(Updates with details on emerging-markets strategy from ninth paragraph, asset-management earnings in last.)
Feb. 21 (Bloomberg) -- Axa SA, Europe’s second-largest insurer, posted a 10 percent increase in 2013 profit on higher earnings at its life and savings and property and casualty divisions.
Net income rose to 4.48 billion euros ($6.15 billion) from 4.06 billion euros a year earlier, the Paris-based insurer said today. Earnings missed the 4.74 billion-euro average estimate of 16 analysts surveyed by Bloomberg as the company booked costs related to foreign-exchange hedges.
U.S. life insurance sales climbed as stock markets rose and the economy grew faster than France and the euro area. Axa, led by Chief Executive Officer Henri de Castries, has disposed of 8.5 billion euros of assets in developed markets since 2010 to invest in faster-growing nations from China to Colombia as a sluggish economy weighs on European insurers’ revenue.
“There is a negative impact of forex and interest rate hedging,” said Raphael Caruso, a Paris-based analyst at Raymond James, who recommends buying the stock. “But globally their profitability had a clear improvement. The touchstone is the recovery in the U.S. unit-linked portfolios.”
Axa fell 0.1 percent in Paris trading to 19.53 euros by 5 p.m., leaving gains over the past 12 months at 47 percent and valuing the company at 47.3 billion euros. Allianz SE, Europe’s largest insurer, rose 27 percent in the same period while the Bloomberg Europe 500 Insurance Index gained 28 percent.
Axa plans an 81 cent-a-share dividend for 2013, up from 72 cents the year before, matching analysts’ forecasts.
Adjusted return on equity, a measure of profitability, reached 14.8 percent last year, compared with the company’s target of 13 percent to 15 percent for 2015, Axa said.
“U.S. operations have enjoyed a very, very strong year, but in Europe too we are starting to see gradually the benefits of the recovery,” de Castries said in a Bloomberg Television interview. Emerging markets remain “an area of the world in which we can enjoy strong growth and high margins” even if some of these economies are slowing down, he said.
Axa is seeking to double operating profit from fast-growing markets in 2015 from 2010. Born three decades ago from a combination of French mutual insurers, Axa has shifted more than 10 percent of its shareholders’ equity since 2008 to expand in emerging markets.
“We have just about what we have wanted” for Axa’s footprint in emerging markets, de Castries told journalists. “If an opportunity arises here or there which is a good fit to what we have, there would be no reason to turn it down. But we are disciplined. It must be a real opportunity.”
Axa completed its purchase of a 50 percent stake in Shanghai-based Tian Ping yesterday to add about 4 million clients and sell auto insurance by phone or online nationwide in China, the world’s largest car market. In November, Axa agreed to buy a majority stake in Colombia’s Colpatria Seguros for 259 million euros to win control of the country’s second-largest property and casualty insurer.
Axa’s life-insurance venture with Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, also made it China’s biggest foreign life insurer, with 72 million euros of premiums last year, almost double 2011 levels, it said.
Asian currencies had their worst weekly loss in almost three months as signs of a deeper economic slowdown in China and the Federal Reserve’s support for tapering asset purchases weighed on emerging markets.
Axa has protected its balance sheet against possible declines in the Turkish lira and the Russian ruble, Deputy CEO Denis Duverne said at a press meeting. The company doesn’t have a significant amount of other emerging-market currencies on its balance sheet, he said.
Operating profit, which excludes capital gains, one-time charges and variations in asset valuations, rose 14 percent to 4.73 billion euros in 2013. Operating earnings from life and savings, Axa’s biggest unit, rose 7 percent to 2.79 billion euros, helped by “robust” U.S. earnings growth, Axa said in a presentation.
Axa’s property-and-casualty unit had a 12 percent increase in full-year operating profit to 2.11 billion euros on higher demand in emerging markets and as the company increased prices in segments such as Turkish motor insurance, it said.
The unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 96.6 percent from 97.7 percent a year earlier. A ratio below 100 percent means an insurer is making a profit from underwriting.
Axa is investing about 100 million euros over three to four years to start corporate insurance operations in Brazil, where it was almost absent, Jean-Laurent Granier, head of the global property and casualty business, told journalists. Axa’s new Brazilian unit should start underwriting policies and collecting premiums by the end of the first half, Granier said.
Operating profit from Axa’s asset-management businesses rose 6 percent to 400 million euros. AllianceBernstein Holding LP, its New York-based asset-management unit, last week reported $3.9 billion of fourth-quarter redemptions from retail clients. Axa Investment Managers, the Paris-based asset manager, had full-year net inflows of 12 billion euros, up from 7.5 billion euros in the first nine months, data on Axa’s website show.
--Editors: Frank Connelly, Mark Bentley