Axa Sa · EURONEXT:CS
Axa Sa — H1 2012 Earnings Presentation
53 slides from Axa Sa's earnings presentation, Aug 3, 2012
Slide 1: Half Year 2012 Earnings Presentation
Half Year 2012 Earnings August 3, 2012 Presentation
Slide 2: Cautionary note concerning forward-looking statements
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 be
Slide 3: 1H12 key highlights
1H12 key highlights • Underlying Earnings increased to Euro 2.3 billion, stable on a comparable basis Sustainable earnings • Adjusted Earnings stable at Euro 2.4 billion • Net Income at Euro 2.6 billion (Euro 4.0 billion in 1H11) due to non repeat of exceptional gains on disposals • Solvency I at hi
Slide 4: Table of contents
Table of contents Introduction & highlights Page 5 by Henri de Castries, Chairman and CEO 1H12 financial performance Page 17 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Concluding remarks Page 49 by Henri de Castries, Chairman and CEO A4 – AXA 1H12 Earnings – August 3, 2012
Slide 5: Today's environment is challenging for the industry
Today’s environment is challenging for the industry Eurozone Governments challenged on fiscal deficit and growth initiatives crisis not over Difficult Strong decrease in interest rates (ca. 140bps* lower than 1H11) financial Widening spreads in Eurozone peripheral countries markets Macro-driven equi
Slide 6: AXA's business model is proving resilient with sustainable earnings
But AXA’s business model is proving resilient with sustainable earnings Underlying Earnings Adjusted Earnings In Euro million In Euro million 2,402 2,427 2,305 2,228 1H11* 1H12 Net Income In Euro million 4,013 Exceptional gains on the sales of Taikang Life stake (€ 0.7bn) and 2,586 Australian & New
Slide 7: The majority of earnings comes from non-market sensitive segments
The majority of earnings comes from non-market sensitive segments 1H12 pre-tax Underlying Earnings1 Property & Casualty and International 44% +5% G/A Protection & Health +9% 31% Savings and Asset 25% Management2 -14% Changes are at constant Forex A7 – AXA 1H12 Earnings – August 3, 2012 All notes are
Slide 8: Our solvency level is comfortable, supported by strong operating return
Our solvency level is comfortable, supported by strong operating return Economic solvency ratio +13 pts 183% -7 pts -3 pts 174%* -13 pts Decrease of ratio mainly driven by market effects FY11 Change in US 1H12 Operating Dividend Market June 30, 2012 local solvency return effects & Other Debt gearing
Slide 9: We keep our focus on delivering on our Ambition AXA strategy
We keep our focus on delivering on our Ambition AXA strategy Mature markets Sustainable growth in earnings & operating Free Selectivity Financial performance Cash Flows impacted by market conditions High growth markets Double our size organically Acceleration Delivering on operational initiatives Ef
Slide 10: Ambition AXA: financial performance impacted by market conditions
Ambition AXA Financial performance impacted by market conditions Underlying Earnings per share Group operating free cash flows In Euro per share +4% CAGR Ambition AXA Ambition AXA 2010-2015 CAGR 2010-2015 0.92 1H12 in line with 0.90 cumulative +10% 0.85 Ambition AXA plan Euro 24 billion 1H10 1H11 pu
Slide 11: Ambition AXA: reshaping the Life & Savings business
Ambition AXA: reshaping the Life & Savings business Higher profitability through improved business mix APE by product NBV margin In Euro million APE growth G/A Protection Unit-Linked G/A Savings CAGR & Health 3,075 1H10-1H12 2,986 2,948 NBV margin 43% 22% -5% 11% 13% 10% 31% +3% >28% 30% 32% 24% 24%
Slide 12: Ambition AXA: fostering P&C profitability
Ambition AXA: fostering P&C profitability Combined ratio improvement is well on track and benefits from a favorable P&C cycle Current year combined ratio Combined ratio -4.6 pts -2.2 pts 103.1% 99.2% 98.6% 98.6% <97.0% 97.2% 96.4% <96.0% 1H10 1H11 1H12 Ambition AXA 1H10 1H11 1H12 Ambition AXA 2015 2
Slide 13: Ambition AXA: improving flows in Asset Management
Ambition AXA: improving flows in Asset Management Stable assets under management Resilient Underlying Earnings In Euro billion In Euro million 898 837 888 157 159 150 1H10 1H11 1H12 Improving net flows In Euro billion 1H10 1H11 1H12 -8 1H10 1H11 published 1H12 -23 published -25 Continue to improve i
Slide 14: Ambition AXA: cost savings plan in mature markets is on track
Ambition AXA: cost savings plan in mature markets is on track Ca. Euro 0.16 billion savings achieved in 1H12 In Euro billion 1.5 Ambition AXA 1.0 Maintain P&C and L&S administrative costs Reduce P&C acquisition expense 0.3 0.16 ratio by 1.5 pts 2011 1H12 2H12E - 2015E 2011 - 2015E achievement achiev
Slide 15: Table of contents
Table of contents Introduction & highlights Page 5 by Henri de Castries, Chairman and CEO 1H12 financial performance Page 17 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Concluding remarks Page 49 by Henri de Castries, Chairman and CEO A15 – AXA 1H12 Earnings – August 3, 2012
Slide 16: 1H12 financial performance
1H12 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet A16 – AXA 1H12 Earnings – August 3, 2012
Slide 17: Underlying Earnings (1/2)
Underlying Earnings (1/2) Underlying Earnings Underlying Earnings by segment In Euro million Reported Constant In Euro million 1H11* 1H12 basis Forex 0% 2,305 Life & Savings 1,316 1,411 +7% +3% 2,228 Property & Casualty 989 1,044 +6% +4% Asset Management 157 159 +2% -4% International Insurance 143 1
Slide 18: Underlying Earnings (2/2)
Underlying Earnings (2/2) In Euro million 41 73 2,305 45 -25 -9 2,228 -48 1H11* Life & Savings P&C International Asset Holdings Forex & scope 1H12 insurance management, Banking * Restated for the change in DAC accounting methodology adopted retrospectively as at January 1, 2012 A18 – AXA 1H12 Earnin
Slide 19: Adjusted Earnings and Net Income
Adjusted Earnings and Net Income Adjusted Earnings In Euro million Of which € 123 m net realized capital 2,402 2,427 gains Of which Adjusted Earnings mainly impacted by lower € 174 m net realized capital realized capital gains on equities and real estate, gains partly offset by lower impairments, ma
Slide 20: Efficiency
Efficiency Cost savings plan in mature markets is on track Ca. Euro 0.16 billion savings Ambition AXA achieved in 1H12 In Euro billion In Euro billion 0.5 1.1 1.5 Maintain 0.6 P&C and L&S administrative 2011E- 2014E- Total costs administrative 1.0 2013E 2015E cost savings In Euro billion Reduce P&C
Slide 21: 1H12 financial performance
1H12 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet A21 – AXA 1H12 Earnings – August 3, 2012
Slide 22: L&S – New business sales and margins by market
L&S – New business sales and margins by market In Euro million Mature markets High growth Total markets1 0% +1% o/w AXA Asia* up 9% 2,948 3,075 2,467 2,590 o/w CEE down 36% -3% New business 481 485 sales (APE) + = 1H11 1H12 1H11 1H12 1H11 1H12 40% 42% 24% 24% 21% 21% New business margin + = 1H11 1H1
Slide 23: L&S – New business sales and margins by business
L&S – New business sales and margins by business Continued improvement in business mix APE (Euro million) NBV margin 1H11 1H12 Change 1H12 Strong sales in South-East Asia, India and G/A Protection & China, Germany (anticipation of a change in 1,130 1,250 +5% 43% regulation), Japan (Term Rider and Lo
Slide 24: L&S – New business margin rollforward
L&S – New business margin rollforward Positive impact from improved business mix 1H12 drivers of change Going forward Improved mix toward Mainly lower interest Continue to improve business mix Protection & Health rates impact on GMxB products Additional organic net capital Higher contribution from i
Slide 25: L&S – Underlying Earnings
L&S – Underlying Earnings In Euro million 71 1,411 55 1,316 38 72 13 -122 -32 1H11* US Variable Investment UL fees & Technical Expenses Forex Tax, scope 1H12 Annuities margin margin on margin & other GMxB** revenues * Restated for the change in DAC accounting methodology adopted retrospectively as a
Slide 26: L&S – Underlying Earnings: US GMxB
L&S – Underlying Earnings US GMxB Underlying Earnings US Variable Annuity GMxB Underlying Earnings (post tax)* ( Euro million, net of DAC and tax*) 2011 2011 1H11 1H12 Reported Restated** Restated** Total VA base fees & other, less expenses 156 165 123 100 GMxB Hedge Margin (252) (291) (7) (90) o/w
Slide 27: L&S – Pre-tax Underlying Earnings by business
L&S – Pre-tax Underlying Earnings by business G/A Protection G/A Savings Unit-Linked US Variable & Health excl. US Variable Annuities GMxB In Euro million In Euro million Annuities GMxB In Euro million In Euro million +9% 1,196 1,070 +3% +28% 371 387 297 237 178 -10 1H11* 1H12 1H11* 1H12 1H11* 1H12
Slide 28: 1H12 financial performance
1H12 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet A28 – AXA 1H12 Earnings – August 3, 2012
Slide 29: P&C – Revenues by segment
P&C – Revenues by segment In Euro million Total Personal lines +3.0% 9,085 9,424 +3.7% • Average price increase of +3.0% • Increase in volumes (+ 637k net new 16,173 contracts) offset by lower average 15,350 premium 1H11 1H12 Commercial lines +5.0% 6,690 6,190 • Average price increase of +2.7% • Mor
Slide 30: P&C – Price increases by country and segment
P&C – Price increases by country and segment 2.8% price increase on average Personal lines Commercial lines 1H12 Price Revenues Price Revenues Revenues increase growth increase growth growth 2012 market pricing trends France +2.5% +1.7% +6.0% +5.6% • Price increases in both Personal and Commercial l
Slide 31: P&C – Revenues and margins by market
P&C – Revenues and margins by market Improved current year combined ratio with strong sales in Direct and high growth markets In Euro million Mature High growth Direct Total markets markets1 +3.7% +2.4% o/w UK Direct down 29% 16,173 o/w other countries up 10% 15,350 12,726 13,259 Revenues + +17.4% +
Slide 32: P&C – Underlying Earnings
P&C – Underlying Earnings Improved combined ratio P&C Underlying Earnings Combined ratio In Euro million + Price increases + Lower expenses +4% - Increase in freeze claims 99.2% 1,044 98.6% 0.1% 97.2% 0.5% -2.0% 96.4% 989 -2.1% 1H11 1H12 1H11 1H12 1H11 1H12 Natural Catastrophes Prior year reserve Al
Slide 33: 1H12 financial performance
1H12 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet A33 – AXA 1H12 Earnings – August 3, 2012
Slide 34: AM – Assets under management
AM – Assets under management In Euro billion Average AUM 1H12 net outflows: Euro -2 billion 0% Split by expertise 503 514 Investment +1 +1 Solutions Of which voluntary Equity* Fixed Income exit from unprofitable employee shareholding plan 1H11 1H12 -5 schemes (Euro -4 bn) In Euro billion Average AUM
Slide 35: AM – Underlying Earnings and revenues
AM – Underlying Earnings and revenues Underlying Earnings Revenues In Euro million In Euro million -10% 1,658 1,575 -4% 159 157 1H11 1H12 Change is at comparable basis Expenses In Euro billion -11% 1,384 1,298 1H11 1H12 1H11 1H12 Change is at constant Forex Change is at constant Forex A35 – AXA 1H12
Slide 36: 1H12 financial performance
1H12 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet A36 – AXA 1H12 Earnings – August 3, 2012
Slide 37: Shareholders' equity
Shareholders’ equity Shareholders’ equity Key drivers of change In Euro billion 1H12 vs. FY11 48.6 48.7 +• Net income for the period € +2.6 billion 46.5 -2.1 +• Increase in net unrealized capital gains* € +1.7 billion +• FX movements net of hedging instruments € +0.6 billion - • Dividends € -1.6 bil
Slide 38: Solvency I
Solvency I Solvency I ratio at 207% +15 pts 207% +9 pts -5 pts 188% 171% 182% 127% Of which +12 pts on fixed income assets FY08 FY09 FY10 FY11 Underlying URGL FX & Other 1H12 Earnings Solvency I Sensitivities In Euro billion Ratio as of June 30, 2012 207% 50 44 Interest rate +100bps 155% Surplus 26
Slide 39: Economic solvency
Economic solvency Economic solvency1 Economic solvency1 In Euro billion with equivalence In Euro billion without equivalence 183% 174% 148% 136% 38.9 36.6 39.9 40.1 26.3 26.9 Available capital Required capital Economic solvency ratio without US equivalence 23.1 21.8 FY11 June 30, 2012 Sensitivities
Slide 40: Stable debt gearing at 27%
Stable debt gearing at 27% Net financial debt Debt ratios In Euro billion FY11 1H12 13.4 13.2 Debt Gearing2 26%* 27% Undated subordinated 7.8 7.9 debt 6.8 7.0 Interest Cover3 9.1x 9.7x 3.3 3.3 4.5 5.0 Debt gearing mainly affected by the change FY11 1H12 in DAC accounting methodology from January 1,
Slide 41: General Account invested assets
General Account invested assets Invested assets (100%) FY11 % 1H12 % In Euro billion Changes in asset allocation Fixed income 384 82% 395 82% • Net inflows, investment income and maturities: invested mainly in corporate o/w Govies and related 207 44% 208 43% bonds o/w Corporate bonds 148 32% 155 32%
Slide 42: Focus on net unrealized capital gains
Focus on net unrealized capital gains Balance sheet net unrealized Off balance sheet net capital gains1 unrealized capital gains In Euro billion In Euro billion Equities Real Estate and loans2 7.0 Corporate bonds 1.0 Government bonds 5.2 0.9 1.9 3.2 3.4 1.2 4.2 3.1 FY11 1H12 FY11 1H12 Net unrealized
Slide 43: Focus on exposure to Eurozone peripheral countries government bonds
Focus on exposure to Eurozone peripheral countries government bonds Exposure by issuer Domestic vs. non domestic exposure Or € 11.2 bn with AXA MPS JV at Group share AFS OCI Gross book Gross book Gross market value value value in Euro billion Dec. 31, 2011 June 30, 2012 June 30, 2012 Italy 16.1 14.7
Slide 44: Asset & Liability Management (1/4)
Asset & Liability Management (1/4) Interest rate management in G/A Life & Savings Duration gap L&S asset yield* L&S net investment margin* Guidance: 70-80 bps Asset duration as at June 30, 2012 3.9% 3.8% 76 bps 72 bps Life & Savings 7.4 years Property & Casualty 5.0 years FY11 1H12 FY11 1H12 Renewal
Slide 45: Asset & Liability Management (2/4)
Asset & Liability Management (2/4) Investment policy in Fixed income for Life & Savings and P&C entities Cash-flow from asset portfolio reinvested Current investment policy on Fixed income ABS Euro 384 billion ~5% Loans ~3% Short duration Maturities high yield Government bonds Coupons ~9% ~22%
Slide 46: Asset & Liability Management (3/4)
Asset & Liability Management (3/4) Life & Savings investment spreads Inforce business New business Spread above New business reinvestment rate on fixed guaranteed rates income assets above guarantees offered 160bps 3.8% 210bps 2.8% 2.2% 0.7% 1H12 1H12 Yield on total L&S asset base Yield on L&S fixed
Slide 47: Asset & Liability Management (4/4)
Asset & Liability Management (4/4) Life & Savings investment spreads for main entities Inforce New business 4.4% 370bps 3.1% 310bps • G/A reserves: € 93 billion France 0.7% • G/A Savings NB sales with LT 0.0% guarantees stopped in 1998 1H12 1H12 80bps 160bps 4.2% 3.3% • G/A reserves: € 55 billion 3.
Slide 48: Table of contents
Table of contents Introduction & highlights Page 5 by Henri de Castries, Chairman and CEO 1H12 financial performance Page 17 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Concluding remarks Page 49 by Henri de Castries, Chairman and CEO A48 – AXA 1H12 Earnings – August 3, 2012
Slide 49: 1H12 key highlights
1H12 key highlights • Underlying Earnings increased to Euro 2.3 billion, stable on a comparable basis Sustainable earnings • Adjusted Earnings stable at Euro 2.4 billion • Net Income at Euro 2.6 billion (Euro 4.0 billion in 1H11) due to non repeat of exceptional gains on disposals • Solvency I at hi
Slide 50: Ambition AXA plan is well designed to respond to current challenges
Ambition AXA plan is well designed to respond to current challenges SELECTIVITY Mature markets Sustainable growth in earnings Selectivity & operating Free Cash Flows High growth markets Double our size Acceleration Efficiency Everywhere with a focus on mature markets Investor Day on November 7, 2012
Slide 51: Q&A session
Q&A session Q&A session A51 – AXA 1H12 Earnings – August 3, 2012
Slide 52: Notes
Notes Page 7 1. Excluding Holdings 2. Including G/A Savings, Unit-Linked and Banking Page 10 1. ROE: Return corresponds to adjusted earnings net of interest charges on undated debt. Equity corresponds to average shareholders’ equity excluding undated debt and reserves related to change in fair value
Slide 53: Definitions
Definitions AXA's 1H12 results have been prepared in accordance with IFRS and interpretations applicable and endorsed by the European Commission at June 30, 2012 and are subject to completion of a limited review by AXA’s independent auditors. Adjusted earnings, underlying earnings, Life & Savings EE