AXA XL drives profit recovery on back of rising prices and reduced Covid claims

Further strong price increases at renewals enjoyed by AXA XL, the impact of its recent portfolio re-underwriting, plus no repeat of the major €1.5bn Covid-19 claims booked last year, helped drive a strong recovery in profits at Paris-based AXA during the first half of this year. The group reported total group gross revenues from its combined P&C, life and savings, health and asset management businesses up 3% to reach €59.4bn for the first half of 2021. Net income flew up 180% on a reported basis from €1.4bn to €4bn. AXA XL, the group’s commercial and corporate insurance and reinsurance group, led the charge with an excellent set of numbers. Total group P&C revenues rose by 4% to €28.1bn, with growth reported across all geographies. Commercial lines revenues increased by 6% to €18.7bn. AXA said that this was driven mainly by positive price effects of some 7%. Price effect is calculated as a percentage of total gross written premiums in the prior year. Price increases on renewals are calculated as a percentage of renewable premiums. This strong growth in revenues in the first half was mainly driven by AXA XL, up 7%. The group said that this was mostly from continued favourable price effects of 11% and the partial recovery of clients’ turnover. This was partly offset by disciplined exposure reduction, notably in property and casualty lines down 6% in France and 3% in Europe. At AXA XL, price increases on renewals remained “strong” in the first half. They were up 15% in insurance and 10% in reinsurance, said the group. Personal lines revenues increased by 1% to €9.3bn, with 4% higher revenues in non-motor from higher volumes and favourable price effects, partly offset by slightly 1% lower revenues in motor. AXA’s current year combined ratio improved by 8.4 points. The all year combined ratio was 93.3% for the first half of this year. This was driven by the lack of Covid-19 claims compared to the first half of last year, which was worth 6.5 percentage points, and a strong improvement in the current year loss ratio excluding natural catastrophes, worth 2.1 percentage points. AXA said that this was mostly driven by AXA XL that achieved higher pricing and portfolio re-underwriting, partly offset by higher nat cats. As a result of this improved picture, P&C underlying earnings were up 323% to €2.2bn in H1. AXA’s preliminary estimate of claims associated with the July floods that hit Germany, Belgium and other parts of western and central Europe, is €400m before tax and net of reinsurance. Thomas Buberl, AXA CEO, not surprisingly focused on the excellent results delivered by AXA XL in his headline comments. The CEO announced the $15.3bn acquisition of XL in September of 2018, only five months after he was appointed. The deal was not well received by investors and came at a time when the commercial and corporate insurance market was struggling after a long soft market and rising losses. Mr Buberl was convinced that he would be proven right and these latest results seem to suggest that the complex integration of XL into AXA is working out. “This strong result was achieved across all our markets, and notably at AXA XL with very good underwriting performance. Taking advantage of the continued favourable pricing momentum, AXA XL is well positioned to deliver its €1.2bn earnings target in 2021 and sustainable and profitable growth beyond,” said Mr Buberl.

AXA XL drives profit recovery on back of rising prices and reduced Covid claims

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