Axa on Thursday said it was confident it would raise profits this year in spite of a drop in first-quarter sales as Europe's second-biggest insurer implements a strategy shift focused on improving margins.

Axa pointed to raised margins in the first quarter, particularly its new business margin which was up 5 percentage points to 26 percent, helped by price increases.

The first quarter reflected our continued focus on improving the profitability of our operations, in line with the priorities we set early in 2010, Axa Deputy Chief Executive Denis Duverne said in a statement.

On June 1, Axa is due to present its strategic plan based on a bigger focus on margins than on sales and increased investments in emerging markets.

The good news are the margins indicators, one Paris-based analyst said.

The strategy change has already led Axa to sell part of its life insurance business in the United Kingdom and buy back Asian operations from its Australian branch Axa APH.

Axa posted a 2 percent drop in first-quarter revenue on a comparable basis, hit by significant declines in business in France, Italy and the United Kingdom.

The insurance group generated revenue of 27.9 billion euros ($39 billion) in the three months to March 31, a figure which remained flat year-on-year on a reported basis.

The average first-quarter revenue expectations from four analysts was 28.8 billion euros.

Life and savings new business on an annual premium equivalent (APE) -- an industry measure used to iron out market volatility -- was down 44 percent in Italy, 4 percent in France and 17 percent in the United Kingdom.

Axa's life and savings revenue was down 4.9 percent to 15.9 billion euros overall in the first quarter.

For now, the year is looking just as we expected in February, so there is no change in outlook, Duverne told journalists in a conference call.

In February, Axa said the improved economic outlook should help the insurer raise profits.

Duverne said Axa did not have any additional figures on the impact of Japan's earthquakes and nuclear crisis on top of an estimate before tax of at least 100 million euros given at the end of March.

(Editing by Erica Billingham and Sophie Walker)

($1 = 0.7158 euro)