Despite the Covid-19 pandemic AXA said its “well positioned” as a group and remains resilient in these challenging circumstances
AXA announced that its underlying group earnings had dropped by 48% to €1.9bn (£1.71bn) due to the impact of the Covid-19 pandemic, in its half year results for 2020 released today.
Commercial lines were the “most impacted” – notably AXA XL.However, the rest of the group remained resilient with the impact of Covid-19 claims which were offset by a lower frequency in motor as well as growth in health and asset management.
On a call with the media this morning, the insurer said that the Covid-19 impact is in line with its previous estimate, however the group is “well positioned” to get through this.
Thomas Burberl, chief executive at AXA said the firm’s “strategic vision and business profile shift are more relevant than ever, notably with its growing and profitable health business, and an unparalleled opportunity to benefit from the hardening pricing cycle in P&C [property and casualty] commercial lines”.
The decline in underlying earnings was driven by P&C which dropped by 72% because of the impact of Covid-19 claims.
Gross revenues also dropped by 10% to €52.391m (£46.82), this is compared with its H1 2019 figure of 57.949m (£51.32). And its net income decreased by 39% to €1.4bn.
But Burberl emphasised that “with a clear focus on technical risks, the group is well positioned for a prolonged period of low interest rates”.
“The Covid-19 pandemic has shown the critical role of insurance in protecting societies and supporting economic recovery”, he added.
“In the first half of 2020, AXA demonstrated its resilience in the challenging context of the Covid-19 pandemic. Revenues were down 2%, to €52bn (£46.82), reflecting strong growth in the first quarter offset by lower business activity in the second quarter,” Burberl added.
Meanwhile in the UK and Ireland gross revenues slipped by 2% at €2.794bn (£2.528m).
Although personal motor stayed steady at €678m (£613.5m), while non-motor plunged by 4% to €282m (£255.1m).
But it was commercial motor that took the biggest hit slipping 10% at €322m (£291.3m) and commercial non-motor remained stable at €489m (£442.5m).
Its Solvency II ratio remained resilient coming in at 180%.
This has led AXA to withdraw its Ambition 2020 underlying earnings per share and adjusted return on equity targets.
Following discussions with the French regulator, AXA’s board of directors took the decision not to propose an “exceptional distribution” of reserves to shareholders in Q4 this year.
Back in June, AXA announced it was cutting its dividend from €1.43 (£1.49) per share to €0.73 (£0.66) per share following its communications from the European Insurance and Occupational Pensions Authority (EIOPA) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR).
This was due to AXA revealing that it was anticipating €1.2bn (£1.2bn) in overall claims costs after tax and net of reinsurance as a result of the pandemic.
At the time, the insurer said increased claims would mostly come from business interruption and event cancellation business
AXA also said it expected this to be partly offset by reduced claims in some areas, most notably from motor.
The insurer reiterated its stance as a green insurer, on a call with the media this morning.
As a global insurance leader and investor, the group continues to take ambitious measures to meet the major challenges.
This means aligning post-Covid-19 recovery strategies with its long-standing commitment to facilitate the green economy transition.
“Our people are key to the group’s performance, and I wish to thank all our employees, agents and partners, for their unwavering commitment to provide support and undisrupted service to our clients during these challenging times,” Burberl added.