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AXA’s P&C underlying earnings down in 2020 on COVID-19 claims

25th February 2021 - Author: Luke Gallin

Global insurer AXA has reported an 18% dip in net income to €3.164 billion for 2020 and a 34% dip in underlying earnings to €4.264 billion, driven in part by the impacts of the COVID-19 pandemic on the performance of its AXA XL property and casualty (P&C) business.

axa-logoAll in all, AXA has reported gross revenues of €96.723 billion for 2020, which is down on the €103.5 billion reported a year earlier.

By business line, revenue growth of 1% was seen in P&C with higher revenues in commercial lines from strong price rises, notably at AXA XL. Health revenues increased by 6% with growth across all lines and geographies.

In Life and Savings, AXA has reported a 6% decline in revenues for the year as a result of lower sales in G/A savings in France and Europe as a result of COVID-19. In Asset management, AXA has announced 4% revenue growth from higher average assets under management.

Commenting on the COVID-19 pandemic and related claims impact, AXA states that the impact on 2020 underlying earnings for the Group from pandemic-related P&C claims and solidarity measures totalled €1.5 billion, post-tax and net of reinsurance.

This figure is in line with the re/insurer’s estimate provided with its H1 2020 results. Regarding the impact of further lockdown measures in the second-half of last year, AXA says that additional claims in commercial lines were offset by frequency benefits in retail lines of business, resulting in a broadly neutral impact.

The significant dip in underlying earnings to €4.3 billion in 2020 was driven by a 51% decline in P&C, mostly owing to the impact of COVID-19 related claims.

Within in P&C, total revenues increased by 1% to €48.7 billion, as commercial lines revenues grew by 2% to €31.7 billion, driven mostly by AXA XL Insurance with continued favourable price effects, somewhat offset by underwriting actions designed to improve profitability and the expected impact of the reduced activity of insureds in light of the pandemic.

At AXA XL Insurance, price increases on renewals were +17% in 2020, of which +22% occurred in the final quarter of the year. At AXA XL Reinsurance, price increases on renewals were +7% in 2020 and price increases for January 1st, 2021 renewals were +9%, against +6% in Jan 1st 2019.

In Personal lines, revenues declined by 1% to €17 billion, mostly driven by Europe and France, notably from reduced new business activity in motor lines as a result of the COVID-19 pandemic.

Within P&C, AXA has reported an all year combined ratio of 99.5%, reflecting the impact of pandemic related claims int he period and also higher natural catastrophe charges at AXA XL.

The P&C segment’s underlying earnings fell by more than 50% year-on-year to €1.644 billion, on the back of COVID-19 claims, notably from business interruption (€1.1bn), event cancellation (€0.6bn), other lines (€0.5bn mainly from credit, financial lines and liability), and solidarity measures and other (€0.2bn), and also higher nat cat charges at AXA XL as a result of higher frequency of events in the Atlantic.

Thomas Buberl, Chief Executive Officer (CEO) of AXA, commented: “Throughout the Covid-19 crisis, AXA has been actively fulfilling its role in society, serving its customers and supporting its employees, while contributing to the economic recovery through Euro 700 million investments in SMEs as well as other solidarity measures in France and other countries where the Group operates.

“AXA’s revenues were resilient in 2020, down just 1% compared to the previous year, reflecting the relevance of our strategic choices and business mix. Our preferred segments, P&C Commercial lines, Health and Protection, continued to perform well, growing by 3% in 2020 and accelerating in the fourth quarter (+5%).

“The Group’s underlying earnings were Euro 4.3 billion in 2020, notably impacted by Euro 1.5 billion of Covid-19 related claims, as previously communicated, and by higher natural catastrophes. We are confident in our earnings outlook and have set a 2020 starting base of Euro 6.3 billion underlying earnings for our 2021 – 2023 strategic plan targets.

“AXA’s solvency II ratio at December 31st was 200%, up 20 points from September, and including +13 points from the integration of AXA XL into the Group’s internal model.

“After carefully considering the Group’s balance sheet position, cash flows and overall operational performance as well as the continuing uncertainties related to the ongoing Covid-19 crisis, the Board of Directors decided to propose a dividend of Euro 1.43 per share.

“I would like to thank all AXA colleagues, agents and partners for their unwavering commitment during these challenging times, as well as our clients for their loyalty and trust. Our strategy is aligned with the interests of all our stakeholders and firmly rooted in our purpose – ‘Acting for human progress by protecting what matters’.”

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