that has been 1H22 in Europe due to the mix of macro and other factors. systems.

The fact is that AXA is down 21.7% since my last article, which is very low. My status is still green because I bought my AXA at ​​a very low rate plus benefits and FX. However, I believe that the market is now very confused about AXA and its future potential.

This is the power of valuation-centric sector investing. Now, my initial position was around €7,000 – an increase of around 95% including FX gains. Looking at AXA today, we see a stable company even though things may not improve in the near future. Dividend yields are also offering a chance to rise, due to high profits and new payouts at 50-60% of adjusted earnings. With the XL included, we should see continued growth in the segment for the next few years.

(Seeking Alpha, AXA story)

Because as the company’s forecast shows, this is not just a gradual decline in future earnings, but the opposite of what is expected.

AXA expects revenue growth for 2022E, and experts agree. S&P Global is forecasting 2% 2022E EPS growth, and FactSet is at 1.8%, calling for ADR to generate $3.11 EPS for the fiscal year.

Let’s see what this could mean for the tree.

The price of AXA shares

If we believe AXA’s market analysis, then the market believes that the company should not exceed 6.94XP/E, for a business with a yield of 7% with an A grade loan. A bit steep if you ask me, especially since the company trades at least 3X P/E over that.

2023-2024E is not expected to be a few years, with EPS growth of 5-7% at the high end, which may indicate a significant reduction in this period.

The price of AXA shares

AXA price (FAST graph)

The company will not stay at these prices for long. While it is possible that we could go deep “south” here, I don’t see a huge risk of this happening if you are trading long term. As a long-term investment, this company has great results. Even at only 10X P/E, that upside is 28% per year, or close to 80% of the total RoR through 2024E targets. That’s alpha, as I see it.

Even if the company were to trade around 6-8X P/E, the margin is 10-15% per year or 30-40%, and that’s in. silent trade for the next few years.

Based on this calculation, there are few scenarios that I can see where the company will generate a negative RoR in the long run. On a peer basis, AXA’s closest peers are Allianz (OTCPK:ALIZF), Zurich (OTCQX:ZURVY), Generali (OTCPK:ARZGY), and Sampo (SAXPY). For this group, the average P/E is around 11-12X – AXA is not appreciated to this amount – and it is also enabled to multiply the P/B, and provides higher yield more than all the competitors in the current figures. From a peer perspective, the company is now at a very low valuation, with a huge discount in P/B.

The average during this period is about €30.5/share, and 19 out of 20 analysts consider the company to be “BUY” or “Outperform”. This goal hasn’t changed in over 5 months – not nearly. Although I would say that the price of €30.5 is acceptable –I can go down to the price of €28.5 / part, according to the number of my friends.

But even for those reasons, the recent decline we are seeing in AXA is very important. I’d say it’s around 40% now, and AXA should be considered one of the top buys if you’re a dividend investor.

Thoughts

My thoughts on AXA are:

  • This is one of the largest property managers and insurers in Europe and the world. It has a strong foundation and a history of 200 years. Under the right circumstances and at the right valuation, this company is a definite “BUY”.
  • I believe the firm’s valuation of the company’s potential calls for a premium of €28.5/share, which would mean a 35%+ upside for the company based on where I’m trading today.
  • Based on this, I would consider AXA a “BUY” here.

Remember, I’m close:

  1. Buying cheap – even if the discount is small, not huge – companies at a low price, allowing them to change over time and reaping huge profits and profits in the moment.
  2. If the company continues to stabilize and invest more, I reap the dividends and flip my position into other junk stocks, repeating #1.
  3. If the company is not overpriced, but is going up in value, or going back down, I buy more if time permits.
  4. I also return income from dividends, savings from work, or other income as described in #1.

AXA is currently “BUY”.