INFORCE MANAGEMENT. A strategic asset. Paul EVANS CEO of AXA UK & Ireland Member of the AXA Group Executive Committee. Investor Day November 20, 2014

Transcription

1 INFORCE MANAGEMENT A strategic asset Investor Day November 20, 2014 Paul EVANS CEO of AXA UK & Ireland Member of the AXA Group Executive Committee

2 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, 2013, 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.

3 TODAY S KEY MESSAGES AXA S INFORCE PORTFOLIO, A STRATEGIC ASSET DEMONSTRATED EXECUTION CAPACITY WHAT S NEXT C3 AXA Investor Day Inforce Management November 20, 2014

4 AXA s inforce portfolio, a strategic asset

5 AXA S INFORCE PORTFOLIO IS A MATERIAL POOL OF VALUE SOURCES OF VALUE #2 INFORCE BOOK FY13 data Life & Savings technical reserves 2 28 Euro billion Value In Force In Euro billion As of December 31, Euro billion Expected inforce surplus generation Peer AXA Euro billion Underlying Earnings 1 Peer Euro billion Capital allocated Peer million Customers Peer C5 AXA Investor Day Inforce Management November 20, L&S 2013 post-tax Underlying Earnings before loadings on new business premiums and acquisition costs and after DAC amortization 2. Worldwide ranking by L&S technical reserves., including Unit-Linked. Source: companies data

6 ADDRESSING CUSTOMERS EVOLVING NEEDS THROUGH A WIN-WIN RELATIONSHIP Value for customers Value for shareholders Constant progression in health expenditures 1 % of GDP Increase in life expectancy 2 6.3% 71y 8.2% 79y 9.0% 83y Up-sell Protection & Health add-ons to Savings contracts Enhanced benefits in case of illness, dependency, extreme longevity, etc. Higher ROE Risk diversification Increased loyalty and equipment rate Savings accounts return impacted by record low interest rates 3 6.5% 4.5% 1.3% Diversification towards hybrid savings products Upside potential Investment diversification & longer investment horizon Higher ROE Less capital intensive Earnings diversification Continuous technological breakthroughs New e-services Multi-access Simplified procedures Improved cost efficiency Legacy systems decommissioning Flexible solutions to fit customers needs while optimizing return on equity for shareholders C6 AXA Investor Day Inforce Management November 20, Example of France Source: DREES 2. Example of Japan Source: World Bank 3. Example of France Livret A Source: French Ministry of Economy

7 DELIVERING FLEXIBILITY FOR CUSTOMERS AXA France INVESTMENT DIVERSIFICATION Additional return from holding hybrid vs. pure G/A Savings products LIQUIDITY OPTION GMxB buy-out offer AXA US 260 ca. bps HIGHER RETURN 1 >13% TAKE-UP RATE >30% 31% TAKE-UP RATE EQUIP. RATE AXA Winterthur INVESTMENT DIVERSIFICATION Pilot - Offering upside potential through modern offers EXTENDING COVERAGE Additional Protection & Health coverage as needs evolve AXA Life Japan C7 AXA Investor Day Inforce Management November 20, Average difference over between G/A Savings crediting rates and return on assets invested in Unit-Linked products

8 DELIVERING ON AMBITION AXA OBJECTIVES AMBITION AXA OBJECTIVES ACHIEVEMENT ADDITIONAL UNDERLYING EARNINGS VS m as of 2015E + 280m as of 2013 L&S ADJUSTED RETURN ON EQUITY 2 11% as of 2015E vs. 9% as of % as of 2013 C8 AXA Investor Day Inforce Management November 20, Additional yearly recurring underlying earnings from inforce management actions compared to 2010 baseline, not adjusted from the closed MONY portfolio transaction 2. Life & Savings Adjusted Return on Equity, before debt

9 Demonstrated execution capacity

10 A SYSTEMATIC REVIEW OF OUR INFORCE PORTFOLIO A segmented inforce journey enabling a systematic customized portfolio review 30% of inforce For certain customers For shareholders Transform/ Exchange Increasing gap between purchased cover and current needs Increasing visibility on books profitability 1 FURTHER ENGAGE WITH OUR CUSTOMER BASE 2 ADAPT TO CURRENT FINANCIAL & MARKET ENVIRONMENT 3 TRANSFORM ORGANIZATION, PROCESSES AND IT 4 UNLOCK AND ACCELERATE CASH FLOWS 30% 50% 20% C10 AXA Investor Day Inforce Management November 20, 2014 % contribution to earnings generated by inforce management over

11 1 FURTHER ENGAGE WITH OUR CUSTOMER BASE EARN CUSTOMER LOYALTY PROMOTE ALTERNATIVE VALUE PROPOSALS OFFER LIQUIDITY SCREEN CUSTOMER NEEDS Tied agents maintain regular relationships with customers Up-selling & cross-selling opportunities Customer satisfaction and loyalty improvement Targeting 280,000 inforce clients holding a traditional savings product since 8+ years Proposing alternative hybrid solutions Targeting 14,000 clients Proposing to exchange their GMAB contracts against immediate monetization Targeting Group Life end customers Promoting additional individual contribution Upselling additional Protection & Health coverage Started in 2014 AXA JAPAN AXA BELGIUM AXA MPS ITALY AXA FRANCE 6.5% Lapse rate down 2.6pts 40,000 Opt-in >60% Take-up rate + 31m Revenues + 23m Underlying Earnings 40% Unit-Linked share 120m Reserve relief + 1m Underlying Earnings 2014 C11 AXA Investor Day Inforce Management November 20, 2014

12 MAINTAIN PROFITABILITY IN CURRENT ENVIRONMENT 2 ADAPT TO CURRENT FINANCIAL & ADJUST EXPENSES TO COMPETITVE MARKET ENVIRONMENT ENVIRONMENT 3 Proactively adjusted crediting rates in Continental Europe 1 and US, despite heavy commercial pressure Strategic decision to balance short-term performance vs. protecting the interests of the client in the long-term Disciplined Asset & Liability Management, enabling resilient long term investment income and limited duration mismatch Identified specific portfolios (i.e. closed books) and performed an in-depth analysis of associated costs and processes Decreasing costs through reduction and automation of processes as well as outsourcing solutions Maintained a resilient investment margin despite decreasing interest rates AXA Germany: a success to be leveraged 76bps 73bps 78bps 80bps 79bps Target portfolio: 1.9 million policies / Euro 15.6 billion reserves 190 FTEs associated Cost savings expected over 5 years: ca. 40% FY10 FY11 FY12 FY13 1H14 2 Dedicated project team to be deployed throughout the Group C12 AXA Investor Day Inforce Management November 20, France, Germany, Switzerland, Belgium 2. Annualized

13 4 UNLOCK AND ACCELERATE CASH FLOWS Euro 1.5 billion remittance to Group holding over E including the closed MONY portfolio transaction which will contribute Euro 0.6 billion to US internal debt repayment 1 Traditional inforce management measures Capital engineering Upon strategic review Incl. prioritization & market opportunity Disposal 1 Further engage with our customer base Review corporate structures and merge entities Systematic yearly scrutiny of eligible blocks 2 Adapt to current financial & market environment Structured reinsurance to optimize capital and reserves Specific assessment framework balancing earnings, expenses, value and capital 3 Transform organization, processes and IT 0.2bn Capital relief (on 8bn G/A Savings portfolio) 0.3bn Sale of mandatory Pension business 2 0.4bn of dividends 0.8bn Closed MONY portfolio transaction C13 AXA Investor Day Inforce Management November 20, To be included in the calculation of AXA s remittance ratio 2. Transaction pending, subject to regulatory approval

14 A COMPETITIVE EDGE AND A MORE BALANCED CULTURE BETWEEN INFORCE AND NEW BUSINESS PEOPLE & GOVERNANCE AXA S PROPRIETARY NETWORKS LONG TERM SUSTAINABILITY More than 200 FTEs in dedicated inforce management teams throughout the Group 13 entities have nominated a Head of inforce management, with a shared governance fully aligned with strategic planning process Strong competitive advantage to foster direct interactions with inforce customers Low turnover rate enabling to build long term client relationships Embedding inforce management in the Global Life & Savings decision making process A true business enabler, through mindset transformation and results achieved = REDEFINITION OF OUR INFORCE PORTFOLIO MANAGEMENT SUPPORTING: IMPROVED CUSTOMER EXPERIENCE GROWTH EARNINGS GENERATION CAPITAL OPTIMIZATION C14 AXA Investor Day Inforce Management November 20, 2014

15 What s next

16 AN INITIATIVE STARTED IN 2011 WHICH HAS MORE POTENTIAL WE ARE READY TO ENTER INTO OUR 3 RD PHASE OF MATURITY PHASE 1 Inforce as a project PHASE 2 Dedicated, but not embedded PHASE 3 Fully Embedded Beyond 2015 Inforce Management as a collection of standalone projects Short-term action plans Dedicated management team operating besides other corporate functions (e.g. legal, finance, operations, etc.) Dedicated KPIs to manage Focusing on specific areas Fully embedded within operations with a dedicated inforce P&L and associated strategic plan Full range of inforce actions contemplated and implemented on an ongoing basis LEVERAGING A UNIQUE PLATFORM Look-through view of inforce portfolios Common analytic tools enabling local and global benchmarking Yearly in-depth Systematic Portfolio Screening to track areas of improvement ALLOWING US TO Find more as we search Diversify type of activities Expand across product lines C16 AXA Investor Day Inforce Management November 20, 2014

17 THE MORE WE SEARCH, THE MORE WE FIND E Going forward Entities in scope Expand to additional entities BROADENING SCOPE OF ACTIVITY Pipeline of opportunities Additional products (Protection & Health, ) TRANSLATED INTO RESULTS Underlying Earnings 1 In Euro million E target updated from Euro 250 million to Euro 400+ million C17 AXA Investor Day Inforce Management November 20, Additional yearly recurring underlying earnings from inforce management actions compared to 2010 baseline, not adjusted from the closed MONY portfolio transaction

18 FOSTER CUSTOMER CENTRICITY AND EXPLORE DISRUPTIVE SOLUTIONS Foster customer centricity Explore disruptive solutions Reinforce our customers knowledge Develop data analytics capability LEVERAGE DIGITAL CENTRAL RISK CARRIER Pool Life & Savings reserves through internal reinsurance for European entities Pilot: US Targeting to convert 25% of heritage reserves to an alternative offer by 2020 INCREASE INTERACTIONS WITH CUSTOMERS 4 key initiatives going forward OPTIMIZE FUND RANGE Pilots: France, UK, Belgium Convergence and rationalization of Unit- Linked inforce funds without compromising value for clients Pilots: Spain, Germany, Switzerland Pilots: France, UK, Belgium C18 AXA Investor Day Inforce Management November 20, 2014

19 CONCLUDING REMARKS INFORCE MANAGEMENT AT AXA IS an opportunity to better serve customers a framework to mitigate risks in old books key for earnings resilience and capital efficiency a competitive advantage as first mover INFORCE MANAGEMENT AT AXA WILL increase customers satisfaction be fully embedded in all business lines support creating sustainable and flexible new business transform deeply AXA s operating model C19 AXA Investor Day Inforce Management November 20, 2014

20 Appendix

21 BIOGRAPHY PAUL EVANS GROUP CEO, AXA UK Paul Evans is Group Chief Executive of AXA UK & Ireland and member of the AXA Group Executive Committee. He has previously held the roles of Chief Financial Officer for AXA UK and Chief Executive of AXA Life UK. Paul is also the sponsor of the Group Inforce initiative. Paul joined AXA in January 2000 following a 13-year career with PricewaterhouseCoopers. Paul is additionally Chairman of the Board of the Association of British Insurers (ABI). C21 AXA Investor Day Inforce Management November 20, 2014