Global insurer and reinsurer AXA has reported a 48% decrease in underlying earnings to €1.9 billion for the first half of 2020, driven mostly by a 72% decline in property and casualty (P&C) business primarily as a result of the impacts of the COVID-19 pandemic.
The French re/insurer has reaffirmed its best estimate for the impact on 2020 underlying earnings across the group from pandemic-related P&C claims and solidarity measures at €1.5 billion, after-tax and net of reinsurance.
Within P&C, underlying earnings fell by 72% to €554 million in H1 2020, mostly as a result of the pandemic, including a business interruption impact of €800 million mainly at AXA XL, France, UK & Ireland, Switzerland, and Germany, and an event cancellation impact of around €500 million, again mostly at AXA XL.
P&C total revenues declined by 1% for the group in the first six months of the year to €28.1 billion, comprised of stable revenues in commercial lines at €18.4 billion, and a 2% decrease in personal lines to €9.6 billion.
The segment’s all year combined ratio totalled 101.7% as at the end of June 2020, which represents a deterioration of 6.5 percentage points on the same period last year, driven by the impact of the COVID-19 pandemic.
In Life and Savings, AXA’s total revenues fell by 8% to €15.6 billion in the six-month period, as 4% growth in the first-quarter of the year was more than offset by a 21% decline in Q2 in the context of COVID-19. The underlying earnings within this business segment decreased by 9% to €1.165 billion in H1 2020, driven by a lower technical margin.
In Health, AXA’s revenues increased by 9% to €7.9 billion, while the combined ratio deteriorated by two percentage points to 94% as a result of the lower claims frequency during the pandemic-induced lockdown period. Underlying earnings in AXA’s health operation grew by 7% in H1 2020 to €388 million.
Across the group in H1 2020, total revenues declined by 2% to €52.4 billion, which is reflective of 4% growth in Q1 which was more than offset by a 10% dip in Q2 in the context of the ongoing pandemic.
Overall, AXA has announced net income of €1.4 billion for the first half of the year, which represents a decline of 39% from the same period last year.
Commenting on the company’s results, Thomas Buberl, Chief Executive Officer (CEO), said: “In the first half of 2020, AXA demonstrated its resilience in the challenging context of the Covid-19 pandemic. Revenues were down 2%, to Euro 52 billion, reflecting strong growth in the first quarter offset by lower business activity in the second quarter. Growth in Health remained strong throughout the first six months of the year, at +9%, and price increases in P&C Commercial lines continued to accelerate.
“The Group’s underlying earnings were Euro 1.9 billion, down 48%, and were up 1% excluding Covid-19 claims3 and the disposal of Equitable Holdings. The impact of Covid-19 on AXA’s earnings was in line with our previously published guidance. Commercial lines were the most impacted, notably at AXA XL. The rest of the Group was resilient, with the impacts from Covid-19 claims largely offset by lower frequency in Motor and growth in Health and Asset Management.”
Adding: “AXA’s Solvency II ratio was resilient at 180%, its debt gearing was reduced by 1.2 points to 27.6%, and cash remittance amounted to Euro 4.9 billion, confirming the strength of the Group’s balance sheet in volatile market conditions.
“AXA’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 Commercial lines. With a clear focus on technical risks, the Group is well positioned for a prolonged period of low interest rates.”
In light of the unprecedented and significant impacts of the ongoing crisis on the firm’s underlying earnings, AXA has decided to withdraw its Ambition 2020 underlying earnings per share and adjusted return on equity targets. Although, the firm has selected to maintain its Solvency II ratio and Free cash flow targets for the year.
“The Covid-19 pandemic has shown the critical role of insurance in protecting societies and supporting economic recovery. This conviction is encapsulated in our new purpose ‘Acting for human progress by protecting what matters’. As a global insurance leader and investor, the Group continues to take ambitious measures to meet the major challenges of our time, aligning post-Covid recovery strategies with our 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,” concluded Buberl.
