Kevin Keenan Company Secretary Phone: 61 3 8688 3978 Fax: 61 3 9614 5298 18 November 2009 Australian Securities Exchange Company Announcements Office 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam AXA Asia Pacific Holdings Limited Please refer to the attached investor presentation. Yours sincerely Kevin Keenan Company Secretary Page 1 of 25 AXA Asia Pacific Holdings Limited ABN 78 069 123 011
Investor presentation 18 November 2009
Unique investment proposition AMP / AXA SA proposal Asia Highly valuable strategic footprint Hong Kong South East Asia China and India Australia and New Zealand Model orientated to the future Advice and distribution Wealth management Financial protection Strong balance sheet and capital position Summary Contents 3 4 6 16 22 23 2
Unique investment proposition Unique exposure to Asia Broad geographic exposure to Asia across 8 markets Two thirds of earnings Only Australian financial services firm with the majority of its business in Asia Diverse operations across Australia, New Zealand and Asia provide resilience and flexibility Multi-distribution: strategic advantage across all markets Balance between wealth management and financial protection Innovative products performing strongly in recent challenging environment (e.g. North, Takaful) Attractive long term fundamentals for our markets Compulsory retirement schemes in Australia, New Zealand, Hong Kong and Singapore High savings rates, low insurance penetration and high margins in most of our markets Economies generally growing faster than the world average 1 Strong balance sheet and capital position 3 1. IMA Asia Asia Forecast Book Q4 2009 Forecasts to 2015
AMP / AXA SA proposal Unsolicited and conditional scheme proposal received from AMP and AXA SA on Saturday 7 November 2009 AMP would acquire all shares in AXA and AXA s Asian operations would be sold to AXA SA Consideration per AXA minority share: 0.6896 AMP shares; and A$1.3796 cash based on the A$/US$ exchange rate on 5 November, with actual cash to vary with exchange rate Committee of Independent Directors ( Independent Board Committee ) carefully reviewed the proposal with the assistance of advisers (Macquarie and Mallesons) Proposal was subject to a significant number of material conditions including extensive due diligence by a competitor and numerous regulatory approvals, and no price protection for AMP shares Independent Board Committee s rejection of the proposal was announced to the ASX on Monday 9 November 2009 4
AMP / AXA SA proposal Proposal rejected because it was not in the best interests of AXA s minority shareholders as it significantly undervalued AXA The proposal did not fully reflect the key value drivers of AXA: Unique position in the dynamic Asian markets, built over 25 years Value of Australian and New Zealand businesses, with their strategic position and scale Substantial upside to AXA s operating earnings as economic conditions and markets rebound Initiatives underway that will underpin medium term growth, with a track record of delivering on key initiatives and acquisitions Strong balance sheet and capital position 5
Asia Highly valuable strategic footprint The history and breadth of AXA s Asian business, combined with the nature of the markets, makes it a highly valuable strategic footprint The barriers to entry in Asia are very high Foreign investment restrictions, limited new licences and many other regulatory barriers Relationships and JV partnerships take a long time to establish and opportunities are limited in number No coincidence that the strongest competitors (including AXA) have been in Asia the longest Asia is a fast growth region for our industry AXA has been operating in the region for 25 years Operating 15 businesses across 8 countries, with >4,000 employees, ~60,000 agents and advisers and around A$17 billion in funds under administration, management and advice Access to ~24 million customers through partnerships with leading banks across the region Value of inforce 1 Value of new business 2 Operating earnings 3 A$6,018.0m A$407.2m A$255.5m 6 1. As at 30 June 2009, risk discount rate based on assumed equity return 2. Rolling 12 months to 30 June 2009, risk discount rate based on assumed equity return 3. 1H09 operating earnings
Asia Highly valuable strategic footprint Well positioned in emerging markets to benefit from strong growth in GDP per capita Life insurance premiums (as a percentage of GDP) versus GDP per capita 1 7 1. Swiss Re, Sigma No3/2009 World insurance in 2008
We have achieved rapid growth in our Asian New Business Index ( NBI ) and diversified our portfolio Asia Highly valuable strategic footprint NBI growth in Asia over past 3 years at 33% CAGR More than half of new business coming from markets other than Hong Kong 1 Asian NBI 2 Asian NBI contribution 2 8 1. Based on NBI for respective divisions at 100% share for the 9 months to 30 September 2009 2. NBI for respective divisions at 100% share
Hong Kong Large and strong position in an attractive market The fundamental drivers of the Hong Kong market are strong Significant savings in bank deposits Savings rate of 28% 1 with HK$6.4 trillion in cash deposits 2 Compulsory savings through the Mandatory Provident Fund Life insurance market predicted to grow at ~8% per annum 3 Well positioned to benefit from economic growth in China Real GDP growth forecast for Hong Kong of 4.4% (2010-2015) 4 High margins 5 AXA Hong Kong financial protection 6 AXA Hong Kong total 1H09 1H08 83% 78% 51% 47% 9 1. Swiss Re Insights January 2009 2. Hong Kong Monetary Authority 3. Hong Kong life insurance market growth rate for 2009 2019 based on total premium income; Source Swiss Re - The Hong Kong Insurance Market - No 1/2009 - January 2009 4. IMA Asia Asia Forecast Book Q4 2009 Forecasts to 2015 5. Value of new business / NBI 6. Excludes medical and general insurance
Hong Kong Large and strong position in an attractive market AXA is the 4 th largest financial protection provider in Hong Kong Market ranking: #4 1 with over 1 million policy holders Market share: 8.4% 1 Total premium income: A$2.1 billion 2 2003-2009 1H Top 5 Players 3 Year Rank 1 st 2 nd 3 rd 4 th 5 th 2003 AIA HSBC Prudential Manulife Hang Seng 2004 AIA HSBC Prudential Hang Seng Manulife 2005 AIA HSBC Hang Seng Prudential Manulife 2006 AIA HSBC Prudential Hang Seng AXA 2007 AIA Prudential HSBC AXA Hang Seng 2008 Hang Seng Prudential AIA HSBC AXA 2009 1H HSBC Hang Seng Prudential AXA AIA 10 1. 6 months to 30 June 2009. Source OCI data 2. 12 months to 31 December 2008 3. OCI - Provisional Statistics for Long Term Business. The market share and ranking of players are in term of NBI
Hong Kong Large and strong position in an attractive market AXA s multi-channel distribution provides a key strategic advantage in the market 11 1. Source internal analysis
Hong Kong Large and strong position in an attractive market The immediate priority for the new management team is to focus on organic growth New management team Michael Bishop: Regional Chief Executive AXA Asia Life (October 2008) Formerly Managing Director of Prudential Corporation Asia, President and CEO of Prudential's life business in Korea Keith Perkins: Chief Operating Officer AXA Asia Life (January 2009) Formerly Aviva's COO Korea, CEO Malaysia and CEO of HK/Dubai/Singapore Stuart Harrison: Chief Executive AXA Hong Kong (April 2009) Formerly Country Manager and Managing Director of AIA Australia; Vice President and Chief Sales Officer for AIG Life Korea Immediate priority to focus on near term growth Aggressive agency growth agent numbers up 7% at 30 September 2009 to 2,953 (2,766 at 31 December 2008) Salaried sales channel restructured to AXA Privilege and Swiss Privilege AXA Privilege NBI up 13% for 9 months to 30 September 2009 Swiss Privilege wealth management business impacted by challenging markets, with NBI down 29% for 9 months to 30 September 2009 Growth in bancassurance Citibank sales up 20% for 9 months to 30 September 2009 Further distribution initiatives planned for 2010 12
South East Asia Set to capitalise on achieving scale AXA has operations in 5 countries, with strong JV partners Unique distribution footprint through both agency and bancassurance partners Access to 2,464 branches and 17,627 agents and advisers JV relationships very difficult to replicate Country AXA s market rank Bank JV partner Strength of partner Bank branches 1 Agents & advisers 1 NBI (A$m) 2 NBI CAGR 3 Philippines 4 th #2 bank 554 1,335 18.7 12% Indonesia 4 th Bank Mandiri #1 bank 1,027 8,333 106.8 42% Thailand 7 th Krung Thai Bank #2 bank 800 7,205 125.8 48% Malaysia 16 th AFFIN Holdings Top 10 bank 83 379 11.1 507% Singapore 9 th - - - 375 34.4 6% Total 2,464 17,627 296.8 13 1. As at 30 June 2009 2. 9 months to 30 September 2009 3. Based on local currency. 2005 2008 except for Malaysia, which is 2006 2008
Rapid growth in South East Asia South East Asia Set to capitalise on achieving scale Rapid growth in NBI not yet fully reflected in operating earnings South East Asia represents 42% of Asia's NBI 1 and 10% of Asia's operating earnings 2 Asian NBI 1 Further rollout of multi-distribution strategy underway NBI 3 Operating earnings 4 14 1. NBI for the respective divisions at 100% share for the 9 months to 30 September 2009 2. 1H09 operating earnings at actual AXA share 3. NBI for the respective divisions at 100% share 4. At actual AXA share
China and India Valuable strategic options AXA s operations in China and India represent valuable strategic options China and India have large and rapidly growing life insurance markets Life insurance markets of US$96 billion in China (2 nd largest in Asia) and US$49 billion in India (5 th largest in Asia) 1 Forecast to grow at 16-17% per annum over the next 10 years to become the two largest markets in Asia 2 Both markets pose challenges for foreign players AXA has established a strong distribution footprint in each market and is actively exploring new banking relationships Our approach and size of investment in these markets reflects both the opportunity and market dynamics China NBI 3 India NBI 3 15 1. World Insurance in 2008, Swiss Re sigma 2. Swiss Re - The Chinese and Indian Insurance Market - No 1/2009 - January 2009 3. NBI at 100% share
Australia and New Zealand Model orientated to the future AXA well positioned in advice and distribution, wealth management and financial protection Highly professional advice/distribution Large and diverse distribution footprint One of the largest financial advice networks in Australia, with 1,623 owned/aligned advisers Relationships with a further 6,500 independent financial advisers Responding to the scale challenge in wealth management Reducing management expenses Innovative North product New generation platform Broadening single-manager and multi-manager investment offerings Focus on profitable growth in financial protection Well positioned for anticipated regulatory changes 16
Australia Highly professional advice/distribution High quality multi-distribution model well positioned to respond to anticipated regulatory changes Uniquely positioned across aligned channels, owned advice business and with significant access to independent financial advisers (IFAs) Multiple aligned and owned advice brands supporting different adviser segments one service model % of Sales (6 month to June 2009) 40 AXA owned and salaried advisers Clear market leader in QLD 167 AXA owned and salaried advisers 1 Pre-eminent in advice 219 self licensed advisers Provides licensee services 335 advisers licensed by AXA Broad platform choice 481 advisers licensed by AXA Trade under own brand Use AXA platforms 17 1. Includes advisers employed by businesses operating under a partnership agreement with ipac 381 advisers licensed by AXA Trade under AXA brand Use AXA platforms
Australia wealth management Responding to the scale challenge Initiatives to improve operating efficiency and drive growth Management expenses reduced by ~10% in 2009 1 Innovative North product Over A$1 billion FUM since 2007 launch Unique product - numerous industry awards Post retirement proposition launch 1H 2010 New generation platform Fully automated functionality - marginal operating costs 40% lower than current technology 2 Platform development - full wrap service, low cost simple superannuation solution Super 1.0 versus North platform marginal cost comparison 2 Super 1.0 platform (Summit, Generations, iaccess) migrating over 3 years A$14 billion of FUA 3 Continue to diversify and broaden investment propositions across both single and multi-manager solutions 18 1. After adjusting for acquisitions to achieve a like-for-like comparison 2. Comparison of estimated marginal operating costs of North platform versus Super 1.0 platform based on FUA 3. As at 30 June 2009
Australia wealth management Responding to the scale challenge Leveraged to upside in investment markets Significant operating earnings leverage as economic conditions improve Net inflows are improving and have a compounding impact on future earnings FUA/FUM balances have grown strongly over the past 6 months Industry net retail fund flows 1 19 1. Plan for Life, June 2009 All retail (ex cash management), administrator s view
Our focus remains on profitable growth Australia Focus on profitable growth in financial protection Inforce premium of A$667 million provides critical mass and places AXA in top 5 in Australia Growing new business in the IFA segment for individual life (largest market segment versus direct and bank) Significant investment in financial protection technology to improve operational efficiency and market position has led to improved service and product ratings Increasing value of new business and operating earnings Retaining strong profitability and clients in group life Individual FP sales (incl increases) by quarter TTT (Lump Sum) market share IFA segment 1 20 1. Plan for Life, June 2009 Life Statistics
Australia Well positioned for anticipated regulatory changes Fee-for-service remuneration model Higher professional standards for financial advisers Lower cost superannuation Key expected regulatory requirements Network well progressed in the transition to a feefor-service environment >70% of advisers already using some fee-forservice pricing Advisers already well versed in dollar cost disclosure Network already of very high standard four of the top ten licensees in Australia as ranked by Brand Management are AXA licensees Significant governance and quality control processes in place Substantial investment and resources dedicated to practice development and quality advice >75% of new superannuation business in rollover and voluntary contributions 12 existing superannuation products operating below 1% per annum fee levels Highly efficient North platform solution provides opportunity for lower cost product offerings (40% lower marginal operating costs) 1H09 earnings breakdown 21
Strong balance sheet and capital position Total capital resources of A$5.5 billion Significant excess capital More than A$1.6 billion in total assets above regulatory requirements, including more than A$900 million in excess of target surplus 1 Low gearing Debt to equity ratio at 30 September 2009 was less than 30%, well below our target ratio of 40% to 50% Existing debt facilities of A$430 million available If fully drawn down, gearing would still only be at the bottom end of the target ratio Expected organic growth funded through internally generated earnings Usage of earnings 2 22 1. As at 30 September 2009 2. Management estimate. Assumes normalised investment returns. Any dividend payout is subject to the absolute discretion of AXA s board
Summary Asia highly valuable strategic footprint Very high barriers to entry Large and strong position in the attractive Hong Kong market Set to capitalise on achieving scale in South East Asia Valuable strategic options in China and India Australia and New Zealand model orientated to the future Highly professional advice and distribution Responding to the scale challenge in wealth management Focus on profitable growth in financial protection Well positioned for anticipated regulatory changes Significant earnings leverage as economic conditions improve Strong balance sheet and capital position 23
Disclaimer Further information on AXA Asia Pacific Holdings Limited is provided in the Company's half year accounts, Investor Compendium and results announcement released on 5 August 2009. This presentation provides information in summary form only and is not intended to be comprehensive. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. This presentation should be used in conjunction with the 2009 half year Investor Compendium. Further information, including historical results and a description of activities of the Group, is available on our website, www.axaasiapacific.com.au This presentation may contain certain forward-looking statements. The words anticipate, believe, expect, project, forecast, estimate, likely, intend, should, could, may, target, plan and other similar expressions are intended to identify forward looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Due care and attention have been used in the preparation of forecast information. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of AXA Asia Pacific Holdings Limited that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. 24