Axa beats expectations

By Rob Hosking

Friday 27th February 2004

Axa's Australia and New Zealand operation has posted a $A147 million operating profit, excluding the sale of the company's health insurance operation  a 17% increase on the previous year.

"Whilst there are some areas of questionable profit quality this is nevertheless a good performance," was the verdict of Macquarie analyst Tony Jackson. The company's final dividend is also higher than expected, at 5.50Ac a share.

Credit Suisse First Boston analysts noted the result was positive, with signs the company's transformation strategy was beginning to pay off, especially in the troublesome Hong Kong arm.

The analysts had a slight concern that the expense levels in the Australian and New Zealand operation which, although reduced, did not meet the admittedly ambitious targets set. Those reductions were expected to be reached this year, they said.

Investment earnings for the group were up 189% to $A322 million, mostly due to the turnaround in equity markets.

Axa has also halved its gearing ratio.

As with other firms in the final services market it was a year of two halves for Axa  weaknesses in world equity markets in the first half of 2003 saw a net loss but that was more than made up for in the second half of the year, chief financial officer Andy Penn said.

"It was a good year in a difficult market.," he said.

Two years ago Axa bought financial planning firm Spicers, and that arm of the business did particularly well, Penn said. Spicers had a positive funds flow of $13.3 million for the year.

The overall wealth management business within New Zealand had a net outflow of 9%, reflecting the flight to other investments, such as property, experienced right across the industry.

Despite that 9% drop, industry data from Morningstar indicated the company grew market share, he said.

In a pointer to possible New Zealand developments, Axa experienced a high churn of advisers during the year in its Australian operation.

The new Australian licensing regime caused a number of advisers to quit, the company said.

With the New Zealand regulators seriously considering a similar regime, finical services firms may see the same kind of exodus here.

The company has no inherent problems with a licensing regime, however, Penn said.

While there were some difficult transitional issues, the licensing regime in Australia "moved everyone to the same base."

Comments from our readers

No comments yet