Axa Sa · EURONEXT:CS
Axa Sa — H1 2006 Earnings Presentation
52 slides from Axa Sa's earnings presentation, Aug 3, 2006
Slide 1: Half Year 2006 Earnings
Half Year 2006 Earnings August 3, 2006
Slide 2: Cautionary statements concerning forward-looking statements
Cautionary statements 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 (including statements herein with respect to (a) AXA
Slide 3: Note
Note All first half 2006 information coming from AXA’s consolidated financial statements has given rise to a limited review by AXA's independent auditors. AXA's 1H06 results have been prepared in accordance with IFRS, including IAS 34 related to Interim Financial Reporting, and IFRIC interpretations
Slide 4: Table of contents
Table of contents 1 : First Half 2006 key highlights 2 : Overview of 1H06 financial performance 3 : Balance sheet and capital as of June 30, 2006 4 : Update on Winterthur acquisition 5 : Closing remarks Half Year 2006 Earnings – August 3, 2006 – 4
Slide 5: 1H06 another successful milestone towards Ambition 2012
After a strong 2005 performance, 1H06 constitutes another successful milestone on AXA’s path towards reaching Ambition 2012 Strong and profitable organic top line growth across the board Further profitability improvement in all business lines resulting in very strong earnings growth Acquisitions & d
Slide 6: 1H06 performance: acceleration of top line growth
1H06 performance: acceleration of top line growth, driving towards Ambition 2012 long-term targets… Long-term Growth on a comparable ∆ FY05 / ∆ 1H06 / growth basis FY04 1H05 targets Life & Savings APE(1) +11% +17% +5% / +10% Property & Casualty revenues +3% +4% +3% / +5% Asset Management revenues +1
Slide 7: Profitability improving in all segments
…with profitability improving in all segments 1H06 ∆ 1H06 / 1H05(1) Life & Savings New Business Value (NBV) € 670 m +30% NBV/APE margin 21.9% +2.2 pts Property & Casualty Combined Ratio 96.9% -0.6 pt Asset Management Cost Income Ratio: AllianceBernstein 70.0% -1.9 pts AXA IM 70.5% -5.2 pts (1) On a
Slide 8: Underlying earnings growth remained very strong
Underlying earnings growth remained very strong Underlying Earnings Euro million CAGR(1) +20% 2,090 1,761 1,398 +19% 1,022 1,085 1H02 1H03 1H04 1H05 1H06 FGAAP IFRS (1) Compounded Annual Growth Rate. Half Year 2006 Earnings – August 3, 2006 – 8
Slide 9: Adjusted earnings growth fuelled by high realized gains
Adjusted earnings growth was fuelled by a high level of realized gains on the back of favorable equity markets in the first 4 months of 2006 Adjusted Earnings Euro million 2,916 CAGR +26% 2,132 1,661 1,146 +37% 363 1H02 1H03 1H04 1H05 1H06 FGAAP IFRS Net realized capital gains/losses attrib. 1H02 1H
Slide 10: Strategic initiatives taken in 1H06 to enhance growth
In 1H06, we have taken a number of strategic initiatives to enhance growth and reduce volatility… Closing of Closing of Citadel acquisition (Euro 221m) in March 2006 (Canada, P&C) acquisitions Closing of MLC Hong Kong and Indonesia acquisition (Euro 357m) in May 2006 (L&S) JV agreement in Chin
Slide 11: Proposed acquisition of Winterthur
…and we have announced the proposed acquisition of Winterthur, which is a step further in AXA’s growth story Reinforcing AXA Bolt-on acquisitions in 5 key European markets for AXA in core European Leading position in Switzerland and Asian markets Growing foothold in high growth markets in CEE
Slide 12: Table of contents
Table of contents 1 : First Half 2006 key highlights 2 : Overview of 1H06 financial performance 3 : Balance sheet and capital as of June 30, 2006 4 : Update on Winterthur acquisition 5 : Closing remarks Half Year 2006 Earnings – August 3, 2006 – 12
Slide 13: Sustained business growth in Life & Savings and Asset Management
Sustained business growth in Life & Savings and Asset Management APE up 17%, with unit-linked products up 28% to represent 49% of APE NBV up 30%, mainly driven by volume and unit cost improvement, resulting in an NBV to APE margin up 2.2 pts to 21.9% Life & Increasing technical operating cash
Slide 14: Good performance of P&C in a competitive pricing environment
Good performance of P&C in a competitive pricing environment Revenues up 4%, performing well in a competitive pricing environment, with strong contract inflows: Individual lines up 4% Î individual motor inflows of +556,000 contracts Î Individual household inflows of +143,000 contracts Commercial l
Slide 15: Strong 1H06 underlying earnings performance
Strong 1H06 underlying earnings performance with double-digit growth Change Euro million 1H05 1H06 Change at cst. FX Life & Savings 972 1,224 +26% +24% Property & Casualty 695 780 +12% +11% International Insurance(1) 103 64 -38% -39% Asset Management 154 233 +51% +47% OFS & Holdings -163 -212 -- --
Slide 16: P&C underlying earnings up 12% to Euro 780m
P&C underlying earnings up 12% to Euro 780m, boosted by continued combined ratio and investment income improvement Ratios in % Combined ratios(1) Net technical result(2) Results in Euro m Improv’t Improv’t 1H06 1H06 from 1H05 from 1H05 France 97.7 -0.8 59 +24 Germany 96.4 -0.3 51 +4 UK & Ireland 96.
Slide 17: P&C: better combined ratio due to loss ratio improvement
P&C: better combined ratio due to further loss ratio improvement Improv’t Ratios in % 1H06 from 1H05 Better claims experience in the UK and Belgium Loss, excl. CHC(1) 63.9 -1.6 Positive prior years’ development in France and Germany Claims handling 4.6 -0.2 Loss Ratio 68.5 -1.7 Acquisition exp. 18.2
Slide 18: International Insurance: divestiture of AXA RE reduces volatility
International Insurance: divestiture of AXA RE reduces future earnings volatility Underlying earnings Change at 1H05 1H06 (Euro million) cst. FX AXA CS Assurance 38 44 +13% Others, incl. AXA RE run off (2006) 9 20 +110% International Insurance, excl. AXA RE in 2005 48 64 +32% AXA RE 55 NA NM Interna
Slide 19: Asset Management: good AUM resilience owing to strong net inflows
Asset Management: good AUM resilience owing to strong net inflows, despite flat equity markets and negative bond markets in 1H06 Assets Under Management AllianceBernstein & AXA Investment Managers Euro billion +19%(1) 923 944 933 809 822 741 774 3rd party 568 589 469 440 340 354 345 301 12/31/04 avg
Slide 20: Asset Management: net inflows and cost income ratio improvement
Asset Management: Strong net inflows and continued improvement in cost income ratio drove earnings growth Assets Under Management 492 441 Euro billion 427 382 26% 34% 3rd party 87% 89% 74% 66% 13% 11% 1H05 1H06 1H05 1H06 Cost income ratio(1) 71.9% 75.7% 70.0% 70.5% 1H05 1H06 1H05 1H06 Underlying ear
Slide 21: Life & Savings: double-digit underlying earnings growth
Life & Savings: double-digit underlying earnings growth in most countries Underlying earnings Change 1H05 1H06 (Euro million) at cst FX US 388 488 +20% France 249 308 +24% Japan 118 130 +12% AXA APH(1) 66 88 +31% UK 43 80 +86% Benelux 64 68 +6% Germany 15 28 +82% Southern Europe 25 25 +1% Other coun
Slide 22: Life & Savings underlying earnings growth driven by all margins
Life & Savings underlying earnings growth was driven by all margins Margin Analysis of Underlying Earnings(1) Euro million (excluding Japan 1H05 non-recurring items) 1H05 1H06 1H05 1H06 1H05 1H06 4 764 1 201 Investment +7% 4 085 1 108 Margin Gross margin 2 876 Fees & 2 445 +15% +30% Revenues +16% 1
Slide 23: Life & Savings: margin improvement across the board
Life & Savings: margin improvement across the board excluding Japan 1H05 non-recurring items 1H05 1H06 Underlying Investment Margin up 7%: Increase in equity dividend levels, combined with higher G/A balance 1 201 Fees & Revenues up 16%: 1 108 Insurance fees & loadings up 13% driven by unit-linked b
Slide 24: Life & Savings separate account evolution
Life & Savings separate account evolution reflecting strong unit- linked new business flows Life & Savings separate account balances(1) Euro billion 16%(2) 141 142 142 128 127 120 113 12/31/04 avg 1H05 06/30/05 avg FY05 12/31/05 avg 1H06 06/30/06 Separate account balances as a % of Life & Savings gr
Slide 25: Life & Savings 1H06 New Business Value up 30%
Life & Savings 1H06 New Business Value up 30% Group share in Euro 1H05 1H06 Change million, except change 1H06 NBV NBV/APE NBV/APE and margin in % from 1H05 margin margin US 211 +56% 15.6% 21.2% Japan 182 +14% 63.2% 53.9% France 98 +41% 12.9% 15.5% Benelux 57 +12% 29.4% 30.0% UK 42 +25% 8.8% 8.8% Ho
Slide 26: Volume growth and unit cost improvement drove NBV growth
Volume growth and unit cost improvement were key drivers of NBV growth Life & Savings New Business Value Based on Euro million 05/31/06 RFR 22 4 670 Volume +102 137 Mix -4 Expenses +39 Increased RFR from Based on year-end 2005(1) year-end 2005 RFR 512 -4 1H05 NBV Modeling changes Volume, expenses Ch
Slide 27: US, France, Japan and UK NBV drivers
US, France, Japan and UK NBV benefited from volume and expenses, but business mix and change in risk free rates had varying impacts US Japan 30 6 211 35 Volume +52 Mix -36 182 Volume +19 Expenses +13 -8 Mix +28 47 -3 163 129 Positive impact from higher RFR, partly offset by Positive impact from high
Slide 28: From underlying earnings to net income
From underlying earnings to net income Euro million, Change 1H06 EPS 1H05 1H06 Change Except per share data at cst. FX EPS(2) Change Underlying earnings 1,761 2,090 +19% +17% 1.12 +21% Net capital gains(1) 370 826 Adjusted earnings 2,132 2,916 +37% +35% 1.56 +39% Profit/loss on financial assets 119
Slide 29: Table of contents
Table of contents 1 : First Half 2006 key highlights 2 : Overview of 1H06 financial performance 3 : Balance sheet and capital as of June 30, 2006 4 : Update on Winterthur acquisition 5 : Closing remarks Half Year 2006 Earnings – August 3, 2006 – 29
Slide 30: Unrealized capital gains attributable to shareholders
Unrealized capital gains attributable to shareholders: still strong despite increased interest rates and flat equity markets Unrealized capital gains attributable to shareholders (after tax) Euro billion 11.8 1.4 8.8 7.9 1.3 Off B/S 1.1 6.2 8.2 4.4 In SH 5.3 3.9 equity 5.8 2.2 3.7 1.6 On 2.3 2.3 2.2
Slide 31: Impact of increased interest rates on economic value
Increased interest rates in 1H06 had a positive impact on the overall economic value of the Group Estimated (unaudited) impact of increased interest rates on: Approx. rates evolution from 12/31/05 0,70% Sensitivity of Life EEV to +50bp in RFR* 588 Life EEV evolution from 12/31/05 823 Other than Life
Slide 32: Net income offset by decrease in fair value of assets
Strong 1H06 net income was more than offset by the decrease in fair value of assets recorded through shareholders’ equity, as a result of increased interest rates Euro billion Total FV of invested Capital assets in SH equity: Management Euro 5.3bn 33.8 2.7 0.6 31.7 -2.9 -1.6 -0.3 -0.6 12/31/05 SH Ch
Slide 33: Continued deleveraging of the balance sheet
Continued deleveraging of the balance sheet Gearing ratio 49% 46% 43% 42% 38% 37% 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 06/30/06 FGAAP IFRS Estimated impact of Winterthur acquisition on gearing ratio would be to increase it by 2 to 3 points Half Year 2006 Earnings – August 3, 2006 – 33
Slide 34: Table of contents
Table of contents 1 : First Half 2006 key highlights 2 : Overview of 1H06 financial performance 3 : Balance sheet and capital as of June 30, 2006 4 : Update on Winterthur acquisition 5 : Closing remarks Half Year 2006 Earnings – August 3, 2006 – 34
Slide 35: Winterthur acquisition financing secured
Update on Winterthur acquisition’s financing: successfully and promptly secured Total Acquisition price: CHF 12.3bn (Euro 7.9bn) consideration Refinancing of CHF 1.6bn (Euro 1.0bn)(1) of Winterthur’s outstanding debt Equity Capital increase: Euro 4.1bn financing 208 million new shares issued
Slide 36: Winterthur integration planning
Update on Winterthur integration planning: teams are already at work Integration planning set up at the end of June Project structure covers: Local integration planning, including asset management and head office Transversal integration planning, to take early advantage of Group leverage Prepara
Slide 37: Table of contents
Table of contents 1 : First Half 2006 key highlights 2 : Overview of 1H06 financial performance 3 : Balance sheet and capital as of June 30, 2006 4 : Update on Winterthur acquisition 5 : Closing remarks Half Year 2006 Earnings – August 3, 2006 – 37
Slide 38: We are confident for the future
We are confident for the future After a strong 2005 performance, AXA delivered on its organic growth objectives in 1H06 We are entering the 2nd half of 2006 with a good momentum in terms of: Revenues Combined ratio: barring any major catastrophic events, FY06 combined ratio should remain in line
Slide 39: Q&A
Half Year 2006 Earnings Q&A A A 6 FINANCIAL PROTECTION Be Life Confident
Slide 40: Appendices
Half Year 2006 Earnings Appendices
Slide 41: Life & Savings: APE growth benefited from unit-linked products
Life & Savings: APE growth benefited from unit-linked products, up 28% on an APE basis to represent 49% of APE Change on % UL in APE(1) UL Change APE 1H05 1H06 comp. on comp. (Euro million) 1H05 1H06 basis basis US 829 993 +14% 70% 75% +23% France 536 630 +18% 20% 24% +42% UK 381 477 +25% 87% 89% +2
Slide 42: Description of NBV calculation at 1H06
Description of NBV calculation at 1H06 Using profitability factors by product from year-end 2005 with some period-appropriate adjustments: Reflects actual business volumes and product mix for sales through June 30 (March 31 for Japan, consistent with accounting half year) NBV profitability factors
Slide 43: Evolution of risk-free yield curves
Evolution of risk-free yield curves in US, Eurozone, Japan and UK Risk free yield curves US Risk free yield curves Japan 3,0% 5,4% 5,2% 2,5% 5,0% 2,0% Dec 05 4,8% Sept-05 June 06 1,5% 4,6% March-06 May 06 1,0% 4,4% 4,2% 0,5% 4,0% 0,0% 0 5 10 15 20 25 30 35 yrs 0 5 10 15 20 25 30 35 yrs Risk free yie
Slide 44: Tillinghast opinion
Tillinghast opinion Tillinghast has reviewed the methodology and assumptions used to determine the value added by new business for the first six months of 2006, and the comparable period in 2005, for the principal life operations of the AXA Group(1). The methodology and assumptions used are cons
Slide 45: Revenue diversification unmatched
Revenue diversification unmatched 1H06 IFRS insurance revenues by geography(1) AAPH Others 3% 3% International Insurance 4% France Southern Europe 27% 6% Japan 7% US UK & Ireland 1H06 IFRS revenues by operating segment(1) 21% 12% International Asset Mgt & Other Northern Europe Insurance financial se
Slide 46: Diversification from underlying earnings perspective
This diversification is also unique from an underlying earnings perspective 1H06 insurance underlying earnings by geography AAPH Others 5% 4% International Insurance 3% France Southern Europe 25% 5% Japan 6% 1H06 underlying earnings US UK & Ireland by operating segment 24% 13% International Asset Mg
Slide 47: Impact of Japan 1H05 non-recurring items
Reminder of impact of Japan 1H05 non-recurring items on underlying margins Gross Net Euro million impact impact(1) Impact of change in future investment assumptions on: - Underlying investment margin -8 -5 - DAC amortization -22 -14 - VBI amortization -197 -123 Release of valuation allowance on DTA
Slide 48: Other Financial Services & Holdings underlying earnings
Analysis of Other Financial Services & Holdings 1H06 underlying earnings Change Euro million 1H05 1H06 at cst. FX Other Financial Services 42 33 -9 Holdings -205 -244 -37 Underlying earnings OFS& Holdings -163 -212 -46 Other Financial Services were impacted by the non recurrence of the release in
Slide 49: Loss from financial assets under FV option and derivatives
Analysis of 1H06 loss from financial assets under FV option and derivatives Euro million 1H05 1H06 Change Operating entities 93 -183 -276 (L&S + P&C + Int’l Ins. + Asset Mgt + OFS) Holdings 26 -92 -118 Profit or loss on financial assets 119 -275 -394 under FV option and derivatives Operating entit
Slide 50: AXA's invested asset mix by business
Detail of AXA’s invested asset mix by business Total Total % in carrying value L&S(1) P&C Int’l Group Group 06/30/06 12/31/05 Fixed maturities 72% 67% 68% 71% 71% Equity securities 11% 17% 6% 11% 11% Non-consolidated mutual funds 2% 2% 7% 2% 2% Mortgages and other loans 7% 2% 0% 6% 6% Real estate 3%
Slide 51: A monitored credit exposure
A monitored credit exposure Estimated figures Fixed Maturities(1) Total Group Total Group % in market value 06/30/06 12/31/05 Government bonds & related 58% 57% Corporate bonds 36% 38% economic data o/w ≥ A ratings 27% 27% Based on o/w BBB ratings 8% 9% o/w ≤ BB ratings 1% 1% o/w non rated 1% 1% ABS
Slide 52: FINANCIAL
A A % FINANCIAL PROTECTION Be Life Confident