Equity slump hits Axa bottom-line

By Phil Boeyen, ShareChat Business News Editor

Monday 10th December 2001

Falling stock markets have dented Axa Asia Pacific's (NZSE: AXA) investment earnings for the full-year but the drop has been partly offset by a strong performance in the Australasian health insurance business.

For the year ended September Axa has reported an after-tax profit of A$320 million, down 14% from last year's A$374 million. Operating earnings rose 47% to A$362 million compared with the previous year's A$247 million.

Investment earnings fell 57% to A$88 million, which the company says reflects weak stock markets,

In Australia and New Zealand investment earnings fell from $A90 million last year to less than half that figure at $A42 million. However operating earnings almost doubled to A$207 million from A$106 million previously.

The company says all three business areas - funds management, risk and health - contributed to the improvement, with health business profits more than doubling to A$84 million.

"Membership growth and the maintenance of below average claims and management expense ratios drove this excellent performance," Axa says.

Group chief executive, Les Owen, says the significant improvements in operating performance in Australia and New Zealand signals that the hard work the company has done to strategically reshape the operations is starting to pay off.

"Obviously the health business has had a stand-out year, but this result is as much due to excellent management of the basic business ratios as to the one-off increase in membership generated by the Lifetime Health Cover initiative. I am equally pleased to report good progress in the critically important areas of retail savings and investments."

In the China Region Mr Owen says the fall in global equity markets had a significant impact on investment earnings but the fact that the company has been voted "Best Insurance Company in Hong Kong" for the second year in a row reflects the strength of the company's reputation and customer satisfaction.

"I am confident that these strengths, together with our relatively low cost base, critical mass in the new Mandatory Provident Fund market, existing client base and multi distribution strategy will ensure that AXA CR delivers profitable growth in the future.

"Our operations in Singapore, Indonesia, Thailand and the Philippines continue to develop and have all generated strong growth in new business. We announced in October that we were exiting the Taiwan market, where we could not foresee achieving a reasonable market share without a very substantial and expensive acquisition."

Axa is changing its balance date to December 31 and will report on the full-year for the 15-months ended December in March next year, when it will declare a final dividend.

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