AXA Earnings: Robust Underlying Profit Is Due to Release of Reserves; Fair Value Estimate Maintained

For the first half of 2023, AXA CS has reported robust results, with underlying earnings before tax, or pre-tax income, of EUR 5.1 billion. This is compared with the first half of last year when calculated under the same IFRS 17 accounting standards, the business reported pre-tax income of EUR 4.2 billion, an increase this year of around 20%. One-time full-year guidance is to deliver underlying earnings of EUR 7.5 billion or better. On a normalized basis, these earnings mean AXA is now generating returns for shareholders above its cost of capital, touching mid-teen rates. The improved results have been driven by better performance in AXA’s property and casualty division. In addition, the company has continued to tilt away from natural catastrophe-exposed reinsurance, which has lessened its natural catastrophe impact.

Reserves were shown to be much more adequate in this half as post-accounting transition they have been strengthened in the first-half last year and can now be released when excess prudence arises. While AXA looks to be generating returns above its cost of capital, we currently maintain our no-moat rating and our fair value estimate of EUR 29.8 per share. The outlook for the second half of this year is that the good pricing environment will stay in place and the effects of discounting on underwriting will depend on changes in discount rates. AXA expects claims to remain elevated in the second half in U.K. health. Price increases have been initiated here, but the effects of these are not expected to be felt until the start of 2024.