Axa Sa · EURONEXT:CS
Axa Sa — FY2011 Earnings Presentation
66 slides from Axa Sa's earnings presentation, Feb 16, 2012
Slide 1: Full Year 2011 Earnings Presentation
Full Year 2011 Earnings February 16, 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: Table of contents
Table of contents 2011 key highlights Page 4 by Henri de Castries, Chairman and CEO 2011 financial performance Page 14 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Business overview Page 48 by Mark Pearson, President & CEO of US operations Véronique Weill, Group COO Concluding remarks Pag
Slide 4: Resilient business model
Resilient business model Underlying Earnings FY11 pre-tax Underlying Earnings1 In Euro billion Property & Casualty and International +2% 46% +14% 3.9 G/A Protection 3.7 & Health +8% 34% Savings and Asset 20% Management2 -18% FY10 FY11 +5% on a reported basis Earnings growth supported by less financi
Slide 5: Strong operating Free Cash Flow generation and robust Balance Sheet
Strong operating Free Cash Flow generation and robust Balance Sheet Operating Free Cash Flows1 Solvency I ratio close to In Euro billion up 14% historical highs 4.2 188%2 3.7 182% FY10 FY11 FY10 FY11 Remittance ratio from entities up to 76% Reduced debt gearing Economic solvency ratio at comfortable
Slide 6: Dividend maintained at Euro 0.69 per share
Dividend maintained at Euro 0.69 per share Dividend maintained In Euro per share Resilient business model 0.69 0.69 Strong operating Free Cash Flows FY10 FY11 Robust balance sheet Dividend yield of 7% based on share price as at 31/12/2011 Payout ratio1 of 49% 6 – AXA FY11 Earnings – February 16, 201
Slide 7: Ambition AXA
Ambition AXA Well suited to the challenges of the current environment 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 initi
Slide 8: Ambition AXA
Ambition AXA Financial performance impacted by market conditions Underlying Earnings per share Group operating Free Cash Flows In Euro per share In Euro billion +4% +14% Ambition AXA 1.57 1.57 Ambition AXA 4.2 1.51 2011-2015 2010-2015 CAGR 3.7 cumulative +10% Euro 24 billion FY10 FY10 FY11 Published
Slide 9: Delivering on operational initiatives
Delivering on operational initiatives 1. Improved business profitability G/A Protection Unit-Linked G/A Savings & Health APE Reshaping the growth +13% -3% -20% L&S business NBV margin 47% 23% -4% Current year combined ratio Combined ratio 102.6% Fostering P&C 99.5% -2.9 pts 99.6% 97.9% profitability
Slide 10: Delivering on operational initiatives: active capital management
Delivering on operational initiatives 2. Active capital management Disposals of mature entities and Acquisitions in high growth markets non-strategic participations Asia Life minority interests buyout Australia & New Zealand Euro 3.2 billion Euro 1.3 billion Proceeds: 16% stake in Taikang Life Euro
Slide 11: Delivering on operational initiatives: acceleration of profitable growth
Delivering on operational initiatives 3. Acceleration of profitable growth in selected areas Asia Life Simplification of Integration of Life Leverage Group governance and P&C businesses transversal capabilities minority buyout Asia Life Asia Life Asia Life growing in 23% APE line with expectations g
Slide 12: Delivering on operational initiatives: cost savings plan
Delivering on operational initiatives 4. Cost savings plan in mature markets is on track € 0.3 billion savings Ambition AXA achieved in 2011 In Euro billion In Euro billion 0.5 1.1 Maintain 0.6 P&C and L&S administrative 1.2 1.5 costs 2011E- 2014E- Total 2013E 2015E administrative cost savings 0.3 I
Slide 13: Table of contents
Table of contents 2011 key highlights Page 4 by Henri de Castries, Chairman and CEO 2011 financial performance Page 14 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Business overview Page 48 by Mark Pearson, President & CEO of US operations Véronique Weill, Group COO Concluding remarks Pag
Slide 14: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 14 – AXA FY11 Earnings – February 16, 2012
Slide 15: Underlying Earnings (1/2)
Underlying Earnings (1/2) Underlying Earnings Underlying Earnings by segment In Euro million Reported Constant In Euro million FY10 FY11 basis Forex +2% Life & Savings 2,445 2,267 -7% -9% 3,731 3,901 Property & Casualty 1,553 1,848 +19% +16% Asset Management 269 321 +19% +20% International Insurance
Slide 16: Underlying Earnings (2/2)
Underlying Earnings (2/2) In Euro million +2% Of which €-215m on US GMxB 3,880 -149 technical margin +79 3,901 +77 -9 3,731 -141 +236 -72 FY10 FY10 FY10 Life & Life & P&C, Asset Holdings Forex FY11 published Canadian restated for Savings Savings International Management, & other Underlying sold scop
Slide 17: Adjusted Earnings
Adjusted Earnings Adjusted Earnings Details on Adjusted Earnings In Euro million In Euro million FY10 FY11 -15% Underlying Earnings 3,731 3,901 4,150 Net realized capital gains/losses 419 (312) 3,589 Realized capital gains/losses 900 682 Impairments (377) (840) o/w equities (169) (308) o/w fixed inc
Slide 18: Net Income
Net Income Net Income Details on Net Income In Euro million In Euro million FY10 FY11 Adjusted Earnings 4,150 3,589 Change in fair value of assets 212 114 +49% Of which Goodwill and related intangibles (81) (1,167) €-943m goodwill reduction 4,324 attributable to Restructuring and integration costsA
Slide 19: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 19 – AXA FY11 Earnings – February 16, 2012
Slide 20: L&S – New business sales and margins by markets
L&S – New business sales and margins by markets In Euro million Mature markets High growth Total markets1 -1% o/w Asia up 16% -1% o/w CEE down 23%2 5,780 5,733 5,114 4,808 +2% New business sales (APE) + 667 925 = FY10 FY11 FY10 FY11 FY10 FY11 New business margin 20% 22% + 38% 42% = 22% 25% FY10 FY11
Slide 21: L&S – New business sales and margins by business
L&S – New business sales and margins by business Continued improvement in business mix NBV margin (%) APE (Euro million) FY10 FY11 FY10 FY11 % change Strong sales in the US (new Indexed Universal Life product), France G/A Protection & (success of Group Protection), 47% 47% 1,802 2,184 +13% Health Sw
Slide 22: L&S – New business margin rollforward
L&S – New business margin rollforward Increase in new business margin despite financial market impact 2011 drivers of change Going forward Improved mix toward Mainly lower interest Continue to improve business mix Protection & Health rates impact on G/A Savings products with Additional organic capit
Slide 23: L&S – Underlying Earnings
L&S – Underlying Earnings -2%1 Mainly increase in o/w €-111m in France, mainly changes o/w €-191m from the UK in regulation average asset base o/w €+50m from AXA APH o/w €-64m in Japan, mainly due to the and improved mix impact of the Great East earthquake Mainly increase in average asset base 2,445
Slide 24: 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 +8% 2,240 2,065 +18% +4% 581 511 511 504 147 FY11 FY10 FY11 FY10 FY11 FY10 FY11 FY
Slide 25: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 25 – AXA FY11 Earnings – February 16, 2012
Slide 26: P&C – Revenues by segment
P&C – Revenues by segment Total Personal lines In Euro million +3.6% • Average price increase of +4.8% +3.5% 16,073 16,309 • Increase in volumes more than offset 27,046 by lower average premium 25,986 FY10 FY11 Commercial lines +3.3% • Average price increase of +2.3% 9,714 10,535 • More favorable bu
Slide 27: P&C – Price increases by country and segment
P&C – Price increases by country and segment Personal lines Commercial lines FY11 Price Revenues Price Revenues Revenues increase growth increase growth growth 2012 market pricing trends +4.1% • Price increases expected in both Personal France +0.1% +5.2% +2.8% and Commercial lines Germany +1.1% +6.
Slide 28: 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 +3.5% +1.3% Revenues 21,067 21,609 + +15.7% + +8.2% = 25,896 27,046 2,990 3,335 2,102 1,928 FY10 FY11 FY10 FY
Slide 29: P&C – Underlying Earnings
P&C – Underlying Earnings Improved combined ratio P&C Underlying Earnings Combined ratio In Euro million +• Price increases +• Lower Nat Cat costs +• Cost savings +• Lower frequency +16% -2.9 pts -• Increase in severity 1,848 102.6% 1.7% 99.6% 99.5% 1,553 0.7% 97.9% -3.1% 100.9% -1.7% 98.9% FY10 FY1
Slide 30: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 30 – AXA FY11 Earnings – February 16, 2012
Slide 31: AM – Assets under management and revenues
AM – Assets under management and revenues Average AUM FY11 Net outflows In Euro billion In Euro billion -2% AXA IM Euro -1 billion 863 836 Split by expertise AXA +4 269 Rosenberg Other (5) expertises FY10 FY11 AllianceBernstein Revenues Euro -28 billion In Euro billion Split by product strategy 0% 3
Slide 32: AM – Underlying Earnings
AM – Underlying Earnings Underlying Earnings AXA IM +69% In Euro million 215 125 Non repeat of 2010 Rosenberg coding error +20% provision and higher revenues 321 269 FY10 FY11 AllianceBernstein -23% 143 106 Decrease mainly due to FY10 FY11 lower revenues reflecting lower average assets under managem
Slide 33: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 33 – AXA FY11 Earnings – February 16, 2012
Slide 34: Shareholders' equity
Shareholders’ equity Shareholders’ equity Key drivers of change In Euro billion FY11 vs. FY10 +• Net income for the period € +4.3 billion 49.7 48.6 • Forex movements net of € +0.5 billion 46.2 + hedging instruments -• Goodwill deduction related to AXA APH transaction € -2.5 billion -• 2010 dividend
Slide 35: Solvency I
Solvency I Solvency I ratio at 188% +17 pts 186% 188% 171% 182% -7 pts 154% -4 pts 127% Of which: • +3 pts on fixed income assets • -8 pts on equity FY06 FY07 FY08 FY09 FY10 Underlying Dividend Market FY11 Earnings effects & Other Solvency I Sensitivities In Euro billion Ratio as of December 31, 201
Slide 36: Economic solvency
Economic solvency Economic solvency1 Main risk drivers In Euro billion FY11 vs. FY10 178% 148% >150% - Credit and government bond spreads, net of liquidity premium -15 pts 50.3 38.9 - Interest rates -20 pts 28.3 26.3 Sensitivities Ratio as of December 31, 2011 148% Interest rate +100bps 165% Decembe
Slide 37: Improved debt gearing at 26%
Improved debt gearing at 26% Net financial debt Debt ratios In Euro billion • Dividends from entities net of financing costs and dividends to shareholders • Net cash proceeds from disposals / acquisitions FY10 FY11 Debt Gearing2 28% 26% 15.2 13.4 7.7 7.8 Interest Cover3 8.5x 9.1x 6.7 6.8 3.4 3.3 Deb
Slide 38: General Account invested assets
General Account invested assets Invested assets (100%) FY10 % FY11 % In Euro billion Changes in asset allocation Fixed income 365 83% 384 82% • Net inflows and investment income: invested mainly in fixed income o/w Govies and related 188 42% 207 44% o/w Corporate bonds 150 34% 148 32% • Mark to mark
Slide 39: 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 6.6 Equities 5.1 3.1 0.9 Corporate bonds 2.9 3.2 1.4 1.1 Government bonds Real estate and loans2 2.3 3.1 FY10 FY11 FY10 FY11 Net unrealized
Slide 40: Focus on exposure to Eurozone peripheral countries government bonds
Focus on exposure to Eurozone peripheral countries government bonds Exposure to Eurozone peripheral countries Exposure by issuer Domestic vs. non domestic Gross Net1 Gross market Domestic AFS OCI Gross Book market value GMV in % unrealized value in Euro billion value Dec. 31, of BV 45% 2011 gains/lo
Slide 41: Non domestic exposure at AXA France, Belgium and Germany for L&S entities
Non domestic exposure at AXA France, AXA Belgium and AXA Germany for L&S entities Total gross unrealized Exposure to Eurozone Reinvestment rate vs. capital gains1 peripheral countries guaranteed rate1 sovereign debt1 In % of G/A reserves1 In % of G/A reserves1 Current investment 190bps yield1 6.4% V
Slide 42: Asset & Liability Management
Asset & Liability Management Investment policy – investment margin sustainability Sustainable investment margin 2011 L&S Reinvestment rate on Fixed income assets Eurozone 3.9% 76 bps 73 bps US 3.0% Japan 2.1% Investment Switzerland 2.8% margin Total 3.5% Current investment policy on Fixed income FY1
Slide 43: 2011 financial performance
2011 financial performance Group earnings Life & Savings Property & Casualty Asset Management Balance sheet Embedded value and Free Cash Flows 43 – AXA FY11 Earnings – February 16, 2012
Slide 44: Group Embedded Value
Group Embedded Value Group EV at € 31.5 bn Key drivers of change In Euro billion FY11 vs. FY10 34.2 +• Operating return € +6.3 billion 31.5 - • Investment experience € -8.0 billion VIF 20.1 17.1 - • Dividend € -1.6 billion +• Forex € +0.4 billion TNAV 14.1 14.5 FY10 FY11 19% operating return on Grou
Slide 45: Group operating Free Cash Flows
Group operating Free Cash Flows Operating Free Cash Flows1 +14% In Euro billion 4.2 3.7 Life & Savings 1.4 1.8 Strong increase driven by both Life & Savings and Property & Casualty2 2.0 2.1 Property & Casualty Asset Management3 0.3 0.4 FY10 FY11 Remittance ratio Excluding proceeds +19% from disposal
Slide 46: Life & Savings operating Free Cash Flows
Life & Savings operating Free Cash Flows FY09 FY10 FY11 Euro billion Euro billion Euro billion New business New business New business IRR at 10.3% IRR at 10.9% IRR at 11.5% 3.9 3.4 3.6 1.8 1.7 1.4 (2.2) 0.8 (2.2) (2.5) Target Expected inforce surplus New business investments Life & Savings operating
Slide 47: Table of contents
Table of contents 2011 key highlights Page 4 by Henri de Castries, Chairman and CEO 2011 financial performance Page 14 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Business overview Page 48 by Mark Pearson, President & CEO of US operations Véronique Weill, Group COO Concluding remarks Pag
Slide 48: 2011 financial performance
2011 financial performance Focus on the US Focus on efficiency program 48 – AXA FY11 Earnings – February 16, 2012
Slide 49: Focus on the US
Focus on the US Good operating performance in adverse economic conditions Key Operating Metrics In USD million FY10 FY11 Diversification strategy shows good momentum APE 1,319 1,411 Underlying Earnings impacted by 2H11 NBV 164 188 market deterioration Underlying Earnings 640 433 Net Income reflects
Slide 50: Focus on the US
Focus on the US Strong momentum with solid track record of diversification and efficiency Life and Annuity Gross expenses1 New Business APE -11% In USD million In USD million +14% 1,408 1,2642 989 866 Life 345 +40% 246 FY10 FY11 Non-GMxB Aligned distribution: AXA Advisors now Annuity generating 66%
Slide 51: Focus on the US
Focus on the US Excluding GMxB technical margin, pre-tax underlying earnings are growing In USD million, pre-tax +10% +79 -99 +153 1,278 -863 +422 1,162 -17 740 415 FY10 Add back FY10 Net Fees & Commissions DAC & FY11 GMxB FY11 GMxB hedge before investment revenues and & expenses VBI before hedge af
Slide 52: Focus on the US: Reduction of US goodwill
Focus on the US Reduction of US goodwill by USD 1.3 billion VA GMxB Sales & Risk Profile No longer for New Business sale Goodwill primarily from 2000 purchase of Retirement Accumulator remaining minority interest in AXA Financial Impact on capital Acc 7 Series Cornerstone 11.0 Initial capital as % 7
Slide 53: Focus on the US VA GMxB business
Focus on the US VA GMxB business Policyholder behavior Lapse assumptions in line with experience VA GMxB Lapse Rates Actual vs. Expected (post surrender charge period) % • Reserve assumptions now in line with FY11 experience Reserve • Reserve based on projections of different market conditions assum
Slide 54: Focus on the US VA GMxB business
Focus on the US VA GMxB business Strong discipline for volatile markets Disciplined Risk Management Prudent hedge reporting • AXA does not use non-performance risk adjustment “NPR” as • Suspended additional contributions into legacy permitted under US GAAP, which reduces amount of reserve Accumulato
Slide 55: Focus on the US
Focus on the US Diversified, innovative and disciplined: well positioned for growth Reshape Life & Savings business Variable Annuity (APE) FY10 FY11 More diversified product portfolio Accumulator Accumulator Employer Employer sponsored sponsored 18% • 41% of sales in FY11 from newly launched 46% 26%
Slide 56: AXA Equitable has a clear strategy for growth
AXA Equitable has a clear strategy for growth Our objective: deliver sustainable earnings and Free Cash Flows growth 1 Strong presence in the US - the world’s largest profit pool 2 Well positioned to grow with unique assets in distribution and inforce 3 Disciplined risk management 4 New products gai
Slide 57: 2011 financial performance
2011 financial performance Focus on the US Focus on efficiency program 57 – AXA FY11 Earnings – February 16, 2012
Slide 58: AXA's efficiency program: Euro 1.5 bn cost savings
AXA’s efficiency program: Euro 1.5 bn cost savings in mature markets (excl. Direct) by 2015 € 0.3 billion savings Ambition AXA achieved in 2011 In Euro billion In Euro billion 0.5 1.1 Maintain 0.6 1 P&C and L&S • o/w Euro 0.2 bn P&C and L&S administrative administrative costs 1.2 1.5 costs 2011E- 20
Slide 59: Focus on P&C and L&S administrative costs
1 Focus on P&C and L&S administrative costs Euro 0.2 billion savings in 2011 In Euro billion Operational External spend 0.2 (0.2) ~67% ~22% 6.0 (0.1) 5.9 IT costs ~11% FY10 Inflation, Savings One-offs FY11 Admin. volume and Admin. expenses and other Exceptional expenses 2011 achievements 2012 outloo
Slide 60: Focus on P&C acquisition ratio
2 Focus on P&C acquisition ratio Euro 0.1 billion savings in 2011 Renegotiation of Containment of general Change in product mix with commissions with brokers in distribution expenses in emphasis on businesses with the UK and agents in Spain Germany and in the UK lower commission ratios in Belgium an
Slide 61: Table of contents
Table of contents 2011 key highlights Page 4 by Henri de Castries, Chairman and CEO 2011 financial performance Page 14 by Denis Duverne, Deputy CEO & Gérald Harlin, Group CFO Business overview Page 48 by Mark Pearson, President & CEO of US operations Véronique Weill, Group COO Concluding remarks Pag
Slide 62: 2011 key messages
2011 key messages Resilient business model Dividend maintained • Solid set of results • Strong operating Free Cash Flows • Robust balance sheet Delivering on Ambition AXA operational initiatives Improved new business Delivering on cost savings 1 profitability 2 Active capital management 3 initiative
Slide 63: Going forward
Going forward Maintain agility to deliver on Ambition AXA strategic priorities in the current environment Actively grow Protection & Health Selectivity Extract value from Life & Savings inforce book Foster growth in Direct business Acceleration Accelerate in High Growth Markets Efficiency Deliver on
Slide 64: Q&A session
Q&A session Q&A session 64 – AXA FY11 Earnings – February 16, 2012
Slide 65: Notes
Notes Page 5 1. Operating Free Cash Flows correspond: (i) for Life & Savings, to the expected inforce surplus generation (cash and capital) net of New Business investment (capital and cash strain). (ii) For Property & Casualty and Asset Management, to the underlying earnings, realized capital gains
Slide 66: Definitions
Definitions 2011 financial statements are subject to completion of audit procedures by AXA’s independent auditors. AXA's FY11 results have been prepared in accordance with IFRS and interpretations applicable and endorsed by the European Commission at December 31, 2011. Adjusted earnings, underlying