UPDATE 3-AXA confident on 2010 strategy as profit surges

* Higher prices, new products to boost profitability-CEO

* 2009 profit 3.6 billion euros vs 923 million in 2008

* Dividend increase to 0.55 euros

* Stock seems expensive relative to rivals-analyst

(Adds analyst comment, share price, CFO comment)

By Lionel Laurent

PARIS, Feb 18 (BestGrowthStock) – AXA (AXAF.PA: ), Europe’s
second-biggest insurer said it expected improved profitability
from price increases and new products as the cyclical downturn
bottoms out and it almost quadrupled 2009 net earnings.

AXA followed industry peers like Munich Re (MUVGn.DE: ) and
Zurich Financial (ZURN.VX: ) by hiking dividends, lifting its
payout by over one third to 55 euro cents. [ID:nLDE6122GZ]

Shares of AXA were up 1 percent, at 15.72 euros, at 0950
GMT, slightly ahead of the DJ STOXX insurance index (.SXIP: ) and
giving it a market value of 36 billion euros.

“The figures weren’t too bad … The dividend increase is a
reflection that the company is not any longer short of cash,”
said Andreas Schaefer, an analyst with WestLB Research.

However, Schaefer said AXA’s stock still seemed expensive
when compared with Zurich Financial (ZURN.VX: ) or German rival
Allianz (ALVG.DE: ), which reports results on Feb. 25.

“Solvency ratios at companies like Zurich are still a bit
better,” he said.

AXA reported a solvency ratio of 171 percent for 2009, lower
than Zurich Financial’s above-average 198 percent.

CLAIMS RISE

AXA’s net profit for 2009 was 3.6 billion euros ($4.94
billion), benefiting from improved financial market conditions
such as a tightening of credit spreads. However, underlying
profit fell 5 percent over the year, the company said.

Chief Executive Henri de Castries blamed a rise in natural
disaster claims and the recession’s impact on AXA’s property and
casualty business, which accounts for nearly half of group
profit, for the fall in underlying profit.

He said an imminent cyclical upturn would vindicate a
strategy of hiking prices and creating new products.

“It’s cyclical, the worst is probably already there, we see
the future in a more positive way,” he said in a video interview
posted on the company’s website.

AXA’s combined ratio — claims and costs as a percentage of
revenue — rose 3.6 points to 99 percent in 2009 for property
and casualty.

AXA’s life insurance division reported better profitability
in 2009 than property and casualty but price rises in the United
States hurt sales and market share.

“We were in fact the first to reprice our products (in the
US) and we hope that this is a temporary drop,” Chief Financial
Officer Denis Duverne told a news conference.

CAPITAL HEALTH

AXA’s full-year earnings compared with 923 million euros in
2008 and beat expectations of 2.9 billion. [ID:nLDE61F2D1]

Insurers’ efforts to rebuild their capital at a time of weak
economic growth has fuelled speculation that some companies
might return cash to shareholders rather than deploy it in
unpromising markets. [ID:nLDE6100RJ]

AXA raised 2 billion euros in a rights issue last year and
is currently in talks to sell Australasian assets from
subsidiary Axa Asia-Pacific (AXA.AX: ). [ID:nSGE61F0IW]

The industry is also keeping a cautious eye on forthcoming
stricter European capital requirements, under what is called the
Solvency II regime.

CEO De Castries said that while AXA sees Solvency II
fundamentally as a good system, regulators across Europe must
not crack the whip too hard.

“This industry did not need additional capital in the
crisis,” he said. “We do not think that Solvency II should lead
to an increased amount of capital for the industry.”

Investment Analysis

(Editing by Marcel Michelson, David Cowell and Karen Foster)
($1=.7283 Euro)

UPDATE 3-AXA confident on 2010 strategy as profit surges