Axa’s First-Half Operating Profit Rises 3% on Health Insurance

Axa Says Net Falls 36% After Year-Earlier Gains From Asset Sales
Axa has fallen 19 percent over the past 12 months in Paris trading, exceeding the 7.4 percent drop of Allianz SE, Europe’s largest insurer by market value. Photographer: Antoine Antoniol/Bloomberg

Axa SA, Europe’s second-largest insurer, reported a 3 percent increase in first-half operating profit, helped by rising revenue from health and property-and-casualty insurance.

Operating profit, which excludes capital gains, one-time charges and asset-valuation swings, rose to 2.3 billion euros ($2.8 billion), Paris-based Axa said in a statement today. That compares with the 2.15 billion-euro average estimate of analysts surveyed by Bloomberg. Net income fell 36 percent to 2.59 billion euros after last year’s results were boosted by 1.4 billion euros of gains from asset disposals, Axa said.

“Very clearly, the shift toward health and protection policies goes on,” said Francois Boissin, a Paris-based analyst at Exane BNP Paribas with a buy rating on the stock. “The savings business is benefitting from that.”

Axa, led by Chief Executive Officer Henri de Castries, is expanding in Asia as it aims for 10 percent annual growth in operating earnings a share through 2015. The French insurer last year set a 2015 target to reach annual operating profit of 6 billion euros, compared with 3.88 billion euros in 2010. Axa is “perfectly in line” with its cost-cutting and productivity targets, de Castries said in an interview on Axa’s website.

Allianz SE, Europe’s biggest insurer, reported a 23 percent increase in second-quarter net income to 1.23 billion euros today, topping analysts’ estimates, as earnings increased at its life and health business.

Axa was little changed at 9.69 euros by 9:47 a.m. in Paris trading, while Allianz rose 2.5 percent to 80.58 euros in Frankfurt. Axa has declined 3.6 percent this year, compared with an 9.1 percent gain in Allianz and an 8.8 percent advance in the 26-company Bloomberg Europe 500 Insurance Index.

Property, Casualty

Axa’s capital ratio, under Solvency II standards, declined to 174 percent at the end of June from 183 percent at the end of 2011, the insurer said. Deputy CEO Denis Duverne told journalists at a meeting in Paris today described the company’s solvency level as “very comfortable.”

Profit at Axa’s life-and-savings business, the insurer’s largest, rose 7 percent to 1.41 billion euros, beating analysts’ estimates. First-half annual premium equivalent, a common measure of sales for insurers, rose 11 percent to 1.25 billion euros at health-and-protection, a business that includes coverage for critical illnesses and long-term nursing care, according to Axa’s statement.

Property-and-casualty first-half earnings rose 6 percent to 1.04 billion, compared with analysts’ estimates for 1.01 billion euros. Average price increases of 3 percent boosted the unit’s revenue, Axa said.

“Our strategy has been for several years now to develop in business lines that are not market sensitive -- property and casualty, health, protection,” Chief Financial Officer Gerald Harlin said on a call with journalists.

Fewer Disasters

Europe’s biggest insurers are using last year’s catastrophes to push through higher prices for coverage. Natural disasters caused less than $3 billion of insured losses for insurers and reinsurers in the first quarter, down from almost $53 billion a year earlier, according to estimates from Aon Benfield, the world’s biggest reinsurance broker.

Revenue from property and casualty insurance rose 5.4 percent in the first half, while life and savings revenue gained 2.8 percent. Asset management revenue fell 5 percent and the business recorded 7.7 billion euros of net outflows, mostly in the first quarter, according to Axa’s data.

“Outflows are slowing down,” Exane’s Boissin said. “It isn’t so bad.”

AllianceBernstein Holding LP, the New York-based fund-management unit, had 5.2 billion euros of outflows in the first half. At Axa Investment Managers, based in Paris, clients pulled a net 2.5 billion euros in the first half, with outflows stopping in the second quarter, according to Axa’s data.

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