AXA. Henri de Castries Chairman & CEO. October 5, Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011

Transcription

1 AXA Henri de Castries Chairman & CEO October 5, 2011 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011

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, 2010, 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 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

3 Today s key messages Ambition AXA: a comprehensive plan Earnings generation capacity is diversified Balance sheet is robust and asset allocation is diversified 3 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

4 Ambition AXA A comprehensive plan 4 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

5 Ambition AXA SELECTIVITY Mature markets Sustainable growth in earnings & operating Free Cash Flows Selectivity High growth markets Double our size Acceleration Efficiency Everywhere with a focus on mature markets 5 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

6 What will success look like in 2015? Underlying Earnings per Share 10% CAGR Group operating Free Cash Flows 24 billion In the next 5 years Adjusted Return on Equity 15% by 2015 Debt gearing 25% by Compound annual growth rate 6 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

7 Positive earnings contribution from strategic priorities only partly impaired by market conditions Underlying Earnings per share CAGR Our central scenario +4-5 pts -1 pt +2 pts Sensitivities to market conditions -2 pts -2 pts +2-3 pts Efficiency everywhere +3-4 pts Acceleration in high growth markets Selectivity in mature markets Actively grow selected businesses 2x size 2.5x earnings Euro 1.5 billion pre-tax cost savings 2011 scope 2 effect 6% 1 equity markets return 0% 1 equity markets return 3% interest rates by Including dividends 2. AXA APH and UK Life transactions 7 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

8 Earnings generation capacity is diversified 8 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

9 Earnings risk profile is diversified AXA 1H11 pre-tax underlying earnings 1 Property & Casualty Life & Savings AM Property & Casualty 2 Protection & Health Savings Unit- Linked, Mutual Funds & Other Asset management and Banking 42% 29% 10% 10% 9% 71% Mainly geared towards insurance risk 29% Mainly geared towards financial risk 1. Excluding Holding & other companies and before Inter-segment eliminations 2. Including International Insurance 9 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

10 Property & Casualty business Combined ratio improvement well on track Current year combined ratio Ambition AXA targets All year combined ratio How will we deliver on our targets? 102.6% FY % 1H11 <97% FY15E 99.5% FY % 1H11 <96% FY15E Efficiency Technical excellence 4 pts improvement of enlarged expense ratio To offset claims inflation 2H11 objectives Maintain strong sales momentum in Direct business and high growth markets Remain below 100% current year combined ratio through price increase and productivity gains 10 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

11 Protection & Health business Allocating more capital to a highly profitable business In Euro million High and sustainable earnings level mostly driven by consistent underwriting result Pre-tax Underlying earnings 2,018 1,083 2,091 1,094 o/w -70m from Japan earthquake Combined ratio consistently below 95% since 2007 FY09 1H10 FY10 1H11 Other 2% Asia ex. Japan 12% MedLa 2% NORCEE 25% and strong diversification France 24% US 12% Objective to allocate more capital Additional Euro 2 billion of capital to grow Protection & Health by 2015 Japan 23% Total 1H11 Pre-tax Underlying earnings: Euro 1,094 million 11 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

12 G/A Savings business We have the capacity to maintain 70 to 80 bps investment margin on total general account business 6% 5% Demonstrated track record Decreasing interest rates GER 10Y USD 10Y Sustainable investment margin 1 capacity going forward Strong and resilient investment margin capacity Sustainable margin capacity in a persisting low rates scenario 4% 3% 4.4% Δ1.8% 4.0% 3.75% 3.5% bps 2% Δ 1.8% 1% 0% 2.7% 2.2% 2.0% 1.7% Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 but resilient investment margin 1 79 bps 79 bps 76 bps 75 bps 2 68 bps 2007 AXA Group asset yield (projections based on a conservative reinvestment rate of 3.5% over the next 8 years) AXA Group average guaranteed rate 1H E 2019E Long asset duration (7 / 8 years) Sustainable investment margin 1 going forward Duration gap tightly managed at less than 1 year Flexibility in crediting rates FY07 FY08 FY09 FY10 1H11 1. Group investment margin on total general account business 2. Annualized 12 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

13 G/A Savings business More and more sold in conjunction with Unit-Linked business G/A savings APE represented 19% of total APE in 1H11 1H11 G/A individual savings APE in Continental Europe Hybrid products sold with a Unit-Linked share Sold to attract higher margin Unit-Linked business NBV margin: 5-10% with an average 20% Unit-Linked share 63% Pure G/A products 37% Most products sold without guarantee or with a 1-year guarantee NBV margin: close to 0% Total: Euro 477 million Going forward No additional capital to be allocated to this business 0% guaranteed on most G/A Savings products in Italy, Spain and France More and more sold in conjunction with Unit-Linked business Focus on increasing Unit-Linked share in hybrid products 13 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

14 Unit-Linked business Remains sensitive to market conditions despite improved Variable Annuity risk profile Split of Unit-Linked reserves Sensitivity to market conditions Variable Annuities 36% Other UL 64% Lower Unit-Linked fees as a result of drop in equity markets Impact of high equity and interest rates volatility experienced in 3Q11 on US Variable Annuity hedging margin Current market conditions to affect new business margins as measured at year end 1H11 average UL reserves: Euro 143 billion Focus on US Variable Annuity hedging margin Improved VA risk profile VA product redesign and new product launches Lowered risk through fund action plans Interest rate hedge in place for anticipated 2011 sales Hedge objectives 2 Equity Interest Rate Equity Volatility Interest Volatility Fully Fully Partially Partially In Euro million Hedge margin 1 Reserve increase due to lapse experience H11 3Q11E (109) 5 (150) (97) 0 (150) Mainly high equity and interest rate volatility experienced in 3Q11 As announced earlier this year, lapse assumptions were reviewed to reflect lower than expected experience 1. Net of tax and DAC reactivity 2. On an IFRS basis 14 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

15 Balance sheet is robust and asset allocation is diversified 15 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

16 Balance sheet is robust Regulatory solvency is close to historical high levels Group Solvency I coverage ratio 242% 193% 205% 216% >190% 172% 186% 171% 182% 186% 154% 127% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 1H11 3Q11e AXA Equitable RBC ratio 406% >400% 382% FY09 FY10 3Q11e Economic solvency 1 178% FY10 184% 1H11 Coverage ratio >150% 3Q11e Main change drivers: Widening corporate spreads Decrease in equity markets and interest rates Debt gearing 28% 26% Ambition AXA target 25% FY10 1H11 2 FY15E 1. AXA s internal economic model calibrated based on an adverse 1/200 year shock 2. Pro forma of the sale of Canadian operations 16 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

17 High quality and diversified government bonds portfolio UK 1% The Netherlands 2% Austria 3% US 5% Spain 5% Italy 9% Belgium 11% Government bonds and related gross portfolio Supranational institutions 2% Other 5% Switzerland 7% As of June 30, 2011 Total: Euro 187 billion France 23% Germany 14% Japan 13% AFS OCI in Euro billion Exposure to European peripheral countries Gross market value Gross unrealized gains/losses Net* unrealized gains/losses Italy Spain Portugal Ireland Greece Estimated as of September 30, 2011 * Net of tax and policyholder participation, after impairment ** After impairment at June 30, 2011 market value of bonds maturing before 2020 recorded in 1H11 accounts Fixed income assets are marked to market in the balance sheet and reflected in Shareholders Equity, Solvency I ratio 1 and Economic solvency ratio ** High quality portfolio, with an average AA+ rating 1. Under Solvency I, a total net unrealized gain position on fixed income assets is included in the available capital while a total net unrealized loss position would be excluded 17 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

18 High quality and diversified corporate bonds portfolio Corporate bonds portfolio by industry Focus on banks Energy 5% Consumer cyclical 5% Industrial 6% Utilities 8% Communications 9% Consumer non-cyclical 11% As of June 30, 2011 Total: Euro 142 billion Basic materials 4% Others 3% Banks 38% Other financials 11% Average rating of the portfolio: AA Gross market Senior debt Sub debt value Non Lower Upper Total Covered Tier 1 Preferred in Euro billion covered Tier 2 Tier 2 US France UK Germany Netherlands Spain Australia Italy Switzerland Austria Sweden Canada Other Total As of June 30, 2011 Increased proportion of net inflows is currently invested in high quality corporate bonds 1. More than 30 countries 18 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

19 Equity portfolio overview Limited equity exposure Focus on banks 5% stake in BNP Paribas (Euro 3.2 billion as of June 30, 2011) % of General Account assets invested in listed equities 16% 10% 4% Other 0.1 France 0.1 Australia 0.1 Excluding BNP Paribas, very limited and well diversified exposure US 0.2 Italy 0.1 FY01 FY07 Total: Euro 18 billion (as of June 30, 2011) 1H11 UK 0.1 Canada 0.1 Spain 0.1 Japan 0.1 China 0.1 Total excl. BNP Paribas: Euro 1.0 billion As of June 30, Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

20 We have flexibility to cushion adverse events In Euro billion Significant amount of net unrealized gains on fixed income assets ca ca ca.+3.6 As of June 30, 2011 Estimated as of September 30, 2011 Total excluding Italy, Spain, Portugal, Greece and Ireland govies Italy, Spain, Portugal, Greece and Ireland govies Total net unrealized gains In Euro billion Large policyholder capital Policyholder participation reserves Flexibility on crediting rates The low average guaranteed rate on our inforce portfolio (2.2%) gives us the flexibility to adapt crediting rates to our policyholders FY09 FY10 1H11 20 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

21 Flexible approach to dividend policy Flexible payout ratio Dividend policy: 40% to 50% of Adjusted Earnings, net of undated debt cost Significant cash extracted from 2011 transactions Efficient cash remittance from entities In Euro billion Exceptional capital gains Cash Operating Free Cash Flows Cash dividends from entities FY FY FY11E AXA APH transaction Sale of Taikang Life stake Sale of Canadian operations Remittance ratio 59% 73% >75% Total Majority of dividends expected in 2011 already remitted to Group holding company A decision on the dividend proposal will be taken in February Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

22 Conclusion 22 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

23 Conclusion Ambition AXA: a comprehensive plan Earnings generation capacity is diversified Balance sheet is robust and asset allocation is diversified We will continue to run our business with agility 23 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011

24 Q&A session Q&A session 24 Bank of America Merrill Lynch Annual Banking & Insurance CEO Conference 2011 October 5, 2011