AXA predicts €34bn future profits under IFRS 17
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AXA expects to create a contractual service margin of €34bn (£29.4bn) on its transition to IFRS 17, the upcoming accounting standard for insurance contracts that takes effect on 1 January 2023.
Instead of recognising all the profits on day one, IFRS 17 introduces a new concept of CSM, which represents the future profit that life insurers amortise over the lifetime of a contract.
Ahead of its investors presentation this afternoon, the composite insurer said shareholders equity would remain broadly stable on transition at around €58bn. This amount includes a €4bn risk adjustment and a reserve of future profits of around €34bn created on transition.
The French insurance group does not expect to recognise a CSM in its property and casualty business. Of the €34bn, €25bn is expected to be generated in its life and savings segment and the remaining €9bn is predicted to come from its health business.
‘Limited impacts overall’
AXA believes IFRS 17 to have limited impact on its operating profit, shareholders equity and capital management and strategy.
Group chief financial officer Alban de Mailly Nesle said: “This announcement marks a key step in the implementation of IFRS 17, a project that has mobilised all finance teams across the group in recent years.
“We expect limited impacts overall, including on our shareholders' equity and on the group's operating profit, due to our model, which is mainly oriented towards technical and commission-generating lines.”
AXA is due to host an IFRS 17 presentation to investors today at AXA XL's offices in London.
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