Ambition AXA Investor Day June 1, US Life. Mark Pearson President & CEO of AXA in the US

Transcription

1 Ambition AXA Investor Day June 1, 2011 US Life Mark Pearson President & CEO of AXA in the US

2 Cautionary note concerning forward-looking statements Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities litigation Reform Act of Forward-looking statements include, but are 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. Such risks and uncertainties may cause actual results to differ materially from the results contained in the forward-looking statements. Please refer to AXA Financial Inc. s Annual Report on Form 10-K for the year ended December 31, 2010, Quarterly Report on From 10-Q for the quarter ended March 31, 2011, and other filing AXA Financial makes with the Securities and Exchange Commission for a description of certain important factors, risks and uncertainties that may affect AXA Financial s business. AXA Financial 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 Ambition AXA June 1, 2011

3 Agenda Overview and market opportunity AXA Equitable strategy AXA Equitable financial profile Outlook 3 Ambition AXA June 1, 2011

4 AXA Equitable 2010 Key metrics $12.6 billion revenues 150+ years of history 5,200+ AXA Advisors $640 million earnings 3.3+ million customers 1, rd party distribution relationships 5,000+ engaged employees $164 million NBV 18.9% L&S NBV margin 12.4% including mutual funds $2.9 billion annual life benefits paid to 50,000 families $140+ billion separate/general account assets Represents consolidated AXA Financial information 4 Ambition AXA June 1, 2011

5 Experienced leadership team committed to delivering shareholder value Mark Pearson Chairman & CEO Andrew McMahon Financial Protection & Wealth Management Nick Lane Retirement Savings Richard Dziadzio Finance Dick Silver Strategic Shared Services Rino Piazzolla Human Resources 5 Ambition AXA June 1, 2011

6 AXA Equitable is a significant contributor to AXA s Life & Savings business 2010 APE AXA: 5.7 billion US: 986 million Underlying Earnings AXA: 2.5 billion US: 478 million NBV AXA: 1.3 billion US: 122 million France 24% MedLA 10% US 17% France 25% MedLA 4% US 20% France 12% MedLA 7% US 9% NORCEE 23% Asia- Pacific 19% UK & Ireland 9% NORCEE 21% Asia-Pacific 23% UK & Ireland 5% NORCEE 23% Asia-Pacific 46% UK & Ireland 3% Represents consolidated AXA Financial information 6 Ambition AXA June 1, 2011

7 US is largest profit pool globally, driven by high consumer needs US: largest Life & Savings market Breakdown of Life profit pool 1 (%) North America 38 Baby-boomers will inherit $ 8.4 trillion 3 70 By 2025, people 65+ will be 18% of population over 60 million, nearly 2x 2000 levels population over 60 million in 2025 Western Europe Japan 9 40 Asia Pacific E 2020E 2025E Latin America Africa Eastern Europe Total 100% ( 85 billion) US individual investors are cautious and seek financial advice Needs based planning Secure retirement concerns Tax rates increasing Concerns on Social Security safety Shift in pension responsibility Guaranteed living benefits 1. McKinsey report 2011, Life operating profits excludes realized capital gains / losses 2. LIMRA Factbook on Retirement Income Center for Retirement Research at Boston College Ambition AXA June 1, 2011

8 AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth Actively grow in selected segments Target Protection, At Retirement and Asset Accumulation Drive strong multi-channel distribution platforms Focus on inforce optimization Ensure efficient capital utilization & disciplined risk management Proactively manage inforce Reshape Savings business Design innovative and diversified product portfolio Provide client focused value-driven advice and solutions Increase productivity and efficiency Improve cost income ratio Continue to build a high trust and achievement culture 8 Ambition AXA June 1, 2011

9 Well positioned to grow in target segments: (1) Protection & Estate Planning Opportunity $ 10 billion annual premium Life Insurance market with average market growth rate of ~7% 1 Compelling need for protection in US households 56% of households have no individual Life insurance 2 50% of households believe they are underinsured 2 Unique positioning Significant and diversified advisor force Innovative and flexible client solutions Advanced underwriting and risk selection Productive distribution: face amount 3x industry avg Ranking Variable Life: #2, ~10% share Retail Life: #7, ~4% share Term: #9, ~4% share Strategy Client-focused range of competitive products Grow highest value third party life relationships Provide valuable support and service platforms 2010 Results (after-tax, in $ million) Protection & Estate Planning At Retirement & Asset Accumulation Other 9 Ambition AXA June 1, 2011 APE Represents consolidated AXA Financial information Underlying Earnings 53% 25% 1, LIMRA average annual growth rate 2. LIMRA 2010 Life Insurance Ownership Study 3. Total includes mutual funds, group pension and reinsurance 4. Excludes mutual funds Prot. & Estate Planning Total 3 % Contribution No. of policyholders (m) % General Account (bn) 4 $ 27 $ 52 52% Separate Account (bn) 4 $ 11 $ 91 12% Reserves (bn) $ 38 $ %

10 Well positioned to grow in target segments: (2) At Retirement and (3) Asset Accumulation (2) At Retirement (3) Asset Accumulation Opportunity $ 140 billion annual premium VA market with average market growth rate of ~8% 1 and $ 1.5 trillion VA assets VA demand: 72% VA sales including Living Benefit riders 2 $ 4 trillion assets in DC market: growth rate ~7% 3 $ 100 billion assets in educational market US savings rate doubled over last 3 years to 5.7% Unique positioning Multiple distribution network with recognized brand Innovative VAs with flexible growth and guarantee options Well established brand in education market Dedicated distribution driving superior customer loyalty 2010 Ranking: VA: #6, ~5% share 2010 Ranking: 403(b) educational: #3, ~20% share Strategy Diverse VA product portfolio to meet client needs Capture market share in value enhancing segments Employer sponsored expertise and service capabilities Leverage partnerships and assets for government, municipalities and higher education 2010 Results (after-tax, in $ million) Protection & Estate Planning At Retirement & Asset Accumulation Other 10 Ambition AXA June 1, 2011 APE 47% Represents consolidated AXA Financial information Underlying Earnings 70% 1, LIMRA average annual growth rate 2. LIMRA Factbook on Retirement Income Cerulli average annual growth rate At Retirement/ Asset Accum. Total 4 % Contribution No. of policyholders (m) % General Account (bn) 5 $ 22 $ 52 42% Separate Account (bn) 5 $ 79 $ 91 87% Reserves (bn) $ 101 $ % 4. Total includes mutual funds, group pension and reinsurance 5. Excludes mutual funds

11 Growth driven by strong multichannel distribution platform AXA Advisors Distinct Asset 5,200+ proprietary agents #1 market share among proprietary VUL distributors Top 3 market share among proprietary VA distributors Long serving and loyal sales force Consistent life and annuity production Established 3rd Party Distribution Variable Annuities AXA Distributors (658 selling agreements) 76 banks 30 broker dealers 552 independent financial planner firms Life Insurance AXA Partners 535 broker general agent relationships Sales and Productivity Top productivity amongst peers and 1.5x peer average 1 4 yr retention of new agents is 2x industry average 93% branch managers have >10 yrs service vs. 57% industry average 2 Sales and Productivity Multi-product sales targets with key distribution partners ~$ 1 billion sales in first to market VA products since 2010 AXA Partners average face amount: $ 2 million (10x industry average) Flexibility of distribution (40% of 2010 sales came from newly launched products) 1. Agent Production & Retention, LIMRA 2009 study based on FY commissions 2. LIMRA Field Benefit Practices, Ambition AXA June 1, 2011

12 AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth Actively grow in selected segments Target Protection, At Retirement and Asset Accumulation Drive strong multi-channel distribution platforms Focus on inforce optimization Ensure efficient capital utilization & disciplined risk management Proactively manage inforce Reshape Savings business Design innovative and diversified product portfolio Provide client focused value-driven advice and solutions Increase productivity and efficiency Improve cost income ratio Continue to build a high trust and achievement culture 12 Ambition AXA June 1, 2011

13 Margins driven by in-force optimization Key Drivers and Results (2010) 2010 Gross Margins Pre-tax, pre-dac Investment Margin Stable net investment margins Fees & Revenues Separate Account and brokerage fees Contractual charges Technical Margin Stable mortality margin GMxB impact of reserves adjustment and hedging results In $ million Protection & Estate Planning At Retirement & Wealth Accumulation 1,046 All Other Total 2, bps spread: >$50 bn General Account SA Balance (in $ billion) Margin (bps) $ 95 Growth in Separate Account Assets and Margins $ bps spread and 3 year mortality 116 bps fees: >$90bn margin average is Separate Account 1.5% of reserves $ $ 91 $ , ,665 (1,141) 77 2,412 (569) Reflects lapse reserve increase and market volatility Q 2011 Investment Margin Fees & Revenues Technical Margin Represents consolidated AXA Financial information 13 Ambition AXA June 1, 2011

14 Disciplined risk management driving positive GMxB results US Variable Annuity GMxB Net Underlying Earnings Hedge objectives (In $ million, net of DAC and tax 1 ) Q 2011 VA base fees & other, less expenses GMxB Hedge Margin 22 (144) (1) o/w Basis (30) (17) 0 o/w Volatility (182) (88) (1) o/w Interest rates, credit spreads & other 234 (39) 1 Equity Interest Rate Equity Volatility Interest Volatility Fully Fully ATM funds covered ~70% Partially Reserve Increase due to lapse experience / assumptions (38) (130) n/a VA GMxB Underlying Earnings Lapse experience will be reviewed in Notional tax rate of 35% VA Actions Taken VA product redesign Retirement Cornerstone reduced interest rate risk Lowered risk through fund action plans Added volatility tool (AXA Tactical Manager) Implemented basis risk action plan 70% moved to passive funds Required use of allocation funds Introduced maximum equity allocation Interest rate hedge is in place for anticipated 2011 sales 14 Ambition AXA June 1, 2011

15 AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth Actively grow in selected segments Target Protection, At Retirement and Asset Accumulation Drive strong multi-channel distribution platforms Focus on inforce optimization Ensure efficient capital utilization & disciplined risk management Proactively manage inforce Reshape Savings business Design innovative and diversified product portfolio Provide client focused value-driven advice and solutions Increase productivity and efficiency Improve cost income ratio Continue to build a high trust and achievement culture 15 Ambition AXA June 1, 2011

16 Diversified, innovative and disciplined: positioned for growth Reshape Life & Savings business Variable Annuity (APE) More diversified product portfolio 1Q Q % of sales in 2010 came from newly launched products Expanded VA platform with new products to meet wider client base Other VA 50% Accumulator 39% Other VA 43% Accumulator 21% Strong position in 403(b) VA market: #3 in education Continued growth of life sales in selected markets Retirement Cornerstone 11% SCS 5% Retirement Cornerstone 31% Increased profitability Enhanced risk profile and improved product margin for profitable and sustainable VA business Focused sales on less capital intensive and interest sensitive products New business IRR targeted to grow from 10% in 2010 to ~15% in 2015 Athena UL 31% VL 31% Other 2% Life (APE) 1Q Q 2011 Term 36% Athena UL 24% Indexed UL 27% Term 21% Other 2% VL 26% 16 Ambition AXA June 1, 2011

17 New VA products have lower risk profile Inforce Actions New Business Actions Accumulator Accumulator 7 Series 1 7 Series 2 Accumulator 9.0 Retirement Cornerstone Basis risk % Passive equity funds 5% 60% 80% 100% Equity vol % ATM equity funds % Equity in funds 0% 70% 65% 65% 80% 100% 60% 55% Equity and interest rate exposure Equity hedge notional Interest rate hedge notional 23% lower than 7 Series 25% lower than 7 Series 27% lower than 7 Series 62% lower than 7 Series Key takeaways VA product design and repositioning provide lower risk profile VA funds action plans have increased hedge efficiency 1. At point of sale 2. Post management actions of lowering % of active equity funds and implementing ATM 17 Ambition AXA June 1, 2011

18 New VA products have lower capital requirements No longer for sale New Business Accumulator 7 Series Accumulator 9.0 Retirement Cornerstone (UST at 4.65%) (UST at 3.32%) (UST at 3.32%) Initial Capital as % of Premium 7.8% 0.7% 1.6% Impact for new sales after interest rates decline 100bps % 2.9% 1.6% If equity markets decline 25% % 2.8% 3.4% Key takeaways Repositioned VA products have lower capital requirements Capital for new business is less sensitive to stress scenarios Retirement Cornerstone s floating rate benefit offers better capital profile in low interest rate environment 1. Capital requirements applies only to new sales after the interest rate decline if those products continue to be sold in such an environment 2. Post-issue 18 Ambition AXA June 1, 2011

19 AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth Actively grow in selected segments Target Protection, At Retirement and Asset Accumulation Drive strong multi-channel distribution platforms Focus on inforce optimization Ensure efficient capital utilization & disciplined risk management Proactively manage inforce Reshape Savings business Design innovative and diversified product portfolio Provide client focused value-driven advice and solutions Increase productivity and efficiency Improve cost income ratio Continue to build a high trust and achievement culture 19 Ambition AXA June 1, 2011

20 Programs are in place to increase productivity and improve cost income ratio Gross economic expense efficiencies Operational productivity actions Cost Income Ratio 1 Gross economic expenses (in $ billion) -13% % 58% 71% 71% % Focus on sustainable margin growth in changing market environment 2011 actions to reduce expense by $ 100 million Headcount reductions ~$ 40-$ 50 million Reducing space requirements ~$ 10 million E Simplifying workflow ~$ 10 million Headcount Increasing outsourcing/offshoring 5,967 5,493-20% 5,142 5,206 4,800 Initiatives on procurement spending Offshoring technology E 1. Cost income ratio: Net expenses / net revenues, IFRS spread basis 20 Ambition AXA June 1, 2011

21 AXA Equitable 2015 ambition (after-tax) In $ million Underlying earnings ,100 NBV, NBV margin NBV margin (%) NBV (in $ million) 12% 7% 5% ~20% E E US statutory capital 2 In $ billion (%) + $ 2.8billion % New Business IRR 9% 10% ~15% AXA Eq RBC: 332% 382% 406% Q E E Represents consolidated AXA Financial information 21 Ambition AXA June 1, Projection assumptions: E APE CAGR of 16%; S&P returns 5-7% p.a.; 10Y treasury 3-5% p.a. 2. AXA Equitable and MONY

22 AXA Equitable 2015 ambition and sensitivities (after-tax) In $ million Underlying earnings ,100 Underlying earnings sensitivities 2015E Underlying Earnings 1,100 Reduce S&P growth to 0% p.a. -12% Equity volatility up 25% -3% E Equity volatility down 25% +3% Interest rates down 100bps -5% NBV margin (%) NBV (in $ million) NBV, NBV margin ~20% NBV sensitivities 2010 NBV % 5% 7% E Equity volatility up 25% -5% Interest rate volatility up 25% -17% Interest rates up 100bps +7% Interest rates down 100bps -11% Represents consolidated AXA Financial information 1. Projection assumptions: E APE CAGR of 16%; S&P returns 5-7% p.a.; 10Y treasury 3-5% p.a. 22 Ambition AXA June 1, 2011

23 Clear strategy to deliver underlying earnings (after-tax) In $ million Underlying earnings 1 New business growth in: Protection At Retirement Asset Accumulation Benefit from expense savings and reduction in unit costs 160 Grow technical margin: Mortality / morbidity GMxB 140 1, Growth in selected segments Productivity and efficiency Inforce optimization 2015E 1. Projection assumptions: E APE CAGR of 16%; S&P returns 5-7% p.a.; 10Y treasury 3-5% p.a Represents consolidated AXA Financial information 23 Ambition AXA June 1, 2011

24 Generating significant Free Cash Flows In $ billion Free Cash Flows generation In $ billion In $ billion E (0.7) 0.6 (0.4) 0.7 (2.8) 4.3 Inforce net surplus generation New Business strain Free Cash Flows generation Cash to holding company E $ 3.4 billion $ 0.4 billion $ 2.7 billion 2 Capability driven by statutory earnings Inforce net surplus generation New Business strain Free Cash Flows generation Represents consolidated AXA Financial information 24 Ambition AXA June 1, AXA Equitable and MONY 2. Cumulative ordinary dividends from onshore entities projected to be paid in Includes renewal years for new business

25 AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth 1 Strong presence in the US the world s largest profit pool 2 Well positioned to grow with unique assets in distribution and inforce 3 Clear strategy to deliver underlying earnings and Free Cash Flows 4 New products gaining momentum 5 Increasing Free Cash Flows while growing new business 25 Ambition AXA June 1, 2011