AXA and BMPS join forces in the Italian bancassurance and pensions market
March 23, 2007
pag. 1 AXA and BMPS join forces to create a new Italian leader
Worldwide leader in Leading Italian banking financial protection group, with strong customer franchise Strong expertise in life & savings, P&C and asset Successful bancassurer management
“To build a leader in life and non-life bancassurance and pensions in Italy through a unique, exclusive and global long-term partnership”
pag. 2 Main terms of the transaction
Perimeter of the transaction Structure of the partnership AXA acquires: ¾ 50% of MPS Vita and MPS Danni ¾ 50% of BMPS open pension funds business ¾ Management of insurance companies assets (€13bn¹) and open pension funds (€0.3bn¹) assets 50% + Mgmt control 50% The new partnership to enter a long-term exclusive distribution agreement with all banks of MPS Group Including BMPS (including BAM²) for the sale of life, non-life and pensions open pension funds products 10 years, automatically renewable for additional 10 years MPS Vita will become the sole manufacturer of open MPS Vita MPS Danni pension funds for both AXA and BMPS clients in Italy ¾ BMPS to transfer its existing open pension fund 100% business to MPS Vita 100% to be acquired by end of 2007 Quadrifoglio Insurbanking for AXA’s clients in Italy MPS Life MPS Vita to acquire 100% of Quadrifoglio Vita for Vita embedded value before the end of 2007 following the unwinding of the JV between BMPS and Unipol
Key financial terms Governance highlights Price of €1,150 million AXA acquires management control of MPS Vita and MPS Exit price at full Appraisal Value Danni with veto rights for BMPS on significant strategic Commission structure unchanged with 55%/45% profit split decisions bank/insurer for life products Embedded value (deterministic) of MPS Vita (including Equal representation of AXA and BMPS on BoD with BMPS MPS life) and MPS Danni as of June 30, 2006 equal to appointing the Chairman and AXA appointing the CEO approx. €900 million Mr. Giuseppe Mussari (Chairman of BMPS) to join AXA S.A. New business value (deterministic) of MPS Vita (including MPS Life and excluding Quadrifoglio Vita) of €22 million in Supervisory Board³ and one BMPS representative on AXA the first half of 2006 Assicurazioni BoD
¹ As of year end 2006, for insurance companies the figure refers to technical reserves excluding index-linked ² Currently distributing Quadrifoglio Vita products ³ Subject to shareholders approval pag. 3 Unique, exclusive and global long-term partnership
Consolidate and further strengthen BMPS leadership in life and non-life bancassurance Leverage upon AXA specific know-how to capture the growth and profitability potential and develop a leading position in the Italian pensions market Benefit from AXA’s global leadership and best practice ¾ Full exploitation of potential offered by BMPS franchise ¾ Improvement of product and service offer ¾ Higher efficiency and commercial effectiveness True long-term strategic partnership ¾ Partnership to become the sole platform for expansion of AXA and BMPS in the Italian bancassurance and pensions market through any new distribution channel except for AXA agents and brokers network ¾ Commitment to develop also the non-captive business in Italy for bancassurance and pensions through new distribution agreements ¾ BMPS to distribute on an exclusive basis its banking products to AXA’s 1.6 million clients in Italy ¾ AXA and BMPS to explore jointly further areas of cooperation outside Italy
pag. 4 Contribution of BMPS to the partnership
3rd largest Italian banking group (total assets of €159bn as of YE2006 growing at a 8% CAGR since 2000) with a highly recognised brand name 4.5 million clients served through over 1,900 branches and 700 “promotori” 6th largest player in Italian life insurance market with a market share of 6.6% 4th largest life bancassurance player with a 10.4% market share Leading player in non-life bancassurance with a market share in excess of 10% and with a strong combined ratio (70% in 2006)
Top-10 life insurers by GWP (€bn) Top-10 life bancassurers by GWP (€bn) and market share (%)¹,² and market share (%)¹,³
19.7 Generali 24.8% Eurizon 8.1 16.1% Allianz 9.0 11.4% Intesa Vita 7.9 15.6% Eurizon 8.1 10.3% Poste Vita5.8 11.6% Unipol (ex. QV) 6.0 7.6% MPS Vita + QV 5.2 10.4% Poste Vita 5.8 7.4%
MPS Vita +QV 5.2 6.6% CreditRas 4.5 9.0% 3.7 Fondiaria-SAI 4.7% Aviva 3.4 6.7%
Cattolica 3.6 4.6% BNL Vita 3.0 6.0% Aviva 3.4 4.3% CNP Capitalia 2.7 5.4% CNP Capitalia 2.7 3.4% Anton. Vita 1.4 2.7%
1.3 AXA 0.8 1.1% Lombarda Vita 2.7%
Note: figures pro-forma for Toro acquisition by Generali and Bipiemme Vita acquisition by Fondiaria-SAI ¹ Source: ANIA 2005, including Irish life businesses of Italian insurers (es. MPS Life, Sanpaolo Life, CNP Capitalia Life and Mediolanum Life) ² Market shares in total life GWP ³ Market shares in GWP distributed by banks and postal offices
pag. 5 Contribution of AXA to the partnership
Financial protection expertise Existing Italian market knowledge via AXA Italy
Innovation in life products (e.g. Accumulator) & non-life Market knowledge and expertise (segmented approach) Award winning product innovation Successful pensions experience (product Strong P&C product and claims management development, financial advice and financial planning capabilities tools) in the US, Europe and Australia Advanced ALM capabilities Global asset management capabilities with over €1 trillion of assets under management
Global presence Distribution management experience
Worldwide best practices 50% of revenues in non proprietary distribution Capacity to roll out successful local products in other Bank networks already an important distribution countries channel for AXA in the US, Europe and Asia
pag. 6 The common project
Life: Pensions: Focus on product innovation and increased yield Joining forces to address new market opportunities Rebalance business mix towards high value added unit- Partnership as the sole platform for the manufacturing of linked products (only 12% of technical reserves and 8% open pensions funds distributed to both BMPS and AXA of GWP for MPS Vita in 2006) clients in Italy Introduce successful higher margin AXA Accumulator Leverage BMPS’s customer base to expand open product into BMPS branches (high potential for at pensions funds business retirement products in Italy) Target individuals, SMEs and large corporates Use sophisticated ALM techniques to improve policyholder returns
Non life: Foreign markets: Using AXA expertise to increase penetration Evaluate areas of potential cooperation
Increase penetration of bundled products to market Facilitate BMPS international expansion levels Expand bancassurance partnership to other countries Launch motor products via BMPS branches which BMPS could enter Targeted approach to SME clients of BMPS Exploit all cross-selling opportunities Focus on service and claims management Other Italian developments: Management of insurance & pensions assets: Develop further distribution & customer opportunities Optimise yields Develop insurbanking in Italy Increase asset diversification to increase returns Develop the non-captive business for bancassurance (current asset allocation of MPS insurance companies: and pensions through new distribution agreements 97% fixed income) Primary platform to develop new distribution channels
pag. 7 Italy: a large and attractive market
4th largest insurance market in Europe with €119bn GWP in 2005 Strong growth achieved in life volumes to date, expected to continue due to low penetration compared to other European markets (life technical reserves as % of GDP equal to 25% vs. 42% European average¹) Bancassurance channel remains key for life distribution with 61% of the total volumes in 2005 Low penetration of bancassurance in P&C (1.5% vs. 7.8% European average) provides for significant growth potential Significant opportunity in group and individual defined contribution pensions deriving from new pensions reform and “pensions gap” of Italian families
1 Source: ANIA 2005
pag. 8 High profitability prospects for the dominant channel in the Italian life market
2005 GWP by distribution channel1 Bancassurance market share by product1 1% 1% 1% 1% 1% 11% 14% 11% 10% 8% Unit and index linked 77% 9% 9% 11% 13% 12% 18% 20% 18% 19% 18% Human life 58%
61% 56% 59% 59% 61% Capitalisation 39% Average 61%
Individual pension plans 18% 2001 2002 2003 2004 2005 Pensions funds 6% Banks Agents Salaried salesforce Financial advisors Brokers
Penetration of life bancassurance2 Product mix (2005)1
Italian life market GWP 62% 61% MPS Vita + MPS Life GWP
Other: 1% Unit linked: 5% Index linked: Unit/index linked: 22% 36% 24% Traditional: 20% 63% 8% Traditional: 73% France Italy UK Germany Switzerland
Attractive opportunity arising from the switch from traditional and index-linked products towards high value added unit-linked products 1 Source: ANIA 2005 2 Life GWP distributed by banks on total life GWP. 2004 figures for Germany. Source: ANIA, FFSE, ABI, SSV, Datamonitor, CEA – European insurance in figures June 2006
pag. 9 Emerging role of bancassurance in the P&C market
2005 GWP by distribution channel1 Bancassurance market share by product1 Average 1.5% Motor 1.1% 87% 86% 85% 85% 84%
12% 13% 14% 14% 14% Non-motor 2.1% 0.9% 1.0% 1.2% 1.0% 1.5% 2001 2002 2003 2004 2005 Banks Other² Agents
Penetration of P&C bancassurance3
11.0% 11.0%
9.0% 7.0% 6.5% 6.1% 5.7%
1.5%
Netherlands Portugal France UK Germany Spain Belgium Italy Strong growth potential in P&C bancassurance to move from 1.5% share of distribution to average European share of 7.8%3 1 Source: ANIA 2005, including Post Offices channel 2 Includes brokers, direct channel (internet and telephone) and financial advisors 3 P&C GWP distributed by banks on total P&C GWP. Source CEA- European insurance in figures June 2006
pag. 10 Strong potential of the pensions market following reform
Evolution of individual pension plans Size of pension funds relative to GDP1 and open pension funds2 2.3% 6.3 Italy AuM (€bn) 2.8% % = 77.7 4.4 3.0 AGR 3.4% C Germany 3.0 2.2 3.9% 3.3 1.8 1.7 1.1 2.2 5.5% 0.2 0.6 1.2 Belgium 0.9 1.3 4.2% 0.2 0.6 0.2 0.6 1999 2000 2001 2002 2003 2004 2005 3.9% France Individual pension plans Open pension funds 5.8%
5.8% Spain 9.1% Customers (mm) 1.2 1.1 2.1% 1.0 = 5 72.5% GR 0.4 UK CA 0.4 70.1% 0.7 0.4 0.5 0.8 104.4% 0.3 0.7 Switzerland 0.3 117.4% 0.2 0.6 0.1 0.4 0.1 0.2 0.2 102.6% Netherlands 124.9% 1999 2000 2001 2002 2003 2004 2005 Individual pension plans Open pension funds 2005 2001
Demographic trends, low penetration and new reform (starting January 2007) creating a strong backdrop for the future growth of the pensions market in Italy 1 Source: OECD – GLOBAL Pensions Statistics, Mefop for Italy 2 Source: COVIP, ANIA
pag. 11 A broad partnership with profitable growth prospects
This is a true long-term partnership leveraging the clear strengths of both parties to the benefit of our clients, companies and shareholders High growth market with potential in unit-linked in life, higher bancassurance penetration in P&C, favourable new pensions regulations and more diversified asset classes in asset management A committed management and a strong cultural fit
“To become a leading and highly profitable bancassurer and pensions player in Italy”
pag. 12 Key figures of BMPS insurance activity
MPS Vita + MPS Life IFRS consolidated financials (€mm) MPS Danni Italian GAAP financials (€mm)
2004² 2005 2006 2004 2005 2006
GWP¹ 3,570 4,465 2,997 GWP 50 60 65
Investment income 622 434 458 Technical result 11 14 19
Net income 57 61 81 (including 100% of MPS Life) Net income 8 11 12
Investments 16,390 18,786 18,476 Investments 112 125 131
Net technical reserves 16,090 11,803 11,412 Net technical reserves 95 108 115
Unit and index linked reserves N/A 6,377 6,098
Combined ratio 79.6% 72.2% 69.6%
RoE 11.4% 12.0% 16.2% RoE 18.9% 23.9% 24.5%
For reference Quadrifoglio 813 741 838 Vita GWP
1 Include unit and index linked GWP (accounted as financial products under IFRS) 2 2004 figures are under Italian GAAP
pag. 13 IMPORTANT LEGAL INFORMATION AND 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 statements because, by their nature, they are subject to known and unknown risks and uncertainties, including the risk that the proposed transaction may not be consummated. Please refer to BMPS's Annual Report for the year ended December 31, 2005, for a description of certain important factors, risks and uncertainties that may affect BMPS business. BMPS undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise. Please refer to AXA's Annual Report on Form 20-F and AXA’s Document de Référence for the year ended December 31, 2005, for a description of certain important factors, risks and uncertainties that may affect AXA’s business. AXA undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise. This document does not constitute an offer or invitation to purchase or subscribe for any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
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