Property & Casualty workshop

Transcription

1 Property & Casualty workshop François Pierson, Head of P&C global business line Philippe Egger, CEO of AXA Winterthur Stéphane Guinet, CEO of AXA Global Direct

2 Cautionary note concerning forward-looking statements Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please refer to the section Cautionary statements in page 2 of AXA s Document de Référence for the year ended December 31, 2009, for a description of certain important factors, risks and uncertainties that may affect AXA s business. AXA undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise. 2-AXA Investor day November 16, 2010

3 Summary of key achievements over the year What we said one year ago What we have done Maintain profitability A B C Increasing average premium by 1 to 5% on average per business line Maintaining strong discipline in pricing, underwriting and reinsurance Improved technical management of portfolio Average price increase of 2.8% in the first nine months of 2010 Selective underwriting in retail, pruning in commercial lines 1.3pts* improvement of Current Year combined ratio between 1H09 and 1H10 Increase growth potential D E F Expanding our market depth in our existing markets Building a Direct platform to capture market potential and improve profitability Increasing our exposure to high growth markets** Strong growth of retail business of 3.9% between 9M09 and 9M10 Transformation of Direct operations: 20% revenues growth between 9M09 and 9M10 Selective acquisitions in 2010 in high growth markets *Harmonized presentation of current and prior year loss ratio throughout the Group. The all accident year loss ratio, combined ratio, earnings and reserves are not impacted by this change in presentation ** Morocco, Turkey, Gulf, Mexico, SEA exc. Japan, CEE, Russia 3-AXA Investor day November 16, 2010

4 Today s key messages A new global organization to drive the development of the P&C business Foster technical expertise Optimize our business model to improve profitability Enlarge our footprint 4-AXA Investor day November 16, 2010

5 A new global organization to drive the development of the P&C business Our global strategy is deployed according to local market maturities 2009 Revenues: Euro 26 billion 2009 Combined ratio all year: 99.0% Current Year: 104.4% 2009 Underlying Earnings: Euro 1.7 billion FY09 revenues, in Euro billion France Germany 83% Mature entities UK Spain Switzerland Belgium Italy Canada Ireland 1 2 Foster technical expertise Optimize our business model Portugal 6% Direct AGD & Direct UK 11% High growth markets* Mexico Turkey Gulf Russia Rest of the world Group share 3 Enlarge our footprint 5-AXA Investor day November 16, 2010 * Morocco, Turkey, Gulf, Mexico, SEA exc. Japan, CEE, excluding Korea and Poland Direct operations which is reported in Direct, including 36.7% Reso Garantia share accounted in equity method

6 A new global organization to drive the development of the P&C business We have an efficient governance to enforce our strategy Members of the P&C Board: collectively accountable for global P&C results S. Guinet Business Transformation P. Egger AGD Business IT Convergence JF. Blais Retail J. Van den Berg Emerging Markets Asia J. de Peretti Distribution P. Rocard Emerging Markets ACS J-P. Rignault Commercial Lines F. Pierson Global Head of P&C M. Hofmann Commercial Lines F. Bucchini Reinsurance AGP&C J. De Agustin Claims MedLa S. Morelli Assistance S. Hardy E. de Talhouet Drive technical profitability Current Year combined ratio 104.0% 102.7% 100% % 1H09 1H10 E2011 Across the cycle Overall targeted price increase of 3% in 2011 Drive expense ratio* reduction -4pts from 2009 to 2015 i.e. over Euro 1.0 bn productivity gains pre tax 4 collective roles Define the P&C strategy Drive global P&C profitability Accelerate operational efficiency gains Leverage global technical expertise Each member has Individual ownership of a business driver Representation of a country or region * including Claims Handling costs ** Morocco, Turkey, Gulf, Mexico, SEA exc. Japan, CEE, Russia 6-AXA Investor day November 16, 2010 High growth markets** and Direct will fuel 50% of future growth Euro billion >10% CAGR in high growth and direct High growth markets Direct Mature markets

7 Today s key messages A new global organization to drive the development of the P&C business Foster technical expertise Optimize our business model to increase profitability Enhance global technical management of retail & commercial portfolios Further strengthen claims initiatives, especially in Motor Leverage reinsurance Enlarge our footprint 7-AXA Investor day November 16, 2010

8 1 Enhance global technical management of retail portfolios AXA to leverage its size and footprint in Motor Market share Ranking Market share Ranking 20 % 11 % 23 % More than 23 million motor policies: we insure 1 car out of 10 in our key geographies 4 % 8 18 % 2 4 % 9 16 % BLG 1 12 % 3 6 % 4 FY09 Revenues split AXA motor worldwide Distribution mix Agents 49% Other 5% Direct operations 15% 31% Brokers Top 3 agent network in continental Europe with ca. 15,000 agents Top 3 pan European direct platform Source: AXA estimates 8-AXA Investor day November 16, 2010

9 1 Enhance global technical management of retail portfolios Technical turn around of the retail portfolio under way Forecasted price increases in total retail lines «MotorWay» : a comprehensive global technical program based on 5 pillars 5% Price increase 9M 2010 vs. 9M 2009 Expected price increase FY 2011 vs. FY 2010 MedLA Technical modeling Value pricing Variable interactions and technical segmentation Rating structures Strategic segmentation and customer value Offer and Value for money pricing Position AXA on the internet Elasticity & portfolio management Multi-year projections and generational analysis Offer and price elasticity 0% Tools and platforms Pricing tools Time to market and pricing agility Average target price increases of minimum 3% in 2011 HR Build community experts to capitalize on global know how Portfolio management and segmented price increases expected to contribute to targeted Current Year combined ratio of 100% in 2011 overall 9-AXA Investor day November 16, 2010

10 1 Enhance global technical management of commercial lines Leveraging the benefits of being global Market share Ranking Market share Ranking 22 % 18 % 1 1 Leading positions in key countries (12% market share overall) 9 % 9 % % 3 13 % 3 7 % 2 14 % % 6 11 % FY09 Revenues split Aviation Space Others 2% 7% Marine 7% Motor 20% 31% P&C Commercial Business mix 32% Liabilities, Construction, Workers Compensation A large footprint A balanced business mix A wide spectrum of clients: from large multinational corporations to small businesses Property Source: AXA estimates 10 - AXA Investor day November 16, 2010

11 1 Enhance global technical management of commercial lines Strong price increases and active portfolio management Forecasted price increase in commercial lines 5% Motor fleet MedLA Property Liability Improve portfolio management Foster rigorous technical segmentation per line of business, industry, and geography Monitor portfolio dynamically: - Strict underwriting (prevention and coverage) - Retention and development - Price increases - Portfolio pruning 0% Price increase 9M 2010 vs. 9M 2009 Expected price increase FY 2011 vs. FY 2010 Average target price increases of ca. 3% in 2011 Launch global growth initiatives International solutions for SMEs - Leverage our existing global network, expertise and tools Segmented offers across several markets - Target specific client industries and propose bundled offer - Replicate across markets Portfolio management and segmented price increases expected to contribute to targeted Current Year combined ratio of 100% in 2011 overall 11 - AXA Investor day November 16, 2010

12 2 Further strengthen claims initiatives AXA is successfully addressing claims payout drivers designed to improve profitability Claims initiatives and key results Fraud Leakage reduction Insurance Procurement Industrialization/ IT convergence New savings in 2009 Reduce fraud through prevention and automatic 60m detection Tackle main leakage causes, including recovery management Increase orientation to approved suppliers Improve cost advantage benefit due to scale Foster convergence opportunities - Accelerate off andnear-shoring - International Claims tool 50m 120m 10m Examples of achievements in motor claims in 2009 Claims pay-out in 2009 Total: 17bn Non Motor Motor Motor: 7.4bn Bodily injury Motor material Case Management: 50% of severe bodily injuries handled through case management program Motor Engineering Automation: reduction of expertise costs by 25% Total Loss Management: increased value of wrecks through e-auctioning by 20% 240m 12 - AXA Investor day November 16, 2010

13 3 Leverage reinsurance AXA further integrated its reinsurance platform AXA Global P&C centrally optimizes and enlarges Group protections Objectives - Manage counterparty risk - Capture Group diversification benefits Principles - Governance enforcing risk management standards - Consistent metrics allowing global optimization - Alignment of Group reinsurance / business strategies AXA Global P&C - Places and administrates P&C treaty reinsurance through centralized platform with dedicated IT tools - Provides enlarged covers as compared to entities on a stand-alone basis 2.9 bn* Entity A - Example European storm - Traditional R/I market Pool mechanisms Entity B Financial market Entity C Group cover Group retention Local retentions Dynamic management of local and Group retentions in order to optimize capital Cat bond to diversify capacity sources and reduce counterparty risk Cat bond spreads currently at all time low with significant investment capacity available to be allocated Key benefits of issuing a cat bond - Reduced counterparty exposure - Reduced capacity constraints - Multi-year cover at a tight price First cat bond to utilize the PERILS Industry Exposure Database for the modeling analysis of catastrophe bonds - Issued in October Euro 275 million due January 2014 to institutional investors * 2010 figure Leverage Group expertise and capacity 13 - AXA Investor day November 16, 2010 Better security and cost reduction

14 Today s key messages A new global organization to drive the development of the P&C business Foster technical expertise Optimize our business model to increase profitability Enlarge our footprint 14 - AXA Investor day November 16, 2010

15 Our objective is to decrease the P&C enlarged expense ratio (inc. claims handling costs) by 4 points by 2015 Support Functions (~20% of total expenses) Distribution (~60% of total expenses) Operations (~20% of total expenses) IT HR, finance and others Product devt / support dist. Distributors Underwriting Admin Claims Expenses Expense ratio (~28pts in 1H10) ~32pts* Key Initiatives Organizational alignment - Reduction of organizational complexity Convergence on shared IT solutions and platforms Development of web/phone models for most commoditized products (Motor) Improvement of traditional channel effectiveness Industrialization of processes Outsourcing / near-shoring / offshoring Shared services - Consolidation of operations when subscale Ca. 20% productivity gains Ca. 10% expense optimization Ca. 20% productivity gains Reduction of enlarged expense ratio (inc. claims handling costs) by 4pts by 2015, i.e. over Euro 1.0 billion productivity gains pre tax * Enlarged expense ratio, including claims handling costs (~4 pts in 1H10) 15 - AXA Investor day November 16, 2010

16 Set up multi-distribution capabilities Secure sales costs reduction and growth for commoditized products Support Functions Distribution Operations IT HR, finance and others Product devt / support dist. Distributors Underwriting Admin Claims Set-up multi-distribution capabilities Position AXA on the web Supported by low cost platforms and offer segmentation Full fledge distant arm (direct underwriting) and full multi-access (lead management) Optimize complementarities with distribution networks Leverage agreements between distant model and agent networks Accelerate Sales force effectiveness program to leverage cross selling and telemarketing Reduce sales costs Increase efficiency of sales support organizations Optimize local distribution organizations Review incentive and valuesharing schemes (brokers, partnerships) Building a multi-distribution capabilities is a strategic asset of AXA s P&C model Integrated with agents model to better address all market / distribution evolutions (Aggregators, affinity, retailers, hybrid brokers, etc) Support growth of commoditized product lines 16 - AXA Investor day November 16, 2010

17 Accelerate industrialization of P&C operations AXA P&C benefits from a strong track record in improving productivity Support Functions Distribution Operations IT HR, finance and others Product devt / support dist. Distributors Underwriting Admin Claims AXA P&C has strong expertise in operations efficiency Most optimization levers have been successfully implemented in one or more entities Expanding and accelerating industrialization efforts is well underway Leverage our local expertise globally Enhance on-going projects to implement additional improvement levers -20/30% -15/20% -20% Project illustrations Offshoring Over 70% of the activity is now processed in Morocco Project "Engagement" Standardization and workload management Centralization of operations Gains achieved between % Lean / W3 project 17 - AXA Investor day November 16, 2010

18 Today s key messages A new global organization to drive the development of the P&C business Foster technical expertise Optimize our business model to increase profitability 1 In high growth markets: strong franchise in several markets and the ambition to further accelerate Enlarge our footprint 2 Direct: a web-originated low cost proposition 18 - AXA Investor day November 16, 2010

19 1 High growth markets AXA is already a leading player in P&C 230* ~ Revenues (Euro Million) Over Euro 3 Billion Revenues in 2009 AXA overall #2 global player in P&C high growth markets Source: AXA estimates 19 - AXA Investor day November 16, 2010 * 36.7% Reso Garantia share accounted in equity method

20 1 High growth markets AXA has expanded in high growth markets through external and organic growth Revenues in Euro billion A double digit profitable growth* 30% CAGR Acquisitions Organic (+12% CAGR) 30% CAGR Current Year combined ratio 103% in strategic imperatives in the high growth P&C markets in Continue bolt-on acquisition strategy 3 Leverage Group capacity to accelerate development of commercial lines 2 Foster transfer of expertise from mature to high growth markets 4 Launch segmented offers across multiple markets 20 - AXA Investor day November 16, 2010 * Scope: Morocco, Turkey, Gulf, Mexico, SEA exc. Japan, CEE, including 36.7% Reso Garantia share accounted in equity method

21 2 Direct A high growth engine now progressively organized in a global and unified governance An enlarged footprint fuelling growth GWP in Euro billion >10% CAGR* > * E2010 E2015 Already one of the largest players in Direct Over 4 million Direct Motor policies 9 European and Asian markets Leading market positions (# 1 in Korea, France, # 2 in Spain, Japan, Belgium) and very promising new ventures (Italy, Poland) Already 15% of AXA Group individual Motor GWP in 2009 now organized as a fully integrated platform All entities progressing towards one single unified Governance (since 2009) Glocal organization leveraging best existing expertise and scale effect while protecting local accountability Systematic Growth/Return optimization across the geographies and cycles Source: AXA estimates 21 - AXA Investor day November 16, 2010

22 2 Direct The new global organization is already delivering significant benefits One clear strategy... Delivering profitability Current Year combined ratio 1 Aggressively transition to lowcost web-enabled model 105% 101% 105%* 102%-103%* 96-98%* Develop world-class direct marketing and customer experience capabilities Develop world-class pricing and claims management capabilities Build a high-performing entrepreneurial and truly global organization 97% 93% * Excluding start-ups (Italy and Poland) 2009 E 2010 Across the cycle Transformation well underway: Share of Web-originated sales already > 50% in most markets Expense ratio already decreasing by ~ 2.5pts in 2010 (~3.8pts in continental Europe) 22 - AXA Investor day November 16, 2010

23 Today s key messages A new global organization to drive the development of the P&C business Foster technical expertise Optimize our business model to improve profitability Enlarge our footprint 23 - AXA Investor day November 16, 2010

24 Conclusion: AXA Global P&C aspiration Drive technical profitability A new organization Collective accountability for global P&C results Individual ownership of a business driver Current Year combined ratio 104.0% 102.7% 100% % to foster technical expertise In Retail, reach out for leading-edge technical modeling and commercial pricing In Commercial lines, become a world reference for technical expertise, quality of advice & service to enterprises transform our business model to adapt to a low cost environment Build a multidistribution capacity lowering distribution costs Drive greater industrialization and business convergence and enlarge our footprint A world leader in Motor business, agent intermediated and in Direct Increase footprint in high growth markets 1H09 1H10 E2011 Across the cycle Drive expense ratio* reduction High growth markets** and Direct will fuel 50% of future growth Euro billion Overall targeted price increase of 3% in pts from 2009 to 2015 i.e. over Euro 1.0 bn productivity gains pre tax >10% CAGR in high growth and direct 26 High growth markets Direct Mature markets * including Claims Handling costs ** Morocco, Turkey, Gulf, Mexico, SEA exc. Japan, CEE, Russia 24 - AXA Investor day November 16,

25 Q & A