This note is the first in a three part series examining the key
investment issues likely to affect the share prices of AXA and AMP. The
notes will compare the following: 1) Operational trends 2) Leverage
to equity markets of Earnings, Capital and Share Price 3) Threats,
Opportunities and Valuation: Cooper Review, Value in Asia &
Corollary. The note focuses mainly on AXA and AMP – but includes
where appropriate trends for PPT, CGF, SUN, NAB, ANZ, WBC and
CBA as a comparison.1.
• In this first note, we come to the conclusion that AMP’s operating
trends in JunH09 outshone AXA: AMP had quite stronger operating
trends in JunH09 relative to both AXA and most of the broader industry.
• In the Wealth Management space (Platforms & Advice in the case of
AXA), AMP showed better trends in earnings over both the half and vs.
the pcp. FUM and flow data appeared prima facie to be weaker than
AXA; however. this was caused by a combination of both the purchases
of the Genesys business from Challenger Financial Services in 2008, and
also the AXA's new North product. At the industry level, AMP was also
the top performer, reporting an increase in operating margins over
JunH09, whilst others recorded significant declines.
• Whilst figures were weak for both AXA and AMP in Investment
management, AXA showed less deterioration over 1H09 in earnings,
but worse trends vs. pcp. AXA suffered due to loss of some mandates,
whilst AMP suffered from reduced performance and transaction fees.
• In Wealth Protection, AMP had better operational and growth trends,
and in particular showed no losses coming through on Disability Income.
This bodes well for more certainty on earnings if unemployment rises
than for AXA. At the industry level, AMP was also a strong performer,
reporting strong inforce growth, and high operating margins.
• Mature trends were tough for both AXA and AMP in 1H09– but
appeared more robust for AMP.
• New Zealand trends were tough for both AXA and AMP. The weak
economy is obviously impacting the profitability of their operations.
• We have already factored these trends into our forecasts – but
caution that particularly in a sharply deteriorating economic
environments, there is more risk to AXA's earnings.