AXA 'resilient' amid COVID-19 volatility but Q1 gross revenues down
European re/insurer AXA saw "limited" impact from COVID-19 crisis in the first quarter but chief executive Thomas Buberl warned of a "material impact" on 2020 earnings with potential event cancellation claims in "mid triple digit million euros".
The carrier posted a 4 percent increase in revenues with growth across all business lines and geographies.
AXA's total gross revenue for the quarter was €31.7 billion, compared with €35 billion in the first quarter of 2019.
The Solvency II ratio for the quarter was 182 percent, down 16 points vs. December 31, 2019, mainly driven by unfavorable market conditions (-19 points), primarily from higher corporate and sovereign spreads and lower interest rates, partly offset by a positive operating return for the quarter.
AXA expects the lockdowns in affected countries to impact its sales and revenues progressively, most notably through a reduction of new business activity across most lines of business.
It said that claims notified related to COVID-19 in March have been limited at this early stage. However, confinement measures across all geographies are expected to have a material impact on the level of claims across a number of product lines, most notably in event cancellation and business interruption.
For event cancellation, AXA's preliminary estimate for the total potential claims related to COVID-19 is in the "mid triple digit million euros", pre-tax and net of reinsurance. It said certain other lines, including D&O, liability and travel) may also be impacted, but likely to a lesser extent.
AXA’s management believes that the effects of the COVID-19 crisis will have a material impact on the group’s earnings in 2020.
"The Group performed well in the first quarter of 2020," said Buberl. "Revenues were up 4%, once again with growth across all lines of business and geographies, notably supported by a strong pricing environment in P&C Commercial lines.
"AXA’s balance sheet remains resilient in these volatile market conditions, with a Solvency II ratio at 182%, and after the repayment of Euro 1.3 billion subordinated debt in April, AXA’s debt gearing was reduced to below 28%."
Buberl added: "Although COVID-19 related claims notified in March were limited and the precise implications of the crisis remain uncertain at this stage, we believe that the effects of the COVID-19 crisis will have a material impact on our earnings in 2020.
"We are confident in our strategy and its execution, and the need for enhanced insurance coverage in our preferred segments confirms our growth potential post-crisis. I would particularly like to express my gratitude to all AXA colleagues and partners for their unwavering commitment during this crisis, and their support as we prepare for a safe and progressive end to global lockdowns."