Paris: The AXA insurance multinational reported a 38% drop in first-half net profit on Wednesday to €1.323 billion ($1.9 billion) but this was twice the figure expected by analysts.
The group said that it had ample capital and suggested it was eyeing expansion opportunities in central Europe and South America, and the price of its shares surged by 3.92% to €15.91 euros. The overall French market was showing a gain of 0.45%.
The French group said that the life assurance business had slowed down, capital gains had fallen and that it had had to make new provisions.
The figures pointed to a sharp fall by savers in the amounts they were putting into instruments offered by AXA, and the amount of funds in portfolio management fell heavily.
A consensus of analysts’ forecasts as polled by Dow Jones Newswires had put the outcome at €592 million.
The results mark a switch into profit for the group which had reported a net loss of slightly more than one billion euros in the first half of last year.
Chief executive Henri de Castries told a telephone conference that these “solid” results marked a clear recovery from the equivalent figure last year but said that AXA had not been spared by the crisis.
He said that the fall in profit on a 12-month basis reflected mainly a fall in the contribution from activities for life assurance, savings and pension plans.
The profit from these areas had fallen by more than 60%.
These activities account for more than 60% of group sales, and the overall volume of business in these divisions had fallen further, by 16 %. The margin on new business had fallen.
The overall results had been set back by a fall in capital gains and by provisions of €312 million for depreciations. But there was compensation for this because adjustment of deeply depreciated assets amounted to €280 million instead of €1 billion 12 months ago.
The results had been bolstered by a good performance in the damage insurance sector for which sales rose by 2.8%, and by a 3.5% rise in international insurance business.
But portfolio management was hit with a €38 billion drop in assets under management on a 12-month basis, and this cut commission income. However, “when one sees the total volume of assets managed by the group, it is almost stable over six months,” de Castries said. AXA was one of the biggest managers of assets in the world, he added.
He said that when markets began to rally “we will benefit.” The signals about the state of the world economy were “generally encouraging.”
AXA said that the ratio of its available shareholder funds relative to regulatory shareholder funds had improved by six points to 133% and that it had reduced borrowings.
“We have €7 billion in surplus relative to the capital needed for our business,” de Castries said.
The group was also working to save about €600 million in 2010, finance director Denis Duverne said.
De Castries also said that there were “opportunities” for external growth, implying takeovers or ventures, in central Europe and in some countries in South America.
At brokers CM-CIC, analyst Pierre Chedeville said: “These results show a more favourable financial environment than that in the fourth quarter of 2008, despite still significant asset depreciations.”
But “at operating level, the situation has deteriorated badly and remains difficult for life-savings-pension activities as well as asset management.”