AXA XL contributes strong results as pricing momentum picks up pace

AXA CEO Thomas Buberl will have been delighted to report that AXA XL – the combination of XL Group, AXA Corporate Solutions Assurance and AXA Art – had a “great” first half of 2019 with revenues up by 9% to €10.4bn, a combined ratio of 98.3% and underlying earnings of €502m from a group total of €3.6bn. Mr Buberl took some flak for the decision to make the €12.4bn acquisition of XL Group last September, because the price was regarded as high at a time when decent profits were hard to come by in the highly competitive and catastrophe-ridden global corporate insurance market. The market remains competitive, but conditions and underlying losses are definitely improving for insurers, as underlined by AXA XL’s results in the first six months of this year. The healthy €502m underlying earnings contribution made by AXA XL was built upon current-year underwriting profits boosted by broad based price increases, volume growth and early delivery of cost synergies, partly offset by elevated non-cat large losses. Other positive factors were favourable prior-year reserve developments related to fourth-quarter 2018 natural catastrophes, notably California wildfires, and improved investment income, explained the insurer. AXA XL reported that price increases on renewals were 5% in insurance and 2.4% in reinsurance during the first half of this year. “The favourable pricing momentum continues to build across most lines,” added the insurer. Mr Buberl focused on AXA XL’s contribution as he presented the group numbers, and possibly found it difficult not to add ‘I told you so’ to his comments. “AXA continued to deliver strong operating performance, with a 4% growth in revenues and a 10% increase in underlying earnings per share in the first half of 2019. AXA’s earnings benefited from a virtuous double dynamic, both growing volumes and improving profitability across all our geographies and preferred segments,” he said. “AXA XL had a great first half, with continued and disciplined growth in revenues and a solid contribution to the group’s earnings. Synergies are materialising well and AXA XL should benefit from the increasingly positive pricing context,” continued Mr Buberl. “AXA is very well advanced on its transformation journey. The group has reduced its sensitivity to financial markets, created the [number one] global P&C commercial lines insurance platform and strengthened its position as a world leader in health insurance. I would like to thank all our colleagues and partners for their critical role in the execution of our transformation, as well as our clients for their continued trust,” he added. Greg Hendrick, CEO of AXA XL, said: “I am very pleased that our integration is on track and we are already benefiting [from] being part of the group and the power of the AXA brand. The pricing environment strengthened further in the first half of 2019, with momentum building across most lines. In this favourable context, we continue to deliver strong growth while remaining selective in our underwriting.” AXA XL revenue growth of 9% was driven by a number of regions and markets. P&C insurance revenue was up 15%, benefiting from both volume growth and positive price effects, notably in North America professional lines, including a new significant multi-year contract sold in the first quarter. Property lines also performed well, benefiting from early revenue synergies in Europe, explained the group. Specialty business was up 6%, mainly driven by political risk, accident and health, and fine art and species business. This improvement was the result of higher volumes, partly offset by continued selectivity in London wholesale and marine. Reinsurance business was up 2%, driven by both higher volumes and “favourable price effects” in specialty lines, partly offset by lower volumes in property catastrophe business. In other results news, RSA said it is “on or ahead of schedule” to clean up its commercial insurance business, as the group reported half-year group operating profit down 8% to £280m.

AXA XL contributes strong results as pricing momentum picks up pace

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