French insurer AXA
In terms of numbers, AXA had a strong fourth quarter and full year. Shareholder equity increased 29%, thanks to the acquisition, earnings growth, and a strong equity market in 2006. Although property and casualty revenues were up only 4% because of a softening global P&C market, the life and savings and asset management segments (AXA owns a majority stake in AllianceBernstein
Initially, AXA's decision to acquire Winterthur made sense. They both had similar business mixes in life and savings and property and casualty insurance, and both had strength in international distribution. For example, based on 2004 sales, AXA's market share position in the U.S. was No. 4; in France it was No. 3, and in Germany it was No. 7. Although integration could be a tricky issue, so far it has been going well.
In the conference call, management talked about how it can pick and choose which products to sell through the combined distribution network to improve the sell-through and margins, while at the same time accessing new geographies. In fact, AXA targets a 350-million-euro synergy from the merger. Management noted that if you tax and capitalize this savings, it creates 2.5 billion euros' worth of value -- or about 30% of the cost of the acquisition from synergies alone. Although it's still too early to judge, so far the merger is paying off very well.
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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.