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AXA's repositioning more than doubles profit

Tuesday 26th August 2003

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Financial services organisation AXA Asia Pacific says its work repositioning its business is delivering results.

The company has more than doubled its profit in the six months to June 30, compared to the corresponding period last year.
Profit after income tax and before non-recurring items was up 113% from A$134 million to A$287 million ($324 million).

One-off items, including the sale of AXA Health in Australia and a 50% stake of Members Equity, saw the profit jump 389% to A$655 million.

One of the big pluses for the group was that a bounce in markets has seen investment earnings rise from A$27 million to A$188 million.

Chief financial officer Andy Penn described the result as "a good performance in a difficult environment."

He says that AXA's work in repositioning the business was delivering results and the company was "well-positioned to benefit from a the market recovery."

Financial strength has further improved with a significant reduction in gearing and capital resources are in excess of targets.

The company says the lack of a compulsory savings regime in New Zealand and a strong reaction to falling sharemarkets has contributed to a volatile funds flow.

Consequently, the company reported net funds outflows of A$142 million in the six month period. However, outflows reduced in the June quarter to A$15 million - the smallest outflow since the first quarter of 2002.

Results from AXA's flagship advisory business, Spicers, have been particularly affected by the economic conditions due to the focus of its business model on providing post-retirement, lump sum investments in predominantly equity-backed products.

"Due to Spicers' focus on diversified equity-backed products, redemption volumes during the six months were up 17%, and inflows down 74% compared to the corresponding period last year.

New Zealand chief executive Vaughan Underwood says Spicers' negative flows of A$44 million was a reasonable result in the context of negative funds flow industry wide. AXA's analysis indicates that Spicers' market share has risen through achieving a better than market average result.

Whilst Spicer's performance doesn't look too flash on the face value, Underwood says the business has, by his reckoning, at least maintained market share, if not increased it.

Underwood says AXA has been acquiring more advisory firms, besides Sterling Portfolio Management (formerly Harts and Reeves Moses).

On the insurance side of the business AXA has seen an 8% increase in new business and in its in-force business.
This growth has come from product enhancement, new pricing and a greater push into the broker market.

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