AXA Group Investment & ALM Improving insurers investment - - PowerPoint PPT Presentation

▶
axa group investment alm improving insurers investment
SMART_READER_LITE
LIVE PREVIEW

AXA Group Investment & ALM Improving insurers investment - - PowerPoint PPT Presentation

Apr 26, 2023 935 likes •1.12k views

AXA Group Investment & ALM Improving insurers investment environment Insurance Europe Malta, June 12 th , 2014 Laurent Clamagirand, Group CIO Group Investment & ALM Laurent Clamagirand, Group CIO AXA today: a diversified Group

slide-1
SLIDE 1

Group Investment & ALM Laurent Clamagirand, Group CIO

Improving insurers’ investment environment

Insurance Europe

Malta, June 12th, 2014 Laurent Clamagirand, Group CIO

AXA Group Investment & ALM

slide-2
SLIDE 2

2

Geographical diversification

AXA today: a diversified Group

Business diversification

Northern, Central & Eastern Europe region 29% France 24% Mediterranean & Latin America region 15% UK & Ireland 5% Asia-Pacific 10% United States 13%

Direct 3% Revenues 2012

Property & Casualty and International Insurance 42% Protection & Health 26% Savings & Asset Management 32%

Underlying Earnings

As of 31/12/2013

Direct P&C 2% France 24% United States 11% United Kingdom & Ireland 3.5% Japan 8.5% Mediterranean & Latin America region 9% Northern, Central & Eastern Europe 30% Asia (excl. Japan) 8%

Insurance Underlying Earnings

International insurance 4%

91.2 1,113 4.7 52.9 102 56 1st

Euro billion revenues countries Euro billion assets under management Euro billion underlying earnings Euro billion shareholders’ equity million customers insurance brand worldwide

AXA at a glance

slide-3
SLIDE 3

3

Property & Casualty Scope overview

  • Insurance Europe - Malta, June 12th, 2014

18 Euro billion compensation paid in

2013 for the benefit of 40 million customers

18 Euro billion compensation paid in

2013 for the benefit of 40 million customers

8.5 million motor claims paid in 2013 8.5 million motor claims paid in 2013 2nd P&C insurer in Europe

1st international insurer in Asia* 3rd Direct insurer in Europe

2nd P&C insurer in Europe

1st international insurer in Asia* 3rd Direct insurer in Europe

Brokers & other 47% Agents 38% Partnerships 5% Direct (1) 11%

FY13 revenues by channel (excl. International insurance)

A diversified distribution

€ 28.8 bn

FY13 Revenues

Personal 52% International Insurance 11% Commercial 37%

FY13 revenues by activity (incl. International insurance)

A balanced business mix

€ 31.9 bn

FY13 Revenues

slide-4
SLIDE 4

4

Life & Savings Scope overview

  • Insurance Europe - Malta, June 12th, 2014

25 Euro billion increase in the value

  • f our customers’ Life Insurance

invested assets

12 Euro billion benefits paid to

Protection & Health customers

25 Euro billion increase in the value

  • f our customers’ Life Insurance

invested assets

12 Euro billion benefits paid to

Protection & Health customers

1st L&S insurer in Europe 1st L&S insurer in Europe 6 Euro billion new business in 2013 6 Euro billion new business in 2013

APE by activity in 2013

Protection & Health 39% G/A Savings 14% Mutual Funds &

  • ther

12% Unit-Linked 34%

APE by channel in 2013

A diversified Distribution

Agents & salaried sales force 47% Brokers - IFAs 36% Partnerships 17%

A balanced business mix

€ 6.3 bn

APE 2013

€ 6.3 bn

APE 2013

slide-5
SLIDE 5

5

Asset Management Scope overview

Assets under Management Footprint Distribution Product offer

Complementary business models

– Structured by “Investment Style” – Focus on growth and value equities, blend strategies, fixed income – New developments in alternative investments – Institutional research services

  • Integrated distribution platforms
  • Mainly US and Asia
  • Euro 354 billion as at 31/12/2013

– A multi-expert model structured by asset class – An expertise in fixed income, equities and quantitative management – A distinctive presence in alternative investments (structured finance, private equity, real estate, funds of hedge funds)

  • Separate distribution platforms for Third

parties & AXA Insurance Companies

  • Mainly Europe
  • Euro 539 billion as at 31/12/2013

AXA Group

~10th largest asset manager worldwide

  • Insurance Europe - Malta, June 12th, 2014
slide-6
SLIDE 6

6

AXA Group’s Investment teams organization Overview

  • At the Group level, AXA’s investment team is composed of

around 250 professionals

  • A

centralization

  • f

the

  • rganization

along with the implementation

  • f

specialized, cross-entities Centers

  • f

expertise has been implemented

  • The current set-up, chaired by the Group CIO, allows an

improved reactivity and a better sharing of the knowledge

  • In order to coordinate local and global Investment processes,

decisions within the investment community are taken by the Group Investment Committee This committee defines investment strategies, steers tactical asset allocation, evaluates new investment opportunities and monitors the Group’s investment performance.

slide-7
SLIDE 7

7

AXA Group’s Investment teams organisation GIA simplified organisation chart

  • Insurance Europe - Malta, June 12th, 2014

Group CIO Group Credit Team (GCT) Group ALM / Investment Monitoring Group Investment Solutions (GIS) Alliance Bernstein AXA Investment Managers AXA France AXA Switzerland AXA MedLa AXA Asia Region AXA Germany AXA Japan AXA Equitable AXA Belgium AXA UK AXA CEE Group CIO Local CEO/CFO

Group Investment & ALM department Group’s Asset Managers Local Entities

9 Asset Class CoEs 5 Functionnal CoEs

Centers of Expertise

slide-8
SLIDE 8

8

AXA Group’s Investment stream The investment value chain

Assets Liabilities Portfolio management Asset allocation Asset-liability management Group Local Entities

ALM is a local responsibility, including deciding on SAA. Asset allocation is implemented locally

(exceptions to be justified by local team)

Local responsibility

Asset Managers

Asset allocation executed by the asset managers Mainly performed by Group asset managers The ALM methodology is defined centrally (ongoing). Asset allocation decided centrally and locally by the GIC Performance measurement is computed Centrally

  • Insurance Europe - Malta, June 12th, 2014
slide-9
SLIDE 9

9

Asset Management

Investment policy in Fixed income for Life & Savings and P&C entities

Investment portfolio overview

Real Estate

5%

Govies and related

45%

Policy loans

1%

Listed equities

4%

Cash

4%

Other fixed income2

7%

Corporate bonds

31%

Alternative investments

3% FY13 Total insurance invested assets3: Euro 470 bn

FY13 reinvestment rate on Fixed income assets for Life & Savings and Property & Casualty entities FY13 Eurozone 3.2% US 3.3% Japan 2.2% Switzerland 1.9% Total 2.9% Amount reinvested Euro 55 billion

  • Insurance Europe - Malta, June 12th, 2014

2013 investment policy on Fixed income

Corporate bonds

~31%

Secured financial bonds

~5%

ABS

~5%

Government bonds

~41%

Loans

~10%

Short duration high yield

~8%

  • f which Euro 4 bn
  • n European

peripheral countries

slide-10
SLIDE 10

10

Asset & Liability Management Interest rate management in General Account

Interest rates increase expected to reduce duration gap

Duration gap

Asset duration as at June 30, 2013 Life & Savings 7.3 years Property & Casualty 5.0 years

Life & Savings

Duration gap close to 1 year L&S asset yield L&S net investment margin

Property & Casualty

P&C asset yield

Guidance: 70-80 bps AXA asset yield definition: Net underlying investment income on General Account assets Average General Account asset base at amortized cost

FY12

3.8%

FY11

3.9%

FY13

80 bps

FY12

78 bps

FY12

3.9%

FY11

4.0%

  • Insurance Europe - Malta, June 12th, 2014

3,7%

FY13 FY13

3.9%

slide-11
SLIDE 11

11

Asset & Liability Management Life & Savings investment spreads

New business Inforce business

Significant buffer to cover guarantees and to manage crediting rates to preserve investment margin

L&S average guaranteed rate Yield on total L&S asset base

Products sold to attract higher margin Unit-Linked business Average reserves of Euro 338 billion

L&S average guaranteed rate Yield on L&S fixed income assets

  • Insurance Europe - Malta, June 12th, 2014

FY13

Spread above guaranteed rates

3.7% 2.2%

+150bps

Spread above guaranteed rate

FY13

0,6% 2.9%

+230 bps

slide-12
SLIDE 12

AXA Group and Solvency 2 Multiline & Multinational

AXA is a major actor of the Insurance sector in Europe and beyond

 As a multi-line insurer, AXA has to manage different business lines

presenting different characteristics

  • P&C / Commercial and Retail
  • L&S
  • Asset Management

 9 Eurozone countries + other countries

Which creates multiple accountancy constraints:

  • More than 30 local GAAP
  • Financial Statements
  • IFRS

 In addition, AXA’s global position, has been deemed G-GSiFi Insurer

  • Further constraints on our balance-sheet (still unknown)
  • Solvency II brings some complexity (coverage ratio)…
  • … but allows an alignment of constraints (Eurozone & Equivalence)
  • Insurance Europe - Malta, June 12th, 2014

12

slide-13
SLIDE 13

AXA Group and Solvency 2 Governance update

 Need to create a matrix organization: local/group  AXA is fine-tuning its reshaping to fully incorporate S2 constraints

in its organization

 Internal model management  Lobbying  Matrix organization of Investment

and Risk Departments:

 More generally, all our processes are currently thought around

Solvency 2 philosophy:

  • Use Test
  • KPIs
  • Investment decision
  • Analyst Communication
  • Performance Measurement
  • Rating agencies
  • S2: An in-depth organizational change

Local CEO Local CRO ... Local CFO ... Local CIO Group CIO Group CRM 25% 75% 50% 50%

  • Insurance Europe - Malta, June 12th, 2014

13

slide-14
SLIDE 14

AXA Group and Solvency 2 Performance

Performance measurement has always been at the heart of AXA’s activity, S2 is now adding a layer of complexity to this exercise. Asset Management: A deep transformation

Sources of performance have to be aligned with S2 framework:

  • Interest rate, Carry, Spread, Equity…

Split by Stakeholders

  • Strategic Asset Allocation, Tactical AA, Alpha

In front of complex and variable liabilities

L&S

  • Liabilities subject to policy holders’ behavior

 Performance measurement is subject to EEV sensitivity (complex), itself subject to changes of the AFR model induced by S2 regulation.

P&C  A simpler liability profile which requires nevertheless an important computation power In a Multi-line business  Lake of alignment between L&S and P&C due to taxes and policy holder absorption effects  Group consolidation not possible

  • S2: A new vision of performance measurement
  • Insurance Europe - Malta, June 12th, 2014

14

slide-15
SLIDE 15

46% 36% 35% 38% 5% 3% 5% 5% 4% 11% 4% 5% 2% 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2003 Govies IG

  • Alt. Investments

Real Estate Listed Equities Cash Other FI

AXA Group and Solvency 2 Impact on Assets

The combine effect of S1 and S2 have had a crucial impact crucial on the Group’s balance-sheet

 Balance-sheet evolution:

  • Decrease of Equity
  • Diversification in less liquid assets

 If the main lines of S2 regulation are now defined, its structure still

can be deeply impacted by some unknowns

  • Internal model
  • S2 coverage ratio management (ie risk-appetite)
  • More technical topics: Volatility adjuster, boundaries of contract
  • Capital charges and subsequent consequences for certain asset classes

such as Infrastructure, Securitization… for standard model

  • S2: Adaptation to new metrics needed
slide-16
SLIDE 16

AXA Group and Solvency 2 Prospectives and Conclusions

 AXA has been one of the leaders in integrating S2 in its

  • rganization and in its investment management

 Last details of the regulation still need to be fine-tuned and

will not

  • nly

influence the investment policy

  • f

the Insurance sector but also its societal impact

 Local

vs Global Solvency 2 management: Challenging double layer management & governance needed

 Alignment of the Accountancy vs Solvency 2 phase 2 is still

work in progress

 Lift of Solvency 1 constraints is still uncertain

16 - Insurance Europe - Malta, June 12th, 2014