* To result in 400 CHF mln hit to H1 net income
* But will lead to enhanced cash remittance to AXA (Updates with details, comment)
PARIS, April 10 (Reuters) - French insurer AXA is restructuring its Swiss business in a move that would hit its results in the short term, but is expected to give it more financial flexibility ahead of the $15 billion acquisition of XL Group.
AXA, Europe's second-biggest insurer by market value behind Allianz, said it would make its Swiss Group Life insurance unit a semi-autonomous business focusing on small-to-medium sized enterprises (SMEs).
In addition to a 400 million Swiss francs ($419 million) hit to first-half earnings, AXA also said the new structure would result in a temporary reduction in its underlying earnings of around 20 million euros from 2019.
However, the change -- subject to regulatory approvals -- was expected to save around 2.5 billion Swiss francs ($2.6 billion) in terms of capital requirements in 2019, and lead to an enhanced flow of cash to AXA over the next three years.
"In the prevailing environment, this re-orientation should enable us to offer our Swiss SME clients more attractive occupational benefits solutions creating prospects of higher pensions on retirement, at lower costs," said Antimo Perretta, Chief Executive Officer of AXA in Europe.
AXA has been taking steps to reduce its exposure to volatile financial markets and to cope with the impact of tougher regulation on the financial and insurance sectors.
Analysts at KBW said that restructuring of the Swiss business would increase AXA's flexibility at a time when its prepares for an initial public offering of a part of its US business in the first half of the year. "If Axa was forced to postpone the IPO and needed to draw down on the bridging loan, incremental cash remittance from the Swiss transaction would help to repay any short-term increase in debt," they said.
AXA share price was up 1.1 percent at 1110 GMT, still down around 10 percent since the start of the year as investors view the unexpectedly big acquisition of Bermuda-based XL Group as challenging.
Last month, AXA announced the acquisition of XL Group for $15.3 billion to create what it said would be a world leader in property and casualty insurance, while the deal would be partly financed by cash from the IPO.
The French company also reaffirmed its 2020 financial targets, under which AXA aims to increase earnings per share by 3 to 7 percent a year over the 2016-2020 period. ($1 = 0.9557 Swiss francs)
Reporting by Sudip Kar-Gupta and Maya Nikolaeva in Paris, additional reporting by Carolyn Cohn in London; Editing by Edwina Gibbs and Keith Weir