Axa avoids worst of the fallout
Axa, Europe’s second-biggest insurer, reported lower first-half net profit yesterday although its earnings still managed to beat analyst expectations.
Net profit fell 32 per cent to €2.16bn (£1.7bn) partly due to write downs on fixed income assets. The French insurer revealed a €237m impact on asset backed securities and a €502m hit on fixed income funds.
Even so, the company managed to beat the average market forecast with its first-half underlying earnings, which rose 3 per cent to €2.7bn. Axa said its 2008 underlying earnings should be in line with those of 2007, provided market conditions did not deteriorate materially. It also scotched market speculation that it might have to raise capital, confirming this was not the case.
“Strong solvency. No capital increase required,” the company said in a presentation to investors.
Henri de Castries, chairman of the Axa management board, said that Axa had proved “robust” in a turbulent market environment.
Keef, Bruyette & Woods analyst Ralph Hebgen agreed with his view. He told CityA.M.: “I think today is the day when you can demonstrate in the numbers that Axa is a very high-quality company. The earnings are extremely robust in difficult economic conditions.”
The global credit crunch, which has been sparked by losses on US subprime mortgages, has hit insurers around the world. Earlier this month, reinsurers Munich Re and Swiss Re both posted lower profits due to the financial market turbulence. Axa’s shares, which have fallen 26 per cent this year, closed up 1.7 per cent.