Grounded planes and damaged buildings from Russia’s invasion of Ukraine have cost Axa €300mn pre-tax, among the largest estimated bills from the conflict reported by an insurer so far.
The Paris-based group announced the costs in interim results on Wednesday that exceeded expectations elsewhere and included the announcement of a further €1bn buyback programme. Shares in the group rose 5 per cent in early trading.
Chief executive Thomas Buberl told the Financial Times the Ukraine war loss figure, which is net of recoveries from reinsurance, was Axa’s “best estimate [of losses] at this stage”.
“We are in the middle of this war, nobody knows what the next phase will look like,” he said, adding that the group’s general approach was to be “prudent” in estimating such losses.
Aviation was responsible for the majority of the predicted losses, said Buberl.
The sector is proving one of the main sources of insurance losses from the Ukraine war, mainly from claims for the hundreds of planes left stranded. Axa also booked losses on its political risk cover for events such as damage to buildings in the course of the war.
Overall, its gross revenues reached €55.1bn in the first six months of the year, up 2 per cent from a year earlier and slightly above analyst expectations. Net income was €4.1bn, up from €4bn a year ago, and also above consensus forecasts.
As with rivals, Axa is grappling with inflation and the knock-on effect on its business from the rising costs of claims. The group flagged a “more uncertain” economic backdrop in its results on Wednesday.
It also said an increased focus on markets such as health insurance was paying off and reported growing income in that sector.
Buberl said Axa was increasing commercial insurance prices by more than inflation and benefited from having its own repair network to keep down the cost of motor insurance claims.
UK motor insurers Direct Line and Sabre issued profit warnings last month, prompted by the rising cost of claims.
Many insurance executives have said the economic fallout of the war in Ukraine was likely to raise commercial insurance prices.
Buberl predicted high single-digit price increases in commercial insurance for the next 12 to 24 months. “There are plenty of reasons why prices will continue to increase,” he said, citing Ukraine claims but also natural catastrophe payouts for extreme weather.
The company, one of Europe’s biggest insurers, said the new buybacks would be in addition to €2.2bn of share buybacks carried out in the first half of the year.
London-listed insurer Hiscox also disclosed $48mn of expected losses, net of recoveries, from Russia and Ukraine in its interim results on Wednesday.
It swung to a first-half loss of $107mn before tax after the bond market sell-off hit its investments.