Organizational Restructuring at AXA: Adopting (and Dropping) a New Business Model
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Case Code: BSTR079 Case Length: 18 Pages Period: 1996-2006 Pub Date: 2003 Teaching Note: Not Available |
Price: Rs.500 Organization: AXA Industry: Insurance, Countries : France Themes: Corporate Restructuring |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
A Change in Business Philosophy
Since the mid-1980s, Axa had structured itself around various distribution channels from where it got its business. This was unlike most other insurance companies which were structured around the products and services they offered. Axa realized that not all distribution channels were equally profitable and hence, were required to be dealt with separately.
Therefore, the company established separate outfits for business that came through agents, brokers and direct marketing (Axa Assurance, Axa Courtage and Axa Conseil respectively). However, within this framework, Axa too sold its policies in an undifferentiated manner. By the 1990s, as the competition intensified, it was becoming extremely difficult to hard sell commodity-like insurance products to customers. Moreover, as the insurance companies expanded their operations across the world, they found it difficult to put in place the elaborate marketing/distribution networks required by such a business model...
Reorganizing AXA - Phase I
While the above changes were largely influenced by external factors, the proposed organizational restructuring exercise received a major boost from an internal issue - the company's reinsurance business. In 1996-97, Axa Re (the inward reinsurance division) contributed 3.2% of Axa's total revenues. With the strong financial backing of the parent company, Axa Re had reached 13th position in the list of top 25 reinsurance companies in 1999 (as per a survey of reinsurers ranked in terms of net premium written, conducted by rating agency Standard & Poor). Within France, Axa Re was the undisputed leader in this business. Two other businesses connected to Axa Re also influenced the restructuring decision: Axa Global Risks (AGR), which underwrote large property and casualty insurance risks for the group across the world, and Axa Cessions, which was responsible for buying reinsurance for the entire Axa group from other reinsurance majors (outward reinsurance)...
Reorganizing AXA - Phase II
Industry observers claimed that with the above changes, Axa, till now a 'provider of insurance and reinsurance solutions,' had made its first move towards becoming an outfit offering a 'comprehensive range of financial, risk management and asset/wealth management solutions.' The company was planning to make some more radical changes in its traditional structure. Axa knew that like Axa Re, AGR and Axa Cessions, there were, in all probability, many more affiliate companies fighting it out among themselves for the same clients in different parts of the world. In the new set up, there was no question of a prospect being looked at as a client by more than one unit of the company. A client of a single unit became the client of the entire group. Axa's top management formulated a new rule, according to which, no other group company could solicit a client that Axa Corporate Solutions dealt with or planned to deal with. Axa Corporate Solutions prepared a list of such prospects/clients, which was circulated among all the group companies...
The Transition and the Problems that Followed
Axa sources revealed that to achieve the synergies expected out of combining Axa Re, AGR and Axa Cessions, the 'best practices' of all of them would be adopted. Since Axa Re had more exposure to the global way of running a business, its managers were given most of the top spots in Axa Corporate Solutions. While Nessi was the CEO of the new outfit, AGR's erstwhile head, Charles-François Walckenaer, was made a member of the management team. After spending one year fine-tuning the group's corporate structure and defining the roles and responsibilities of the newly-created entities, Axa finally introduced Axa Corporate Solutions to the world at the '2000 Les Rendez-Vous de Septembre.' Axa announced that the company would be headquartered in Paris with regional offices across the world. By January 2001, all the legal formalities (within France and the other countries) were completed and Axa Corporate Solutions became operational. However, from the very start, the prospects of Axa Corporate Solutions were viewed with concern by industry observers...
Reorganizing AXA - Phase III
At the '2002 Les Rendez-Vous de Septembre,' Axa announced that Axa Corporate Solutions would be split into three parts again. Axa Re was resurrected as the group's reinsurance division, and the industrial risks business (once AGR) was renamed Axa Corporate Solutions Assurance. The third unit, Axa Liabilities Managers, was to take care of the run-off businesses. Axa also announced that it would stop dealing in financial guarantees in the US and would limit the reinsurance operations in that country...
Exhibits
Exhibit I: Top 10 Life/Health Insurance Companies (2002)
Exhibit II: AXA - Financial Performance Summary (1999-2002)
Exhibit III: Top 15 Reinsurance Groups (2002)
Exhibit IV: AXA - Detailed Organizational Structure Chart
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