AXA lifts profit on back of transfer

By RICHARD BRADDELL

A year of refocusing under a new management team has seen Axa Asia Pacific, formerly National Mutual Holdings, report a 16 per cent rise in net profit before abnormals to $A309.4 million.

The result, reported on the same day as it announced a small fall in New Zealand profit to $NZ22.1 million from $NZ24.5 million, comes as the company repositions itself to claw back eroding positions in the key superannuation and investment markets.

Axa Asia Pacific, which has 90,000 New Zealand shareholders, is raising the final dividend to A5c from A4.5c.

"Our people have told me that for the first time in many years, there has been focus in our direction," group chief executive Les Owen said when announcing the result.

The group profit came after a 16 per cent rise in operating earnings to $A97.8 million for the September year. Although investment earnings were down 19 per cent to $A90.4 million, the previous year included a $A40 million one-off gain.

But the group's bottomline profit of $A374.1 million was substantially buoyed by a $A149.3 profit on the internal transfer of wholly owned Axa China Region, the Hong Kong subsidiary, from the holding company to National Mutual Life Association.

The subsidiary had previously been held in the accounts at book value.

Satisfied that the underlying improvement was solid, chief financial officer Matthew Slatter said it was nevertheless constrained by restructuring and other costs such as preparation for Y2K and for Australia's GST, which totalled $A150 million pre-tax in the last year.

Abnormals writedowns included $A37.9 million in restructuring costs and $A46.7 million from the write-off of goodwill in a subsidiary.

Axa is endeavouring to reinvigorate itself under the leadership of Mr Owen, who came from Axa Sun Life in London a year ago.

He has instituted a programme known as K5, referring to five "aspirational" goals it seeks to achieve by 2003:

Double the business' value.

Enter the top five in net retail funds inflows.

Halve the management expense ratio.

Get a rating in the top quarter in service and support to advisers.

Be among the best in the Axa group in employee satisfaction.

After poor Australian performance, Axa is transferring its funds management operations into Australian and New Zealand joint ventures with global manager Alliance Capital Management.

The company has reviewed its organisational structure and reviewed its e-commerce strategy.

But while the China Region has been a star performer, with September-year profit up $A72 million to $259 million, it is encountering fierce competition in a scramble for market share as Hong Kong moves to a mandatory superannuation arrangement. Forty per cent of companies still do not have superannuation for their employees.

Competitors have been poaching competitors and Axa has lost 200 agents. However, Mr Owen said that it had lost half its agency force five years ago, but many had returned.

He questioned whether competitors could make a profit on the business they might get, given the inducements they had paid.

* Richard Braddell travelled to Melbourne courtesy of Axa Asia Pacific.