AXA reports strong result, but little growth for ACS

AXA Group reported a 12% rise in net income to €5bn in 2014, which included a €0.3bn writedown on the value of its non-life business in Russia, RESO, due to the worsening economic outlook in the country. Overall revenues were 3% higher at €92bn, reflecting growth in its life and asset management business. The company's chairman and chief executive Henri de Castries described AXA's results in 2014 as 'strong and good'. He said that the insurer had delivered. He noted that underlying earnings had crossed the €5bn mark for the first time in the company's history. However, he said that AXA would have wished for higher revenue growth in 2014, while 2% growth in property and casualty underlying earnings could be seen as disappointing. The low property and casualty earnings growth was the result of higher than average catastrophe losses in Europe and Mexico, Mr De Castries explained.hideWhile group revenues were up 3%, the insurer's property and casualty business saw its growth slow. The corporate and specialty insurance business shrank slightly. AXA Corporate Solutions’ (ACS) gross premiums were 1% lower in 2014 on a comparable basis (1.2% higher on a reported basis) at €2.12bn, as a consequence of lower volumes in liability insurance, aviation and marine, partly offset by growth in motor and property. The unit saw a 5% reduction in liability premiums-due to a change in payment pattern of a large contract-and a 10% reduction in aviation insurance, reflecting lower rates. It also posted a 12% increase in motor premiums and a 4% rise in property, mainly due to higher new business sales. "After several years of soft underwriting conditions, corporate risks insurance pricing conditions continued to tighten in 2014, across all business lines," AXA said in its 2015 Business Report. ACS reported a 34% rise in net income to €201m in 2014, or a 33% increase at constant exchange rates. However, underlying earnings decreased by 2% to €147m, or a 3% decline at constant exchange rates. "AXA Corporate Solutions ended the year with a performance in line with its objectives, despite a challenging economic context, increased competition and the occurrence of major claims, mainly in the aviation and property lines," the insurer said in a statement. AXA's corporate insurance business produced a combined ratio of 97.9%, almost unchanged on the 97.7% achieved in 2013. The current accident year loss ratio increased by 0.6 points to 86.1% driven by higher large losses in property and construction, partly offset by lower large losses in liability. Higher positive prior year reserve developments in property and motor, however, were partly offset by a negative prior reserve development in liability for ACS. Overall, AXA's property and casualty business-not including ACS-posted a 12% rise in net income to €5bn, while operating income was up 8% to €5.1bn. Property and casualty revenues were up 1% to €29.7bn, mainly driven by an average positive price increase of 2.2% across its business. In line with the group strategy, ACS said it will target geographic diversification in emerging countries. It plans a new structure with Tian Ping, the Chinese insurer it acquired last year, and intends to launch a hub in Morocco for Sub Saharan Africa. ACS will also continue to focus on mid-market corporates-those with revenues of €600m to €4bn. This an area in which it achieved growth in 2014, as well as in emerging markets. Property and casualty revenue growth was partly offset by 'pruning actions', said AXA, most notably in commercial lines, mainly in France and Spain, Italy commercial non-motor and German commercial motor. Commercial property and casualty premiums were 2% higher at €2.1bn in 2014, while commercial rates increased by an average 2%. "In 2014, the global property and casualty market experienced a more moderate growth than in 2012 and in 2013. In mature countries, the p/c market experienced a limited slowdown, with growth sustained by moderate tariff increases in both individual and commercial lines, especially in Germany, France and the UK," AXA said in a statement. The combined ratio for AXA's property and casualty business deteriorated by 0.4 points to 96.9% in 2014. Lower claims frequency was partly offset by higher natural catastrophes losses that amounted to €561m, largely as a result of European storm Ela (€271m) and Hurricane Odile (€256m) in Mexico. Speaking to analysts, Mr De Castries said that AXA has raised some €9bn through disposals since 2010, having invested just under €1bn each year on acquisitions. In 2014 AXA completed a number of acquisitions, entering the Colombian and Nigeria insurance markets. It also became the largest foreign non-life insurer in China with a deal to buy a 50% stake in Tian Ping. According to Mr De Castries, AXA remains interested in acquisitions, but only where the financials make sense. "We want to increase our footprint in emerging markets but we do not think we need to spend zillions," he said. He noted that AXA has been investing, and will continue to invest, significant amounts in digital technology. "Digital will transform the insurance industry faster than people thought five years ago," he said. Digital technology will 'fundamentally change client relationships' but also change underwriting more than some people think, Mr de Castries said. Digital technology will enable AXA to better know its clients' risks, he said. "If we can convince customers to share their data we can align our interests," he added.

AXA reports strong result, but little growth for ACS

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