Axa to defy regulators with dividend payment

French insurer Axa said it plans to pay a dividend to shareholders, defying the recommendations of regulators worried that the coronavirus crisis will leave the industry facing huge claims.

As the economic damage from the pandemic gathered pace in April, France’s regulator, ACPR, and Eiopa, the EU supervisory body, asked insurers to halt planned payouts. 

That prompted Axa to postpone a decision on its dividend, but on Wednesday the group said that it would be making a payment, albeit a smaller amount than set out with its results in March.

Axa chief executive Thomas Buberl, who in April hit out at the regulatory confusion over dividend policy, defended its payout as a “a balanced approach”.

“The board has met four times [on this topic] over the past two months and it was the subject of very intense discussion,” he said.

The group wanted to balance the need to maintain solvency and liquidity against a responsibility to its shareholders, he added.

The ACPR in April said that French insurers “must refrain from proposing dividend distributions, at least until 1st October 2020”, adding that companies that did not halt payments would have to explain why.

Axa shares jumped 7 per cent on Wednesday following the payout decision.

The news came as Axa warned that the fallout from the pandemic was set to cost it €1.2bn in claims payments, mainly stemming from cancelled events and business interruption policies. 

“The estimate is the largest single company claims estimate that we have seen in Europe reflecting Axa’s position as the largest global commercial insurer but is still higher than the level than we had anticipated,” said Kamran Hossain, an analyst at RBC Capital Markets.

UBS said that the estimate was 20 per cent higher than it had expected.

Axa has been caught up in the growing controversy over whether customers can claim cover on business interruption policies — something many insurers have disputed. Last week, the company lost a court case in France over payments to a restaurant.

Mr Buberl said that Axa would appeal the ruling.

He added that there were questions over the contracts of about 1,700 further customers, but an agreement had been reached with more than 200 of them.

“We want to go straight to the customer and propose a solution where we pay something and meet halfway . . . we want to find solutions, we prefer dialogue to the court,” he said.

Mr Buberl also suggested policyholders would also benefit from finding a middle ground with company.

“If you go the court route and you have six months of an accountant checking your accounts, then going back into court, then determining the actual damage, the payment, it could take a long, long time,” he said.

Axa shareholders will receive a dividend of €0.73 on July 9, down from the €1.43 that it originally proposed. The company said it would consider paying out another €0.7 later in the year.

Mr Buberl noted that “some of our major competitors in Europe have been paying dividends”.