Analysts at JP Morgan have said that a performance turnaround for AXA’s XL division will be key to the company’s results for the first half of 2021, which are due to be released in early August.
Specifically, JP Morgan says that it is important for AXA’s management to showcase that the business is progressing well towards its €1.2 billion underlying earnings target for 2021.
XL has been viewed as underperforming other segments since its consolidation, and, as a commercial P&C player, it was not helped by the COVID-19 outbreak.
Management is actively adjusting the business portfolio and being more conservative on reserving, but it will be a negative for AXA’s share performance if the target is not achieved in guided timeline, analysts say.
Currently, XL’s underlying earnings is expected at €468 million, compared with management guidance of €1.2 billion for the full year.
JP Morgan’s forecast for H1 is lower on a run-rate basis versus the full year, partly due to the expectation that strong pricing momentum will be benefit H2 more, and partly due to heavy nat cat losses in the first half of the year.
Meanwhile, group underlying earnings are estimated at €3.2 billion, compared with €1.9 billion last year due to the disruption caused by COVID.
On an underlying basis, analysts expect earnings to decline by 2% year on year, mostly driven by unfavorable FX movements. JP Morgan’s underlying estimate for 2021 remains at €6.6 billion overall.
