Middle Market Mindset

In this episode, Matt Waters, head of US Middle Market for AXA XL, shares what it has taken for his team to build out its business over the past couple of years.

Waters also discusses what characteristics impact the middle market and what industry segments the company is focused on.

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Disclaimer: Podcast transcriptions are computer generated, please excuse errors. For the most accurate version of the conversation, please refer to audio.

Matt Waters: You know, we always have to be cognizant anytime there’s a new administration and you know, a lot of the discussion around tariffs and other things that could impact the supply chain. But I would say the world has just obviously become increasingly more global. We can’t just have a solution for us mid-market risks only.

Sandy Laycox: Welcome to the Leader’s Edge podcast. I’m Sandy Laycox, editor in chief of Leader’s Edge. In this episode, which is part of our AXA XL sponsored podcast series, I talk with Matt Waters, head of US Middle market for the company. For the past few years, Matt has been building out this business for AXA XL and we get the inside view of how it’s been done and where the unit is going. We start off our conversation by defining what middle market means to AXA XL and the specific industry segments the company is focused on.

Matt Waters: This is everyone’s favorite question I’ve found out, and there are varying definitions. We play on the higher end of middle market, but it is defined as revenues from 100 million up to a billion, which essentially equates to premiums 150,000 up to a million and a half. And that is the package business, which is workers comp, GL, auto, lead umbrella and property. So, we’ve defined our business really in two segments. One is private equity. So we’re going to quote those five lines for PortCos from the PE firms themselves. And it was a slow 24 in terms of deal making, but it’s going to be a hot market in 25. We’re ready and we’ve got a real specialized team to handle that business because of the pace associated with it. There’s only a few trusted markets that do that and we’re one of them.
The other side of the house is what we call general industries. You know, a lot of carriers are specializing by industry verticals. This one we have very much a specific industry appetite, but we’re trying not to carve off segments of the market in an effort to partner with our brokers. The third leg of that stool, if you will, is construction. And we just recently launched a construction vertical in July of 24. We’re expecting that to gain some traction come 25.

Sandy Laycox: We then dig deeper into construction, manufacturing and private equity. Each of these industries is as focused for the middle market team and we’ve discussed risk and opportunities in each.

Matt Waters So construction is a market that AXA XL has great brand on the large end, and we do a lot of the large loss sensitive wraps, you know, sophisticated contractors. But we haven’t been a player in the mid-market. So it’s a great extension of what we’re already doing in construction. We’re able to tap into that expertise, the resources and services that we provide to those clients already on the large end. So to me, construction is just natural extension of what we’re already doing. The other industry on the general industry side that we’ve been heavy in right now is manufacturing. I think manufacturing has been a good performing segment for us in general.

It’s going to likely take off a little more in 25 with the new administration and some of the discussion around tariffs and more manufacturing in the US So I think we’re also well positioned for growth in 25. Similar to private equity.

Sandy Laycox: Are there any particular risks in those areas where you’re focused or where you’re really heavily looking at in terms of underwriting or risk management?

Matt Waters: I would say on the construction side it’s more the specialty trade contractors. There are some GCs that we like as well, but pretty open in construction. We’re not looking to do street and road and we’re not looking to do New York labor law, but I think that’s fairly consistent now in market. I would say appetite’s pretty wide there. Same with manufacturing. You know, it’s true manufacturing though. We’re not looking to really do food and beverage and that sort of stuff. There are specialized markets there and we’re not one of them. On the private equity side, pretty much our industry appetite mirrors that of our general industries appetite. It’s just for PE firms.
But we’re going to see probably more activity on the PE side with, you know, HVAC contractors, tech, and those are, you know, exciting and well aligned industries with our appetite.

Sandy Laycox: And as you see those businesses grow, do you anticipate changes in their profiles or different things that you’ll be have to focus on as they grow?

Matt Waters: That’s a great question. Because PE firms, they’re not completely homogeneous, right? So it’s not like they’re all one industry. … But they can change their position kind of like midstream on where they’re focused. So we do want to partner with them and we go in with, you know, an industry appetite and a certain segment. But recognizing that can branch into other things.

Sandy Laycox: Okay, sounds like a sort of a nimble position.

Matt Waters: And that’s honestly what PE firms value. Right? Because they have to move quick. They don’t want insurance getting in the way of the deal. And they expect responsiveness, underwriting, service and ability to be nimble and not, you know, not operate to a zero exception rule. Right. And we’ve provided underwriters to that marketplace that they get it and they perform well.

Sandy Laycox: Looking at the global supply chain, Matt discusses the factors that affect middle market businesses and how AXA XL is positioned to respond.

Matt Waters: You know, we always have to be cognizant anytime there’s a new administration and you know, a lot of the discussion around tariffs and other things that could impact the supply chain will ultimately impact us in the business. But I would say the world has just obviously become increasingly more global and we can’t just have a solution for us mid-market risks only. We recently hired someone who is a experienced multinational underwriter. When our US operations have businesses overseas, we can kind of lean into AXA’s global network and issue policies in pretty much any country which are typically AXA owned insurance companies. So it allows us to differentiate in market and have a competitive edge amongst many of our peers.

Sandy Laycox: Then we get into broker relationships and how AXA XL relied on their trading partners to ensure they were building a business division that brought value to those relationships. Relationships and vice versa.

Matt Waters: And first I would say this was the coolest part of the gig. And I’ve been doing this for 27 years and you don’t often get the opportunity to build something from ground up. And when you do, I took that responsibility very seriously. And a lot of what we did was building talent. And I really do believe our talent is the differentiator for us right now. And where we sourced our talent, to your point, was from the brokerage community. So we stood up a broker council and named, you know, of the large brokerage houses we had, you know, somebody appointed represent middle market. And we asked them who the best was in private equity, who’s the best in general industries, who’s the best in construction.

And what they valued was their relationship with these individuals, but also the intensity they brought in terms of marketing along with they were empowered. And I do think the matrix with an underwriting has disguised empowerment a little bit. And what we wanted to do was to get people in that not only had the right relationships but were also empowered to make the decisions. And that I think was and still is a major differentiator for us.

Sandy Laycox: Absolutely. And what about on AXA XL side? What are you all looking for as you seek out trading partners for middle market?

Matt Waters: Yeah, so we having run a bigger middle market business. It almost became like finding a diamond in the rough where you opened up to all these brokers and agents and you got tremendous flow but you had really low quote ratios, really low hit ratios. And that doesn’t work for anyone. Right. Because that weighs on underwriters’ morale. Brokers don’t want you wasting their time, and we don’t want to waste their time. We decided to go in deep with, you know, eight trading partners that really do value relationship that, you know, see our vision to grow in these industries and as we expand our geographic footprint, they’re well aligned with that.

We’re looking for a trading partner that of course we can do business with, but also someone that we value the relationship and there’s mutual respect and I think we’ve done a good job finding those partners.

Sandy Laycox: Finally, Matt shares the division’s plans for product and geographic expansion in 2025.

Matt Waters: We had a great launch; we had a successful launch. But a lot of our business has been centered up in the northeast with our broker partners. So now we’re looking to expand in a more meaningful way starting in Canada as well as the Midwest. We’re hiring underwriters right now in Chicago and we’ve had a lot of success out of the gates again leaning on our broker partners for support. But I just hired a head of our Canadian operation, and she came over a couple months ago. She’s also hiring people to get us going in Canada in a more meaningful way. It’s a big market and we have a small space in it currently within mid-market. We see a lot of opportunity there. I would say the last piece of it in terms of product lines.

We now have additional product lines within middle market with our environmental business as well as inland marine and excess. And these products complement the core package and again are a differentiator in market because now we can sell more product lines. We’d be looking to push both geography end product in 2025 and that’s only going to help our growth ambition.

Sandy Laycox: Sounds like you’ve got a lot in store, and it should be very exciting.

Matt Waters: We’re pumped.

Sandy Laycox: Well, thank you so much for joining me. This has been great. I’m excited to hear about the future for this division of AXA XL.

That was Matt Waters, head of US middle market for AXA XL.

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