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Axa UK profits up 14%

Axa UK & Ireland has reported a 14 per cent increase in underlying earnings from £160 million for the first half of 2007 to £183 million for the same period this year.

Globally the business reported underlying earnings up 7 per cent to £2,195 million for the same period thanks to strong operational performance in its main business lines despite a ‘very challenging environment’.

Eighteen months ago AXA UK created 11 strategic business units and it is continuing to restructure the support functions and related activities in its operating companies. As a result, 500 redundancies are expected to be made within the support services with related functions subject to consultation. A combined annual saving of £80 million in three years will be made with this review alongside the Company’s cost saving plan in Ireland and the reorganisation of Axa Winterthur Wealth Management.

In the UK life and savings business, Axa reported strong growth in protection with the Axa protection account APE up 82 per cent on 2007 levels despite a slowdown in the UK mortgage market. Group pensions were also up by 23 per cent year on year.

Investment bond business fell by 18 per cent with total APE down by 3 per cent from £553 million for the first half of 2007 to £536 million in 2008 on the back of recent changes to the tax treatment of investment bonds.

New business value fell £11 million to £58 million pre-tax, with underlying earnings for the life and savings business down from £92 million in the first half of 2007 to £72 million in 2008.

Total general and health insurance revenues including distribution were up marginally to £1,872 million for 2008 from £1,861 million in 2007 with conditions remaining tough in many sectors. UK health revenues were up 9 per cent from £537 million to £585 million year on year.

Funds under management for Thinc, Axa UK’s life and savings distribution business increased by 75 per cent to over £0.5 billion since 2007 year-end.

Axa UK group chief executive Nicolas Moreau says: “Conditions in many property and casualty sectors remain challenging and show little sign of improvement in the short term. Despite these tough markets we have delivered a robust result for the first six months of the year because we have been resolute in following our UK strategy.”


Now for the good news

Since markets were hit by the credit crisis last summer, bonds have priced in a lot of bad news, both real and that which was expected but never materialised. Having suffered considerably more than equities, corporate bonds now look excellent value from an historical perspective. Investment-grade bonds are pricing in four times the last worst period for defaults in 1984.


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