ReviewReview ofof AXA’sAXA’s Activities Activities inin JapanJapan SeptemberSeptember 30, 30, 20042004 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 and can be affected by other factors that could cause actual results and AXA’s plans and objectives to differ materially from those expressed or implied in the forward looking statements (or from past results). These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future terrorist related incidents. Please refer to AXA's Annual Report on Form 20-F and AXA’s Document de Référence for the year ended December 31, 2003, 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.
Review of AXA’s activities in Japan – September 30, 2004 - 2 Today’s Presenters
Philippe President and Chief Executive Officer Donnet
Susumu Head of AXA Advisors Yabe
Yasunori Head of AXA New Markets Kume
Pierre-Yves Head of AXA Partners, Durand Marketing & Communications
Paul Sampson Chief Operating Officer
Frederic de Courtois Chief Financial Officer
Jean Head of Underwriting and Malhomme Pricing
Review of AXA’s activities in Japan – September 30, 2004 - 3 AXA Japan’s Multicultural Management Team
1 Frederic de Courtois 10 Yoshio Chiba Chief Financial Officer Customer Service
2 Philippe Donnet 11 Alistair Brown President & CEO Financial Control 12 Ian Johnson 3 Paul Sampson 123 Company Secretary Chief Operating Officer Audit / Legal / Compliance
4 Susumu Yabe 13 Guy Marcillat AXA Advisors AXA Direct
14 Susumu Ikehara 5 Yasunori Kume Chief Information Officer AXA New Markets 15 Timothy Ryan 6 Pierre-yves Durand 7 4 5 6 8 Chief Investment Officer AXA Partners Marketing & Communication 16 Koji Ariyoshi AXA Corporates & Agents 7 Yoshiya Ichinose AXA Partners
8 Jean Malhomme Underwriting & Pricing 9 9 Yukiko Fukui Communication 10 14 12 15 16 13 11
Review of AXA’s activities in Japan – September 30, 2004 - 4 Today’s Presentation 1 : Japanese Market Review Page 6 2 : AXA Japan Overview Page 15 AXA Japan’s history AXA Japan’s organization and missions AXA Japan in the AXA Group & in the Japanese market AXA Japan’s ambition
AXA Japan’s key achievements since April 2003 3 : Scrum Win 7 Strategic Programs Page 30 New business Negative spread reduction Retention program
Expense management 4: AXA Japan’s Financial Review Page 57 Asset Liability Management Solvency and rating FGAAP results New business profitability 5: AXA Direct Japan Page 76 6: What is next for AXA Japan ? Page 83 Distribution empowerment AXA Advisors’ productivity improvement Product development strategy AXA New Markets 7: Conclusion Page 104 Review of AXA’s activities in Japan – September 30, 2004 - 5 1. Japanese Market Review The Japanese market has unique growth opportunities Japan is a large market changing dynamically
World’s 2nd largest life insurance market
Rapidly aging population
Significant individual financial assets accumulated: Î JPY1,400 trillion (USD 12.75 trillion) Î 40% of US size, 3.5 times France
Continuing deregulation in financial markets
Growth opportunities
Review of AXA’s activities in Japan – September 30, 2004 - 7 World’s 2nd largest life insurance market Japan’s life insurance market is the world’s 2nd largest with 23% of the world market share. Life premiums account for 8.6% of GDP
USD billion % GDP 600 12.0 Premium income % GDP 500 481 10.0
400 381 8.0
300 6.0
200 4.0 155 105 100 77 2.0
0 0.0 USA Japan UK France Germany Source:Japan Institute of Life Insurance “Fact book 2003” Worldwide Life insurance premium income in 2001
Review of AXA’s activities in Japan – September 30, 2004 - 8 Rapidly aging population Rapidly aging population is leading to an increasing demand for financial protection for longer lives – medical coverage and retirement savings million 140,000 Projection
＊: % of population 120,000 over age 65yrs
100,000
80,000
60,000 35.7％* 19.4％* 40,000 （2050） （2004） 20,000
0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Total population Over 65yrs
Source:National Institute of Population and Social security research “Population Projections for Japan:2001-2050, January 2002 Review of AXA’s activities in Japan – September 30, 2004 - 9 A large mass-affluent market which is still under-served
Individual financial net assets are …With most financial assets still in low- 2nd highest in the world… yielding deposits
(US$ Thousand) Assets per capita % of financial assets in Savings deposits/Cash 160.0 United States 11%
140.0 121.5 Japan 120.0 54%
100.0 93.3
UK 24% 80.0 73.9
60.0 50.4 Germany 34% 42.5 40.0
20.0 France 27%
0.0 United States Japan UK Germany France 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Rate: JPY123 @1US$ Source:Central Council for Financial Services Information, FY2001
Review of AXA’s activities in Japan – September 30, 2004 - 10 Steady trend of deregulation is changing the competitive landscape Staged but steady deregulation in the insurance market creates opportunities for players who can be innovative in products and distribution
Before 2002 2002 - today Future
Lift barriers between life Allow banks to distribute a Full deregulation for banks’ and non-life (1996) limited range of insurance insurance distribution products Individual Annuity Allow securities firms to Privatization of Japan Postal distribute insurance Mortgage insurance Office products (2000)
Full deregulation on First demutualization (2001) commission (2002)
Review of AXA’s activities in Japan – September 30, 2004 - 11 Changes bring in both challenges and opportunities
Challenges for those who rely heavily on a traditional business model
Significant opportunities for those who can be flexible and innovative, such as AXA Japan Î Multiple distribution channel strategy Î Strong focus on growing markets
Review of AXA’s activities in Japan – September 30, 2004 - 12 Consumers want financial protection for longer lives The traditional death protection market is maturing… …as the needs of consumers shift to medical coverage and retirement savings
Growth of Industry Premium Income Volume 2.50 Traditional products Medical products 2.00 Annuity products
1.50
1.00 The result of FY2001=1.00 0.50
0.00 FY2001 FY2002 FY2003 Note: Japanese Fiscal Year (April – March) Source:The Life Insurance Association of Japan Review of AXA’s activities in Japan – September 30, 2004 - 13 Life insurance premium income is growing again Due to the sharp increase in the sales volume of individual annuity through bancassurance, premium income increased after years of decline.
Industry Premium Income Volume FY1999 - FY2003 30.0 FY99-03 CAGR 0.5 0.4 0.4 0.3 0.3 25.0 6.9 6.8 4.9 Group Pension 6.6 5.1 -8.2%
20.0 1.3 1.4 1.4 1.3 1.4 Group Life 2.1 2.2 -1.4% 2.1 3.0 4.6 15.0 Individual Annuity (JPY trillion) 21.2%
10.0
16.7 16.2 15.7 15.7 14.9 Individual Life -2.8% 5.0
0.0 FY1999 FY2000 FY2001 FY2002 FY2003
Individual Life Individual Annuity Group Life Group Pension Others
Note: Japan Fiscal Year basis: April-March Source: Life Insurance Association of Japan Review of AXA’s activities in Japan – September 30, 2004 - 14 2. AXA Japan Overview AXA Japan’s history AXA Japan’s organization and missions AXA Japan in the AXA Group AXA Japan in the Japanese market AXA Japan’s ambition Key achievements since April 2003 AXA Japan’s history
10 years ago, Japan was already strategic for AXA
In 1994, AXA’s life insurance business was established: Î AXA Life Insurance Company Limited (“AXA Life”)
In 1998, AXA’s P&C insurance business was established: Î AXA Non Life Insurance, Ltd (known as “AXA Direct Japan” or “ADJ”)
In late 1999, a unique opportunity to reach critical size in the Japanese life market: Î Acquisition of a major Japanese life insurance company, Nippon Dantai Life Co., Ltd. (now “AXA Group Life”)
Review of AXA’s activities in Japan – September 30, 2004 - 16 AXA Japan’s organization and missions
Today Tomorrow
AXA S.A. AXA S.A. 97.44% shareholding 97.59% shareholding
AXA Japan Holding AXA Insurance Holding Mission：Management of the operating companies and promoting synergies
AL AGL ADJ AL AGL ADJ Mission: Mission: Mission: New individual Group business Direct individual business (Inc. old individual auto insurance, AXA AXA business) Collection Hoken personal accident Services Service
AXA Collection AXA Hoken Services Service Mission: Mission: Premium Non-life agency collection business
Review of AXA’s activities in Japan – September 30, 2004 - 17 AXA Japan Scorecard
AXA GROUP LIFE + AXA LIFE AXA DIRECT JAPAN (Life) (Non-Life)
Premiums (FY03) 785.3bnYen 12.3bnYen
Employees 2,600 360
Salespeople 5,600
Non tied agents 3,000
Main products Term, Medical, Savings, Direct Motor Group Life & Pensions Personal Accident
Review of AXA’s activities in Japan – September 30, 2004 - 18 AXA Japan in the AXA Group: 3rd largest new business contribution (NBC)
New Business Contribution (NBC) AXA Japan NBC 1H04 Results represents 8% of AXA Euro million Group’s 1H04 140 130 insurance revenues (Euro 2,953m) 120 100 AXA Japan’s new 71 business is one of the 80 64 most profitable within 60 the AXA Group 40 28 21 AXA Japan is the 17 15 20 12 9 Group’s 3rd largest NBC contributor & 0 represents 17% of K total 1H04 NBC value an pe p HK any U USA a ro J m France enelux Eu B Ger Australia Source: AXA 1H04 results uth o NBC is before cost of capital S Review of AXA’s activities in Japan – September 30, 2004 - 19 AXA Japan in the Japanese life insurance market - FY2003 Rankings Premium income basis Assets basis
Premium Market Total Market Rank Company name Income Share Rank Company name Assets Share (JPY B) (JPY B)
1 Nissay 5,143 19.5% 1 Nissay 45,271 24.6%
2 Daiichi 3,421 13.0% 2 Daiichi 29,653 16.1%
3 Meiji Yasuda 3,297 12.5% 3 Meiji Yasuda 25,330 13.7%
4 Sumitomo 2,697 10.2% 4 Sumitomo 21,124 11.5%
5 AIG Group 1,974 7.5% 5 Taiyo & Daido 12,427 6.7%
6 Taiyo & Daido 1,722 6.5% 6 Mitsui 7,509 4.1%
7 Mitsui 920 3.5% 7 AIG Group 6,772 3.7%
8 AFLAC 892 3.4% 8 Asahi 6,447 3.5%
9 Fukoku 741 2.8% 9 Fukoku 5,005 2.7%
10 Asahi 679 2.6% 10 Prudential US 4,502 2.4%
11 Prudential US 655 2.5% 11 AFLAC 4,251 2.3%
12 AXA 652 2.5% 12 AXA 3,973 2.2%
13 Hartford 516 2.0% 13 Sony 2,376 1.3%
14 Sony 515 2.0% 14 Tokio Anshin 1,512 0.8%
15 ING 460 1.7% 15 Manulife 904 0.5%
Note: AIG Group: Alico, AIG Edison, AIG Star , Prudential US: Prudential, Gibraltar Source: Company data (as of March 2004) Review of AXA’s activities in Japan – September 30, 2004 - 20 Significant market share in key client and product segments
AXA’s market share: 19.5%
Large 1,700 corporations have business with AXA Corporations 1.8 million clients: 960,000 have individual >1,000 regular employees policies, 990,000 have group policies and 150,000 have both types of policies.
AXA’s market share: 5.7% Small and Main targets of the CCI Channel Medium Enterprises AXA is a lead manager for 76% of CCIs (SME) <100 regular employees 1 million companies and individual small business owners have business with AXA
Medical Products AXA’s market share: around 20%
Note: All market shares are based on premiums Review of AXA’s activities in Japan – September 30, 2004 - 21 AXA Japan’s ambition: Capitalize on the strong turnaround in 2003-2004 to become the reference insurance company in Japan
1) Outgrow the market by focusing on our key customer segments, providing profitable innovative products. Further improving the product mix and channels’ diversification. To become 2) Reduce negative spread impact to de-risk the company. the 3) Protect in-force business by reducing our S&L rates. reference company 4) Manage our costs. of the Japanese 5) Optimize the return of our investments. insurance industry 6) Continuously improve our service levels to our customers and distribution partners.
7) Become the employer of choice.
Review of AXA’s activities in Japan – September 30, 2004 - 22 AXA Japan’s key achievements since April 2003 Short term action plan April 2003 - September 2003 Full success
3 Year strategic plan October 2003 successfully launched 1st year: October 2003 - September 2004: Full success
As a result: Î Strong improvement in the P&L (both FGAAP and JGAAP) Î Strong improvement in the Solvency Margin Position
Review of AXA’s activities in Japan – September 30, 2004 - 23 Scrum 9 - Short term action plan
Objective: Improve the remainder of the 2003 AXA Year
Target Result
Negative spread conversion (# of policies) 41,615 46,719
Key6 New Business 50 Bn Yen 50.1 Bn Yen
Economic expenses 48 Bn Yen 48 Bn Yen
Retention of key Group-Medical clients Retain Retained
Positive underlying earnings in AXA Year 2003
Review of AXA’s activities in Japan – September 30, 2004 - 24 Scrum Win 7, our 3 year strategic plan, delivers performance
To achieve our objectives, we must deliver on each of the following:
Strategy + Operations + Execution What do we How do we How do we need to do? do it? measure it?
7 Strategic imperatives: 7 Strategic programs: 7 KPIs:
Profitable new business Distribution New Business APE growth Products Negative spread policies: Negative spread Technical & CV converted & management Investment margins surrendered Increase customer Customer service & Profitable Policy S&L rate retention Operational Efficiency Economic Expenses Manage our costs HR Return on Investment Asset allocation Infrastructure Customers’ satisfaction management & Enhancements Employees’ satisfaction Improve our service levels Regulatory, Be an employer of choice compliance & others
Confirm the turnaround Review of AXA’s activities in Japan – September 30, 2004 - 25 Scrum Win 7 results by channels and branches are widely communicated within AXA Japan
Example: Negative Spread Conversions by CCI Branch (% of target)
Negative Spread Conversion (# of policy) 160% YTD Achievement ratio （Oct 2003 – May 2004）
140% CCI: 107.8% (YTD)
120%
100%
80%
60%
40%
20%
0% ji i i a a o i i i i a a a a a t o i t i a u a k r e o i a r a e k o k h h k b y a n e k r s o u y i m m m o a a t c a t c i a b w s k o o n g K M m m o o s t i h a h i o z z a u a o t o r t g i g a m a u p a o i u a a g n a C s a y y K K T o a N i o k k p y m i g T a o G o i a k M r N N o r A u a a a M S i O k K T F S M m O N H a a T Y
*Achievement Ratio： Based On Submit Status for May 2004.
Review of AXA’s activities in Japan – September 30, 2004 - 26 Our plan is working well: Successful turnaround of our operations Key Performance Indicators (AXA Year)
Actual Actual Forecast Change (in billion Yen) New business growth focusing 2002 2003 2004 2004/2003 on profitable products (Key6) New Business APE 59,0 62,7 68,7 10% Reduced liability costs through our conversion program for negative spread policies Negative spread 20 106 95 -10% CV Converted Surrender & lapse rates have reduced by 15% in 2004 S&L Rate 9,07% 7,64% 6,50% -15% Profitable Policies Economic expenses are under control, despite significant Economic investments 49 48 48 0% Expenses
Improved our investment return Investment Return 2,0% 2,3% 2,7% +40bp
Review of AXA’s activities in Japan – September 30, 2004 - 27 Significant turnaround in FGAAP results
Underlying FGAAP Earnings (Billion Yen) From April 1, 2003 to March 31, 2004 = From Scrum 9 to Scrum Win 7
(Billion Yen)
15
Half Year 10.8 10 7.1 Impact +3.7
5 Impact +12.5
0 AXA Year 2002 AXA year 2003 1st Half 2004
-5 -5.4 -10 1H04 benefited from a particularly strong yield on assets.
Review of AXA’s activities in Japan – September 30, 2004 - 28 AXA Japan enjoys growth at the expense of traditional life insurers
Premium Income Growth vs Net Profits/Assets 0.015 Achieving profitable growth
0.010 Comp P Comp J AXA Comp C Comp B 0.005 Comp D Comp K Comp L Comp M Comp I Comp N Comp F 0.000 Comp A Comp O FY 2003 Net Profits/Assets* Comp E -0.005 -40% -20% 0% 20% 40% 60% 80% 100% Premium Income Growth (FY 2001 – FY 2003)* * JGAAP year (April to March) Source: Company data, Insurance
Review of AXA’s activities in Japan – September 30, 2004 - 29 3. Scrum Win 7 Strategic Programs New business Negative spread reduction Retention program Expense management 3. Scrum Win 7 Strategic Programs New business Extensive product range for our clients
Large Small and Medium Bancassurance Corporations Enterprises Customers & their employees & their employees % of 2003 17.3% 76.2% 6.4% NB APE
Term 20% 48% Savings ８% 16% 100% Medical 36% 25% Group 10% Term&Pension *36%
* Includes strong group transfers. Review of AXA’s activities in Japan – September 30, 2004 - 32 Significant product development achievements in 2003-2004
Increased product development capacity and speed to market Î Doubled our investment in product development Î 10 new and enhanced products in last 18 months, in a highly regulated market
Focused on following priorities: Î Negative spread management Î Profitability improvement Î Enhanced competitiveness with innovative features
Review of AXA’s activities in Japan – September 30, 2004 - 33 Product Development 2003-2004
Negative spread Profitability Competitiveness conversion improvement improvement
Increasing Term Term product range , Long Term Term Safety Plus Reduction of Savings guaranteed rate on Fixed Annuity New Medical Collective Medical, Medical Whole Life New Medical Whole (WLM03) Life (WLM03) Group Reduction of New Group Term guaranteed for CCIs (New Term&Pension pension rate Mutual Aid) Cashless Others Conversion
Review of AXA’s activities in Japan – September 30, 2004 - 34 Key6 profitable products are the sales channels’ priority:
Medical Term
Medical Medical Whole Life
Medical Riders
“Protection” Term Term Increasing Term Rider
Savings Variable Life
In a low interest rate environment, Fixed Annuities, Whole Life and Endowment policies are not as profitable as Key6 products.
Review of AXA’s activities in Japan – September 30, 2004 - 35 Success Factors for Key6 sales
Addressed customer (CCI Success in Key6 sales members) needs (CCI channel) 9Individual needs: Medical protection 9SME’s needs: Asset Accumulation
Revised commission program Revised performance 9Commission program / incentive scheme linked with products’ profitability measurement 9Improved evaluation items for sales managers
Enhanced sales training 9Training by Area Training Managers 9Lead management
Review of AXA’s activities in Japan – September 30, 2004 - 36 Changed and improved product mix
Solution for individual customer needs: Î Whole Life →Medical, Nursing rider Solution for corporate customer (SME) needs: Key6 Products Î Endowment →ITR, Whole Life →Term 70
60 Medical
50 Term 80% 76% 40 62% Increasing Term Rider Variable Life 30
Annuity & others 20
10
0 2001 2002 2003 Review of AXA’s activities in Japan – September 30, 2004 - 37 Strong sales of Key6 products have contributed to a 15% increase in Key6 inforce
2004 progression of the Key6 Annualized Premium Equivalent (APE)*
Key6 New Business Key6 S&L and Key6 APE Maturities Net Inforce APE
CY2004 Original Key6 Net Inforce APE
y6 Ke of 5% e 1 orc + inf Individual business APE *
01-Oct-03 Estimated Sept 04 * APE = 10% of Single Premiums +100% of Regular premiums Review of AXA’s activities in Japan – September 30, 2004 - 38 3. Scrum Win 7 Strategic Programs Negative spread reduction Reducing and diluting the negative spread portfolio The former Nippon Dantai was suffering from the burden of negative spread and high surrender rates on profitable business when it merged with AXA in 2000. AXA’s strategy for the new company differed from that of many of its foreign competitors: ÎManulife and GE reduced guaranteed rates ÎAXA decided to: z Reduce negative spread z Retain profitable in-force business z Grow new business
New business
In-force
Negative spread
2003
Review of AXA’s activities in Japan – September 30, 2004 - 40 Reducing and diluting the negative spread portfolio – Strategic Segmentation The individual in-force business was segmented between negative spread and other contracts.
Proportion of FGAAP Definition Objective reserves as at 1/10/2002
Policy Guaranteed rate >= 3.75% Reduce negative spread policies Negative *Negative spread reserve to reduce 1/3 Spread − Individual business such as Annuity, financial burden Whole life, Endowment
Policy Guaranteed rate < 3.75% Retain profitable Other − Individual business such as Medical, policies to keep 1/3 individual Term Individual business continuous profit business − These policies are profitable due to high technical margin and fees
Group 1/3 Guaranteed rate is 1.25% Retain Business
Review of AXA’s activities in Japan – September 30, 2004 - 41 Negative spread policies - Customer segmentation and prioritisation Based upon the financial impact, the first priority was the annuity segment, P-loan (sold by banks’ in-house agents) and other Annuity.
Negative Spread split at the start of AXA Year 2003 (56%) (32%) (14%) 100%
1. P Loan 80%
60% 3. Whole Life 4. Endowment 40% 2. Other Annuity 20%
0%
Review of AXA’s activities in Japan – September 30, 2004 - 42 Reduction of the negative spread portfolio
In two years, significant reduction has been achieved in the negative spread block of business
Negative Spread Cash Value % Converted in AXA Year 2003 and 2004 100% 2003 2004 80% 1. P-loan 3. Whole 60% Life 2003 2004 2004 2003 2. Annuity 2003 40% 2004
20% 4. Endowment
0% 2003 Conversion and Surrenders (15%)
2004 Conversion and Surrenders (12%)
(27%) Review of AXA’s activities in Japan – September 30, 2004 - 43 Key steps to reduce negative spread policies
Customer Products & Tool Campaign Segmentation Marketing enhancement management Improvement
Risk Control Committee Segmentation by customer profile
Generation of leads Complaint Risk Control - The complaint rate New product development by customer needs is very small at 0.4% Sales force Incentives Sales tool and Lead Management Tools enhancement
Leads assignment through LMT Closely monitor by sales branch and customer feedback
Review of AXA’s activities in Japan – September 30, 2004 - 44 Future plan from AXA Year 2005 to AXA Year 2007
The remaining inforce policies are tough leads, most of which have already been visited and therefore, are less likely to be converted or surrendered. However, we shall try to convert them in 2005, focusing mainly on annuities. Trend of negative spread program from AXA Year 2003 and AXA Year 2007
% of Cash Value Converted & Key actions Surrendered 1) Annuity focused activities 2) Launch new product 3) Closely monitor Conversion sales activities
Surrender 4) Complaint risk control
2003 2004 2005 2006 2007 % Converted and surrendered 15% 12% 6% 4% 3% Cumulative Target % 15% 27% 33% 37% 40%
Review of AXA’s activities in Japan – September 30, 2004 - 45 3. Scrum Win 7 Strategic Programs Retention program Key steps to retain profitable customers
Process Sales Response to Orphan policy of Commission control uncollected management surrender / lapse
Integrate with Customer Service Center (CSC) CSC communicates with customers Notify customers what they own Improve the skill of consulting sales people Conduct training for prevention of S&L Restrict churning Review the payment period of commission Strengthen the claw-back rule Strengthen the assessment standard Hand over info on existing policies Establish follow-up system for policies Adjust premium as customer solvency Revive lapse contracts left by customers Assign replacements Follow up by CSC
Review of AXA’s activities in Japan – September 30, 2004 - 47 S&L management is entrenched in AXA Japan’s culture
Surrender & Lapse rate on profitable products (ANP basis) Key actions
10,00% 1) Orphan policy management 8,94% 9,07% 2) Closely monitor sales activities 9,00% 3) Maximum usage of prevention tool 7,64% 8,00% 4) Mitigate the surrender impact of large customers
7,00% 6,50%
6,00%
5,00%
4,00% 2001 2002 2003 2004 Our long term target surrender & lapse rate is in the range of 6.5% - 6.75% per annum.
Review of AXA’s activities in Japan – September 30, 2004 - 48 AXA is one of the best performers in Japan on S&L rates
16.00%
14.00%
11.90% 12.00% 10.70% 10.03% 8.29% 10.71% 10.71%
10.00% 9.62% 9.65% 2001 9.16% 8.77% 8.92% 8.44% 2002 2003 8.00% Ratio 6.51% 6.00%
4.00%
2.00%
0.00%
Fukoku AXA Daido Nippon Taiyo Dai-ichi Sumitomo Mitsui Meiji Yasuda Asahi
• Ratios are calculated on a sum insured basis. • Japanese Fiscal year basis (from April to March). • 2003 S&L ratios for Meiji and Yasuda are the same as these companies were combined in January 2004. • Source:Nikkei Financial Daily (May 31, 2004) • Foreign insurers are excluded. Review of AXA’s activities in Japan – September 30, 2004 - 49 Managing the surrender process to retain more of our new business
Balance of new business and S&L has improved since 2001 with sales control (i.e. restricting churning)
50
40 2003 30 Individual Insurance ANP 20 (unit:Billion yen) 40
10 13 0 50 New Business S&L 2001 40 Individual Insurance ANP 30 (unit:Billion yen) 20 30 10 20
0 New Business S&L
*Note: Figures for CCI channel only ANP = Single Premiums /Policy Duration + Regular premiums Review of AXA’s activities in Japan – September 30, 2004 - 50 3. Scrum Win 7 Strategic Programs Expense management The operational efficiency program is driving expense reductions
The operational efficiency program was launched following integration in 2001. The post-integration phase of the program focused upon extracting cost savings. Since then, it has matured into a program aimed at: Î Reducing unit costs Î Improving the quality of customer service Î Increasing operational productivity Successes to date: Î Shift of data center to the US Î Implementation of shared service delivery platform Î Outsourcing and procurement savings
Review of AXA’s activities in Japan – September 30, 2004 - 52 Doing more for less Shared Service Delivery Platform Growth Platform Transition 2005 ----- 2004 “Integrate” 2003 “Standardize” Shared Service Initiation and Support Processes, tools Delivery Platform 2000-2002 “Optimize” and systems “Clean-up” Cross channel Services •Single customer Post-Integration Centralize customer • touch point environment call to CSC Standardize group •Re-aligned sales Streamline policy • • administration network footprint maintenance •Deployed Processes Initiatives Established standard Automated • •Deploy Front offices front office processes underwriting Work workflow Flow •Shared offices across •Cashless sales channels offices •Linked sales offices •Established platform •Cycle time •Achieve straight to Head office for change reduction through Outcome underwriting •Reduction of non- processing •Operational value work (-260 •Improve customer productivity positions) service
Review of AXA’s activities in Japan – September 30, 2004 - 53 Doing more for less Outsourcing and Procurement Growth Platform Transition 2005 ----- 2004 “Integrate” Initiation 2003 “Standardize” 2000-2002 “Optimize” •Further BPO (Group “Extract savings” •Consolidate printing Administration) to sourcing AXA BS •Improved Printing •Real-estate Further Application procurement process consolidation and • •Moved mainframe Development Commenced BPO to management Initiatives operation to AXA • outsourcing to AXA BS – Bangalore Tech US •Commenced IT India/China Consolidation of IT application • Leverage AXA contractors development in • Direct Fukui site China •Developed Can-Do •Proved possibility of •Expense reduction •Productivity Outcome attitude to change Japanese BPO 0.45 BN Yen improvement •Annualized saving •Expense reduction •Further expense of 1Bn Yen 0.45 BN Yen reduction
Review of AXA’s activities in Japan – September 30, 2004 - 54 Significant headcount reductions have delivered expense savings
No. of Employees 2,900(excl. commissioned salesforce)
2,800 2826 -8%
2,700
2,600 2594
2,500
2005 2,400 target 2,439
2,300 Mar - Apr- May- Jun- Jul- Aug- Sep- Oct - Nov- Dec- Jan- Feb- Mar - Apr- May- Jun- Jul- Aug- Sep- 03 03 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 04
Review of AXA’s activities in Japan – September 30, 2004 - 55 Expense reductions have been reinvested into new product development and initiatives
Economic expenses by AXA Year (billion yen)
Billion Yen
50
52 40 49 48 48
30 2001 2002 2003 2004 Project investments have doubled over this period
Review of AXA’s activities in Japan – September 30, 2004 - 56 BREAK
Review of AXA’s activities in Japan – September 30, 2004 - 57 4. AXA Japan’s Financial Review Asset Liability Management Solvency and rating FGAAP results New business profitability 4. AXA Japan’s Financial Review Asset Liability Management AXA Japan has experienced a very difficult financial market environment
AXA Buys 1,800 3.60% Nippon Dantai Topix 1,600 (Nov 1999) 3.20% JPY interest rate (JGB 10y)
1,400 2.80%
1,200 2.40%
1,000 2.00%
800 1.60%
600 1.20%
400 0.80%
200 0.40%
0 0.00%
00 -00 -01 -02 -03 -03 04 Dec-99 Mar- Jun Sep-00 Dec-00 Mar Jun-01 Sep-01 Dec-01 Mar Jun-02 Sep-02 Dec-02 Mar Jun-03 Sep Dec-03 Mar- Jun-04
Review of AXA’s activities in Japan – September 30, 2004 - 60 Impairments have heavily impacted AXA Japan’s result over the last 3 years
TotalTotal FGAAPFGAAP ImpairmentImpairment ChargeCharge && AdjustedAdjusted EarningsEarnings (BN(BN Yen)Yen)
(BN Yen) FY2001 FY2002 FY2003 H1 2004 30
20 17,3 10
0
-10 -5,4 -20 -10,7
-30
-40 -30
-50
-60
-70
Impairments Adjusted earnings
Review of AXA’s activities in Japan – September 30, 2004 - 61 AXA Japan’s Investment Return is now recovering
French GAAP investment income + French GAAP realized gains/losses Investment Return KPI = ------Total Assets
4,00%
3,00%
2,00%
1,00%
0,00% déc-01 déc-02 déc-03
-1,00%
-2,00% ROI (investment income) ROI (realized gains/losses) -3,00% ROI (total)
Review of AXA’s activities in Japan – September 30, 2004 - 62 AXA Japan’s target ALM picture
FGAAP Policy Reserves: 3.5 Trillion Yen FGAAP Assets backing reserves: 3.5 Trillion Yen Diversified Assets 9% Group Life & 30% Group Equities 7% Pension Group Pension 5% Term 6% Medical 8% Variable Products Bonds and Loans 84% 51% Annuity, Whole Life, Endowment
Duration excl. Group Pension : 14 Years Duration: 10 Years
“Average FGAAP guaranteed interest “ FGAAP investment return” (net of expenses and rate” (H1 2004) : 2.3% excl. realized gains & losses): (H1 2004) : 2.6%
Review of AXA’s activities in Japan – September 30, 2004 - 63 AXA Japan’s asset allocation is diversified Cash Japanese Loans 1% Other diversified assets Total Assets backing reserves: 11% 9% Japanese Equities 3.5 trillion Yen 7%
Japanese Bonds 23%
US Bonds 21%
Euro Bonds 28% Review of AXA’s activities in Japan – September 30, 2004 - 64 While all the asset risks are closely controlled, some challenges remain
1. The currency risk is hedged into Yen 2. The bond portfolio has 100% corporate exposure in the US and in Europe which is very well diversified and has an A- average rating. 3. For other diversified assets (9% in total), we focus on: Real Estate (Japan in Megacities) Private Equity Funds Funds of Hedge Funds CDOs 4. We have sold the “Bad” real estate 5. We have significantly reduced exposure to Japanese loans 6. Much of the portfolio is managed by AXA IM & Alliance Capital 7. A steady rise of Japanese interest rates would be an opportunity thanks to our duration gap, while a prolonged period of low Japanese interest rates would be challenging
Review of AXA’s activities in Japan – September 30, 2004 - 65 4. AXA Japan’s Financial Review Solvency and rating AXA Japan’s Solvency Margin is strong
RegulatoryRegulatory MinimumMinimum SolvencySolvency MarginMargin 200% 200% MinimumMinimum TargetTarget SMSM forfor AXAAXA GroupGroup LifeLife 400% 400% MinimumMinimum TargetTarget SMSM forfor AXAAXA LifeLife 500% 500%
AXA Group Life AXA Life
31/03/04 31/03/03 31/03/04 31/03/03 Solvency Margin 694% 392% 1669% 848%
Review of AXA’s activities in Japan – September 30, 2004 - 67 AXA Japan’s rating is among the few players in the AA range AXA Japan’s rating (S&P) is one of the strongest in the Japanese market 2001 2004 AIG AAA AAA AFLAC AA AA AXA A+** AA- Prudential AA- AA-
Nippon Life AA A+ Daido A+ A Taiyo A A Dai-ichi A A- Meiji* A+ BBB+ Yasuda* A- BBB+ Sumitomo BBB+ BB+
* Meiji and Yasuda merged in January 2004. ** Negative outlook. Review of AXA’s activities in Japan – September 30, 2004 - 68 4. AXA Japan’s Financial Review FGAAP results Features of AXA Japan’s F GAAP Result
AXA Japan went through a Purchase GAAP exercise
Î Revaluation of the assets
Î VBI for profitable policies
Î Additional reserves on negative spread business
Î Reduction of mortality reserves
Impact of negative spread conversions and surrenders: Î Reserve release, which is the main contributor of the surrender margin (FY2003 surrender margin = 11 bn Yen)
Review of AXA’s activities in Japan – September 30, 2004 - 70 The 1H04 results confirm an improving trend (H1 2004 vs H1 2003) H1 2004* Underlying earnings breakdown by margin H1 2003 10.8 BN Yen -3.0 BN Yen 7,8 Investment Margin (Underlying) 3,7 2,4 Technical Margin *
54,7 57,5 Fees & Revenues
Million euros, at 100% -7,3
-44,6 Expenses -47,3
-12,3 Taxes -6,8
* After annuity reserve charge in H1 2004 Review of AXA’s activities in Japan – September 30, 2004 - 71 Margin drivers going forward in the near term
Earnings growth will be driven by: ® - Investment Volatile Margin
Technical Improved mortality/ Less Margin morbidity margin conversions
Fees & NB growth Revenues
Expenses Lower unit costs NB strain
Review of AXA’s activities in Japan – September 30, 2004 - 72 4. AXA Japan’s Financial Review New business profitability AXA Japan has stringent profitability targets for new products
NBC/APE margin > 32% (usually IRR > 14%) Protection Products (NBC/APE is usually > 60% for Medical Products)
Savings Products NBC/APE margin > 14% (usually IRR > 8%)
All Key6 new business meets these targets
Profitability emerges over a long period for long term products
Review of AXA’s activities in Japan – September 30, 2004 - 74 Improved profitability has been achieved through a more profitable offering of products
(Unit:Bn yen) Changed 25.0 Product Mix. + 3.8
20.0 + 0.8 16.7 17.1 -4.2 15.0 Changed Changed Volumes assumptions
10.0
5.0
- NBC 2002 NBC 2003
APE: 59 BN APE: 62 BN
Review of AXA’s activities in Japan – September 30, 2004 - 75 New Business Contribution is supported by a high and stable technical margin
NBC by Margin (net of tax)
BN Yen 40 33,4 30 18,1 20 17,1 10,7 10
0 (Mortality/ Total NBC Technical Investment Fees & Expenses -10 Morbidity/ S&L) Revenues -20
-30
-40 Net expenses = -11.7
-50 Review of AXA’s-45,1 activities in Japan – September 30, 2004 - 76 5. AXA Direct Japan AXA Direct Japan’s successful business model
Fast growing
Profitable niche market
Using AXA’s direct business model
Very efficient processes
60% of sales via internet
Review of AXA’s activities in Japan – September 30, 2004 - 78 The Direct Motor Insurance Market is growing rapidly
Share of Direct of the Motor Market in 2003: 2.9% Direct Market is expected to represent 5% of total Motor Market by 2005, and 7% by 2007
Size and Share of Direct Motor Market
350.0 9.0% 8.0% 300.0 8.0% 7.0% 7.0% 250.0 6.0% 6.0% 5.0% 200.0 5.0% 3.7% 4.0% 150.0 2.9% 292.2 2.3% 255.7 3.0% Market 100.0 219.2 (GWP in JPY Bio) 182.7 Direct Motor Market 135.2 2.0% 105.5 50.0 85.1 1.0%
0.0 0.0% Direct Market in % of total Motor 2002 2003 2004 2005 2006 2007 2008 Total Direct Motor Market Share of Direct
Review of AXA’s activities in Japan – September 30, 2004 - 79 In 2003, AXA Direct Japan increased its GWP share % of the Direct market to 10%
AXA grew it’s market share AXA’s motor policies grew to 10% in 2003. 52% on 2003 Direct Motor (No. of policies) Mitsui Yasuda Sony 12% 6% Am. Home > 290 000 29% 20% 350000 197 941 300000
250000 114 792 200000 23% 150000 Zurich 10% 100000 AXA 50000
0
2002 2003 2004 Forecast
Am. Home Zurich AXA Sony Mitsui Yasuda
Apr 2001 to Mar 2002 27% 32% 8% 25% 6% 2%
Apr 2002 to Mar 2003 23% 27% 9% 28% 10% 4%
Apr 2003 to Mar 2004 20% 23% 10% 29% 12% 6%
Review of AXA’s activities in Japan – September 30, 2004 - 80 While maintaining a low loss ratio and significantly reducing the acquisition expenses
French GAAP Loss Ratio Evolution of Acquisition Cost per New Business (2002 = 100) (Motor, Personal Accident, Traffic Accident)
100,0% 120 80,0% 100 100 61,4% 59,7% < 59% 60,0% 80 66 56 40,0% 60
40 20,0% 20 0,0% 0 2002 2003 2004 Forecast 2002 2003 2004 Forecast
Review of AXA’s activities in Japan – September 30, 2004 - 81 AXA Direct Japan is heading towards French GAAP break-even After the start-up phase (1998 to 2000), AXA Direct Japan has been continuously improving its result, thanks to the scale effect.
Evolution of French GAAP Result – BN Yen
4.0
3.0
2.0
1.0
0.0
-1.0 -1.4 -2.3 -2.0 -2.9 -3.0 -3.6
-4.0 -5.0 -5.0 -5.7
-6.0
-7.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Review of AXA’s activities in Japan – September 30, 2004 - 82 Continual growth story and innovation expected in AXA Direct Japan’s motor business
Fast growth via the internet
Cross-selling with AXA Life presents a huge opportunity
Launch of new products
Focus on driving down costs
Review of AXA’s activities in Japan – September 30, 2004 - 83 6. What is next Distribution empowerment AXA Advisors’ productivity improvement Product development strategy AXA New Markets How we are upgrading our growth engine
Distribution Empowerment
Innovative Life & Savings Products Improved performance and Non-life products and other services sales productivity provided by our partners
Group Experience Leverage
Review of AXA’s activities in Japan – September 30, 2004 - 85 New distribution line up starting in 2005 AXA Year
Proprietary Non-Proprietary
CCI LA CS AG New Markets % of inforce* 62% 5% 19% 12% 2% Current models
AXA AXA AXA New AXA Advisors Corporates Partners Markets and Agents
Members Other of Large Small & Medium Chambers of Mega Corporations Enterprises
Future distribution platforms Future distribution Corporations & Commerce & Industry (SME’s) Agencies (CCIs) Mega Banks Regional Banks
* On ANP basis as of March 31, 2004. Review of AXA’s activities in Japan – September 30, 2004 - 86 New Distribution lineup
AXA Advisors AXA Partners 2003 NB APE: 38.9bil 2003 NB APE: 7.7bil 1 Major Products: Medical, Major Products: Medical, Term Group2 # of Tied Sales force：5,600 # of Mega Corporations：30 # of Large Agents：2
AXA Corporates & Agents AXA New Markets 2003 NB APE: 11.4bil 2003 NB APE: 4.6bil Major Products: Term4 Major Products: Savings3 # of Bank Partners：12 # of Agents: approx. 3,000 # of Large Corporations: 1,700
As of June 30, 2004. 1: includes Increasing Term Rider/Increasing Term Product for CCI corporate customers APE in Yen. 2: Group Life/Pension 3: Individual Annuity/Endowment 4: Increasing Term Rider/Increasing Term Product Review of AXA’s activities in Japan – September 30, 2004 - 87 6. What is next AXA Advisors’ productivity improvement AXA is already one of the top players in terms of productivity
AXA Internal Analysis
1.80 # of sales Productivity Productivity reps Index 1.60 Prudential Target Prudential 1.546 2,159 259% 1.40 SONY 1.061 4,262 178%
T&D 0.706 14,002 118% 1.20 SONY AXA 0.596 5,769 100% 1.00 AXA Nissay 0.541 57,141 91% 0.80 Mitsui 0.491 11,620 82% T&D 0.60 AIG Edison 0.483 4,868 81% AIG Edison Mitsui Nissay 0.40 AIG Star 0.412 3,137 69% Gibraltar AIG Star Gibraltar Asahi 0.382 5,536 64% 0.20
(Prudential) month (Million rep per Productivity per sales ¥)
Asahi 0.308 18,218 52% 0.00 0 10,000 20,000 30,000 40,000 50,000 60,000 # of Sales reps
Productivity measured as NB-APE per sales rep (million yen per month)
Review of AXA’s activities in Japan – September 30, 2004 - 89 Focusing on improving Recruitment, Training and Activity Management Activity Recruitment Training Management
Daily activity management Focus on quality recruits More practical selling based upon leads, visits, skills success rates Competencies to become Centralization successful sales How to acquire corporate Build upon negative managers policies spread conversion
Implementation program success
Leads with clear Improvement of initial More high potential sales objectives (new customers productivity people and existing customers) Acquisition of corporate Improved retention of Modern sales processes policies sales people Efficient use of technology Expected Outputs
Customer Commission Product Sales tools needs
Review of AXA’s activities in Japan – September 30, 2004 - 90 More high performers producing more
Progress for 2004 AXA Year (Monthly)* Evolution of sales reps broken down (between high, middle, low and trainee)
100%
90% 1,358 1,454 1,467 1,489 1,554 1,580 1,686 1,766 1,765 1,789 1,789 +30% 80%
70% High
1,236 60% 1,249 1,241 1,252 1,231 1,254 1,136 Middle 1,173 1,155 1,167 1,150 50%
Low 40% 1,251 1,173 1,188 1,167 1,052 1,052 1,044 1,027 1,009 30% 1,008 1,024 Trainee
20%
1,384 1,287 1,320 1,226 1,300 1,151 1,186 10% 1,032 1,107 1,005 1,089
0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Actual Actual Target
*AXA Advisors
Review of AXA’s activities in Japan – September 30, 2004 - 91 We can further increase sales productivity
Sales Productivity Index* 1) Customer needs 07 200 20 y 180 2) Innovative Product b es im 8 t 3) Sales tools 1. 150 +
115 4) Commission 100 100 5) Recruitment
50 6) Training
7) Activity Management 0 2003 2004 2007 Actual Actual Target AXA’s productivity index is currently understated by the fact that agents spend around 20% of their time on conversions. *AXA Advisors Review of AXA’s activities in Japan – September 30, 2004 - 92 6. What is next Product development strategy Product development strategy to drive profitable growth
New offers for the negative spread management program Concentrate on the needs of our key customer segments Î Large Corporations and their employees Î Small and Medium Enterprises Î Bancassurance customers Focus on innovation, leveraging the AXA Group expertise Î Necessary to maintain margins and grow Î Unique experience in other markets Î Strong internal capability to implement new ideas in Japan Continue to increase our speed to market by utilizing our new platform, especially for Savings products Accelerate the shift in sales towards the most profitable products Î Introduction of Key Points
Review of AXA’s activities in Japan – September 30, 2004 - 94 In the next 2 years, we will implement new product solutions for each of our key priorities Strategies Product Solutions for 2005 & 2006
Enhance negative spread 1. conversion capability Conversion Solution
Support large corporate 2. customers, acquire new groups and protect and grow our large, Differentiated Medical Products for Groups profitable Medical portfolio
3. Develop new solutions in highly profitable protection Innovative Protection Type Products business
Innovative Savings Product in Foreign Currency 4. Take advantage of market growth provided by new distribution Variable Annuity channels especially bancassurance
Medical for Deregulation (2007)
Review of AXA’s activities in Japan – September 30, 2004 - 95 Complement our offer with Non-life products and other services provided by our partners
AXA Direct Mitsui Partners AIOI Japan Sumitomo
Family/ Other Product Automobile Personnel Automobile Business 401k / Service (Individual) Accident (Corporate) Products All Risk (Next Step)
Small and Employees/ Employees/ Markets Medium Family Retirees Enterprises (Small Business) (Large Corporations)
Review of AXA’s activities in Japan – September 30, 2004 - 96 This product development strategy will significantly contribute to our profitable growth Full range of innovative and diversified products for our key customer segments In 2007 > 50% of new business volumes will come from products that did not exist early 2004
Margins by product will be similar to current high levels % of new and existing products (APE)
2004 – 2007 >50% New Products
2004 New Products
Existing products <50% Existing products
2004 2007
Review of AXA’s activities in Japan – September 30, 2004 - 97 6. What is next AXA New Markets Bancassurance - a new and fast growing market in Japan
New market with 2 years of history
Rapidly growing
Already competitive
But, competition is open ÎBancassurance partnerships are mainly distribution agreements, non exclusive in nature
Review of AXA’s activities in Japan – September 30, 2004 - 99 Strong market growth is expected to continue
Cumulative bancassurance sales totaled JPY3.5 trillion in just 1.5 years Market is estimated to reach 50 trillion Yen by 2010 (cumulative)
Annuity assets sold through banks (Trillion Yen) 50 um nn r a pe % 30 th ow Gr les Sa al nu An
3.5 0.8
Mar2003 Mar2004 2010 Source: Japan Institute of Life Insurance “JILI Forum N0.13” Prospects of Variable Annuity market size estimation and sales
Review of AXA’s activities in Japan – September 30, 2004 - 100 AXA is a new challenger in this market
AXA Japan has successfully built a growth platform with 12 bank partnerships (amongst top-30 banks) representing 3.1% market share. JPY,billion 800 Sales volume from October 2002 to March 2004 700
600
500 AXA Japan Sales volume: JPY110 billion 400 Market share: 3.1% 300 No of partnerships: 12 200
100
0 u k Citi sui ING ers Alico it AXA nulife h M a Hartford Anshin inancial Nissay Daiichi Fuko Ot ijiYasuda F M Sumitomoe Nipponkoa M AIG Edison T&D Source: Diamond “Weekly Diamond 27” Review of AXA’s activities in Japan – September 30, 2004 - 101 Becoming a major player
AXA Japan’s 2005-2007 strategy is focused on: Innovative products by leveraging worldwide AXA Group capabilities Providing quality products and services to establish a strong reputation in the market High potential and profitable products/markets with disciplined resource allocation Building partnerships with key mega banks and major regionals for the most efficient access to the mass affluent customer base
Review of AXA’s activities in Japan – September 30, 2004 - 102 Focused and consistent approach in product development
October 2002: Product mix of bancassurance market Start with Yen fixed annuity as our basic product YEN Fixed Annuity Variable Late 2005: 23% Annuities New VA product by leveraging Group Foreign expertise in US Currency 55% Fixed Annuity Late 2004: 22% Innovative foreign currency annuity product leveraging AXA Japan’s our European Market experience Penetration Source: Diamond “Weekly Diamond 27”
Review of AXA’s activities in Japan – September 30, 2004 - 103 Building competitive advantage in Bancassurance
Leveraging AXA Group’s expertise in product innovation and wholesale distribution
State-of-the-art IT platform
Experienced sales staff to help banks promote their sales (>10 years average experience)
AXA brand, which stands for financial strength and credibility in Japan
Review of AXA’s activities in Japan – September 30, 2004 - 104 7. Conclusion With these distribution and product initiatives, our objective is to grow new business volumes by around 50% by 2007
Drivers of new 007 y 2 business APE growth: E b P Expected % A 50 productivity x. + pro improvements for Ap AXA New Markets AXA Advisors
AXA C&A* Bancassurance AXA New Markets AXA Partners AXA C&A* Introduction of AXA Partners innovative products AXA Advisors AXA Advisors
2004 2007 AXA Year basis
*AXA C&A = AXA Corporates and Agents Source: AXA internal data Review of AXA’s activities in Japan – September 30, 2004 - 106 We also have the objective of growing new business contribution with a focus on sales of Key6 products
007 y 2 Drivers of NBC growth: C b NB 50% x. + Introduction of pro innovative products Ap AXA New Markets with attractive margins AXA C&A*
AXA Partners AXA New Markets Key points AXA C&A* management in all AXA Partners distribution AXA Advisors channels AXA Advisors
2004 2007 NBC = AXA Year basis
*AXA C&A = AXA Corporates and Agents Source: AXA internal data Review of AXA’s activities in Japan – September 30, 2004 - 107 Some challenges still exist in Japan
Strong new business growth, which is costly because of new business strain in the short term Lower conversion impact going forward
ÎModerate growth of our underlying earnings. ÎSignificant growth of new business contribution
Despite excellent progress in the reduction of the negative spread portfolio, the remaining old block of business leads to a large sensitivity to financial markets
Review of AXA’s activities in Japan – September 30, 2004 - 108 Japan represents great opportunities for AXA
The strong reputation and credibility of AXA
The leadership of an international and experienced management team combined with powerful Japanese implementation
We are ready to exploit the great market opportunities, both organic and external growth
Building strong, sustainable and profitable growth of new business
Already strong achievements…and more to come!
Review of AXA’s activities in Japan – September 30, 2004 - 109 Questions & Answers 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 and can be affected by other factors that could cause actual results and AXA’s plans and objectives to differ materially from those expressed or implied in the forward looking statements (or from past results). These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future terrorist related incidents. Please refer to AXA's Annual Report on Form 20-F and AXA’s Document de Référence for the year ended December 31, 2003, 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.
Review of AXA’s activities in Japan – September 30, 2004 - 111 AppendicesAppendices SummarySummary ofof AXAAXA Japan’sJapan’s ProductsProducts AXA Japans’ products (1 of 2)
Product Key6 Description
“Protection” Yes Traditional term product, typically 5 or 10 years. Fixed benefits (not indexed) Term Renewable to age 75 or 85. Almost no cash value
Term Yes Traditional term product, sold as a base policy or as a rider. Fixed benefits (not indexed) Long policy term (until age 98) Cash value is available Increasing Term Yes Term product (or rider), with benefits increasing during the policy term Benefits increase in a pre-determined %, up to a maximum of 5 times the initial sum insured Cash value available Mostly sold to corporate customers (SME)
Annuity Traditional fixed annuity (accumulation phase, and optional annuitization phase) For new business, guaranteed rate is 1% (Single Premium) and 1.5% (Recurring Premium) Endowment Traditional product, with fixed maturity (typically 10 year)
Whole Life Traditional product, with benefits paid upon death Cash value is available Variable Life Yes Unit-linked product with fixed death benefits Safety Plus Provides guarantee of 115% of premium at maturity (10 year), and upside related to Nikkei performance Available only for conversion
Review of AXA’s activities in Japan – September 30, 2004 - 113 AXA Japans’ products (2 of 2)
Product Key6 Description
Medical Whole Yes Health insurance product providing mostly hospitalization benefits (fixed amount per night in hospital) Life Other benefits (optional) include surgery, death benefits, accidental benefits Lifetime coverage 2 versions: with or without cash value
Medical Term Yes Health insurance product providing mostly hospitalization benefits (fixed amount per night in hospital) Other benefits (optional) include surgery, death benefits, accidental benefits 5 years renewable Typically offered to employees of large corporations Collective Medical (only offered to employees of very large corporations) has 1 year renewable rates and a lower price compared to the regular version
Medical Riders Yes Dread disease, cancer, nursing care, hospital sickness and surgery, adult disease or accident riders (death, hospitalization, outpatient) Fixed benefits
Group Life Typically one year renewable Group Term For large corporate clients
Mutual Aid Group Term sold to CCI members Traditional death benefits with cancer riders Also provides non-life benefits (partnership with non-life company) Group Pension Group Annuity product. Pension funds accumulated for corporate employees Guaranteed rate is reviewed annually (currently 1.25%)
Review of AXA’s activities in Japan – September 30, 2004 - 114