Axa FY'20 net income down 18% as COVID-19 claims hit underlying earnings

Axa SA reported full-year 2020 net income of €3.16 billion, down from €3.86 billion a year ago.

Net income per share decreased year over year to €1.25 from €1.51.

The French insurer attributed the 18% decline in its full year 2020 net income to a decrease in underlying earnings and the negative mark-to-market impact of invested assets, partially offset by a favorable impact from the change in the fair value of derivatives, the non-repeat of the negative impacts from the disposal of Axa Bank Belgium SA and the deconsolidation of Equitable Holdings Inc.

Underlying earnings declined 34% on a yearly basis to €4.26 billion from €6.45 billion, notably impacted by COVID-19-related property and casualty claims and solidarity measures of €1.5 billion posttax and net of reinsurance, according to CEO Thomas Buberl. Underlying EPS came in at €1.71, compared to €2.59 in the prior year.

Total gross revenues amounted to €96.72 billion, down from €103.53 billion in 2019.

The group's all-year P&C combined ratio worsened by 3.2 percentage points to 99.5%, largely reflecting the impact from COVID-19 claims and the higher natural catastrophe charges at Axa XL. Excluding the pandemic-related claims, the ratio was 96.4%.

At the end of 2020, Axa's Solvency II ratio stood at 200%, compared to 198% a year ago.

The company's board of directors will propose a dividend of €1.43 per share at the April 29 shareholders' annual general meeting. The dividend is expected to be paid May 11 with an ex-dividend date of May 7.

Axa has set the starting base for its 3% to 7% underlying earnings compound annual growth rate target for the 2020 to 2023 period at roughly €6.30 billion, or €2.56 per share.

Meanwhile, Axa XL entered into an adverse development cover agreement with a wholly owned subsidiary of Enstar Group Ltd.

Under the terms of the agreement, Axa XL will obtain coverage for 90% of potential adverse developments on its legacy long tail line reserves for accident years 2019 and prior. The protection provides a capacity of up to 90% of $1.0 billion and attaches at $375 million in excess of net IFRS reserves, which amounted to $11.0 billion.

The deal is subject to customary closing conditions, including regulatory approvals, and is expected to complete at the end of the first quarter.