AXA China profit balloons by 130pc
Strong performance by investment portfolio gives insurer its best year
AXA China Region has had its best year since setting up in Hong Kong 18 years ago, thanks to a strong performance by its investment portfolio.
The company, the third-largest insurer in Hong Kong, with about 15 per cent of the market, yesterday said its net profit climbed 130 per cent in the year to December, to $2.2 billion.
Much of the result was attributable to huge gains in investment income - up 373 per cent to $1.4 billion. Operating income, meanwhile, grew 21 per cent to $800 million.
'Despite weak equity markets in the first half and the impact of Sars, new business and, more importantly, the value of new business grew strongly and investment returns were favourable,' AXA Asia Pacific Holdings group chief executive Les Owen said.
'The last 12 months have seen a return to growth for AXA in Hong Kong and China and I expect this to continue. Life insurance penetration in Hong Kong is still relatively low compared to other developed [markets] and there is significant growth potential through our agency distribution.'
Mr Owen said the group planned to expand further in the mainland through joint venture AXA-Minmetals, which had offices in Shanghai and Guangzhou.
The firm's ultimate parent, French-based AXA Group, is the largest insurer worldwide.
Like its parent, which has a history of expanding through acquisitions, AXA China Region may also seek growth through buying rivals.
AXA China Region regional chief executive Mark Pearson said the company had 5 per cent of the Mandatory Provident Fund market and would consider acquiring smaller players.
On the life insurance side, the company has expanded its sales force to 2,200 agents in recent years and also reaches customers through 70 insurance brokers and financial advisers.
AXA China Region sells investment-linked products and traditional life policies.
Investment-linked products allow policyholders to invest premiums in a variety of funds, which have higher risks but offer potentially stronger returns compared with traditional life policies.
Mr Pearson said 28 per cent of new policies sold last year were investment-linked products.
New premiums sold during the year reached a record high of $1.03 billion, up 14 per cent from 2002.
'Although investment-linked products are still a new concept to Hong Kong, we have seen strong demand for these types of products,' he said. 'The interest rate is so low that it is natural for depositors to seek low-risk investment products such as investment-linked policies. For the longer term, investing in investment-linked insurance policies could offer you a much higher return than putting money in the bank.'
