A Blue Blood Leading Axa Into Battle

The insurer's CEO-to-be will have to outfox deep-pocketed rivals

Henri de Castries might once have spent a long and distinguished career in the French bureaucracy, ending with an elevated title at a powerful ministry. As the scion of an old, noble family and a top graduate of the Ecole Nationale d'Administration--the finishing school of France's governing elite--de Castries was groomed for the part. At 26, he was already a high Finance Ministry official; at 32, he was supervising France's balance of payments at the Treasury.

But all that changed in 1989, when de Castries met Claude Bebear. Chief executive of a midsize but growing insurance company named AXA, Bebear was on the lookout for smart young talent. After the CEO outlined his ambitious plans for AXA, it took de Castries only 24 hours to join AXA's corporate finance department. "I knew I'd never be bored," he remembers. "And with Claude, I haven't been bored one nanosecond."

HUGE CLOUT. With his nomination on Jan. 19 as AXA's next CEO, de Castries' life is about to get a lot more exciting. When he takes over from Bebear next May, the financial firepower at his disposal will eclipse not merely the ministry de Castries might once have run but entire governments. In the 10 years since de Castries joined, AXA has metamorphosed into a global financial services powerhouse. The $61 billion in premiums it wrote last year make it the world's largest insurance group. Its $710 billion in assets under management--much of it through Alliance Capital, its U.S. subsidiary--gives it almost unparalleled clout in international equity markets. As a global brand, only Citigroup and American Express rival it.

But as de Castries is the first to admit, AXA has been very much the creation of the brash and charismatic Bebear. His trick now will be to pull together a quickly amassed empire into a more efficient profit machine. AXA had a net income of $1.6 billion in 1998, on revenues of $59 billion. While that is a 12.8% return on equity, AXA trails Dutch insurer Aegon and New York-based American International Group Inc.

The handover at AXA is also occurring just as the once staid insurance industry is getting down and dirty. Axa's enormous German rival, Allianz, is preparing to build a war chest worth up to $40 billion by selling off industrial holdings. The easing of worldwide financial regulations makes it possible for deep-pocketed players such as Citigroup to go after AXA's core insurance and asset-management businesses. "The whole sector is being shaken up," says Andrew Ritchie, Insurance analyst at London stockbrokers Fox-Pitt, Kelton.

New technologies make the future look even more daunting. Aggressive Internet pioneers such as Yahoo! Inc. are gearing up to offer financial services online. "In a field that has already been leveled by deregulation, we're seeing an entire industrial revolution in financial services," says de Castries.

AXA will need someone with the stamina of the athletic 46-year-old de Castries, who rides horses at his estate in the Loire valley. While Bebear has been known for his distinctive dealmaking, colleagues say de Castries is a brilliant problem-solver. And though de Castries says the industry is only at the beginning of consolidation, his priority is to fine-tune before starting a new takeover spree. Recent acquisitions in Japan, Britain, and Germany still need to be absorbed before they can start pumping up the bottom line, admits de Castries. "If we don't have internal growth, we won't have the currency to pay for acquisitions," he says. If AXA slips, he adds, it, too, could be takeover bait.

In 1980, AXA was a regional player, with $200 million in premiums. But Bebear snapped up other French insurers until he was ready for his big leap: His grab of New York's troubled Equitable Cos. in 1992 netted him control of one of the strongest franchises in U.S. life insurance, as well as Alliance Capital Management Holding and Donaldson, Lufkin & Jenrette Inc.

De Castries' star rose steadily. By 1997, he doubled AXA's size overnight by bagging Paris-based UAP, the recently privatized top player in French insurance. De Castries is unlikely to shy away from good deals. Early last year, he led the $5 billion buyout of Britain's Guardian Royal Exchange PLC, making AXA No. 3 in Britain and No. 1 in Ireland. Last November, AXA picked up Japan's Nippon Dantai Life Insurance Co. for $1.9 billion, making it the top foreign player in Japan. Look for the action to continue as de Castries takes over.

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