AXA XL posted a €1.4bn underlying earning loss in 2020, from profits of €507m a year earlier, as Covid-19 and nat cat claims saw its combined ratio hit 112.2 percent
In full-year results, AXA XL also announced that it has entered into an adverse development cover (ADC) agreement with Enstar to provide up to $900m of protection against long-tail lines reserves for accident years 2019 and prior.
AXA XL’s 2020 combined ratio deteriorated from 101.5 percent in 2019 as the pandemic cost the unit about €1.7bn, and its nat cat claims were higher than normal. Excluding pandemic losses, the combined ratio would have been 102.5percent
The numbers come despite strong pricing improvement at AXA XL that helped revenues increase 3 percent at constant exchange rates to €18.53bn, although they fell 1 percent on a reported basis.
AXA XL Insurance achieved 17 percent price increases on renewals last year, rising to 22 percent in the fourth quarter. AXA XL Reinsurance saw price rises of 7 percent for the year and 9 percent at 1 January renewals, compared to 6 percent a year earlier.
Under the ADC deal with Enstar, AXA XL will obtain coverage for 90 percent of potential €1bn adverse reserve development. The protection attaches at $375m in excess of International Financial Reporting Standards reserves of $11bn.
The transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to finalise around the end of the first quarter this year.
But despite this, and a difficult 2020, AXA XL has reiterated its €1.2bn earnings target for 2021.
The performance at AXA XL contributed to AXA P&C’s underlying earnings falling 51% to €1.64bn, driven by P&C Covid-19 losses of €1.5bn. This is line with the company’s previous pandemic estimate.
P&C suffered €1.1bn of business interruption losses, €600m for event cancellation, €500m in other lines and €200m for solidarity payments. This was offset by about €800m of lower motor claims.
P&C was also affected by higher-than-normal nat cat claims of €502m that fell on AXA XL.
AXA said that excluding Covid-19 claims and assuming a normalised nat cat loss year, P&C underlying earnings were up 2 percent
P&C revenues were up 1 percent to €48.73bn, with commercial lines revenue up 2 percent to €31.7bn.
The P&C 2020 combined ratio was up 3.2 points to 99.5 percent, largely reflecting the impact of Covid-19 claims and higher nat cat charges. Excluding Covid-19 claims, the all-year P&C combined ratio was broadly stable at 96.4 percent
AXA Group’s 2020 under-earnings decreased by 34 percent to €4.26bn, driven by the 51 percent fall in P&C. AXA’s group net income was down 18 percent to €3.16bn.
AXA Group’s revenues were down 7 percent last year to €96.72bn, or 1 percent at constant exchange rates. This reflects growth of 4 percent in Q1, decline of 10 percent in Q2, a fall of 1percent in Q3 and an increase of 1 percent in Q4.
AXA’s CEO Thomas Buberl said: “The group’s underlying earnings were €4.3bn in 2020, notably impacted by €1.5bn of Covid-19-related claims, as previously communicated, and by higher natural catastrophes. We are confident in our earnings outlook and have set a 2020 starting base of €6.3bn underlying earnings for our 2021-2023 strategic plan targets.”