AXA slides by 34% despite insurance lift

AN ABSENCE of profits from disposals has caused AXA, the French insurance group that owns Britain's Equity & Law, to suffer a 34 per cent decline in first-half net profits to Fr979m ( pounds 119m).

The sale of non-core businesses and investments contributed Fr636m to last year's interim profit of Fr1.48bn. Claude Bebear, AXA's chairman, said these assets had been sold at prices which would be 'totally impossible' to achieve today.

Profits from insurance more than doubled to Fr895m, thanks largely to much improved results from France and the UK and sharply reduced losses from Spain. But the contribution from financial services halved to Fr302m, partly due to problems with investment funds.

AXA expects a significant decline in net profits for the year as a whole. It warned the improvement in income from insurance activities will not be sufficient to offset the sharp drop in capital gains from the 1991 level.'

AXA recently took a 49 per cent stake in Equitable, the troubled US life insurer in which it invested dollars 1bn last year. Conversion of AXA's remaining bonds will eventually give it a holding of more than 56 per cent. Mr Bebear said the de-mutualisation of Equitable in a single year was a remarkable success. The inclusion of Equitable makes the group the world's 15th-largest insurance company, with a premium income of Fr90bn. It manages assets of Fr970bn, making it the world's fourth-largest asset manager.

Equitable's first-half pre-tax losses have been cut from dollars 280.5m ( pounds 178m) to dollars 18m. After costs of de- mutualisation and discontinued operations, net losses are down from dollars 431m to dollars 65.8m. Equitable expects a modest profit from continuing operations this year.

Equitable's management said that the company's financial strength had been restored to levels comparable with its competitors, that the problematic guaranteed investment contracts were a declining part of its business, and that it had cut expenses by dollars 150m a year and expected to cut a further dollars 100m next year. Most important, it had set aside hefty reserves against its troubled property investments. Its dollars 4.4bn property portfolio is carried at 81 per cent of its original cost.