AXA Confirms 17% Increase in 1st Half Operating Earnings to €1.02 Billion

September 3, 2002

France’s AXA Group confirmed its earlier estimates (See IJ Website Aug. 21) by officially posting 17 percent growth in operating earnings to €1.022 ($1 billion) for the period ended June 30, compared to €876 million ($860 million) in the first half of 2001.

However, the group’s net earnings for the period fell 32 percent to €837 million ($823 million) compared to €1.222 billion ($1.2 billion) in 2001. A combination of lower capital gains and investment returns, €225 million ($221 million) in writedowns on investments, and an added $87 million in reserves to cover WTC related claims, were the primary reasons for the decline..

AXA’s P/C earnings showed particular strength during the period with operating earnings reaching € 228 million ($224 million), nearly double their first half 2001 level. The company’s announcement cited a number of factors which contributed to the gain, including, “a 5.1 point improvement in the combined ratio to 105.8% from 110.9% in the first half of 2001.”

“All the operating entities contributed to this significant achievement through reduction of the loss ratio, owing to lower losses in first half 2002, important tariff increases, stricter underwriting and cancellations of policies,” the bulletin continued. “The current accident year loss ratio improved 3.9 points to 80.0%, and the all accident year loss ratio improved 5.4 points to 77.0%.

AXA’s statement confirmed its commitment to continue its “cost savings program target, and its 2003 combined ratio target of 104%.” It is aiming for a 20 percent growth in operating profit for the year, and most analysts seem convinced that it’s achievable. The big question mark for AXA in particular,, and the insurance industry in general, is the current state of the world’s equity markets. A further downturn would severely affect the earning of most companies, while a rise would have the opposite effect.

AXA warned that “The Group’s Life & Savings and Asset Management activities should continue to show some resilience versus 2001 if financial markets stabilize at their end-of-August levels. However we remain prudent in our outlook for Life & Savings and Asset management operating performance in the second half of the year because of the volatility and unpredictability of financial markets.” They’re not alone.

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