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August 03, 2016 at 07:00 AM
(Bloomberg) – Axa SA, France’s biggest insurer, said first-half profit rose 4 percent as increased earnings from life and health insurance helped offset higher claims from natural catastrophes.
Net income climbed to 3.2 billion euros ($3.6 billion) from 3.1 billion euros a year earlier, the Paris-based company said in a statement on Wednesday. That missed the 3.6 billion-euro average estimate of five analysts surveyed by Bloomberg.
Thomas Buberl was appointed to take over as Axa’s CEO after Henri de Castries unexpectedly said he would leave the company in September. Buberl, 43, plans to increase Axa’s profitability through 2020 by seeking 2.1 billion euros of cost cuts and growing digital investments. Growing earnings is increasingly difficult for insurers like Axa and Allianz SE as competition for premiums intensifies and quantitative easing hurts income from investments.
“Our balance sheet remains very strong with a Solvency II ratio at 197 percent, well within our target range,” Buberl said in the statement. The ratio, a measure of an insurer’s ability to absorb losses under regulatory rules introduced in Europe this year, stood at 205 percent a year ago. Axa’s target range is from 170 percent to 230 percent.
If the ratio exceeds its target range, Axa will consider returning excess capital to shareholders among other options, the company said in December. At that time, it raised the dividend payout to 45 percent to 55 percent of its adjusted earnings.
Axa rose as much as 3 percent in Paris trading and was down 1.1 percent at 17.19 euros as of 10:59 a.m. The stock has fallen 32 percent this year, giving the company a market value of about 42 billion euros. The Bloomberg Europe 500 Insurance Index declined 23 percent over the same period.
Axa is targeting an adjusted return on equity, a key measure of profitability, of 12 percent to 14 percent between this year and 2020. Underlying earnings per share are expected to rise 3 percent to 7 percent annually over the period. Oliver Baete, who took over last year as CEO of Allianz, Europe’s biggest insurer, has similar plans to boost profitability. “Buberl is taking over a company with sound operations and a better-than-expected solvency level,” said Andreas Schaefer, an analyst at Bankhaus Lampe with a buy rating on the insurer. “The targets to grow earnings amid interest rates that continue falling are ambitious at both Allianz and Axa.”
