Feb. 23 (Bloomberg) -- Axa SA, Europe's No. 2 insurer, may report a 23 percent gain in second-half profit as rising stock markets and a change in pension rules increased demand for savings plans in France.

Net income probably climbed to 980 million euros ($1.29 billion) from 796 million euros a year earlier, according to the median forecast of seven analysts surveyed by Bloomberg. The analysts said operating profit, which excludes investment gains and losses and acquisition-related costs, probably advanced 16 percent. Axa is scheduled to report earnings tomorrow.

Paris-based Axa and competitor Assurances Generales de France SA benefited last year as French tax breaks for private pensions spurred demand for equity-linked savings plans. Chief Executive Officer Henri de Castries added 1 billion euros to 2004 sales by purchasing New York-based life insurer Mony Group Inc. for $1.5 billion in July.

``They should benefit from an overall trend in French life insurance last year towards market-linked savings,'' said Jerome Forneris, a fund manager at Banque Martin Maurel in Marseille, which oversees about $6.5 billion and holds shares of Axa.

De Castries, 50, declined to comment through Axa spokeswoman Clara Rodrigo.

Axa's stock gained 19 percent in the past six months, increasing the insurer's market value to 37.7 billion euros. That matched the advance of the 28-member Bloomberg Europe Insurance Index during the period. Munich-based Allianz AG, Europe's largest insurer by premiums, rose 18 percent.

Of the 24 analysts who issued recommendations on Axa in the past six months, 16 advised investors to ``buy'' the shares, seven to ``hold'' the stock and one to ``sell.''

`Key' for 2005

Total French sales of life insurance and savings products rose 13 percent in 2004 to 117 billion euros, according to the French Federation of Insurance Companies in Paris. Second-half profit at AGF more than doubled to 571 million euros, the company said on Feb. 21.

Claude Bebear, 69, Axa's founder and supervisory board chairman, built the company from a Normandy-based insurer into a business with offices stretching from Europe to the U.S. to Asia by buying companies including Equitable Life Assurance Society and Alliance Capital Management LP of the U.S., Germany's Colonia AG and Japan's Nippon Dantai Life Insurance Co.

Asia Expansion?

De Castries, who took over running the company in May 2000, spent about $9.4 billion the same year buying out minority shareholders in U.S. unit Axa Financial. That purchase was financed by proceeds from the sale of investment bank Donaldson, Lufkin & Jenrette Inc. to Credit Suisse Group for $13.4 billion.

``Growth in the U.S. life business is going to be a key feature of 2005,'' said Nick Holmes, an analyst at Lehman Brothers Holdings Inc. in London, who has an ``overweight/neutral'' rating on Axa shares. ``I'd also expect them to give a positive outlook for the non-life business in Europe,'' he said.

``Management is doing a good job,'' said Thomas Koerfgen, who helps manage about $3.9 billion, including Axa shares, as head of equities at SEB Invest GmbH in Frankfurt. ``They've been in the U.S. for many years and they know what they're doing.''

A plan to expand in Asia was derailed in October when Axa withdrew a A$3.4 billion ($2.7 billion) offer for the 48 percent of Axa Asia Pacific Holdings Ltd. it doesn't own after the company's independent directors rejected the bid as too low. De Castries had said buying the rest of the shares would help the insurer speed growth in the region, home to 60 percent of the world's population.

CEO's Compensation

``I'm interested in what they plan to do in southern Europe, where they're under-represented, Germany, where the market remains difficult, and what they can now do in Asia,'' said Pierre Flabbee, an analyst at Kepler Equities in Paris, who recommends investors buy Axa shares.

Axa Asia Pacific said two days ago that second-half profit rose 28 percent to A$346 million as the biggest six-month gain on Australia's benchmark stock index in 11 years boosted wealth management earnings.

American International Group Inc., the world's largest insurer, said Feb. 9 that fourth-quarter profit rose 11 percent to $3.02 billion, helped by higher demand for life insurance in Asia.

De Castries was paid 2.1 million euros in 2003, up 62 percent from a year earlier. That included a 1.4 million-euro bonus based on the group's 2002 performance, almost twice the year-earlier amount. His base salary was unchanged at 500,000 euros. Axa said last year it will pay de Castries a bonus of 1.81 million euros for 2004, based on 2003 performance.

Life and Savings

Operating earnings from life and savings, Axa's biggest business, probably rose 17 percent to 725 million euros in the second half, analysts estimated. Property and casualty earnings may have risen 32 percent to 463 million euros, the survey showed.

Analyst estimates for second-half net income ranged between 678 million euros and 1.04 billion euros.

Axa will have costs of 40 million euros for 2004 to cover the cost of switching to International Financial Reporting Standards, Chief Financial Officer Denis Duverne said in January.

To contact the reporter on this story: Steve Rhinds in Paris at srhinds@bloomberg.net

Last Updated: February 22, 2005 19:21 EST