Axa Shares Down Despite Good Result

The Age

Wednesday February 21, 2007

MARC MONCRIEF, FINANCIAL SERVICES REPORTER

BIGGER dividends and a share buyback shone through the first result delivered by new AXA Asia Pacific chief Andy Penn, but investors stripped nearly 3 per cent from the insurer's shares.

AXA closed 2.8 per cent lower at $7.63 after the result hit the market. Net profit of $668 million for the year to December 31 was up 23 per cent on the previous year.

Mr Penn announced a dividend of 11.25? a share (35 per cent franked), up 45 per cent.

He also said AXA would increase its target dividend payout ratio from 50 per cent to 60 per cent.

"We were quite happy with the result, particularly raising the payout ratio," Argo Investments managing director Rob Patterson said.

Mr Patterson was surprised by the market's negative reaction to the result but said the shares might have run too strongly in preparation. AXA shares have gained 41 per cent in the past year, more than half of which has come in the past three months.

AXA is negotiating the acquisition of the Hong Kong assets of global insurance company Winterthur Life for between $HK1.7 billion and $HK2.4 billion ($A277 million and $A391 million), and has finished integrating MLC's Hong Kong and Indonesian businesses it acquired from National Australia Bank in May for $566 million. Nevertheless, Mr Penn said there was enough money left for a $250 million share buyback.

In a note released after the result, Deutsche Bank analyst James Coghill said spending on development of the business in Hong Kong was a drain on the books that would continue for at least another two years. "Corporate expenses" increased 7 per cent to $61.9 million, which AXA said was "mainly due to increased investment in Asian development".

Funds under management and administration grew 21 per cent to $85.4 billion during the year, with the last three quarters tallying sequential record growth in money shifted to retail funds. "Net retail fund flows" increased 82 per cent on the year to $2.9 billion.

Mr Penn took over from mentor Les Owen last August after nearly a year besieged by the Australian Prudential Regulation Authority.

He had stepped down as chief executive of AXA's Australian operations in September 2005 after APRA accused him and six other directors of failing to disclose changes to their staff superannuation plan.

KEY POINTS

? Profit for the year to December 31 was up 23 per cent on the previous year.

? AXA will increase its target dividend payout ratio from 50 per cent to 60 per cent.

LINK

? See AXA's full-year results package at geobay.com/21b55b

© 2007 The Age

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