Axa CEO gets boost on reports of strong profitability

By BLOOMBERG

LONDON • Axa SA gave under-fire CEO Thomas Buberl (picture) a needed boost with first-half (1H) earnings that beat estimates and growth in new business.

Axa, posting its first results since a disappointing partial spinoff of the French insurer’s US unit, reported strong profitability across the firm and said first-half underlying earnings per share rose 6% to €1.33, exceeding estimates. New business volumes grew strongly in health and protection.

“We view this as a strong set of results,” Goldman Sachs Group Inc analysts led by Johnny Vo wrote in a note. Axa has made clear that its No 1 priority is reducing leverage and restoring financial flexibility, they wrote.

Axa rose as much as 2.4% in Paris trading, the most in two months. The stock was up 1.3% at €21.97 as of 9:22am in Paris.

The CEO has been under scrutiny since he surprised investors by announcing a US$15.3 billion (RM62.73 billion) takeover of XL Group Ltd in March, part of a plan to shift Axa toward property and casualty insurance.

That pressure intensified when Axa, Europe’s second-largest insurer, raised almost US$1 billion less than it had hoped from the initial public offering of its US unit. The firm said on Wednesday that it’s in talks to sell a retirement products business in Dublin and expects €1.17 billion (RM5.53 billion) in cash from the deal.

“Our simplified operating model is bearing fruit,” Buberl said in a statement yesterday. “We have a strong growth dynamic across our geographies.”

The acquisition of XL, Axa’s biggest ever, is expected to be completed in the 2H. The transaction will make Axa the top provider of commercial casualty coverage just as premiums rise after last year’s hurricanes and California wildfires. The deal will also allow the insurer to focus on parts of the industry that are less sensitive to financial markets, a key target for insurers after investment income was hurt by a decade of low interest rates.

“Investors are uncertain about the strategic direction that he’s taking the company in, and the thinking behind it,” Bloomberg Intelligence analyst Charles Graham said before the earnings report.

Costs rose at Axa’s property and casualty unit in the first half when compared with premiums. The combined ratio for P&C has risen 0.5 percentage points to 97.1%, mainly due to weather related events in Europe.