Henri de Castries is a devout Catholic and “believes in miracles”, but the chief executive of Axa says it is not the Lord but cold economic realities that are going to convince European regulators to dramatically shift their stance on the insurance industry.
The boss of Europe’s second-largest insurer by market capitalisation, warns that the €315bn European investment scheme launched last year to kick-start growth will not receive any backing from him or the industry unless regulation shifts as well.
“The bureaucrats of Europe will have to define sensible capital charges for infrastructure investments . . . or nothing will happen [with the scheme]. The ball is in the camp of the European Commission,” he says in an interview with the Financial Times.
The support of Axa and the rest of the European insurance industry is seen as key to the success of the so-called “ Juncker Plan”, which over three years will provide €21bn in guarantees to raise €315bn in private funds to invest in new projects.
Mr de Castries has been lobbying to adjust the EU’s Solvency II capital requirements, which come into effect next year. Insurers say the rules would require them to hold too much capital against investments in areas such as long-term infrastructure projects, discouraging investment.
“On the one hand we are being asked by politicians to invest in infrastructure to help economic growth, but on the other we are being told by regulators that we are going to be penalised for the same investments,” he says.
Speaking from the group’s Paris headquarters, a stone’s throw from the Elysée Palace, he adds that if capital rules punish infrastructure investment, money will go elsewhere: “If Europe decides not to be attractive, fine, capital will move.”
Mr de Castries was speaking as Axa released its full-year results on Wednesday, reporting a 12 per cent increase in net profit to €5bn buoyed mainly by its life and savings division. Revenues were up 1 per cent to €92bn.
Thanks in part to the “good shape” of the US economy, the “gradual increase in long term rates” there was reason to be positive about 2015, he says, with the group raising its dividend by nearly a fifth compared with last year.
Mr de Castries is sanguine about a potential crisis caused by a Greek exit as well, firstly because Axa does not hold any Greek debt, but more importantly because Europe itself had insulated itself from Greece in recent years.
“If Greece left the eurozone it would very bad for Greece, but I am not sure it would be that bad for the rest of Europe. It could well be a situation where nothing really happens, just a couple of days of volatility perhaps.”
The chief of Axa, a group which has more than €1tn in assets under management, says that Greece needs to undertake “unavoidable” structural reforms, but if they choose not to, it would be “their problem” far more than a problem for the rest of Europe.
Mr de Castries may be relaxed about a Greek exit, but to combat the low interest rates in developed markets — which has squeezed the group which has vast bond holdings — Axa has been eager to boost growth in fast-growing emerging markets.
The company has spent about €5bn since 2010 on acquiring companies in several developing economies, most recently targeting acquisitions in Africa. Late last year the group bought Mansard, Nigeria’s fourth largest insurer.
“When Asia started to grow 30 years ago, Axa was too small to be a big player. But now we have the critical size worldwide, now we think Africa will be the emerging continent for the next generation,” he says.
His eyes light up though when he starts talking about the wider shifts happening in the insurance industry around big data, which he says should transform the business in the developed as well as the emerging world.
“It changes everything, it's the equivalent to oil and electricity a century ago and printing five or six centuries ago,” he says.
The insurance industry is increasingly using the large amount of data available to give more targeted insurance policies, for example devices installed in cars to monitor driving habits.
On Tuesday Axa launched a €200m venture capital fund with a presence in San Francisco, New York, London, Paris, Zurich and Berlin to invest in companies that could help it with big data.
Axa has already made investments in groups such as Flyr, a data science company that predicts airfares and Climatesecure, another data company helping to insure financial losses caused by weather anomalies.
“The idea is really to have the means to understand what is going on [in this field].” he says.
He says that if you want to “prosper and survive” in insurance you need to understand how it is going to “redesign your existing business model,” but also make sure that you are ethical in your treatment of the data.
“It’s like California in the mid 1850s, we know there is gold in the mountains, we know a lot of people want to access it, and we know that the ethical level of these people are uncertain. We need to behave impeccably.”
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