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Axa XL on track to contribute €1.4B to group by 2020 after 'excellent' H1

Axa XL is on track to contribute €1.4 billion of underlying earnings to Axa SA by 2020 after an "excellent" first half of 2019 for the new division, CFO Gérald Harlin said.

Axa XL, which writes large commercial insurance and reinsurance globally, was formed from Axa's €15.3 billion acquisition of Bermuda-based XL Group, and is composed of the old XL Group, Axa Corporate Solutions and Axa Art Insurance.

The €1.4 billion expectation was revealed at its investor day in November 2018 and the target assumes a normal level of natural catastrophes.

Axa XL's €502 million contribution to group underlying earnings was driven by its 9% growth in revenues, in turn underpinned by rising insurance and reinsurance prices around the world, Harlin told journalists after Axa reported its first-half 2019 earnings on Aug. 1. Axa XL's insurance prices increased by 5% and reinsurance prices increased 2.4% in the first half. "The trend is continuing in most of our geographies," Harlin said.

Group CEO Thomas Buberl said the combination of Axa XL's expertise and Axa group's distribution power was a "real asset." He added: "Together we are gaining business and we are better at knowing our customers."

On the negative side, Axa XL had been hit by an elevated level of large noncatastrophe losses in the first half of 2019. But Harlin said the ultimate impact would be "more or less neutral" due to releases from reserves the company had set aside for catastrophes that hit in the fourth quarter of 2018, including Hurricane Michael and the California wildfires.

At group level, Axa's net profit dropped 19% to €2.33 billion, partly because of a €600 million hit from the deconsolidation of AXA Equitable Holdings Inc. Adjusted for one-offs and valuation changes, the profit would have increased 8% to €4 billion. Underlying earnings, which exclude realized capital gains and losses, were up 7% to €3.62 billion.

"These results were obtained thanks to our targeted segments and geographies but also thanks to the very good first half of Axa XL," Buberl said.

Axa France CEO Jacques de Peretti said that the group was facing claims arising from protests by the "gilets jaunes" movement, which would hit the 2018 and 2019 financial years, but expects the impact to be less than €20 million across the two periods. The final figures were not yet known because some claims were still developing, particularly where some businesses caught up in the protests have not yet been able to start operating again, he said.