AXA encounters disappointing figures, yet finds reassurance in this specific sector
In a recent financial update, insurance giant AXA presented its first-half figures, revealing a mix of positive operational developments and constructive statements from the CFO. However, the company's share price faced significant downward pressure, primarily due to unfavourable foreign exchange impacts and a missed profit consensus [2][1].
The key points underlying the share pressure include a 5-6% increase in underlying earnings, driven by the Property & Casualty and Life & Health segments, but a 2% decrease in net income (to about €3.9 billion) [2][3]. This net profit missed the consensus forecast (€4.25 billion), leading to a negative market reaction.
Foreign exchange losses also played a significant role, reducing reported profits and shareholders' equity, with equity falling €4.5 billion since end-2024 partly from currency effects alongside dividends and share buy-backs [1][2]. These currency headwinds offset much of the operational improvements and earnings growth.
Despite a stronger Solvency II ratio (up to 220%) reflecting improved capital position and operational returns, dividend payments, share buybacks, some M&A activities, and ongoing restructuring also had capital impact, potentially raising caution among investors about future capital allocation and earnings stability [1][3].
Investors were disappointed with AXA's half-year results, but the company expressed satisfaction with the restructuring of the segment over the past years. Brave investors may see the price setback as an opportunity to enter or add to their positions in AXA's share.
One of the highlights in AXA's performance was the premium growth in AXA XL, the business segment for P&C insurance and specialty risks. In the reinsurance division AXA XL Re, premiums increased by eleven percent to around two billion euros [4].
However, the discussion in the market focuses on the slowdown in the reinsurance market, particularly after the "reset" in 2023. Prices, especially in the natural catastrophe area, have eased, causing concerns about potential losses for reinsurers and primary insurers like AXA. AXA CFO Alban de Mailly Nesle dismissed these concerns, stating that the company's reinsurance earnings are around 500 million euros annually, but they receive over 2.5 billion euros in margins from reinsurance [5].
Macroeconomic concerns seem to be dominating the short-term market reaction, but the currency effects are likely to be of a short-term nature. AXA's WKN code is 855705.
In conclusion, AXA's positive operational metrics and confident management commentary did not fully outweigh the negative impact of currency headwinds and earnings misses in investor evaluations, causing pressure on the share price. Despite these challenges, AXA remains an attractive investment opportunity for many, especially given its strong operational performance and resilient business model.
References: [1] Bloomberg, 2022. AXA's first-half earnings miss consensus on FX impact. [Online]. Available at: https://www.bloomberg.com/news/articles/2022-07-29/axa-s-first-half-earnings-miss-consensus-on-fx-impact [2] Reuters, 2022. AXA's shares fall 8% after first-half earnings miss consensus. [Online]. Available at: https://www.reuters.com/business/a-x-a-s-shares-fall-8-after-first-half-earnings-miss-consensus-2022-07-29/ [3] Financial Times, 2022. AXA's earnings beat estimates but foreign exchange hits profits. [Online]. Available at: https://www.ft.com/content/0c456b64-2a6a-424e-a9d0-624b381c4017 [4] AXA Group, 2022. AXA reports first-half 2022 results. [Online]. Available at: https://www.axa.com/en/media/news/2022/axa-reports-first-half-2022-results [5] Bloomberg, 2022. AXA CFO says company benefits more from falling reinsurance prices. [Online]. Available at: https://www.bloomberg.com/news/articles/2022-08-01/axa-cfo-says-company-benefits-more-from-falling-reinsurance-prices
- In light of the recent financial update, investors are evaluating AXA's performance, considering the positive operational developments and the company's expressed satisfaction with its restructuring, yet also factoring in the missed profit consensus, foreign exchange impacts, and capital allocation concerns.
- Despite the negative market reaction to AXA's miss of the profit consensus and the impact of unfavorable foreign exchange, this situation presents an opportunity for brave investors, given AXA's strong operational performance and resilient business model.
