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AXA: A Lot Of Good News – Seeking Alpha

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AXA: A Lot Of Good News – Seeking Alpha

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Following up on our recent update on AXA (AXAHY,AXAHF), today we are commenting on the company’s Q4 and FY results. The French insurance company was quite penalised by the market for two main reasons: the EIOPA decision on dividend suspension and COVID-19 event cancellation claims. After this black swan event, we are more confident regarding the underlying company performance and we have also updated our 10-year analysis on the main insurance ratio.
So, what’s new and why we are upgrading our view?
The French insurer has announced that it has cumulative cash above its €14 billion targets for the period between 2021 and 2023. This is also backed by the group’s recent news on its intention to transform the AXA SA holding company into the group’s internal reinsurer. The transaction, which envisages the absorption of the internal reinsurer AXA Global Re in the context of a merger, will allow AXA Group to obtain €2 billion in additional liquidity by 2026. The company has a strong capital position rectified by a 217% solvency ratio and we now believe that it will return more capital to shareholders.
An additional key takeaway is the performance of AXA XL, we have always been skeptical of this Achilles heel division, but it performed well during the year, returning €1.2 billion in earnings mainly due to price increases and the successful implementation of new underwriting measures.
AXA XL Q4 ppt
Source: Q4 and FY results
Updating our internal model we note:
CR Mare Ev. Lab Calculation
Source: AXA Combined ratio in P&C 2022 – Mare Ev. Lab Calculation
SR Mare Ev. Lab Calculation
Source: AXA Solvency ratio in 2022 – Mare Ev. Lab Calculation
Looking at the group results, in 2021 the Non-Life sector of the Axa group achieved a premium income of €49.3 billion, up by 3% at comparable values with growth in most geographical areas and an increase in operating profit by 151% to €4.06 billion, thanks to the non-recurrence of claims related to the COVID-19 pandemic in 2020 and the sharp increase in AXA XL technical result.
As already mentioned, the US XL division recorded an operating profit of €1.2 billion ‘in line with objectives‘. The overall combined ratio improved by 4.9 basis points at 94.6%. The life, savings and pensions business recorded premium income up 9% at a comparable level to €33.3 billion, driven by strong growth in France (+17%) and Asia (+16%) that partially offset the results posted in Italy (-23%). This was due to the decline in sales of traditional savings products and a change in the business mix towards investment contracts. Net inflows amounted to €5.6 billion, driven by the pensions segment primarily in the region of France and Asia. Operating results at the divisional level increased by 3% to €2.38 billion.
Moving on with the asset management business, we see that revenue increased by 20% to €1.52 billion, thanks to the growth in management fees, with an operating profit of €348 million (+25%). The net inflows from the AUM amounted to €12 billion euros.
Results Snap
Source: AXA Q4 and FY Results
AXA is well-positioned to continue a strong delivery. No material implication in Russia and Ukraine. The company has positively guided investors on EPS growth with a 3-7% target. Today, they announced a dividend increase of 8% and they will immediately move on with the buy-back program worth €500m euros. We rated the company based on a P/E of 11x at 26 euros per share.
EPS and DPS growth
Source: AXA Q4 and FY Results
If you are interested in learning more about European insurance, you can check out our latest coverage:
This article was written by
Disclosure: I/we have a beneficial long position in the shares of AXAHY, AXAHF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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