The last time Axa relies on equity markets
This will be (or should be) the last time Axa relies on equity markets to boost its profits in the future. ‘Ambition 2012’ has been blown out of the water after equity markets tanked since June this year when the credit crisis really began to implode. According to Citi analysts, equity markets are currently sitting 30% below the average levels that have been witnessed in 2008. Axa originally forecast that it would treble its underlying earnings and double revenues between 2004 and 2012. This would be thanks to equity markets growing each year by 8%.
Admittedly, this forecast had been spot on till June 2008, but things turned for the worse after that, leaving chief executive Henri de Castries to make a sharp U-turn on the grand targets and admit that it wasn’t possible after all.
Assuming the markets remain flat in 2009, AXA will suffer from lower asset fees. However, the insurer’s capital base is sound, Citi reckons, particularly under the Solvency II model (AXA is the first insurer to have given out details of its capital position under the new regime). The analyst remains upbeat about AXA’s prospects in “all but dire markets”.
