AXA profits dragged down by poor performance in Britain

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The Independent Online

AXA, the insurance company with more than 10 million policyholders in Britain, yesterday revealed that tough conditions in the UK had helped drag down earnings by 75 per cent in the first six months of the year.

The major hit to the France-based group's earnings in the first half, however, came from a €1.1bn write down on the value of its investments. Net income fell to €209m from €837m in the first six months of 2003.

The group was also hurt by a weak dollar and a strong euro, and together with poor savings and life insurance sales, these offset the rising rates it has enjoyed in its general insurance businesses.

This was the case in the UK, where underlying profits fell 42 per cent to £43m in the same period last year.

"Investors have seen a complete collapse in the market and then a complete recovery in the first half of the year," Dennis Holt, chief executive of AXA's UK businesses, said. "But as the market becomes more stable, there are good signs that that these areas will grow again. We are not predicting this will happen this year, but we are a strong company that operates efficiently and we will do well."

AXA withdrew from selling with-profit bonds in July 2002, and sales in the life and savings business fell 27 per cent in the first six months of this year. Mr Holt said sales of its unit-linked investment bonds that have a cautious investment approach had risen 71 per cent. This was not enough, however, to stop a 69 per cent fall in underlying earnings in its life and savings business to £21m.

The company's general insurance business in the UK is, however, seeing better times and is now moving towards profitable underwriting. Mr Holt said it had paid out only 2.4 per cent more in claims than it had in premiums, improved from 4.7 per cent the same time last year.

Revenues in its general insurance businesses also increased by 5 per cent, mainly due to a sharp rise in providing motor insurance for commercial vehicles.