Axa Sa · EURONEXT:CS
Axa Sa — H1 2008 Earnings Presentation
68 slides from Axa Sa's earnings presentation, Aug 7, 2008
Slide 1: Half Year 2008 Earnings
Half Year 2008 Earnings August 7, 2008
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 predications of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statem
Slide 3: Definitions
Definitions AXA's HY08 results have been prepared in accordance with IFRS and interpretations applicable and endorsed by the European Commission at June 30, 2008 and have been subject to a limited review by AXA’s independent auditors. Adjusted earnings, underlying earnings, NBV are non-GAAP measures
Slide 4: Table of contents
Table of contents Key highlights 1H08 IFRS earnings Checking the macroeconomic radar screen Concluding remarks Appendices AXA HY 08 Accounts – August 7, 2008 – 4
Slide 5: First Half 2008 key highlights
First Half 2008 key highlights Positive net inflows in all business lines (increased retention in Life and Savings) and stable total revenues in line with 1Q08 trends Positive Underlying Earnings growth in line with February 28, 2008 outlook, reflecting business diversification and resilience of AXA
Slide 6: First Half 2008 key performance indicators
First Half 2008 key performance indicators Stable sales momentum vs. 1Q08 1Q08 1H08 L&S APE -6.3% -6.0% P&C revenues +2.0% +2.3% AM revenues +3.3% -2.7% Total revenues -0.5% -0.4% Positive net inflows Life & Savings Property & Casualty Asset Management € +6 billion +551,000 € +2 billion net new pers
Slide 7: Positive Underlying Earnings growth benefiting from business diversification
Positive Underlying Earnings growth benefiting from business diversification Underlying Earnings Business contributions (Euro million) 191 +7% 92 2,688 2,766 (16) (90) (98) Other L&S P&C business Holdings(1) Forex L&S: Lower technical margin (notably in the US) P&C: Non-recurrence of 1H07 natura
Slide 8: Adjusted Earnings impacted by turbulent market conditions
Adjusted Earnings impacted by turbulent market conditions Adjusted Earnings Net realized capital gains (Euro million) 20% ROE(1) (Euro million) -1% Realized capital gains Impairments 3,424 3,290 Hedging of equity portfolio(2) Net realized 736 524 capital gains attributable to 762 834 shareholders 47
Slide 9: Underlying and Adjusted EPS
Underlying and Adjusted EPS Underlying EPS(1) Adjusted EPS(1) (in Euro) (in Euro) +5% -2% 1.28 1.58 1.54 1.22 1H07 1H08 1H07 1H08 CAGR FY04-HY08 CAGR FY04-HY08 +16% +14% Changes and CAGR (Compounded Annual Growth Rate) are on a reported basis. (1) Fully diluted EPS are reported including impact in e
Slide 10: France key highlights
France key highlights 23% Contribution to Group +16% Underlying Earnings growth Underlying Earnings* +10% in individual lines new business volume (APE), with lower unit-linked Life & Savings share as a consequence of financial market conditions Profitable growth with: Property +3% growth in revenu
Slide 11: NORCEE key highlights
NORCEE key highlights 22% Contribution to Group +15% Underlying Earnings growth Underlying Earnings* Low growth but strong profitability Property Combined ratio improved by 2.6 pts to 96.7% helped by the non-recurrence & Casualty of 2007 Nat Cat events Variable Annuities: X 2 (including Twinst
Slide 12: North America key highlights
North America key highlights Contribution to Group -22% Underlying Earnings Underlying Earnings* 13% Market leader in variable annuities despite economic turmoil Variable Strong net flows (increased retention): Euro +1.6 billion Annuities Strong and diverse distribution channels through propri
Slide 13: Mediterranean Region key highlights
Mediterranean Region key highlights Contribution to Group +24% Underlying Earnings growth Underlying Earnings* 9% Profitable growth with: Property +7% growth in revenues & Casualty 93.8% combined ratio (improved by 2.0 pts vs. HY07) Winterthur Winterthur integration in Spain close to being fin
Slide 14: UK & Ireland key highlights
UK & Ireland key highlights Contribution to Group +13% Underlying Earnings growth Underlying Earnings* 9% No weather events but challenging P&C market conditions Property Successful development of P&C direct motor operations (Swiftcover): more & Casualty than 400k contracts in total Health rev
Slide 15: Asia-Pacific key highlights
Asia-Pacific key highlights Contribution to Group +8% Underlying Earnings growth Underlying Earnings* 8% Improved business mix allowing to maintain margins in a slowing market Japan environment India: Continued •New license in P&C momentum in •14,000 Life agents: +50% increase in 6 months emerging
Slide 16: Asset Management key highlights
Asset Management key highlights 9% Contribution to Group +9% Underlying Earnings growth Underlying Earnings* Net inflows Euro + 2 billion net inflows mostly driven by institutional clients AllianceBernstein ranked #1 in key research quality metrics (knowledge, trust, Business service) franchise
Slide 17: Operational Highlights – Key Takeaways (1/2)
Operational Highlights – Key Takeaways (1/2) AXA's half-year performance demonstrates the relevance of our strategy in an adverse environment Resilience of our underlying and adjusted earnings • Global earnings diversification offsets current weakness in the US • Measures implemented to reduce exp
Slide 18: Operational Highlights – Key Takeaways (2/2)
Operational Highlights – Key Takeaways (2/2) We are well equipped to withstand a further deterioration in world economic conditions P&C and traditional life offset market sensitivity of savings and asset management Dynamic defensive balance sheet management Positive cash flows in all our segme
Slide 19: Table of contents
Table of contents Key highlights 1H08 IFRS earnings Checking the macroeconomic radar screen Concluding remarks Appendices AXA HY 08 Accounts – August 7, 2008 – 19
Slide 20: Life & Savings APE & NBV by region
Life & Savings APE & NBV by region 1H08 Comp. Comp. NBV Comp. APE NBV (Euro million Group share) growth growth margin growth US 808 -14% 144 -15% 17.8% -0.3 pts France 690 -3% 92 -23% 13.3% -3.4 pts NORCEE 660 +8% 209 +8% 31.6% +0.1 pt UK 692 -3% 54 -17% 7.7% -1.3 pts Asia Pacific (incl. Japan) 558
Slide 21: L&S unit-linked reserve roll-forward: positive net inflows
L&S unit-linked reserve roll-forward: positive net inflows Average unit-linked management fees margin 1.17% 1.25%* Euro billion 1H07 1H08 -7% comparable 4 183 (16) (2) 161 (9) +14 inflows -10 outflows FY07 Net inflows Market appreciation Change in scope Forex 1H08 & other Unit-linked management fees
Slide 22: L&S non unit-linked reserve roll-forward: positive net inflows
L&S non unit-linked reserve roll-forward: positive net inflows Average General Account Invest. Margin 0.83% 0.87%* Euro billion 1H07 1H08 +1% comparable 1 2 309 (1) 308 (3) +21 inflows -19 outflows FY07 Net inflows Market Change in scope Forex 1H08 appreciation & other General Account investment mar
Slide 23: Resilient L&S Underlying Earnings, as lower gross margin was partially offset
Resilient L&S Underlying Earnings, as lower gross margin was partially offset by lower expenses and taxes Gross Margin -2%* Expenses & Taxes -1%* Comp. Comp. Euro million HY08 Change* Euro million HY08 Change* Investment margin 1,336 +4% Acquisition expenses -1,513 +0% Fees & Revenues 3,389 +3% Admi
Slide 24: Property & Casualty: profitable growth
Property & Casualty: profitable growth Revenues Combined ratio Comp. Comp. (Euro million Group share) 1H07 1H08 1H07 1H08 growth growth NORCEE(1) 5,202 5,224 -0.1% 99.4% 96.7% -2.6 pts o/w Germany 2,202 2,199 -0.1% 101.0% 98.0% -2.9 pts o/w Switzerland 1,794 1,805 -0.9% 97.7% 92.8% -4.9 pts o/w Belg
Slide 25: Improved P&C Combined Ratio while maintaining strong reserving levels
Improved P&C Combined Ratio while maintaining strong reserving levels Loss Ratio (%) Reserving Ratio -2.1 pts +4pts to 198% Combined Ratio (%) 70.5% +1.3 pts -0.8 pt 68.4% 98.4 -2.6 pts 96.4 1H07 Current Prior Year Nat Cat** 1H08 accident Reserve year Dev. Loss 70.5 68.4 ** Kyril, UK floods and Emma
Slide 26: Strong growth in P&C Underlying Earnings driven by improved technical result
Strong growth in P&C Underlying Earnings driven by improved technical result Gross Written Average Average Combined Premiums(Euro million) P&C Assets (Euro million) Asset Yield (in %) Ratio* (in %) 14,519 96.4% 54,443 4.3% +2.3% -1.9 pts +4% +0.1 pt X X 1H08 1H08 1H08 1H08 Net Technical Result** Net
Slide 27: Asset Managers' AUM roll-forward: positive net inflows
Asset Managers’ AUM roll-forward: positive net inflows Revenues exl. distribution fees on average AUM* 0.37% 0.37% 1H07 1H08 Euro billion 1,092 2 5 (73) 981 (44) +6 at AXA IM -4 at AllianceBernstein FY07 Net inflows Market Change in FX 1H08 appreciation scope Revenues (excluding distribution fees):
Slide 28: Positive earnings growth in Asset Management business
Positive earnings growth in Asset Management business Revenues Underlying Cost Underlying Earnings (Euro million) Income Ratio(1) (Euro million Group share) -2.7% -0.8 pt +9% 2,102 66.8% 285 1H08 1H08 1H08 Stable revenues, Lower compensation and Positive non recurring excluding distribution di
Slide 29: Analysis of other segments' Underlying Earnings
Analysis of other segments’ Underlying Earnings Change on a Euro million 1H07 1H08 comparable basis AXA Corporate Solutions Assurance 58 46 -26% Other 62 126 +111% International Insurance 119 172 +44% Banking 11 24 +118% Holdings -181 -245 +42% Banking and Holdings -170 -221 +36% International Insur
Slide 30: Underlying Earnings growth reflecting business diversification
Underlying Earnings growth reflecting business diversification Change on a Change on a Euro million 1H07 1H08 reported comparable basis basis Life & Savings 1,489 1,396 -6% -1% Property & Casualty 963 1,133 +18% +20% Asset Management 286 285 0% +9% International Insurance 119 172 +44% +44% Banking &
Slide 31: Adjusted Earnings and Net Income impacted by volatility of financial markets
Adjusted Earnings and Net Income impacted by volatility of financial markets Euro million 1H07 1H08 Underlying Earnings 2,688 2,766 Net realized capital gains 762 834 Net impairments -26 -786 Primarily equity impairments Equity portfolio hedging (intrinsic value) 0 477 Adjusted Earnings 3,424 3,290
Slide 32: Estimated shareholders' cash-flow statement
Estimated shareholders’ cash-flow statement Non audited Non GAAP Euro billion FY07 1H08 Adjusted earnings (n-1) 5.1 6.1 Difference between adjusted earnings and statutory results (n-1) -0.3 -1.3 Increase in consolidated solvency requirements(1) -1.4 -1.3 Capital optimization 1.0 -0.7 Estimated share
Slide 33: Shareholders' equity roll-forward
Shareholders’ equity roll-forward Unrealized capital gains FY07 1H08 €+6.9 billion €+2.6 billion 2.1 Real estate, loans 2.1 (Off Balance Sheet) 5.2 2.8 Equities (through OCI) Fixed income assets (0.5) (through OCI) (2.4) Euro million 2,162 45,642 138 (2,473) 40,547 (4,300) (622) FY07 Net income Divi
Slide 34: Table of contents
Table of contents Key highlights 1H08 IFRS earnings Checking the macroeconomic radar screen Concluding remarks Appendices AXA HY 08 Accounts – August 7, 2008 – 34
Slide 35: Checking the macroeconomic radar screen
Checking the macroeconomic radar screen Equity gearing Solvency Asset portfolio Debt gearing & DAC assets liquidity Forex Inflation VA risk management AXA HY 08 Accounts – August 7, 2008 – 35
Slide 36: Equity gearing (General Account exposure)
Equity gearing (General Account exposure) Hedges on general account equity exposure in Euro billion Various hedging strategies implemented including swaps, puts and calls 28 12 notably in Life participating funds Derivatives Notional level Protection trigger point Protection below Outstanding 14 pro
Slide 37: Equity gearing (Unit-linked and Asset Management)
Equity gearing (Unit-linked and Asset Management) Life & Savings annual margin sensitivity to a 10% drop in equity markets* Equities -10% ca. 100bps ca. 67% ca. €-0.1 billion X X = net of tax Unit-linked AUM Equity Fees on UL, net of = €160 billion markets commissions Asset Management annual margin
Slide 38: Asset portfolio: Quality and diversification
Asset portfolio: Quality and diversification Euro billion FY07 % 1H08 % Asset allocation Fixed income 298 78% 286 79% • Increased corporate bond exposure (average rating o/w Govies 135 35% 120 33% A+) to capture higher level of spreads currently available o/w Corporate Bonds 132 35% 138 38% • Lower
Slide 39: Asset portfolio: Fixed income
Asset portfolio: Fixed income Strict ALM: Strict Accounting • Duration & Convexity gap • Mark-to-market valuation based on external • Assets diversification & quality data (Level 3 not material) Fixed income exposure (excluding govies) Sensitivity Good quality portfolio: • Few credit events (limit
Slide 40: DAC assets
DAC assets HY08 balances US UK Net* Life & Savings DAC amounts (Euro bn) 4.3 1.0 Underlying assumptions and methodology US UK Long term unit-linked return 9% 7% Return to the mean (RTM) method Yes** Yes Return to the mean period 5 years 5 years Corridor 0-15% 0-9% Potential net* DAC impairments (Eur
Slide 41: Inflation
Inflation Inflation risk Insurance Sector* Life & Savings Management Actions Unit-linked Limited Constant Maturity Swaps, Caps and Swaptions have been put in place to Traditional life Some protect our portfolios against much higher Property & Casualty or much lower levels of interest rates Short tai
Slide 42: US VA Risk Management
US VA Risk Management Product Design • Diversified VA product offering GMDB/IB/WBL – regularly updated • Certain limits on fund options – i.e. allocation funds for GMWB/WBL • GMIB 10 year annuitization waiting period • Implicit hedges within product features - GMIB election risk relative to GMDB e
Slide 43: Forex
Forex Due to its history and its very strong diversification, an increasing share of AXA’s net asset value is in non-Euro denominated currencies Diversification of earnings is a key driver of AXA’s financial strength and recent earnings growth. However, since 2004, FX movements have been mostly
Slide 44: Debt gearing and liquidity
Debt gearing and liquidity Interest coverage and debt High liquidity gearing at comfortable levels Strong cash-flows Interest coverage* • Strong recurring positive cash-flows across 12.9x 12.7x business lines • Cash management optimized through pooling vehicles Conservative financing FY07 1H08 •
Slide 45: Solvency I
Solvency I Solvency I Roll-forward +16pts Sensitivity to equity markets (2pts) 154% Impact on 148% From June 30, 2008 levels Solvency I ratio (20pts) Equity markets -10% -3 pts Equity markets -20% -9 pts Further negative impact from financial markets limited, as: • Unrealized losses on AFS OCI fix
Slide 46: Rating agencies and Solvency II
Rating agencies and Solvency II Rating agencies’ view Solvency II’s Quantitative Impact Study 4 (QIS4) AXA’s consolidated QIS4 coverage ratio estimated at ca. 175% as of June 30, 2008, up ca. 5 pts vs. December 31, 2007: AA financial strength rating with Decrease in Available Financial Resourc
Slide 47: Table of contents
Table of contents Key highlights 1H08 IFRS earnings Checking the macroeconomic radar screen Concluding remarks Appendices AXA HY 08 Accounts – August 7, 2008 – 47
Slide 48: First Half 2008 key highlights
First Half 2008 key highlights Positive net inflows in all business lines (increased retention in Life and Savings) and stable total revenues in line with 1Q08 trends Positive Underlying Earnings growth in line with February 28, 2008 outlook, reflecting business diversification and resilience of AXA
Slide 49: Table of contents
Table of contents Key highlights 1H08 IFRS earnings Checking the macroeconomic radar screen Concluding remarks Appendices AXA HY 08 Accounts – August 7, 2008 – 49
Slide 50: Results Overview by segment
Results Overview by segment Other Financial Asset International Euro million Life & Savings P&C Services and Total Management Insurance Holdings HY07 HY08 HY07 HY08 HY07 HY08 HY07 HY08 HY07 HY08 HY07 HY08 Revenues 31,555 30,826 14,195 14,519 2,407 2,102 2,489 1,673 156 199 50,801 49,319 Underlying E
Slide 51: Underlying Earnings by region
Underlying Earnings by region Euro million Underlying Earnings HY07 HY08 % % Comparable Life & Savings 1,489 1,396 -6% -1% North America 490 330 -33% -23% France 353 431 22% 22% NORCEE 231 252 9% 8% UK & Ireland 136 92 -32% -22% Asia-Pacific 239 248 4% 10% Mediterranean Region 40 43 7% 7% Property &
Slide 52: 1H08 Revenues
1H08 Revenues 1H08 IFRS Revenues by Operating Segment(1) International Asset Mgt & Banks Insurance 5% 3% P&C 29% 1H08 IFRS Insurance Revenues by Geography(1) France Life & Savings 22% 62% International Insurance North 4% America 16% Mediterranean Region 12% Asia-Pacific (incl. NORCEE(2) Japan) 28% 9
Slide 53: 1H08 Underlying Earnings
1H08 Underlying Earnings 1H08 Underlying Earnings(1) by Operating Segment Asset Management International 9% Insurance 6% 1H08 Underlying Earnings(1) Life & Savings by Geography P&C 46% 38% France 23% Asia-Pacific 8% NORCEE(2) Mediterranean 22% Region 9% North America Asset Mgmt 13% 9% (1) Excluding
Slide 54: Property & Casualty pricing trends
Property & Casualty pricing trends Charts below show the pricing component of change in AXA’s average premiums between 2007 and 2008 (excluding change in mix) Individual motor GER 1H08 net inflows +515,000 IT FR new contracts (+2.4 million BE cumulated net new contracts over the last 3 years) -2% 0%
Slide 55: Positive earnings growth in Asset Management business
Positive earnings growth in Asset Management business -0.6% -6.4% Revenues 1,340 763 1H08 1H08 -1.0 pt -0.3 pt Underlying Cost Income Ratio(1) 67.6% 65.3% 1H08 1H08 +22% -3% Underlying Earnings 128 158 (Euro million group share) 1H08 1H08 Changes are on a comparable basis (1) (general expenses minus
Slide 56: Invested assets: focus on fixed income
Invested assets: focus on fixed income Economic breakdown of fixed Duration Gap at Half Year 2008 income assets by rating(1) ASSETS LIABILITIES AA Life & Savings AAA 29% 38% 7.7 yrs 8.1 yrs A 20% U = +0.4 yr BBB Property & Casualty 9% NR High Yield 6.3 yrs 6.7 yrs 2% 2% U = +0.4 yr Average rating A+
Slide 57: Corporate bonds breakdown including CDS
Corporate bonds breakdown including CDS P = Participating NP = Non-participating Euro billion As of June 30, US UK Japan Germany Switzerland France Other Total 2008 P NP NP P NP P NP P NP P NP P NP P NP AAA 0 0 0 0 0 4 1 4 1 3 2 1 1 13 6 AA 0 2 1 0 3 3 1 3 1 10 3 6 5 22 15 A 0 8 2 0 5 5 2 4 1 10 4 6
Slide 58: Corporate bonds: focus on CDS
Corporate bonds: focus on CDS CDS Investment Strategy: CDS are used as an alternative to investment grade corporate bonds mainly via iTraxx Main Europe Since December 31, 2007, exposure was increased by Euro 4 billion to benefit from high spread levels during 1H08 Euro million Net Market Value As
Slide 59: Focus on Monolines
Focus on Monolines General Account exposure Euro million Euro million Direct investments in equities and Investment in credit enhanced securities As of June 30, 2008 As of June 30, 2008 corporate bonds Participating Non-participating Participating Non-participating Ambac 0 119 MBIA 1 8 MBIA 50 161 X
Slide 60: Asset Backed Securities by underlying type of asset
Asset Backed Securities by underlying type of asset Economic breakdown of ABS by asset type(1) ca 73% AAA & AA Euro billion AAA 66% As of June 30, 2008 Total ABS 14.4 billion AA Mortgage-backed Other asset-backed NR/Equity 5% 7% A UK RMBS 12% € 0.5 billion High Yield BBB 1% 9% US Subprime & Alt-A CL
Slide 61: AXA's ABS valuation methodology
AXA’s ABS valuation methodology EXTERNAL SOURCES INTERNAL SOURCES LEVEL 1 LEVEL 2 LEVEL 3 Referenced to public Valuation techniques using Valuation techniques not price quotations in an observable market inputs supported by prices from active market observable inputs ABS Mark-to-Market 6/30/07 12/31
Slide 62: Focus on Mortgage-Backed Securities
Focus on Mortgage-Backed Securities Euro million Prime Residential As of June 30, 2008 Commercial MBS UK RMBS US Subprime RMBS US Alt-A RMBS MBS (unless indicated) Mark-to-market @ 30/06/07 99% 97% 97% 100% 99% Mark-to-market @ 31/12/07 98% 92% 96% 72% 59% Mark-to-market @ 30/06/08 96% 83% 82% 53% 2
Slide 63: Focus on US Subprime RMBS by vintage
Focus on US Subprime RMBS by vintage Euro million 2004 & As of June 30, 2007 MtM 2006 MtM 2005 MtM MtM Total MtM Prior 2008 AAA 75 54% 124 64% 283 80% 27 90% 508 71% AA 31 54% 79 66% 48 70% 10 65% 167 64% A 31 48% 11 35% 19 41% 22 29% 83 37% BBB 0 5% 4 8% 12 11% 2 11% 19 10% Below invst. grade 5 11%
Slide 64: Focus on other asset-backed securities
Focus on other asset-backed securities Euro million CDO CLO Consumer ABS As of June 30, 2008 Mark-to-market @ 30/06/07 89% 98% 99% CDOs include Euro 3 million CDOs of subprime Mark-to-market @ 31/12/07 78% 90% 98% Consumer ABS is comprised of Mark-to-market @ 30/06/08 75% 77% 94% the following:
Slide 65: Focus on CDO asset quality
Focus on CDO asset quality Euro million Investment High Structured Other Total As of June 30, 2008 grade Yield Finance CDOs AAA 1,040 38 43 308 1,429 AA 49 51 16 42 158 A 393 30 14 8 445 BBB 17 27 5 49 97 Below invst. grade 11 12 3 1 27 Equity / Non rated 120 50 2 127 299 Market value 1,631 208 82 5
Slide 66: Real estate investments
Real estate investments Euro billion As of June 30, France Switzerland UK Germany US Belgium Total 2008 Market value(1) 9 5 1 2 1 2 19 AXA real estate invested in the market where the company is operating Investment are generally geared toward commercial properties (office, retail) Very limite
Slide 67: Mortgage loans and other
Mortgage loans and other Mortgage Loans Euro billion Agency Total As of June 30, 2008 Pools Germany US Switzerland Other Market Value (1) 5 3 3 1 1 14 Germany: Î Mortgage loans are 95% residential and located in participating funds. US: Î Mortgage loans are primarily commercial (ca 2/3) and Agri
Slide 68: Financial debt analysis
Financial debt analysis Total debt (Euro billion) 15.8(1) 16.2(1) Legal maturity breakdown(2) In Euro billion 7.8 6.0 6.2 1.6 1.6 6.0 4.2 5.8 2.1 2.7 5.7 2.5 1.0 (2) 0.2 2.1 0.3 1.6 2.3 (2) 2.9 0.1 0.8 0.2 0.2 0.2 0.2 0.3 FY07 1H08 2008-2010 2011-15 2016-20 2021-25 2026-30 P erpet u al Subordinated