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Axa's cash and capital positions beat expectations

Posted On: Feb. 25, 2021 8:48 AM CST

Thomas Buberl

(Reuters) — Axa SA, Europe's second-biggest insurer, beat expectations on cash and capital positions for 2020, sending its shares higher despite a slump in profit due to COVID-19-related claims.

Axa had cash holdings of €4.2 billion ($5.1 billion) as of the end of December, well above its target of €1 billion to €3 billion — a buffer that Credit Suisse analysts said puts the company “back into the category of one of the strongly capitalized major insurers in the sector.”

Its solvency II ratio — a measure of capital strength— stood at 200%, above analysts’ expectations of 190%.

The stronger performance in cash and capital helped it reinstate a €1.43 dividend per share — in line with 2019 results. That compared with €0.73 last year when European insurers were required to cut dividends to maintain reserves during the pandemic.

Speaking on a conference call with journalists, Axa CEO Thomas Buberl expressed confidence for 2021.

Axa's shares surged after the results, up 4.28% at 1145 GMT.

But net profit came in at €3.16 billion, down from €3.86 billion a year earlier and far below a Refinitiv I/B/E/S estimate of €4.4 billion.

Underlying earnings fell by 34%, while revenue was down 7%.

Claims for business interruption and event cancellations due to the new coronavirus outbreak amounted to €1.5 billion, in line with a previous estimate.

Axa CFO Etienne Bouas-Laurent told reporters that “good momentum” in prices at its company-focused XL unit, which was badly hit by the pandemic, would continue until the end of the year.

Mr. Buberl also said he expected earnings at Axa XL to rebound this year after the unit posted an €1.4 billion loss last year.

The insurer had said in November it would inject around €1 billion euros into the XL unit, which has also been hit by costs stemming from natural catastrophes.

Axa said last year it would keep streamlining its business by selling assets over the coming years in an effort to boost returns.

More insurance and risk management news on the coronavirus crisis here.