AXA slashes dividend as it estimates true cost of COVID-19 on earnings

French insurer AXA has reduced its 2019 dividend paid to shareholders as it also revealed estimates that suggest the coronavirus pandemic will hit its earnings this year by some €1.5 billion.

The insurer has asked shareholders to approve a dividend of €0.73 a share instead of the €1.43 that was originally proposed. It said it would consider making an exceptional payment to shareholders of €0.70 in the fourth quarter depending on market and regulatory conditions.

It also suggested the move had been informed by pressure from the European Insurance and Occupational Pensions Authority (EIOPA) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR), relating to the adoption of a prudent approach towards dividend distributions during the COVID-19 pandemic.

The insurer has also offered an estimate of the impact on 2020 underlying earnings for the group from claims related to COVID-19. It has suggested that P&C claims post tax and net of reinsurance could cost it €1.2 billion with the biggest claims coming from business interruption and event cancellation claims.

In addition to this, it expects what it calls solidarity measures, which includes extended health and disability coverage being offered to vulnerable customers, will cost it €300 million. It said no material impact has been seen in its life & health division yet.

Denis Duverne, chairman of the board of directors at AXA, said: “From the very beginning of the COVID-19 crisis, AXA’s priority has been to act responsibly towards all its stakeholders.

“AXA’s first priority has been to help its customers navigate through this crisis and to protect the safety of its employees, including guaranteeing their full employment for the duration of the confinement period. The Group also continues to support its most impacted customers by taking a range of exceptional measures beyond its contractual obligations, and the wider community by participating in national solidarity efforts including contributions to various public funds. Reflecting the strength of the Group’s balance sheet, AXA has fulfilled these undertakings without requesting any government aid.

“The Board of Directors’ decision to reduce the proposed dividend demonstrates the same sense of responsibility towards AXA’s institutional and individual shareholders, while adopting a prudent approach in the current environment.”