Ambition AXA Investor Day June 1, 2011 Life & Savings in mature markets Jacques de Vaucleroy Head of L&S Global Business Line & CEO of NORCEE region
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. 1 Ambition AXA June 1, 2011
Table of contents Introduction to the L&S business Mature markets focused approach INFORCE NEW BUSINESS Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Actively grow Protection & Health 2 Ambition AXA June 1, 2011
AXA has a large and diversified Life & Savings franchise Global footprint Operations in over 30 countries # 1 global Life insurer 1 Over 40 million customers Technical reserves of Euro 462 bn 2010 APE by geography Asia-Pacific (incl. Japan) 19% France 24% 2010 APE by business Unit-Linked 31% Mutual funds & other 13% Well balanced business mix Strong proprietary networks 2010 APE by distribution channel Total: Euro 5,780 million G/A Protection & Health 31% G/A Savings 25% NORCEE 21% US 17% MedLA 10% UK & Ireland 9% Partnerships 15% Brokers - IFAs 39% Agents & salaried sales force 46% Total: Euro 5,780 million Total: Euro 5,780 million 1. Based on GWP at 100% share for subsidiaries, AXA estimate 3 Ambition AXA June 1, 2011
AXA has one of the largest books of business in the large mature market pool Mature markets represent large profit pool Mature markets High growth markets 2009 industry technical reserves 6% where AXA has a leading position Operations in 13 countries 1 Top 5 position in main markets 2 Over 27 million customers Ca. 68k active distributors of which 28k agents Largest invested asset base of Euro 492 billion 94% Total: Euro 11,118 billion 2009 industry net profits after tax 23% In Euro billion 2010 largest technical reserves among global European players 446 405 332 309 Mature markets Total 140 77% 77% Total: Euro 65 billion AXA Allianz Aviva Generali ZFS Source: McKinsey Global Insurance Pools Source: Company report 1. Belgium, Germany, France, Italy, Japan, Luxembourg, Portugal, Spain, Greece, Switzerland, the UK and the US 2. Based on GWP as of December 31, 2010: France #3, Belgium #3, Switzerland #1 and Germany #5 (based on 2009 figures) 4 Ambition AXA June 1, 2011
representing the basis for sustainable earnings and operating Free Cash Flows growth Our ambition: improve cost income ratio by 5 pts -5 pts Increase gross margins Expenses 1 : 6.5 bn Gross margin: 9.7 bn 68% 63% Control expenses 2010 Pro forma of AXA APH and UK Life transactions 2015E and deliver sustainable operating Free Cash Flows growth In Euro billion 5 11 12% CAGR 2 6 11 Mature markets 1.4 2010 1.7 2011E // 2.5 2015E 2011E-2013E 2013E-2015E < 1 2011E-2015E High growth markets 1. Net of DAC/DOC and policyholders benefits 2. On a reported basis 5 Ambition AXA June 1, 2011
Distinctive and complementary strategy for mature and high growth markets Mature markets Sustainable growth in earnings & operating Free Cash Flows High growth markets Double our size Selectivity Acceleration Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Efficiency Everywhere with a focus on mature markets Actively grow Protection & Health 6 Ambition AXA June 1, 2011
Table of contents Introduction to the L&S business Mature markets focused approach INFORCE NEW BUSINESS Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Actively grow Protection & Health 7 Ambition AXA June 1, 2011
Ambition Increase operating Free Cash Flows generation from inforce Life & Savings operating Free Cash Flows In Euro billion Focus on inforce optimization 24-13 Increase productivity and efficiency -10 Explore closed books for additional opportunities 21-3 11 11 3 Expected cash generation New Business investment L&S operating Free Cash Flows 2011E-2015E 2011E-2015E 2011E-2015E High growth markets Mature markets 8 Ambition AXA June 1, 2011
Focus on inforce optimization Execute on inforce management program Global optimization program launched across 6 entities 1, with dedicated resources locally and centrally Ambition to improve underlying earnings by Euro 50 million p.a. KEY ACTIONS Cross-sell / up-sell / retention management Cross-sell Client reactivation Policy and client retention Examples AXA Switzerland: in 2010 in Individual Life, 23% of the maturities were reinvested (CHF 226 m) Group Life reinvestment campaign targeting pension fund benefits Pricing / offer / incentives Flexible pricing, fee structures and charges Crediting policy Portfolio / product simplification and conversion Fund platform optimization Capital optimization and ALM AXA Germany: charging special services to customers Concept to be replicated in Switzerland, France and the US Active claims management Claims validation / pay-out Active claims management e.g. rehabilitation programs 1. Belgium, Germany, France, Japan, Switzerland and the US 9 Ambition AXA June 1, 2011
Increase productivity and efficiency In Euro billion L&S cost base 6.5 Admin. costs 6.5 2.7 Efficiency measures on mature markets Maintain administrative costs despite inflation and growth Inflation 2 2.7 0.5 Ambition Mature markets 6.1 Acquisition costs 3.2 2010 2015E VBI 1 amortization High growth 0.2 markets 0.5 0.5 2010 2010 Pro forma of AXA APH Pro forma of AXA APH and UK Life transactions and UK Life transactions 1. Value of Purchased Life Business Inforce 2. Assumed 3% CAGR of inflation and other Potential improvement Renegotiate commission schemes Increase commercial productivity Optimize distribution support costs Key actions to address IT costs in L&S Decommissioning pilot program for Life applications in 7 major countries to be launched in 2011 Reduce the BaU costs Migrate Life platforms to low cost infrastructure Reduce application maintenance costs through new Group Centers of Excellence and AGS 3 IT Shared Services Convergence Continue investments to implement a selective convergence approach in Life Expand from IT convergence to operational convergence 3. AXA Group Solutions 10 Ambition AXA June 1, 2011
Potential improvement Explore closed books for additional opportunities Explore closed book opportunities within all 13 mature markets leveraging both in-house expertise and market best practices KEY OPTIONS Outsourcing with / without off-shoring Track-record AXA UK: 2009 successful outsourcing of the Life back book administration to Capita (3.7m policies and 342 type of products), expected to reduce cost per policy by 38% by year 5 and by 53% by year 6 Capital management / optimization AXA Hong Kong: optimization of reserves through a reinsurance contract resulting in a reserve relief of Euro 0.3 billion Migration to global platform / center of excellence AXA Liabilities Managers: since 2001 gradual creation of global platform integrating more than 20 large P&C portfolios in 9 countries totaling more than Euro 8 bn of liabilities Euro 0.4 bn of cumulative UE since 2004 Disposal of portfolios AXA UK: 2010 partial sale (75% of VIF) to Resolution of low margin and capital intensive businesses, with average NBV margin of 5% 11 Ambition AXA June 1, 2011
Table of contents Introduction to the L&S business Mature markets focused approach INFORCE NEW BUSINESS Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Actively grow Protection & Health 12 Ambition AXA June 1, 2011
Ambition AXA Improve return and cash consumption on new business investment while continuing to grow new business value Life & Savings operating Free Cash Flows In Euro billion 24-13 Reshape Savings business Actively grow Protection & Health 2010 G/A Protection & Health IRR 13% NBV margin 47% G/A Savings 7% -1% 11 Unit-Linked 13% 23% AMBITION AXA IRR >15% by 2015 NBV margin >28% by 2015 Expected cash generation 2011E-2015E New Business investment 2011E-2015E L&S operating Free Cash Flows 2011E-2015E 13 Ambition AXA June 1, 2011
Ambition AXA New Business IRR above 15% by 2015 New Business IRR Levers to increase IRR in mature markets 12% 15% 14% >15% 11% 10% 11% Reshape Savings business 2005 2006 2007 2008 2009 2010 // 2015E Actively grow Protection & Health Satisfactory levels in 2006 and 2007 2008, 2009 and 2010 impacted by market conditions Increase productivity and efficiency Targeting 2015 IRR above 15% 14 Ambition AXA June 1, 2011
Table of contents Introduction to the L&S business Mature markets focused approach INFORCE NEW BUSINESS Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Actively grow Protection & Health 15 Ambition AXA June 1, 2011
Reshape Savings business Key actions Early signs of success 1 Increase share of Unit-Linked in Continental Europe 1 Total NBV margin 20% 26% 2009 2010 2 3 Efficient manufacturing of guarantees Leverage scale of our funds platforms New Business IRR 10% 11% 2009 2010 4 Turnaround low margin / capital intensive products Operating FCF 0.8 bn 1.4 bn 2009 2010 1. Share of Unit-Linked in Continental Europe Savings APE Continental Europe countries are France, Switzerland, Germany, Belgium, Italy, Spain, Greece and Portugal 16 Ambition AXA June 1, 2011
1 Increase share of Unit-Linked in Continental Europe 1 Ambition to increase share of Unit-Linked in Continental Europe 1 Savings APE by 20 pts G/A Savings 75% Unit-Linked 25% +20 pts G/A Savings 55% Unit-Linked 45% 2010 2015E KEY ACTIONS Adapt our existing product offering Increase investment advisory capacity of our distribution Better address customer needs Specific capital protection features Combine General Account and Unit-Linked Specific training for specialized sales force Improvement and standardization of the communication support material Online tools enabling customers to continuously monitor their investments Individualized investment approach Examples AXA Belgium: Unit-Linked product with stop loss AXA France: Bonus Euro+ to boost individual Unit-Linked sales 1. Continental Europe countries are France, Switzerland, Germany, Belgium, Italy, Spain, Greece and Portugal 17 Ambition AXA June 1, 2011
2 Efficient manufacturing of guarantees KEY ACTIONS Diversify guaranteed product range Structured products Continue to develop the product offering Create a global product platform Variable Annuities Selectively pursue Variable Annuity offering through traditional and bancassurance channel Examples AXA MPS: index-linked products launched in 2010 Improve risk and return profile of General Account Savings Guaranteed interest rate Reduce minimum guaranteed rates to 0% where possible and/ or subordinate to combination with Unit-Linked Crediting policy Adjust crediting policy to changes in capital markets and competitive environment AXA MPS: decreased guaranteed rates - from 1.5% to 0% for all traditional products -from 2.0% to 1.5% for multi-line products -increase Unit-Linked share in multi-line products 18 Ambition AXA June 1, 2011
3 Leverage the scale of our funds platforms Launch subadvisory platform for Unit-Linked business in Continental Europe 1 leveraging existing platforms with new fund strategy to offer best value proposition to our clients Subadvisory platforms already in place Launch a new platform in Continental Europe 1 US: FMG Euro 70 bn assets under management UK: Architas Euro 3 bn assets under management 2011 2012 2012 2013 Focus on new business flows Identified core list of funds Roll-out in France and Belgium expected in 3Q 2011 Full implementation expected in 2012 Focus on inforce By 2015 Expectation to reach Euro 10 billion AuM Europe: Architas Euro 1 bn assets under management for Variable Annuities Preliminary indication of 25 bps additional fund margin 1. France, Germany, Italy and Belgium at this stage 19 Ambition AXA June 1, 2011
4 Turnaround low margin / capital intensive products Turnaround low margin / capital intensive products to optimize New Business investment and improve IRR, NBV margin and operating Free Cash Flows generation Overview of operating Free Cash Flows generation L&S portfolio 2 has been scored 2010 2011E In 2010 New Business investment IRR NBV APE In Euro billion bn As a % of total NB investment bn As a % of Total NBV bn As a % of Total APE 3.6 Category I 187 products -0.7 35% 14% 0.8 71% 3.1 59% Category II 30 products -0.5 23% 8% 0.2 19% 1.2 22% (2.2) 1.4 1.7 Category III 13 products -0.9 42% 6% 0.1 10% 1.0 19% Inforce cash generation New Business investment 1 Operating FCF Operating FCF June 2011 Objective to turnaround 43 products representing 65% of New Business investment but only 41% of APE and 29% NBV Phase 1: 13 products October 2011 Phase 2: 30 products 1. New Business investment corresponds to required capital and cash strain for new business 2. Excluding South-East Asia, China, India and Australia 20 Ambition AXA June 1, 2011
Table of contents Introduction to the L&S business Mature markets focused approach INFORCE NEW BUSINESS Focus on inforce optimization Increase productivity and efficiency Reshape Savings business Actively grow Protection & Health 21 Ambition AXA June 1, 2011
Actively grow Protection & Health Ambition to increase share of G/A Protection & Health APE by 5 pts G/A Protection & Health 31% +5 pts G/A Protection & Health 36% 2010 2015E KEY ACTIONS PROTECTION HEALTH 1 Simplify mass market approach 3 Combine local and international strategies 2 Develop new markets like long term care and critical illness 4 Foster technical excellence in pricing and underwriting 22 Ambition AXA June 1, 2011
Actively grow Protection & Health Opportunities and positioning Protection Health Opportunity 2009 market size: Euro 158 bn 1 Between 2008 2015: growth rate of 4.7% 1 Fundamental need for nursing care, critical illness rising in mature countries 2009 market size: ca. Euro 190 bn 2 Mature markets represent ca. 65% 2 Public Health expenditures represent ca. 58% of total expenditure in mature markets, with potential future disengagement of public sector AXA position #1 in Group Protection Strong positioning with ca. 10% market share in Individual Protection Profitable business with 3% market share in Individual Protection #1 in Group Health, #5 in Individual Health #2 largest player with 26% market share #4 largest player with 7% market share 1. Source: AXA estimate, Swiss Re, AXCO 2. Source: AXCO excludingthe US 23 Ambition AXA June 1, 2011
1 Protection business Simplify mass market approach KEY ACTIONS Drive simplified mass market offers Replicate successful products from other countries Leverage strong distribution capabilities AXA France: simple mass market offer for domestic accident insurance # of contracts 2010: launch of new Protection Familiale 87k 91k Examples 135k 71k new contracts 186k 247k Jun-09 Dec-09 Jun-10 // Dec-10 Apr-11 Employ new international Direct Protection model One platform to serve several countries on term, accident and funeral products Pilot launched in Belgium in July 2010 with implementation in 3Q 2011. Two further launches scheduled for 2011 24 Ambition AXA June 1, 2011
2 Protection business Develop new markets like Long Term Care (LTC) and Critical Illness (CTC) KEY ACTIONS Continue to push for innovative solutions Successful launch of Long Term Care offers # of contracts sold (LTC products) Italy AXA Germany # of contracts sold (LTC + CTC Illness products) Substantial media investments Replicate successful LTC products from Italy and Germany 1,760 5,270 2010 April 2011 41k 22k 2010 April 2011 Apply strict underwriting guidelines and disciplined risk management LTC offers launched in 2010 established AXA as market leader 25 Ambition AXA June 1, 2011
3 Health business Combine local and international strategies KEY ACTIONS LOCAL STRATEGIES INTERNATIONAL STRATEGIES Japan Differentiate through product innovation in high premium segment Expand distribution capacities (i.e. banks) Leverage the international healthcare capabilities of AXA UK and AXA France International healthcare market size estimated at USD 20 bn 1 UK In addition to top position as premium brand (27% market share), capture middle market segment by using a second brand Leverage AXA Assistance capacities Germany & France Leverage proprietary distribution to drive growth Product innovation in Individual Health business Examples AXA France - Individual Health Individual Health GWP In Euro million 440 CAGR: +13% 505 572 629 Health GWP In Euro million AXA Germany - Health CAGR: +16% CAGR: +8% 541 1,061 1,217 With acquisition (2007) Without acquisition 2007 2008 2009 2010 2000 2010 1. Source: AXA PPP, Boston Consulting Group analysis including the US 26 Ambition AXA June 1, 2011
4 Protection & Health businesses Foster technical excellence in pricing and underwriting KEY ACTIONS Leverage existing expertise in new markets Refine risk and client segmentation Implement tele-underwriting process using Group expertise Entities expertises, Group Risk Management, Global Business Line Adapting to unisex pricing in Continental Europe Building on Spanish successful experience Optimize claims management for Health Claims initiative in case and disease management, fraud and leakage Examples AXA Germany and AXA Switzerland: launch of Preferred Life products AXA Germany New Preferred Life products launched in 2011 to improve NBV margin and IRR NBV margin > 50% Euro 100 million savings by 2014 through expertise in case, disease and fees management 27 Ambition AXA June 1, 2011
Deliver sustainable earnings and operating Free Cash Flows growth in mature markets Inforce optimization Administrative expenses savings of Euro 500 m Gross margin improvement Increase asset base Improve cost income ratio by 5 pts by 2015 Increase New Business investment return Deliver Euro 11 bn of operating Free Cash Flows over 2011-2015 NBV margin above 28% & IRR above 15% in 2015 Reshape Savings business Actively grow Protection & Health Increase productivity and efficiency 28 Ambition AXA June 1, 2011