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Attacks to hurt Axa profit
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December 18, 2001: 7:30 a.m. ET
French insurer says earnings to fall due to September 11 attacks
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LONDON (CNN) - Europe's biggest insurer, Axa, has warned its earnings will fall below expectations this year due to the impact of the September 11 attacks.
The Paris-based company said on Tuesday it expects earnings before interest and taxes of  1.2 billion ($1 billion) for 2001, compared to market forecasts of between 1.5 billion and 2.2 billion.
Axa posted net earnings before interest and taxes of 2.5 billion in 2000 and earnings of 1.5 billion in the first half of 2001. The company's shares fell more than 9 percent sharply in Paris after the announcement.
Axa said this year's earnings shortfall was caused by higher than expected loss related to the attacks on World Trade Centre. In September, the company calculated that claims would cost $550 million on a pretax basis. On Tuesday, it said the figure would be closer to $600 million.
However, Axa said it hopes to reduce expense by 700 million in 2002 and that per share earnings should rise by 20 percent -- assuming "no further market weakness before the year end and that normal market conditions prevail."
Many analysts believe the insurance sector should begin to recover soon from the September 11 attacks.
John Butler, an analyst at Dresdner Kleinwort Wasserstein, told CNN that while the insurance sector has been hard hit by the attacks, "the longer term impact of the effect will be to allow insurers to raise premiums."
In November, Axa canceled all its big-risk commercial insurance policies because of the increased risk of terrorist attacks. The company said it could no longer insure against terrorist attacks, and asked the French government to consider state aid for the sector.
French insurance companies have a legal obligation to provide terrorist coverage. Insurance groups say that since reinsurers now refuse to cover acts of terrorism, they could no longer comply with the law.
Meanwhile, Axa announced in October it was canceling its coverage of the World Cup soccer tournament next year because of the increased risk of terrorist attacks.
Axa's new policy, which other insurance firms in France are expected to follow, could leave French companies without adequate insurance coverage at the end of the year when most insurance contracts expire. 
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