Axa Profit Beats Estimates on Property and CasualtyFabio Benedetti-Valentini
Axa SA, Europe’s second-largest insurer, said first-half operating profit gained 14 percent, beating estimates on higher property-and-casualty earnings.
Axa jumped as much as 3.9 percent to a three-year high in Paris trading after posting operating income of 2.58 billion euros ($3.41 billion), above the 2.38 billion-euro average estimate of four analysts surveyed by Bloomberg. Net income fell a less-than-estimated 3 percent to 2.47 billion euros.
“Performances are at the ‘rendezvous,’ both in the property-and-casualty and life-and-savings businesses,” said Thomas Jacquet, a Paris-based analyst at Exane BNP Paribas who recommends buying the shares. “They’re delivering.”
Axa is expanding in Asia and has shifted billions of euros of capital to faster-growing markets since 2010, while offloading assets in mature markets such as the U.S., Canada and the U.K. Adjusted return on equity, a measure of profitability, reached 16.5 percent in the first half, above the company’s announced target of 13 percent to 15 percent for 2015, Axa said.
“In high-growth markets, we experienced strong top-line and earnings momentum,” Chief Executive Officer Henri de Castries said in a statement today. “We also continued to grow earnings in mature markets.”
Axa was up 2.9 percent to 17.24 euros by 10:37 a.m. after reaching 17.42 euros, the highest since April 2010. Axa has advanced 30 percent in 2013 while the 30-member Bloomberg Europe 500 Insurance Index gained 18 percent.
Allianz SE, Europe’s largest insurer, also beat earnings estimates, posting a 27 percent jump in second-quarter net income. The stock rose 1.5 percent in Frankfurt trading.
Axa’s property-and-casualty unit had an 8.9 percent increase in operating profit to 1.13 billion euros. The unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 95.7 percent from 96.5 percent a year earlier. A ratio below 100 percent means an insurer is making a profit from underwriting. Axa booked 73 million euros in costs from German floods in the first half.
Axa’s board proposed yesterday to reappoint the 58-year-old de Castries, who also holds the chairman role, for a four-year term, the insurer said in a separate statement. The board also backed Deputy CEO Denis Duverne and Vice-Chairman Norbert Dentressangle for four-year mandates, it said.
De Castries and Axa’s top management team received “full confidence” from its board to deliver the insurer’s 2015 targets and “strategically steer the Axa Group through the next phase of its development,” the insurer said.
The chairman and CEO roles will stay together for the next mandate, de Castries said in a Bloomberg Television interview.
Axa, which is seeking to double revenue by 2015 in emerging markets from China to Turkey to Mexico, generates about 13 percent of its life-and-savings operating earnings and 4 percent of its property-and-casualty operating earnings in high-growth markets, Raymond James analysts estimated in June.
Axa agreed in April to buy a 50 percent stake in Chinese auto insurer Tian Ping in a deal valued at 485 million euros. Axa’s annual property-and-casualty premiums in Asia’s emerging markets will climb to almost 2 billion euros in 2015, double last year’s level, Gaelle Olivier, head of the insurer’s Asia P&C business, said on May 31.
Axa agreed in April to sell a U.S. life-insurance unit to Birmingham, Alabama-based Protective Life Corp. for $1.06 billion. Axa Investment Managers, the Paris-based asset-management unit, is selling its stake in Axa Private Equity to a group of investors for as much as 488 million euros, the company said in March.
Axa in the first half booked a 151 million-euro gain from selling a 2.4 percent stake in BNP Paribas SA, France’s largest bank, the insurer said.
Operating profit from life and savings, Axa’s biggest unit, rose 10 percent to 1.53 billion euros, helped by higher sales of life policies and “strong offer positioning” for protection-and-health policies in markets such as China, it said.
In November, Axa lowered its earnings targets through 2015 as financial markets weighed on its life-insurance and asset-management units. Axa said on Nov. 7 it expects operating earnings per share to grow 5 percent to 10 percent annually until 2015, compared with a previous target of 10 percent.