AXA profit plummets by 66% in 2018 after IPO, nat cat costs

French insurer AXA has seen its full-year 2018 net income fall sharply by 66 percent due to exceptional charges linked to its US unit's  initial public offering (IPO) and higher natural catastrophes.

AXA's net income plummeted 66 percent to €2.1 billion, compared with the record net profit of €6.20 billion in 2017.

“2018 was a pivotal year in AXA’s transformation journey, creating the number one P&C commercial lines insurer with the acquisition of XL Group and completing the biggest IPO of the sector with the listing of AXA Equitable Holdings," said Thomas Buberl, chief executive officer of AXA.

The insurer said the drop in its net income was attributable to impairments of both the goodwill from AXA Equitable Holdings in group share (€3 billion) and other intangible assets linked to the transformation of our Swiss Group Life business.

It added that higher restructuring costs and exceptional charges, related to both the IPO of AXA Equitable Holdings and the acquisition of XL Group, contributed to the decline in its net profit, alongside the negative impact from the change in the fair value of financial assets and derivatives.

Last year, AXA acquired commercial lines re/insurer XL Group in a $15.3 billion all-cash deal for which it agreed to pay significantly more than other suitors.

The company reported that its overall underlying earnings increased by 6 percent to €6.2 billion in 2018, and the gross revenues were also up 4 percent to €102.9 billion

Buberl said: “AXA delivered another year of strong operating performance with a 6 percent increase in underlying earnings, to its highest ever reported level, even with a reduced ownership of AXA Equitable Holdings, Inc and an unusually severe fourth quarter in terms of natural catastrophes.

"Continuing to benefit from our simplified operating model, we achieved significant increase in gross revenues across all of our geographies."

The insurer's health revenues were up 7 percent, with growth in all major geographies, mainly driven by higher sales of group health in France, as well as in Europe, Mexico and Hong Kong.

P&C commercial lines revenues increased by 5 percent, mainly at AXA XL as well as in Europe with growth in all countries notably in UK, Ireland and Switzerland, due to new business and positive price effects, as well as in Turkey.

In its AXA XL segment, the company saw an underlying loss of €233 million, as it was impacted by significant natural catastrophe charges in the fourth quarter of 2018.

“Our financials were impacted by two significant nat cat events in the US in the fourth quarter," said Greg Hendrick, CEO of AXA XL. "At January 1st, 2019, we refined and added to our catastrophe protections and are in alignment with the group’s risk appetite. We continue to make use of substantial alternative capital, including growth in AUM at New Ocean, our in-house ILS fund manager.

“We have achieved measurable rate increases in 2018 and the outlook for 2019 looks to be as favorable. We are progressing fast on integration and the delivery of associated synergies, and are already experiencing revenue lift,” he added.

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