AXA reports tough times

AXA New Zealand’s operating earnings drop 28% to $42.8 million in calendar 2008 as funds under management and new business fell.

Thursday, February 19th 2009, 5:58AM

by Jenny Ruth

Its ASX-listed parent reported an overall A$278.7 million ($349.2 million) net loss compared with a $638.7 million net profit in 2007, largely as a result of A$537.7 million in investment losses.

"We are living in extraordinary times with severe dislocation and losses in investment markets," chief executive Andrew Penn said.

“New Zealand has also been affected by a weaker economy now firmly in recession and a number of structural issues for our industry," Penn said.

These included some positive changes such as KiwiSaver but these have been expensive to implement and it will take time to see the full benefit, "particularly given recent softening of government support.”

The value of new business overall was down 40% to $10 million, wealth management down 61% to $3.4 million and financial protection down 17.5% to $6.6 million.

AXA’s total wealth management retail new business in New Zealand fell 12% to $770.1 million with funds under management, administration and advice falling 36% to $6.3 billion. Operating earnings from wealth management dropped 44% to $11.1 million.

AXA blames the fall in retail wealth management business inflows on New Zealand’s three consecutive quarters of negative GDP growth and to investors responding to tax reforms.

Nevertheless, Axa says it maintained its leading market share of 18.2%. Inflows from AXA aligned advisers fell 11.1% to $232 million which the company says resulted from closing mortgage-backed products.

Inflows from non-aligned advisers was down 8.3% to $353 million, "reflecting lower Bank of New Zealand inflows partially offset by growth through KiwiSaver." Inflows from the Spicers business fell 18.5% to $185 million "reflecting the overall difficult wealth management market conditions."

Sales through Spicers and BNZ were affected by the official cash rate being above 8% for the first seven months of the year and negative publicity surrounding the closure of AXA’s mortgage funds.

The number of Spicers advisers fell by seven to 49 while total advisers were up six to 414, not including the about 920 non-aligned advisers.

"The inflows that we did receive also included a larger proportion of lower-margin, defensive-based products," Penn said.

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