AXA Asia Pacific Announces its Half Year Results
New three-year growth strategy outlined
AXA Asia Pacific Holdings Limited today announced an operating profit for the six months to March 31, 2000 of $145
million after tax and before abnormals, down 14 per cent from $169 million for the corresponding period last year.
The Directors declared an unchanged interim dividend of 4.5 cents per share which will be franked to 60 per cent.
Australia and New Zealand
Operating profit in Australia and New Zealand was $50 million compared to $121 million for the corresponding period last
year. Operating earnings were $38 million ($43 million last year) but investment earnings were $35 million, well down on
$84 million last year which benefited from a non-recurring profit on the sale of the company's interest in CGU. In
addition, $23 million of provisions and non-recurring costs, particularly in respect of Y2K, the implementation of the
GST and Business Tax Reform have been taken this year.
Income protection business in Australia recorded product losses of $13 million compared to $15 million for the same
period last year. The major impact was continuing poor claims experience.
International Businesses
Profit in AXA China Region was $135 million, up 65 per cent on last year ($82 million) with particularly strong growth
in investment earnings, up 208 per cent to $77 million ($25 million in the same period in 1999). The results were
boosted by strong equity markets coupled with an asset shift to equities made earlier in the financial year.
The results benefitted from a $6 million profit from AXA Life Singapore following its acquisition last year from AXA SA.
Total Group Profit
Total profit, after tax, for AXA Asia Pacific was $254 million, up from $198 million last year. This increase was
significantly impacted by two large abnormal items. The first was an abnormal accounting profit of $149 million arising
from the transfer of the holding in AXA China Region to NMLA, and the subsequent application of market value accounting.
The second was an abnormal provision of $40 million after tax against expected writedowns as a result of planned sales
of non- core businesses in New Zealand, costs related to the rationalisation of the distribution management structure in
Australia and the planned reorganisation and transformation of the Australian and New Zealand businesses.
Commenting on the results, and on prospects for the future of the company, the new Group Chief Executive, Les Owen,
said:
"The overall result has been affected by taking a cautious approach in a number of areas. There are some
disappointments. Further losses from income protection business, whilst reflecting the general experience in the
Australian market, are disappointing. We are taking further rigorous action in pricing, policy design, underwriting
standards and claims management. I expect that other players in the market will also take action to return this business
to profitability. However we are, if necessary, prepared to see some reduction in market share.
"There are several encouraging features. In particular, the performance from the health business has been strong with
total premiums up 9.4 per cent to $338 million ($309 million last year). Membership has increased by more than 6 per
cent over the first six months and is still growing ahead of the introduction of Lifetime Cover on July 1, 2000.
"Profit from AXA China Region is well up, helped by strong growth in investment earnings. However, investment markets
are volatile and recent rises in interest rates sound a note of caution for the second half.
"New business in Australia has increased in the first half helped by the Summit Master Trust which grew by 158 per cent
and a continuation of the recent improvement in investment performance in our key funds. Annuity business has also
performed well.
"In mainland China, AXA Minmetals, the Group's joint venture company in Shanghai, now has more than 700 agents selling a
full product range. This makes AXA Asia Pacific the only Australian based life company now participating in writing
business in mainland China.
"AXA Minmetals is progressing well and following changes in regulation now provides a platform to expand to other parts
of China. Our investment in this business offers great potential and we have decided that we will not separately pursue
further licences in China," Mr Owen said.
In Japan, AXA Asia Pacific has decided not to take a shareholding in the AXA Group's life insurance company, AXA
Nichidan.
"We have decided that taking a controlling interest would involve too great an investment in this market relative to our
current market capitalisation and would detract from our focus on improving our performance in Australia and New
Zealand"
Future Strategy
"Turning to the future, it is clear to me that a major programme of change and transformation is needed if we are to
become the reference company in the Australian and New Zealand markets," Mr Owen said.
"Our aspiration is to be one of the top 20 performing companies in Australia and New Zealand over the next three years
measured by total return to shareholders.
"Our primary markets will be retail investment, superannuation and risk protection.
"We have set out a strategy which focuses on growing profitable new business, increasing retail funds under management
and significantly improving our current expense ratio. We are determined to deliver excellence in investment
performance, product design and innovation, customer service and distribution relationship management. Our targets over
the next three years are to: *Double the value of our new business *Reach the top 5 in terms of net retail funds inflow
*Reduce our management expense ratio by 50 per cent *Be rated in the top 5 in terms of service in the Assirt service
rankings *Be judged in the top quartile in terms of employee satisfaction, measured by the global AXA Group employee
survey."