AXA INVESTOR DAY. Presentation. December 3, 2015

Transcription

1 AXA INVESTOR DAY Presentation December 3, 2015

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, 2014, 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 TABLE OF CONTENTS INTRODUCTION PAGE 4 Denis Duverne, AXA Group Deputy CEO SOLVENCY II CAPITAL POSITION AND INTERNAL MODEL PAGE 8 Alban de Mailly Nesle, AXA Group CRO CAPITAL MANAGEMENT FRAMEWORK PAGE 22 Gérald Harlin, AXA Group CFO CONCLUSION PAGE 30 Denis Duverne, AXA Group Deputy CEO 3 AXA Investor Day December 3, 2015

4 INTRODUCTION Denis Duverne, Group Deputy CEO

5 STRONG SOLVENCY II RATIO REFLECTS AXA S DISCIPLINED STRATEGY Early 2000s AXA pioneer in developing an internal model Managed through financial and sovereign crises 2011 Launch of Ambition AXA with key strategic initiatives driven by our Solvency II internal model Strengthening of Balance Sheet Internal model refinement and approval process November 2015 Approved Solvency II ratio 212% 3Q15 Internal model approved by ACPR 1 5 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

6 OUR MODEL IS AT THE HEART OF OUR DECISION MAKING PROCESS Business Mix Transformation In Euro billion G/A 1 Savings G/A Protection & Health Unit-Linked, Mutual funds & Other APE by product % 31% 44% % 37% 48% NBV margin +12pts 34% 22% FY10 FY14 FY10 FY14 Resilient L&S investment margin 2 Asset Liability Management Tight duration gap Lower crediting rates Disciplined asset mix 76bps 73bps 78bps 80bps 80bps FY10 FY11 FY12 FY13 FY14 Capital Allocation M&A operations since 2010 Euro 9 billion cash generated from disposals Euro 5 billion cash spent on strategic acquisitions favoring P&C and HGM Sustained dividend paying capacity Euro 19 billion adjusted earnings Euro 8 billion dividends paid 6 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

7 OUR CAPITAL MANAGEMENT IS ANCHORED IN SOLVENCY II Attractive dividend Risk appetite Cash upstream Product structure Product pricing Solvency II ratio at 212% (3Q15) Asset portfolio Capital quality Local capital management M&A strategy Capital structure New business mix Target ratio Geographical mix Ability to sustain shocks 7 AXA Investor Day December 3, 2015

8 SOLVENCY II CAPITAL POSITION AND INTERNAL MODEL Alban de Mailly Nesle, Group CRO

9 SOLVENCY II CAPITAL POSITION AND INTERNAL MODEL Our internal model has been approved and our ratio is resilient Agenda Building blocks of our Solvency II ratio Resilience to financial and non-financial shocks Risk management in action 9 AXA Investor Day December 3, 2015

10 STRONG SOLVENCY UNDER OUR APPROVED INTERNAL MODEL From Economic Solvency Ratio 201% 190% 215% 212% 201% 191% 217% 212% to approved Solvency II ratio FY14 1Q15 1H15 3Q15 1Q15 Solvency ratio temporarily impacted by the spike in implied interest rates volatility (~10 points) Solvency II ratio adjusted for subsequent year dividend payment at Full Year only 10 AXA Investor Day December 3, 2015

11 SOLVENCY II IS A MARKET CONSISTENT FRAMEWORK in Euro billion IFRS Balance Sheet Solvency II Balance Sheet Solvency II Balance Sheet under 1 in 200 years shock Solvency Capital Requirement is the 1-year value at risk of AFR at a confidence level of 99.5% Assets Equity Liabilities Moving to economic balance sheet Market value of assets Available Financial Resources (AFR) Market value of liabilities SCR 1 in 200 years shock Assets after shock AFR after shock Liabilities after shock Solvency II ratio AFR SCR % 3Q15 11 AXA Investor Day December 3, 2015

12 AFR IS THE ECONOMIC VALUE OF AVAILABLE CAPITAL 3Q15 figures under approved internal model, in Euro billion IFRS Shareholders Equity 1 Full market value of assets Intangible assets Remove intangible assets Move to full market value of assets Real estate (Euro +4.1bn) Loans (Euro +0.4bn) Goodwill (Euro -16bn) DAC (Euro -13bn) VBI and other intangibles (Euro -4bn) Best Estimate Liabilities 12 Move to Best Estimate Liabilities Subordinated debt 7 Difference between IFRS reserves and Best Estimate Liabilities (Euro +24bn) Market Value Margin (Euro -12bn) Scope & others -1 Available Financial Resources (AFR) 61 AFR Euro 61 billion 3Q15 12 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

13 SCR IS THE CAPITAL NEEDED TO SUSTAIN A 1 IN 200 YEARS SHOCK 3Q15 figures under approved internal model, in Euro billion Euro 15bn Euro 15bn Euro 4bn Euro 2bn Underwriting Operational Market risk Credit risk risk risk L&S lapse risk P&C reserve risk Longevity risk Equity risk Spread risk (corporate & sovereign) Interest rate risk Fixed Income default risk Reinsurance default risk Mortgage default risk Client, product and business practices External Fraud Employment practices and workplace safety - Diversification benefits across risks Euro 11 billion Asset Management, Banking & others Euro +2.5 billion Tax adjustments Euro -2.5 billion = Post-tax SCR excluding the US Euro 25 billion Euro 4 billion + US equivalence required capital SCR Euro 29 billion 3Q15 13 AXA Investor Day December 3, 2015

14 AXA SOLVENCY II TECHNICAL SPECIFICATIONS (1/2) Scope of Solvency II ratio Internal model covers 97% of insurance business 1 excluding the US US in equivalence Sovereign risk Spread and default risk considered for all government bonds (domestic and non-domestic holdings) Asset Management and Banking included under their own regulatory frameworks Pension funds risk included Transitional rules No use of transitional rules for technical provisions discount rates Ultimate-Forward Rate (UFR) No use of transitional rules on equities risk weighting UFR used due to lack of observable market data for long term interest rates Set at 4.2% 2 at year 60, extrapolated from year 20 (last liquid point) A decrease of 100bps in UFR would reduce our Solvency II ratio by 19pts Fungibility Minority interests in excess of their coverage of local SCR considered unavailable for Group AFR 14 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

15 AXA SOLVENCY II TECHNICAL SPECIFICATIONS (2/2) Market Value Margin Risk buffer added on top of Best Estimate Liabilities (Euro 12 billion at 3Q15) Reflects cost of non-hedgeable risks Computed using 6% cost of capital in line with EIOPA guidance Volatility Adjuster (VA) The Volatility Adjuster has been applied according to EIOPA rules The market value of assets in the AFR reduces when spreads widen. The Volatility Adjuster applies a corresponding adjustment to the liabilities This reflects our ability to bear illiquidity risk on assets backing long term liabilities Loss-absorbency capacity of deferred taxes The tax adjustment on SCR is limited to the existing net deferred tax liabilities already recognized in the Solvency II balance sheet Use of the tax group mechanism (ability to compensate losses between entities in the same tax group) when allowed by the regulator -13pts impact on our Solvency II ratio in case of +75bps widening corporate spreads and stable VA The VA is calculated using the weighting of corporate and sovereign bonds in a reference portfolio of the assets of European insurers EIOPA VA = 65% [ w gov * S gov + w corp * S corp ] with w gov = 38.7% and w corp = 48.2% A reduction by 5% in the weighting of corporate bonds in the reference portfolio would reduce our Solvency II ratio by 5pts 15 AXA Investor Day December 3, 2015

16 OUR SOLVENCY II RATIO IS RESILIENT TO FINANCIAL MARKET SHOCKS in Euro billion 212% Ratio as at September 30, % 61 Interest rate 1 +50bps 212% 0pt 29 Interest rate 1-50bps 204% -8pts Corporate spreads +75bps 211% -1pt Equity markets +25% 214% +2pts 3Q15 Equity markets -25% 206% -6pts Available capital Required capital 16 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

17 LIMITED AND ASYMETRIC SENSITIVITY TO INTEREST RATES in Euro billion Ratio as at September 30, % AFR SCR Interest rates +50bps 212% 0pt AFR increases roughly at twice the rate of SCR maintaining a stable ratio > 200% Interest rates -50bps 204% -8pts -0.1 Interest rates sensitivity highly convex at current low rates AXA Investor Day December 3, 2015

18 LIMITED SENSITIVITY TO CORPORATE SPREADS in Euro billion Ratio as at September 30, % AFR SCR Corporate spreads +75bps 211% -1pt The impact of corporate spreads widening is limited by Volatility Adjuster Corporate spreads sensitivity linked to our asset portfolio characteristics 1 Relatively low share of corporate bonds in AXA s General Account asset mix: 35% Low corporate bonds asset duration: 4 to 5 years Widening of sovereign spreads 2 by +50bps would reduce the Solvency II ratio by 9 points 18 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

19 OUR SOLVENCY II RATIO IS RESILIENT TO A WIDE RANGE OF SHOCKS Ratio as at September 30, % 1/20 year shock 180% -32pts 2008/2009 financial crisis 164% -48pts 2011 financial crisis 190% -22pts 1Q15 IR volatility spike 204% -8pts 1918 Spanish flu 209% -3pts 1999 Lothar & Martin storm 210% -2pts 19 AXA Investor Day December 3, 2015 Definition of shocks on Page 33 of this document

20 STRONG CAPITAL GENERATION ACTS AS A BUFFER Illustrative net capital generation per year is enough to sustain individual shocks on Operational capital generation ~20 points Interest rates -60bps FY14 dividend -9 points Equity markets -45% Net operational capital generation ~11 points Interest rates -30bps & Equity markets -20% 20 AXA Investor Day December 3, 2015

21 STRONG AND RESILIENT RATIO DRIVEN BY OUR STRATEGY Product development Product pricing Reinsurance Securitization Hedging Products Risk mitigation Internal model in action Investments Asset Liability management Driven by liability profile Balance expected return, capital consumption and liquidity Duration gap management Cash flow matching 21 AXA Investor Day December 3, 2015

22 CAPITAL MANAGEMENT FRAMEWORK Gérald Harlin, Group CFO

23 CAPITAL MANAGEMENT FRAMEWORK Our Solvency II ratio is strong and resilient and the framework is now stable Agenda Dividend policy Capital management strategy Capital structure Cash flow and remittance ratio 23 AXA Investor Day December 3, 2015

24 DIVIDEND POLICY: PAYOUT RANGE SET AT A HIGHER LEVEL Payout ratio of 45% - 55% of Adjusted Earnings 1 Dividend per share % % +4% +13% +17% in Euro 55% Payout ratio 40% 40% 49% Previous payout range 45% 40% 40% New payout range 45% FY09 FY10 FY11 FY12 FY13 FY14 FY15E 24 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

25 CAPITAL MANAGEMENT STRATEGY 230% Return excess capital to shareholders Increase appetite for investment risk Additional room to invest in business growth Additional flexibility on the payout ratio Target Capital Range Dividend policy based on 45% - 55% payout ratio Neutralize dilution of employee shares and stock-options offering Invest in business growth Maintain current investment risk appetite 170% 140% Selective de-risking of investments Increased selectivity in growth initiatives Allow for dilution of employee shares and stock-options offering Additional flexibility on the payout ratio Restrict growth initiatives Further de-risking of investments Reduce dividend payout ratio below the range 25 AXA Investor Day December 3, 2015

26 INCREASING THE RESILIENCE OF OUR CAPITAL STRUCTURE AFR structure 1 Tier I 84% Other 2 16% o/w Tier I debt 16% Tier I represents 84% of AFR The strong organic solvency generation of ~11 points per year post dividend allows us flexibility not to renew part of our Tier 1 debt maturing over the next years 3Q15 This would reduce the share of debt in our Tier I capital thereby further increasing our resilience to extreme scenarios 26 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

27 MAXIMIZE CASH UPSTREAM TO THE GROUP ECONOMIC quantification of local capital needs Maintain LIMITED + volatility buffer = above 100% locally Local EXCESS capital (France L&S, Germany P&C, US ) Maximize upstream to the Group subject to Local statutory and regulatory constraints Group Holding Local Entities Reduce local excess capital Maximize ordinary dividends Simplify legal structures Risk pooling 27 AXA Investor Day December 3, 2015

28 LOWER CASH CONSUMPTION FROM L&S NEW BUSINESS Solvency I framework Solvency II framework FY14, In Euro billion L&S New business strain No change in new business strain New business required capital New business future profits from favorable business mix more than sufficient to cover new business required non-eea EEA 1 non-eea capital for EEA entities Total L&S investment in new business New business internal rate of return increases from 14% to 17% P&C and L&S in-force free cash flows remain broadly stable when moving from Solvency I to Solvency II annual uplift in Free Cash Flow writing ~Euro 0.5 billion profitable new business under Solvency II 28 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

29 STRONG REMITTANCE AND DIVIDEND COVERAGE Remittance target confirmed Increased cash upstream in Euro billion % remittance ratio target confirmed with annual new business cash uplift 78% remittance ratio on average over FY14 86% FY14 proforma with additional upstream* Operating Free Cash Flow Cash remitted from entities 1 Dividend comfortably covered by cash upstream ~1.5x dividend coverage ratio 2 *assuming the mid-point of the 75-85% remittance ratio range and a Euro 0.5 billion uplift in Operating Free Cash Flow writing profitable new business under Solvency II 29 AXA Investor Day December 3, 2015 All notes are on Page 33 of this document

30 CONCLUSION Denis Duverne, Group Deputy CEO

31 KEY TAKEAWAYS FROM THE DAY Strong Solvency II ratio at 212% (3Q15) under our approved internal model Key strategic and operational choices driven by our internal model Product mix, Investment mix, Risk mitigation, Portfolio diversification Solvency II ratio resilient to a wide range of both financial and non-financial related shocks Clearly defined capital management framework with % as central target Solvency II range Dividend payout ratio range increased to 45-55% Higher free cash flow under Solvency II resulting from lower new business capital consumption Euro 0.5 billion (annually) Remittance ratio target confirmed at 75-85% leading to strong dividend coverage ratio 31 AXA Investor Day December 3, 2015

32 Q&A Investor Day

33 NOTES Page 5 1. ACPR (Autorité de Contrôle Prudentiel et de Résolution) is AXA s lead supervisor Page 6 1. General Account 2. General Account only Page IFRS Shareholders Equity is gross of minority interests and includes Euro 9.4bn of undated subordinated debt (TSS/TSDI) Page Based on invested assets 2. For Euro, US & Hong Kong dollar and British pound Page Interest rates sensitivity based on swap rates Page All asset portfolio characteristics as at June 30, Sensitivity to a widening in Euro sovereign spreads vs. the Euro swap curve Page 19 1/20 shock: 95% quantile on Market and Credit risk 2008/2009 financial crisis: impact of the evolution of markets between March 2008 and March 2009 combined with credit losses observed during this period 2011 financial crisis: impact of the evolution of markets between January 2011 and January Q15 IR volatility spike: average increase of 46% of implied interest rate volatility modelled with Euro 10x10 interest rate swaptions 1999 Lothar & Martin storm: Sensitivity relates to the severity impact of the storm assuming same reinsurance coverage as at September 30, 2015 Page Net of undated debt interest charges (Euro 307 million in FY14) Page AFR tiering includes US equivalence and excludes Asset Management and Banking operations 2. Tier II and Tier III Page EEA for AXA s Solvency II internal model includes Belgium, France, Germany, Italy and the UK. Page Includes cash dividends from the operating entities, cash proceeds from the US loan repayment to the Group and cash held at regional holding level to finance acquisition (Colpatria) 2. Defined as cash upstreamed from local entities net of holding costs divided by dividends paid to the shareholders 33 AXA Investor Day December 3, 2015

34 DEFINITIONS Adjusted earnings, APE, NBV and Group operating Free Cash Flows are non-gaap measures and as such are not audited, may not be comparable to similarly titled measures reported by other companies and should be read together with our GAAP measures. Management uses these non-gaap measures as key indicators of performance in assessing AXA s various businesses and believes that the presentation of these measures provides useful and important information to shareholders and investors as measures of AXA s financial performance. Life & Savings New Business Value (NBV) is the value of the new business sold during the reporting period. The new business value includes both the initial cost (or strain) to sell new business and the future earnings and return of capital to the shareholder. 34 AXA Investor Day December 3, 2015

35 APPENDICES

36 EVOLUTION OF SOLVENCY II RATIO FY14 1Q15 1H15 3Q Available Capital Required Capital Solvency II ratio 201% 191% 217% 212% 36 AXA Investor Day December 3, 2015

37 SCR REFLECTS OUR UNIQUE DIVERSIFIED PROFILE 3Q15 figures under approved internal model Diversified risk profile* Diversified geographic footprint Diversified business exposure Counterparty Operational 12% 5% 5% P&C 20% 22% Life Market 41% Holdings & Other 22% UK 5% Asia-Pacific Asset management & Banking 11% 4% 9% MedLA 15% 26% 8% France NORCEE US Property & Casualty 24% 53% 19% Life & Savings Holdings & Other 5% Asset Management & Banking *Insurance only, excluding US operations 37 AXA Investor Day December 3, 2015

38 OUR SOLVENCY II RATIO IS COMPUTED WITH US EQUIVALENCE RBC framework US Solvency II US equivalence Solvency II Group In Euro billion 3Q15 212% X 300%* of CAL TAC Available Capital ACL Required Capital CAL US Equivalence Available Capital US Equivalence Required Capital RBC ratio = TAC CAL Solvency II AFR Solvency II SCR TAC - Total Adjusted Capital ACL - Authorized Control Level CAL - Company Action Level AXA excl. US AFR US equivalence AFR AXA excl. US SCR US equivalence SCR * for AXA Equitable Life and Savings Insurance Company (AXA s main Life carrier in the US). 38 AXA Investor Day December 3, 2015