Australia | Aug 05 2008
By Andrew Nelson
Investors are shrugging off a 75% drop in half year net profit at AXA Asia Pacific Holdings ((AXA)) to focus on the underlying numbers. Shares in the French owned insurer rallied more than 8% after reporting an 11% lift in operating earnings.
The operating earnings result of $295 million, which strips out about $230.4 million in investment losses booked on its $35 billion book. This was apparently great news in a market where few are expecting stellar results from investment managers.
Last week Credit Suisse predicted a 1H operating result of $288 million, but with the share price already giving up 42% this year, an expected result was just the medicine.
Looking forward, the company set the bar low, saying it expects global equity markets to continue to provide a challenging environment, at least in the short term.
Chief executive Andrew Penn hedged his bets, saying it remains very difficult to predict how the current market will play out.
“It is our job to focus on the long term because the long term trends in our industry continue to be attractive, and that is exactly what we will do,” he said.
More insulated from recent global weakness (although it may not feel like it), Australian operating earnings helped drive the result, increasing 22% to $141 million.
AXA appears to also have been well served by diversification into Asia and more specifically Hong Kong, where operating earnings were up 23%, while South East Asia increased 84%.
New business rose 16% in Hong Kong compared to a 17% decline in Australia, underlying the company’s increasing dependence on its Asian operations.
Penn concurred, saying Hong Kong remained an attractive market and an important growth engine for AXA.
New Zealand was a drag on the bottom line, with operating earnings down 11% to and the value of new business down 5%.
Penn was more upbeat about the long term outlook, especially in Australia, where he believes the market to be underinsured.
“In Australia compulsory superannuation enhanced with recent tax changes will continue to make this an important driver of growth for our industry,” he said.