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What's going on?
Axa, the French insurance giant, said on Wednesday that it would turn its US operations into a separate company and sell part of it in order to invest in other countries.
What does this mean?
In recent years, Axa has focused on building its presence in emerging markets, where it expects growth to be higher than in mature markets such as the UK and the US. In the US, Axa owns Equitable Life, which is one of the countrys oldest life insurance providers. It also owns a majority stake in AllianceBernstein, a large traditional investment manager. The plan is to formally turn its US operations into a separate company and sell a portion of it on a US stock exchange, allowing new investors to buy into it. Axa should make about $3-4 billion from the transaction, part of which it plans to invest in its businesses in emerging markets.
Why should I care?
For markets: Axa is showing that its not afraid to take some risk.
Axas US business is stable and profitable; its growth prospects may not be exciting, but that doesnt mean its doing badly. Instead of simply pocketing the profits from a safe, staid business, Axa intends to sell off at least part of it (it may sell more over time) and focus on regions that offer potentially higher growth and, almost certainly, higher risk.
The bigger picture: New regulations threaten some parts of the financial advice industry in the US.
A significant part of Axas US business involves selling retirement products via thousands of financial advisers. President Obama proposed a rule that would force such advisers to act in the best interests of their clients rather than simply as brokers that get paid a commission. Its unclear if the Trump administration will follow through with implementing this rule but, if so, it would likely disrupt Axas US business (as well as, of course, certain other financial advisory businesses).
Originally posted as part of the Finimize daily email.
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