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August 3, 2012 12:03 pm
Axa reported first-half profits that beat expectations as Europe’s second-largest insurer by market value said it was on track with the targets of its five-year plan launched in 2011.
The French insurer reported a 36 per cent fall in net profit in the first six months of the year to €2.59bn, but the result in the same period last year was boosted by a €1.4bn capital gain on asset sales.
Excluding the gain, underlying profit rose 3 per cent to €2.3bn, which was higher than analysts’ expectations of about €2.1bn, helped by higher life and property and casualty results, while asset management and savings continued to disappoint. Revenues were 3.4 per cent higher at €48.4bn.
Henri de Castries, chairman and chief executive, said the group was benefiting from increasing its exposure to property and casualty and protection and health, which includes cover for critical illnesses and long-term nursing care.
These were higher margin businesses which were less sensitive to market conditions.
However, the US variable rate annuity business remained weak – the savings products with guarantees which were expensive to honour in poor markets. Axa’s economic solvency ratio fell to 174 per cent at the end of June from 183 per cent at the end of 2011.
Analysts at Credit Suisse said: “Management’s strategy of cost-cutting and refocusing the life business away from general savings accounts is paying off” but added: “The market is likely to remain concerned on both the economic solvency rebased to 174 per cent and further variable rate annuity charges.”
Axa is also seeking to increase its exposure to emerging markets but, for the time being, the eurozone accounts for the lion’s share of its business.
Mr de Castries said there would continue to be short-term “turbulence” in the region but was optimistic about the long-term outlook, citing much-needed structural reforms taking place in Italy and Spain.
He said the region’s economic fortunes would be given a boost once: “France undertakes real structural reform and demonstrates that it is capable of reducing its deficit.”
In an illustration of the unease of some of France’s big businesses with the higher tax policies of new Socialist president François Hollande, Mr de Castries indicated the country was becoming a less attractive place in which to invest.
“Taxes on French companies are much higher than before ... In terms of allocation of capital, it is not necessarily a priority to put our excess capital in this territory.”
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