Investor Day December 4, 2013 Property & Casualty: Commercial Lines Jean-Laurent Granier Chairman & CEO, AXA Global P&C Amanda Blanc CEO Commercial Lines, AXA UK Philippe Rocard CEO, AXA Corporate Solutions
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, 2012, 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. B2 Investor Day Property & Casualty Commercial lines December 4, 2013
Today s key messages Commercial lines are a key building block of Ambition AXA, already representing the majority of P&C underlying earnings and will continue to develop profitably Focus on AXA UK: a disruptive distribution strategy to reposition towards Micro and SME segments, which will be leveraged throughout the Group Focus on AXA Corporate Solutions: profitable corporate risks underwriter, instrumental to address niches and partner with entities to accelerate commercial lines development B3 Investor Day Property & Casualty Commercial lines December 4, 2013
Investor Day December 4, 2013 Commercial Lines at AXA Jean-Laurent Granier Chairman & CEO, AXA Global P&C
Agenda AXA is the #4 global commercial lines player, delivering steady performance AXA is well positioned to capture growth opportunities while growing profitability and monitoring exposures B5 Investor Day Property & Casualty Commercial lines December 4, 2013
AXA Commercial Lines overview #4 commercial lines player delivering steady performance AXA: #4 in the market FY12 Commercial Lines Gross Written Premiums Strong profitable growth track record Revenues In Euro billion Allianz n.a. In Euro billion 8.1 8.4 8.9 CAGR +6% 11.4 12.0 11.9 11.6 12.5 13.3 21.4 AIG 15.8 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 QBE 12.8 8.2 13.3 AXA P&C Commercial Lines revenues grew at a CAGR of 6% since 2004 Underlying earnings above Euro 1.0 billion, contributing more than 20% of AXA s underlying earnings Strong profitability, with a return on equity above 15% Source: Companies reports, AXA estimates. AXA figures include AXA Corporate Solutions. Generali GWP do not include Motor fleet revenues, due to absence of disclosure. AIG ranking based on NWP. Allianz does not disclose Commercial Lines GWP, ranking based on AXA estimates. B6 Investor Day Property & Casualty Commercial lines December 4, 2013
AXA Commercial Lines overview A global player with a comprehensive footprint Corporate ~16% AXA Corporate Solutions 16% Asia 3% UK & Ireland 14% MedLa 1 21% Addressing all clients types Large Enterprises ~20% Dedicated business unit for Corporate clients: AXA Corporate Solutions Micro Enterprises ~25% Small and Medium Enterprises ~39% Well diversified geographic footprint France 18% NORCEE 2 29% Total 9M13 revenues 10.9bn Workers Compensation 7% Construction 6% Liability 15% Health 14% Wide product range Specialties & Other 13% Motor 21% Property 25% Well balanced distribution capabilities Partnerships 3% Brokers - IFAs & Other 68% Direct 1% Agents 28% Scope: P&C Commercial Lines and AXA Corporate Solutions 1. Mediterranean and Latin American region 2. Northern, Central & Eastern Europe B7 Investor Day Property & Casualty Commercial lines December 4, 2013
Commercial lines market An expanding market opportunity A growing market segmented by client size ca. 47% of worldwide P&C market with revenues of Euro 393 billion in 2010 Corporate 2010 market GWP Micro Enterprises Growing market with 2 key drivers: Turnover > 600m 15% Turnover < 2m 21% Strong correlation with the worldwide economic activity Penetration in high growth markets increasing fast, fueled by China and Brazil Estimated market size 2015 vs. 2010 Turnover 150m- 600m 22% Large Enterprises Turnover 2m- 150m 42% Small & Medium Enterprises China Brazil Mexico India Turkey 2010 Euro 5 billion 2015 Euro 5 billion Micro & SME Already represent 63% of the market Expected to outgrow due to underpenetration and lower competition Source: AXCO, AXA estimates B8 Investor Day Property & Casualty Commercial lines December 4, 2013
AXA is well positioned to capture growth opportunities and explore new horizons Accelerate on current business B9 Investor Day Property & Casualty Commercial lines December 4, 2013
1 High growth markets Well positioned thanks to our large footprint and our agile hubs 60% Well positioned thanks to our large footprint Commercial lines represent 60% of P&C revenues in high growth markets with continuously growing needs to tackle AXA Gulf: a sub-regional hub supporting further expansion Bahrain Qatar U.A.E Oman Saudi Arabia AXA s differentiating success factors Strong regional hubs supporting local expansion AXA Corporate Solutions know-how on large corporations and Marine Strong technical expertise fostered through knowledge sharing and transfer Experts and managers mobility, Group reinsurance platform, central P&C risk management team Efficient Commercial Lines organization Sharing expertise and services Bringing technical edge Shortening time to market In Euro million, at 100% Revenues +24% CAGR 197 9M10 380 9M13 Underlying Earnings +22% CAGR 10 FY10 14 FY12 B10 Investor Day Property & Casualty Commercial lines December 4, 2013
P&C commercial lines sales 2 Mature markets Leveraging our strong proprietary networks in European markets Leverage a strong asset Leveraging our tied agents network AXA operates leading proprietary distribution networks in France, Germany, Switzerland and Spain AXA France has launched specific selection and training actions Tied agents segmentation by autonomy level 3%* to explore a significant upselling opportunity Identify and support those tied agents able to sell standardized P&C commercial lines products 10%* 20%* Commercial Lines revenues of trained tied agents at AXA France 1.1 FY11 1.2 FY12 In Euro billion, based on a constant number of agents 1.3 9M13 annualized Quantified target Autonomy Trained agents have to increase sales of P&C packages to self employed and micro enterprises by up to 300% * Percentage among the overall tied agents population B11 Investor Day Property & Casualty Commercial lines December 4, 2013
2 Mature markets Market innovative offers targeting profitable clients AXA International Services Segmented offers Niches International coverage to accompany SMEs in their expansion abroad Food & Drink Pollution European SMEs benefit from a unique policy, in a single language and with a single point of contact Relying on AXA s strong distribution networks, complemented by carefully selected local partners Hotel Museum Education Yachting Renewable energies Cyber risks Providing extended coverage in Property, Liability and Construction Real Estate D&O Next generation Start-up e-commerce Logistic Security B12 Investor Day Property & Casualty Commercial lines December 4, 2013
3 Beyond current frontiers Enter selected markets and seize emerging opportunities Invest in selected growth initiatives Complement coverage Enter new territories Address clients currently not covered: too large for P&C entities too small for AXA Corporate Solutions Colombia 1 China Brazil Launch new products Agriculture Build new development models Bancassurance Surety Direct 1. Transaction pending, subject to customary closing conditions, including obtaining regulatory approvals B13 Investor Day Property & Casualty Commercial lines December 4, 2013
Securing profitability and monitoring exposures Strict underwriting discipline Sustainable underwriting thanks to our Portfolio Management Process Embark overall organization in systematic yearly portfolio review Define growth and profitability objectives by segment Improve technical segmentation level Closely monitor renewal campaign execution Commercial lines market pricing trends Commercial lines current year loss ratio Germany Price increase in Industrial Property 77.6% France UK & Ireland Continued price increase in Construction Stabilization, except for price increase in Employers Liability 75.3% 74.2% 74.5% 74.2% Switzerland Stable prices Belgium Slowdown in price increase for all lines of business MedLA 1 Restoring profitability in Property FY09 FY10 2 FY11 FY12 1H13 1. Mediterranean and Latin American region 2. Restated for sold Canadian operations B14 Investor Day Property & Casualty Commercial lines December 4, 2013
Securing profitability and monitoring exposures Geo-monitoring of accumulations Leveraging technology to geo-underwrite and price with regards to risk exposure (natural or man-made perils) Geo segmented approach to discriminate risks Systematic use of perils customized heat maps, based on advanced understanding of covered perils (incl. freeze, floods, man-made, riots, etc.) Data enrichment about risk, for instance by leveraging geo marketing data or satellite pictures Systematic use of geo segmented approach for all covered guarantees (theft, freeze, etc.) Geo-localization of risks and accumulations monitoring Precise geo-localization at underwriting: longitude, latitude & altitude if available Proactive control of accumulations of insured values per zone for the main covered perils as part of underwriting discipline B15 Investor Day Property & Casualty Commercial lines December 4, 2013
Securing profitability and monitoring exposures Illustrative example of exposure assessment in case of explosion or earthquake 1 ton TNT equivalent 10 tons TNT equivalent Modeled loss gross of reinsurance Pertes nettes moyennes s 250m m 200m m 150m m 100m m 50m m 20m m 10m m < 10m < m 100 tons TNT equivalent Mapping of potential losses depending on location and intensity of the explosion Evolution of the scenario from mono-location (dominance of one exposure) to a real accumulation issue for extreme explosive loads B16 Investor Day Property & Casualty Commercial lines December 4, 2013
Today s key messages Commercial lines are a key building block of Ambition AXA, already representing the majority of P&C underlying earnings and will continue to develop profitably Focus on AXA UK: a disruptive distribution strategy to reposition towards Micro and SME segments, which will be leveraged throughout the Group Focus on AXA Corporate Solutions: profitable corporate risks underwriter, instrumental to address niches and partner with entities to accelerate commercial lines development B17 Investor Day Property & Casualty Commercial lines December 4, 2013
Investor Day December 4, 2013 AXA UK Commercial Lines Amanda Blanc CEO Commercial Lines, AXA UK
In 2010, AXA Commercial UK was a challenged business, with difficulties to turn around AXA Commercial UK 1 back in 2010 Weaknesses to be tackled Declining volumes with a volatile profitability In GBP million 900 770 Revenues Confusing broker segmentation leading to antiselection Inefficient organizational structure not aligned to local trading with brokers Under-investment in e-commerce FY09 FY10 Combined ratio 111% 106% do not offset core strengths in SMEs Not focusing on profitable segments FY10 Revenues contribution FY07-FY10 average combined ratio FY07-FY10 Revenues evolution Micro & SMEs 2 55% 98% Declining Real Estate 15% 95% Stable AXA brand and scale strong in SME Underlying SME portfolio profitable Claims service recognized as market leading MGA 3 30% 110% Increasing 1. Scope of this presentation: AXA UK P&C Commercial Lines, excl. Health, excl. Ireland 2. Companies with turnover below GBP 150 million 3. Managing general agent B19 Investor Day Property & Casualty Commercial lines December 4, 2013
Our answer: a differentiated, multi-channel distribution strategy built upon expertise in SME Focusing on SME, the following trends were expected creating competitive advantage through a multi-channel distribution Macro economy Weak economic outlook Pricing cycles becoming longer and shallower 1 Direct Recognize the consumer trends towards direct and invest in digital capabilities Market trends Emergence of direct Commoditization of micro SME 2 Simple SME Develop digital brokers trading solutions Distribution Advantages to owning distribution Strong broker relationships with clear value propositions Clear distinction between Complex and Simple SME risks Local trading of Complex SME risks 3 Complex SME Expand the branch network to leverage local broker relationships Digital Digital models for direct and broker channels for Simple SME risks 4 Bluefin Optimize the Bluefin broking business and synergies with AXA B20 Investor Day Property & Casualty Commercial lines December 4, 2013
Foster profitable growth by aggressively developing SMEs and improving efficiency In GBP million 770 Micro & SMEs FY10 Grow in a flat market while improving profitability Revenues 1,200 Micro & SMEs FY15E thanks to the implementation of an efficient distribution model Grow SME through low cost models embracing digital capabilities Grow core SME through lower commission regional brokers Current year combined ratio 106% -5pts -11pts -1pt -4pts 95% Exit unprofitable MGA arrangements Achieve volume growth with fixed expenses FY10 Commission ratio Loss ratio Expense ratio FY15E B21 Investor Day Property & Casualty Commercial lines December 4, 2013
Excellent progress in our strategy s execution across all distribution channels since 2010 1 Direct 2 Simple SME Launch of new on-line proposition with 5 new products Launch of Market leading digital platform Developed new Digital capabilities 7 brand new products deployed in 18 months Extended Distribution channels Dynamic pricing team recruited to harness big data Award winning on-line support tools & call centre Centralized and efficient model Growth of non-risk income Targeting growth with smaller brokers Achievement since 2010 Yearly revenues exceeded GBP 100 million, growing at 10% p.a. Achievement since 2010 GBP 10 million new business since Q2 2012 1 3 Complex SME 4 Bluefin Restructured & expanded branch network Empowered branch underwriters Grown low commission Regional brokers Expanded Service centre for smaller brokers Focus on profitable segments (e.g. Real Estate) Full integration of the acquired business Improved operational efficiency Increased fees and non-risk income Strengthened management team Increased share of business to AXA Achievement since 2010 Yearly revenues exceeded GBP 800 million, growing more than 10% p.a. Achievement since 2010 100% increase in profits to GBP 25 million 1. As of Q3 2013 B22 Investor Day Property & Casualty Commercial lines December 4, 2013
Halfway into the turnaround with profitability and growth ahead of plan Excellent progress in all channels 10 quarters of consecutive growth Over GBP 20 million cost savings In GBP million Strong revenue growth Revenues +21% Entirely new management team Re-balanced distribution Strengthened capabilities & professionalism Regained service reputation 601 9M10 725 9M13 GWP increase +21% Profitability improvement on track Current year combined ratio Commission ratio reduction -4 pts 106% -6 pts 100% Expense ratio reduction -2 pts Bluefin profit increase +100% 1H10 1H13 B23 Investor Day Property & Casualty Commercial lines December 4, 2013
regulation digital claims specialisation market Our outlook for the market efficiency broker consolidation consistency professionalism distribution customer data economy commissions local SME confidence rates competition transparency climate change segmentation SME direct B24 Investor Day Property & Casualty Commercial lines December 4, 2013
Conclusion: sponsoring the global SME initiative Lessons from the UK will be leveraged at Group level Focus on SME Distribution Strengthening broker propositions Developing new digital trading channels Re-use of IT platforms Professional trading expertise B25 Investor Day Property & Casualty Commercial lines December 4, 2013
Investor Day December 4, 2013 AXA Corporate Solutions Philippe Rocard CEO, AXA Corporate Solutions
AXA Corporate Solutions has demonstrated ability to grow a diversified and balanced portfolio A well balanced and diversified portfolio Motor 9% Construction 11% Liability 20% Property 24% Revenues FY12: Euro 2.1 billion Other 3% Marine 23% Aviation 9% Space 1% Targeting large corporate clients for 15 years Turnover above 600m Extended coverage of the market 93% of CAC 40 companies 77% of DAX 30 companies 90% of airlines worldwide 25% of commercial trade ships worldwide Underwriting international programs Master policy issued to HQ + local policies for subsidiaries Over the last decade, AXA Corporate Solutions grew by 4% p.a. on average In Euro billion 1.5 Revenues 2.1 Solid growth track record resulting from significant commercial efforts Growth maintained in recent years despite a difficult market environment FY04 FY12 B27 Investor Day Property & Casualty Commercial lines December 4, 2013
while maintaining a strong underwriting discipline Low volatility in technical performance Combined ratio of corporate insurance subsidiaries 125% 120% 115% 2005 Katrina hurricane 2008 China earthquake 2011 Japan, New Zealand earthquakes Thailand floods Irene hurricane 110% 105% 100% 95% 90% 85% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 AXA Corporate Solutions European multiliner #1 European multiliner #2 Significantly less volatile than our peers thanks to: Strict underwriting discipline Adequate reinsurance protection Fostering diversification and optimizing strategy of share by account B28 Investor Day Property & Casualty Commercial lines December 4, 2013
Volatility of the portfolio Our pricing tools aim at optimizing the volatility of our technical result Optimization of share of accounts aims at minimizing loss ratio volatility Volatility of each account assessed against the existing portfolio Depends on trade sectors, insured values, insurance conditions, etc. In most cases, small shares generate diversification and reduce portfolio volatility For some low volatile accounts, a 100% share can be optimal High Avoid this area Account with concentrated exposures and high volatility Account with average volatility In property, shares monitoring resulted in less large claims Portion of total claims above selected thresholds 92% -5 pts 87% 83% -7 pts 76% -9 pts 2010 2013 Low Account with well diversified exposures and low volatility 0% 50% 100% 39% 30% Share of a selected account > 1m > 3m > 30m Average volatility of the portfolio Optimal share Maximal share B29 Investor Day Property & Casualty Commercial lines December 4, 2013
Our strong profitability track record is supported by a well diversified risk profile Cumulative Euro 1.0bn underlying earnings generated since 2004 Well diversified risk profile Underlying earnings In Euro million 50 142 Real estate 10% Listed equities 6% Cash 2% Other fixed income 13% Alternative assets 5% Government bonds 30% Mostly France, US and UK FY04 FY12 Corporate bonds 34% Total 1H13 investments: Euro 5.5 billion Continuous improvement in current year technical results High quality investment portfolio More than 90% of earnings remitted to the Group as dividends in recent years Financial risks account for one third of AXA Corporate Solutions economic capital B30 Investor Day Property & Casualty Commercial lines December 4, 2013
Our journey towards better serving our clients while enhancing our growth and profitability profile Tap new markets offering profitable growth opportunities Continue geographical expansion foster quality of service as a key competitive advantage Leverage service offering for risk prevention Launch new products and enter new segments Global clients Continue and reinforce first class service offer to accompany clients everywhere and anytime in the world while partnering with commercial lines underwriters of AXA entities B31 Investor Day Property & Casualty Commercial lines December 4, 2013
Tap into new markets offering profitable growth opportunities Strengthen footprint and enter new geographies Pursue growth above 15% p.a. in high growth markets which already represent 1/6 th of the revenues Brazil Start a greenfield and set up a hub to access Latin American markets Develop selected partnerships: New segments and products Increase our penetration in the Upper-Middle Market 1 Launched a Cyber risk product in September 2013 Develop Alternative Risk Transfer: risk financing solutions for captives held by jumbo clients Study agricultural parametric insurance New services Leverage our risk consultancy expertise 166 multi-peril consultants based in 18 countries 40 years of experience Fees above Euro 20 million, growing more than 10% p.a. Innovate in digital services Real time access for clients to follow their international programs: issuance of policies, collection of premiums and evolution of claims Vigie (cargo insurance): system to track containers during their journey 1. Clients with turnover between Euro 600 million and Euro 4.0 billion B32 Investor Day Property & Casualty Commercial lines December 4, 2013
Partnering with commercial lines underwriters of AXA entities to accelerate in commercial lines Complement footprint in high growth markets Set up of 19 partnerships with AXA entities, among which: Singapore China Malaysia Gulf Common hull platform Common team for all large businesses Common team in Construction and Property for all large businesses Common team for Construction and Marine Close the gaps in countries where AXA operates Identify segments not addressed: too large for AXA entities, too small for AXA Corporate Solutions Provide underwriting support to local AXA entities: Italy Germany & France Latin countries Joint approach to large SMEs Shared D&O expertise and capacity Expertise and reinsurance in environmental coverage Complement service offering to SME and high net worth individuals 1 out of 4 SMEs in Western Europe has a business outside its domestic country Provide international policies and risk consultancy services for SMEs already insured by AXA entities Provide international services to the high net worth clients of AXA Art: yachting, private jets, mansions B33 Investor Day Property & Casualty Commercial lines December 4, 2013
B34 Investor Day Property & Casualty Commercial lines December 4, 2013 Q&A
Biographies Jean-Laurent Granier Since January 2010, Jean-Laurent Granier has been Chief Executive Officer of the Mediterranean and Latin America region and a member of the AXA Executive Committee. Since January 1, 2012, Mr. Jean-Laurent Granier has been also Chairman & Chief Executive Officer of AXA Global P&C and member of the AXA Management Committee. He also oversees AXA Corporate Solutions. Jean-Laurent is a graduate of Ecole Polytechnique and ENSAE and an actuary. He joined UAP in 1990 until its merger with AXA in 1997. He worked in various positions at AXA France, where he was in particular Head of Technical and Financial Operations of AXA Conseil from 1998 to 2000. Appointed Head of Life Insurance in 2000, he became Manager of AXA France Solutions in 2001 and then CEO of AXA Particuliers/Professionnels in 2002. Amanda Blanc Amanda Blanc was appointed to the AXA UK Board in March 2011 as CEO, AXA Insurance Commercial Lines. Her remit was broadened in July 2012 and she was appointed CEO, AXA Commercial Lines and Personal Intermediary. This is Amanda s second career within AXA where she was previously Regional Director in the Commercial Lines Intermediary business from 1999 to 2003. Amanda rejoined AXA UK from Towergate where she had worked since 2006 as Deputy Group CEO, with responsibility for the leadership of their retail broking operations including regional offices, networks and e-trading businesses. Prior to joining Towergate, Amanda was Customer and Services Director at Groupama for 2 years and previously held posts at Norwich Union. Philippe Rocard Philippe Rocard has been CEO of AXA Corporate Solutions Assurance since 2009. After graduating from the Ecole Nationale Supérieure des Mines as well as from the Ecole Polytechnique, Philippe began his career with Lafarge in 1981. In 1984, he joined the Ministry of Industry where he was in charge of establishing regulations for risk prevention and controlling their enforcement till 1992. Philippe started his insurance career with Groupama-GAN in 1992 as Head of P&C Commercial Lines, before being appointed Head of P&C Retail and Commercial Lines. He joined AXA France in 1999 as CEO of French South-West Region. In 2008, he was appointed Chief Marketing and Chief Actuarial Officer of AXA France. B35 Investor Day Property & Casualty Commercial lines December 4, 2013