AXA, one of Europe's largest insurers, may soon set a more ambitious profit growth target. Analysts at Berenberg, a European investment bank, expect the company to lift its goal for annual underlying earnings per share (EPS) growth to 7%-9% when it holds its capital markets day on September 15. That would be a step up from the current 6%-8% range for 2024-2026.
The call is based on a simple observation: AXA has repeatedly hit the top end of its existing target. That track record, Berenberg argues, gives the company room to raise the bar for the 2027-2029 period.
Why AXA is performing well
Several factors are working in AXA's favor. Higher interest rates have boosted the income the insurer earns on its investment portfolio, a key driver for companies that collect premiums upfront and pay claims later. When rates rise, insurers can earn more on the money they hold, which directly lifts profits.
Berenberg also points to improving profitability in AXA's health insurance business, particularly in the UK and Mexico. After years of investment and restructuring, those operations are now contributing more steadily to growth. In addition, demand from European households for insurance products has remained resilient, even as the broader economy has slowed.
AXA's capital markets day is a key event for investors. It is when the company lays out its medium-term financial targets and strategy. A higher EPS growth target would signal management's confidence in the business's ability to keep delivering, even in a more competitive and uncertain environment.
What it means for investors
For everyday investors, an EPS growth target is a useful gauge of how much profit a company expects to generate per share over time. Underlying EPS strips out one-off items and volatile investment gains, giving a clearer picture of the core business's earning power. A higher target suggests management sees durable growth ahead.
If AXA does raise its target, it could be seen as a positive signal for the stock. Companies that consistently meet or beat their own targets often earn a premium valuation from investors. Conversely, missing a raised target could hurt sentiment, so the bar AXA sets will be closely watched.
AXA is not the only insurer looking to grow. Sun Life has committed CA$5 billion to Canadian infrastructure, a sign that major insurers are seeking new avenues for returns. In the broader market, investors are also keeping an eye on central bank moves, such as the Bank of Japan's expected rate hike, which can affect global bond yields and, in turn, insurers' investment income.
Berenberg's expectation is not a guarantee. AXA could choose to keep its current target or set a different range. But the bank's analysis highlights a company that has been delivering on its promises, and that is often a good sign for shareholders.
For those who own AXA shares or are considering them, the September 15 event will be worth watching. The new target, if confirmed, will give a clearer sense of what the company expects to achieve over the next few years and how it plans to get there.
