2nd UPDATE: Axa Shares Rise After 1st Half Net Beats Expectations
August 05 2009 - 9:05AM
Dow Jones News
Shares in Axa SA (AXA) jumped Wednesday after the French insurer
said first-half net profit dropped less than expected and its U.S.
business recovered from a difficult end to last year.
Europe's second-largest insurer by market capitalization said it
remains ready to ride out any market turbulence still to come.
"We are prepared to withstand a further possible market downturn
and we are well-positioned to benefit from a market upturn," Chief
Executive Henri de Castries said. He declined to give a forecast
for the rest of 2009, noting that a number of uncertainties still
hung over the economic environment.
The group said its Solvency 1 ratio reached 133% at the end of
June, up from 127% at the end of December.
Net profit for the six months ended June 30 decreased 39% to
EUR1.32 billion from EUR2.16 billion a year earlier, significantly
above an average EUR592 million forecast by a Dow Jones survey of
nine analysts. The profit was also a stark improvement compared
with the EUR1.24 billion net loss the insurer suffered in the
second half of 2008.
Axa's first-half results and balance sheet are solid, Nick
Holmes, a London-based analyst at Nomura said in a note to
investors.
"The earnings strength mainly comes from a significant
turnaround in the U.S., as expected, highlighting that AXA has
largely resolved the challenges facing its variable annuity hedging
program," said Holmes, who has a buy rating on Axa stock.
Problems with hedging on the variable annuity products amid
financial market turmoil helped to drag Axa into the red in the
second half of 2008. The group has since overhauled the operations
but remains committed to providing the products, de Castries
said.
At 1157 GMT, Axa shares traded up EUR0.76, or 4.9%, at EUR16.07,
outperforming a 2.1% rise the Stoxx 600 European insurance index.
Prior to Wednesday, the stock had gained 18% in the previous six
months, outshining the Stoxx 600 insurance index, as financial
markets began to return to normal and fears of a potential capital
increase subsided.
Underlying earnings, which exclude capital gains or losses on
financial assets, slid 24% to EUR2.12 billion from EUR2.77 billion
a year earlier. That was still above the EUR1.73 billion expected
by analysts.
As a part of measures to offset the damage financial market
instability has done to earnings, Axa has put into action efforts
to reduce expenses, Chief Financial Officer Denis Duverne said. The
initiatives, first mentioned in February, should yield EUR600
million in savings in 2009 and 2010 with the full effect to be felt
in 2010, Duverne said.
Axa's asset-management activities, where a EUR13 billion fall in
assets under management dragged down revenue, reported the steepest
drop in underlying earnings, down 38% to EUR176 million.
The group's two largest earnings generators, its
life-and-savings and property-and-casualty divisions, posted 12%
and 13% declines in underlying earnings, respectively.
Revenue fell 1.8% to EUR48.41 billion from EUR49.32 billion a
year ago, slightly beating the EUR47.9 billion forecast by
analysts.
Company Web site: www.axa.com
-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738;
jethro.mullen@dowjones.com