Axa has said it will sell its tobacco portfolio because of its "tragic" human cost

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Axa has announced it will divest in the tobacco industry (Source: Getty)

Axa, the world's largest insurer, has announced it will stop investing in tobacco on ethical grounds, citing the "tragic" human cost of the industry. 

The group intends to sell its tobacco portfolio, valued at around €1.8bn (£1.4bn). Axa will also sell all of its equity holdings — worth about almost €200m — in the sector immediately.

Incoming chief executive Thomas Buberl acknowledged that the decision will be costly for the firm, but said overall that the business case is "positive". 

Read more: Plain packaging: New UK cigarette rules are "plain crazy"

"With this divestment from tobacco, we are doing our share to support the efforts of governments around the world," Buberl said.

"This decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge."

Axa has also said the strategy will generate savings by resulting in fewer claims for tobacco-related diseases.

Read more: New EU tobacco rules: In defence of menthol and packs of 10

Regulation on the tobacco industry has ratcheted up in both the UK and Europe in recent weeks.

Last Thursday, big tobacco firms lost a High Court challenge against new plain packaging rules that were implemented on Friday. 

Since 20 May, all cigarette packets manufactured for the UK look similar, with the same green colour, font, size, case and alignment of text on boxes.

To comply with the European Union's Tobacco Products Directive, which also came into force on Friday, health warnings now also cover 65 per cent of the front and back of packets.

The EU law will also clamp down on e-cigarette advertising in print, on television and radio, and limit the strength of nicotine liquids and flavours that can be used for vaping.