Life is tough for funds management and financial services companies as the credit crunch, recession and volatile markets play havoc with accepted wisdoms and strategies.
Even with the rebound in markets since early March, it’s clear that confidence in the old ideas hasn’t returned and that nerves remain on edge and sentiment is fragile.
AXA Asia Pacific Holdings, the local arm of the huge European financial services group, AXA, is case in point.
In November 2007, as markets peaked, despite the worsening of the financial crunch which erupted in August of the same year, AXA revealed ambitious plans to double the value of its business over the five years to 2012.
Now, the achievability of that objective is being questioned, not abandoned, as yet.
AXA’s AGM yesterday heard that the doubling the value of the business ambition is now "extremely challenging" because of the global economic downturn.
Chief executive Andrew Penn told the meeting that it was unclear when market conditions would improve.
"At our annual strategy briefing in November last year we unveiled our Ambition 2012 program and goals for Asia.
"This is the framework that we will follow for the next four years to 2012.
“It includes our aspirations to again double our enterprise value through the doubling of the value of new business, annualised premium and new business index whilst further reducing our cost to income ratios.
"As with Australia these goals will be even more challenging in the current difficult environment however, we remain committed to strive towards their achievement."
"Clearly the impact of the global financial crises has been profound and we are not yet at the end of experiencing the full force of its wide-ranging effects.
"Indeed 2009 looks like it will be a particularly challenging year.
"Clearly the numbers look extremely challenging today. However now is not the right time to change them.
" As I said earlier we cannot control that which happens around us we can only control how we respond.
"Clearly the impact of the global financial crisis has been profound and we are not yet at the end of experiencing the full force of its wide-ranging effects.
"Indeed 2009 looks like it will be a particularly challenging year," he said.
Mr Penn told the meeting in Melbourne that AXA would pay down $430 million of senior debt after raising $880 million of new capital. (The debt is held by the French parent).
He also said AXA would sell half its 26% interest in its Indian joint venture to its parent, Paris-based AXA SA, while retaining full management control.
"This (venture) provides us with an appropriate economic exposure whilst rebalancing the proportion of capital we are investing in this market relative to the rest of the region," Mr Penn said.
AXA’s capital raising, announced on March 17, topped its minimum target of $660 million after raising funds through an institutional placement, a share purchase plan to small shareholders and top-up offer to a small number of shareholders.
Mr Penn said the capital raising meant it had $1.1 billion of assets in excess of regulatory requirements as at March 31 and that its gearing ratio had dropped to about 34%.
AXA still hopes to ride Asia’s growth potential and high savings rates, despite the crunch, with targets to expand its distribution in China and India.
The company now has a presence in 11 cities in China, up from five in 2007 and increased the number of branches in India by 123 during 2008.
Mr Penn said AXA was very pleased with sales of the capital protection product North; sales to the end of April were $283 million – almost reaching total sales for all of 2007/08.
The product, launched last year, is aimed at investors scared of incurring losses in the current market downturn and insures against investment losses over five or seven years.
Under the protected investment guarantee, investors get all of their original investment returned plus any further contributions back at the end of the term – net of upfront fees.
Last month, AXA said group funds under management, administration and advice slipped 5% to $74.8 billion in the March quarter on slower sales brought about by falling equity markets.
The recovery in markets, if sustained through this quarter, should produce a better result when the next quarterly report is released.
AXA shares fell 7 cents to $4.13.
