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Axa Posts Second-Half Loss Based on Investment Declines

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Posted on 19 Feb 2009

Europe's second-largest insurer, Axa SA, posted a second-half loss for the first time in seven years and cut its dividend as the biggest slump in stock markets since the Great Depression eroded the value of investments.

The net loss totaled 1.24 billion euros ($1.56 billion), compared with a net income of 2.49 billion euros a year earlier. Axa cut its dividend 67 percent to 40 cents a share, it said today in an e-mailed statement. The shares plunged to their lowest in almost six years.

The largest decline in equity markets since the 1930s has cut the value of Axa’s investments, reduced fees from money management and dented demand for life-insurance policies linked to stock. Chief Executive Officer Henri de Castries, who said today the insurer will face “another challenging year” in 2009, is having to cut the payout to investors and may sell preferred shares to boost the company’s declining capital level.

“It’s pretty bad,” said Benoit de Broissia, an equity analyst at KBL Richelieu Gestion in Paris, which oversees $5.1 billion including Axa shares. “The solvency ratio is lower than expected.”

Axa fell 1.03 euros, or 9.2 percent, to 10.14 euros as of 12:54 p.m. in Paris, its lowest since March 2003. The stock has fallen 35 percent this year, valuing the insurer at 21.4 billion euros. Allianz SE, Europe’s largest insurer, has dropped 23 percent, while Italy’s Assicurazioni Generali SpA, the continent’s third biggest, has declined 29 percent.

‘Defense Lines’

The French insurer said today its solvency ratio, a measure of its ability to absorb losses, fell to 127 percent from 135 percent on Oct. 31. Analysts estimated the ratio to drop to 131 percent. Axa’s capital reserves exceed regulators’ requirements by 6 billion euros, the company said.

Axa has “defense lines” for preserving its capital levels should markets continue to deteriorate, de Castries said today.

Axa will ask shareholders at their April annual meeting to permit it to issue as much as 2 billion euros of preferred shares. The measure would increase the solvency ratio by about 10 percentage points, Chief Financial Officer Denis Duverne said after an investors meeting, adding that there is no pressure on Axa from regulators to increase its capital level.


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