AXA Plans Dividend Cut

NU Online News Service, Feb. 28, 12:57 p.m. EST?The AXA Group, the world’s second-largest insurance company behind Amsterdam-based ING, reported a 2002 profit of Euro 949 million ($905.44 million), compared to Euro 520 million ($587.04 million) in 2001.

However, despite gains the company said it plans a dividend cut.

Paris-headquartered AXA noted year-end results were significantly improved from 2001, when the company saw Sept. 11-related charges of Euro 561 million ($633.33 million). In 2002, AXA’s 9/11-related charged declined to Euro 80 million ($76.33 million).

Underlying earnings increased by 10 percent in Euro figures, to Euro 1.687 billion ($1.61 billion) from Euro 1.533 billion ($1.73 billion) in 2001, with a strong property-casualty operating performance and a lower cost of debt, the company stated.

On the p-c side, the company earned Euro 226 million ($215.63 million) last year, compared to a loss of Euro 42 million ($47.41 million) the year before. AXA’s p-c operations also saw a six-point improvement in the combined ratio to 106.5 percent last year, from 112.5 percent in 2001.

But despite significant progress in its core operations, the company said it will cut its 2002 dividend by 40 percent because of hefty charges for the declining value of its share investments.

“The sudden shift in the financial market has necessitated an equally radical response,” said Henri de Castries, chief executive officer at AXA.

Mr. de Castries also said a cost-cutting program launched during falling share markets in September 2001 had resulted in savings of Euro 866 million ($826 million) last year.

“We made the choice to improve our operational efficiency and, in the current environment, this choice has proven to be the right one,” he said.

Axa also said it will reduce costs further and continue to focus on operating performance this year. The company also said it will aim to further reduce its property-casualty combined ratio. As part of its ongoing effort to improve efficiency, the company announced today that it has signed a six-year technology services deal with International Business Machines Corp.

Effective immediately, Armonk, N.Y.-headquartered IBM will start consolidating Axa’s server, mainframe and storage systems in an on-demand computing structure. The deal is worth approximately $1 billion over a six-year term, with options to extend. AXA expects to save several hundred million dollars over that time, the company said.

“This on-demand infrastructure agreement prepares us for an increasingly competitive marketplace by giving us flexibility to adjust rapidly to changing business needs,” said Claude Brunet, member of the management board at the AXA Group.