Health business boosts Axa

By Phil Boeyen, ShareChat Business News Editor

Tuesday 5th June 2001

Health insurance sales in Australia and New Zealand have proved a strong contributor to Axa's (NZSE: AXA) half-year result.

For the six months ended March the financial services and insurance company made a profit of A$162.3 million, up 12% on last year's A$144.9 million. Operating earnings rose 49% to A$166 million.

Group Chief Executive, Les Owen, says higher result is further evidence of improving performance in a number of areas of the business.

"In Australia and New Zealand we saw increases in operating earnings in all business areas with the health insurance operation being a very significant contributor with an increase in profits of 132% to $52 million."

Axa says it now provides health insurance to around one million Australians, and admits its market has been helped by government initiatives aimed at getting more people to take out private health insurance.

"Clearly this result has been helped by the significant increase in membership following the introduction of the Lifetime Rating initiative in the second half of last year.

"As the waiting periods for new members run off we would expect to see a return to more normal levels of profit. However, Axa Health benefits from one of the lowest claims ratios and a below average expense ratio and is well positioned in the market place.

But while there was good news from the company's Australia and New Zealand operations, income from investments fell by 24% to A$95.8 million and profit from the China operations was 20% lower.

Mr Owen says although operating earnings grew by 23% in China to A$71.7 million, investment earnings on net assets fell sharply as a result of significant falls in Asian equity markets.

"Over the last 12 months the Hong Kong market has been characterised by extremely aggressive poaching of agents involving the payment of enormous upfront incentives. Churning of inforce business commonly follows these defections and this did adversely affect our operating earnings in the first half."

Mr Owen says agent retention strategies have been introduced including changes to commissions, new client surrender procedures and a media campaign to reinforce the strength of the Axa group locally and worldwide.

"We do not believe that this poaching is in the interests of shareholders, customers or the market generally and we have made it clear that we will not indulge in this sort of behaviour."

Elsewhere in Asia, Axa says its operations in Singapore, Indonesia, Thailand and the Philippines have all generated strong growth in new business and an increase in profit of 19%, substantially earned by Axa Life Singapore.

The company, which is proposing a change of balance date from September to December this year, has declared an unfranked dividend of A4.75 cents per share.

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