RBC Capital Markets opened coverage on AXA SA with an "outperform" recommendation and a 12-month price objective of €48, which implies about 28% upside from the last close of €37.46. Analyst Mandeep Jagpal argued that AXA's current market valuation does not capture what he describes as a decade of structural improvements across profitability and risk management.
The brokerage pointed to AXA's forward multiple and peer gap as evidence of the disconnect. AXA is trading at a 9.1x FY2026 forward price-to-earnings ratio, representing a 26% discount to a European composite group made up of Allianz, Generali and Zurich Insurance Group. That discount is wider than the historical average discount of 20%.
RBC noted that the valuation gap persists even as AXA has materially closed performance differences with peers. Return on equity rose to about 14-15% by FY2024, an advance from the 3-6% range recorded between 2018 and 2020. "AXA has de-rated vs peers despite closing the performance gap," the brokerage said.
Capital return is another pillar of RBC's view. AXA offers a 7.1% FY2027 dividend yield, which the note places as the second-highest in the global composite peer group after Aviva. When combined with a 15% share buyback payout, total capital return is calculated at 8.8%.
RBC emphasized strategic portfolio moves under CEO Thomas Buberl as central to the shift in AXA's earnings profile. Notable transactions cited include the $15 billion acquisition of XL Catlin in 2018, which made AXA the largest commercial property and casualty insurer, and the $10 billion sale of AXA Equitable Holdings by 2019. In July 2025 AXA sold AXA IM to BNP Paribas for €5.4 billion and simultaneously launched a €3.8 billion buyback.
These moves have changed the composition of earnings. Technical and fee-based earnings now represent roughly 85% of group risk exposure, a marked increase from about 20% in 2008. On a solvency measure, AXA reported a Solvency II ratio of 216% at FY2024, placing it among the stronger capital positions in Europe.
RBC's coverage is most constructive on Life & Health. The brokerage models 5% annual earnings growth in that division from 2026 through 2028, versus a 3% consensus. Operational improvements are evident in health underwriting too: AXA's health combined operating ratio improved to 97.8% in H1 2025 from 99.8% in 2023, with pricing and AI-assisted claims management cited as drivers. In the U.K., AXA holds about 20% of the private medical insurance market, which the note highlights as a point of scale.
On profitability measures tied to life insurance, normalised contractual service margin growth rose from 1.1% in 2024 toward RBC projections of 3.2% in 2026 and 3.5% in 2027. RBC attributes that trajectory in part to a shift toward capital-light unit-linked products and to improved French net flows following cuts in the Livret A rate from 3% to 1.5% in 2025.
In property and casualty, AXA generated €56.5 billion in FY2024 premiums. The group's combined ratio has improved to 91% from 97% in 2018. RBC forecasts a further improvement to 90.3% by 2028, while noting that softer reinsurance pricing will pressure AXA XL revenues even as it benefits from lower reinsurance costs, investment income and cost savings.
RBC's EPS projections for AXA are €3.87 for 2025, €4.12 for 2026, €4.43 for 2027 and €4.80 for 2028. These estimates track consensus until 2027 and then diverge. Using a sum-of-the-parts approach with a 9% weighted average cost of capital, RBC arrives at a fair value of €48, equivalent to 10.6x FY2027 earnings. For context, the note sets implied multiples of 11.2x for Aviva and 12.5x for Allianz.
Looking ahead, RBC points to FY2025 results due on Feb. 26 as the next near-term catalyst, which it expects to confirm operating consistency. Management is also expected to outline a new strategic plan within the next 8-12 months. A potential disposal is flagged as a further simplification lever: AXA XL Reinsurance could be valued at around €5 billion and, if sold, would reduce group complexity.
The brokerage also lists key downside scenarios, including weaker commercial and reinsurance pricing, lagging Life CSM growth, pressures from French absenteeism, political volatility and currency exposure. On the last point, a 10% depreciation of the U.S. dollar would reduce earnings by about €300 million, roughly 8% of H1 2025 net income.
Summary
RBC launched coverage of AXA with an outperform rating and a €48 target, citing improved returns, higher capital returns and a structural shift toward fee-based earnings, while flagging valuation as an opportunity given a 9.1x FY2026 P/E and a wider-than-normal discount to peers.