AXA XL falls to loss on Covid-19, but cites significant rate increases

AXA XL, the commercially focused insurance and reinsurance arm of the global AXA Group, has suffered a loss for the first-half of the year, as losses from the Covid-19 pandemic hit its commercial books of business.

Overall, AXA reported net income of EUR 1.429 billion for the first-half, down 39% on the prior year’s EUR 2.333 billion.

The major detractor to performance was the coronavirus pandemic, excluding the claims of which the group would have seen its earnings rise roughly 1% year-on-year.

AXA Group CEO Thomas Buberl explained, “The impact of Covid-19 on AXA’s earnings was in line with our previously published guidance. Commercial lines were the most impacted, notably at AXA XL. The rest of the Group was resilient, with the impacts from Covid-19 claims largely offset by lower frequency in Motor and growth in Health and Asset Management.”

He noted that, positively, “Price increases in P&C Commercial lines continued to accelerate,” during the first-half of 2020.

And his company believes it has, “An unparalleled opportunity to benefit from the hardening pricing cycle in P&C Commercial lines,” Buberl said today.

AXA re-affirmed today that its best estimate for Covid-19 P&C segment pandemic claims and costs are still EUR 1.5 billion, as it had previously announced.

This has been fully-recognised in the first-half of 2020, which as a result saw the property and casualty insurance and reinsurance segment at AXA suffering a 72% decline in underlying earnings.

The company reported “stable revenues” from P&C commercial lines business at AXA XL, with “continued favorable price effects,” but that were “offset by further selectivity primarily on long tail lines and Reinsurance and a provision for exposure adjustments related to a decline in clients’ turnover in the context of Covid-19.”

If you exclude these Covid-19 related exposure adjustments, AXA XL’s Commercial lines revenues grew by some 9% in the first-half.

AXA XL has benefited from strong rate increases as well in the period, with the company reporting that price increases on renewals accelerated further in the second quarter.

Overall for the first-half of 2020, AXA XL’s commercial lines price increases were an impressive +14.3% in primary insurance lines and +7.5% in the reinsurance segment.

The company revealed that AXA XL has taken the majority of an EUR 800 million loss due to Covid-19 related business interruption claims, largely from France, UK & Ireland, Switzerland and Germany.

Event cancellation claims was another EUR 500 million, again largely falling to the AXA XL business.

Another EUR 300 million of Covid-19 losses came from lines including D&O, Liability and Travel insurance.

AXA XL also experienced higher natural catastrophe losses in the period as well, but these were largely offset in the results by reserve releases in the period.

The underlying earnings for the first-half at AXA XL was a loss of EUR 843 million, with EUR 796 million of that falling in the P&C insurance and reinsurance segment, largely due to the impacts from Covid-19.

Excluding Covid-19, underlying earnings would actually have risen by 1%, reflecting the significant impacts a carrier of the scale of AXA has suffered from the pandemic.

In the period, AXA XL actually wrote a little less property catastrophe reinsurance, as it adjusted its exposures in response to the Covid-19 pandemic.

The same was true more broadly in P&C reinsurance, as the company sought to increase the robustness of its portfolio and ensure exclusions and terms are protective of its business going forwards.