AXA Market Entry in India a case study Tim Thomas Chief Operating Officer, Bharti AXA Life

JBC Australia India Summit 2008 Melbourne 20 May 2008

Todays presentation

AXA Asia Pacific Holdings India Life Insurance market and the India consumer mindset Bharti AXA Life today AXA India market entry journey Key lessons when evaluating India market entry

AXA Asia Pacific Group

Regional profile

Operating Earnings 1

Illustrative value of inforce 1

Illustrative value of new business 1

AXA Asia Pacific Holdings operates in Australia, New Zealand, Hong Kong, Singapore, Indonesia, Philippines, Thailand, Malaysia, China and India
(1) As at / 12 months to 31 December 2007

AXA Asia Pacific Group

Financial performance

Profit after tax, before investment experience and non-recurring items, up 12% to A$604.8m

Operating Earnings up 20% to A$543.7m

Asia
Overview of Operations
India

JV (AXA APH share: 26%) with Bharti Enterprises to access the Indian life market Commenced operations end of August 2006 Total premiums: A$18m 77 branches in 66 cities Over 13,000 agents and advisers

China

Hong Kong

JV (AXA APH share: 25%) with Minmetals and AXA SA Top 10 for new business amongst foreign life insurers Total premiums: A$33m Operations in five cities Shanghai, Guangzhou, Beijing, Foshan and Shenzhen

AXA APH share: 100% #4 in new business, #3 in inforce Total premiums: A$499m Funds under management: A$10.3bn Winterthur integrated Citibank distribution agreement

Philippines

Thailand

China India Thailand Hong Kong Philippines Malaysia Singapore Indonesia

Malaysia

JV (AXA APH share: 50%) with Krung Thai Bank leading government bank with over 766 branches #7 for new business Total premiums: A$72m

JV (AXA APH share: 45%) with the Philippines largest financial conglomerate, Metrobank Group, with 544 branches Top 5 in new business Total premiums: A$47m

Indonesia

Singapore

AXA APH share: 100% #7 for new business Total premiums: A$88m

JV (AXA APH share: 80%) with Tempo Group JV (AXA APH share: 51%) with the largest bank in Indonesia, Bank Mandiri, with 928 branches Top 3 in new business Total premiums: A$128m

Apart from market shares (latest available), figures are as at/for the 3 months to 31 March 2008

JV (AXA APH share: 49%) with Affin purchased Tahan Life to access US$4.2bn Malaysian life market through 81 branches Operations commenced in September 2006 Total premiums: A$2.8m

Asia (ex Hong Kong)

Total premiums: A$390mn FUM: A$3.9bn 5

Asia
Our Strategy

Our vision
To be the preferred provider of financial protection and wealth management products

Strategy

Achieve a leadership position in each of our markets by the time they enter the growth phase Provide a comprehensive range of financial protection and wealth management products to mass market, mass affluent and corporate customers Deliver superior performance by applying AXAs global best practices to multiple distribution channels Gain early mover advantage for wealth management and financial planning advice services Drive profitable growth through a single regional platform
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Todays Presentation
AXA Asia Pacific Holdings a brief Asia profile India Life Insurance market and the India consumer mindset Bharti AXA Life today AXA India market entry journey Key lessons when evaluating India market entry

India at a Glance

2006 Population: 1.1bn, growing at 1.4% per annum Size: Seventh largest country by area, 40% of the size of Australia 2006 GDP: A$1,102bn ranked 13th 2006 real GDP growth rate: 9.0% (2nd fastest major growing economy first being China) GDP per capita: A$985 Total life premium (as at March 2007): A$49bn Life premium growth (Mar 2006 to Mar 2007): 64.8% Life premium as % of GDP (y.e. March 2007): 4.1% Population mainly rural with 60% residing in villages Expected to be the worlds 3rd largest economy by 2050 with a GDP of A$34 trillion (Source: Brics Report Goldman Sachs) Services sector comprises 55% of GDP with financial services contributing 14% of GDP
8

Overview of India - Macroeconomics

India is projected to experience a GDP CAGR of 8%-10% over 2007 to 2011 (1)

GDP Growth
00 . 00 . 00 . 00 CAGR 1980-2001: 5.6% . 00 . 00 . 00 . 00 . 00 . 00 . 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00

Strong GDP growth of 8.6% over the last 4 years, the 2nd fastest growing economy in Asia, in which AXA is present interest rates have reduced by 350 Bps from ~11% in 2000 to 7.5% in 2006 based on 10 year government bond yields Lower inflation and interest rates coupled with higher savings resulting in investment led growth Growth in India is domestic consumption led unlike other Asian economies which are export driven Forecast to be worlds 3rd largest economy by 2050 with a GDP size of A$34 trillion, below China only
(Source: BRICS report, Goldman Sachs 2007)

CAGR 2001-07: 7.3%

3 year average

Source: Reserve Bank of India

Strong earnings growth of Indian Companies with a 5 year CAGR of 24.9% for Index stocks, driving stock market performance
9

Note(1): Source: Citigroup, Lehman Brothers

Overview of India - Macroeconomics

The savings rate in India has increased from 24% in 2001 to 32% in 2006
Actual & 3 Actual &average savings rate year 3 year average
35.0
35.0

Savings Rate

Savings rate Saving rate s

The savings rate is still lower than China at about 50% and similar to HK 30% and SEA between 20% to 30%(1) Increasing affluence among middle class population with per capita income increasing by ~7% over the last 5 years, is leading to huge increase in households with discretionary spending power and savings ability Increase in savings rate has happened despite interest rates reducing by 350 Bps from ~11% in 2000 to 7.5% in 2006 based on 10 year government bond yields

30.0

30.0

25.0
25.0

Average growth 4.5) Avg. g rowth since 1980 (2since

1980 (24.5)

3 yr avg.

3 yr avg.

20.0

20.0

15.0

15.0

1970

1970

1975

1975

1980

1980

1985

1985

1990

1990

1995

199 5

2000 2003 2007

2000

2 3 00

2007

Source: Reserve Bank of India

Note(1): Savings as % of GDP. March 2007 Watson Wyatt report

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Overview of India - Demographics

The wealth of general population have increased with average per capita income increasing by ~7% to A$985 per year in 2006
Young population with a median age of only 24 years. Approximately 55% of the population is expected to be wage earning in 2013 Population below poverty line is declining sharply with the population earning below A$3K reducing from 80% of the population in 1995 to <50% currently Mass market customers called Aspirers, earning between A$3K and A$6K, would be the largest class by 2012 comprising 45% of the population by 2012
Deprived (A$<3K)

Globals (A$>29K) Strivers (A$15-29K) Seekers (A$6-15K)

Aspirers (A$3-6K)

Despite large stock market gains in the last 3 years, Indian households continue to invest their savings in bank deposits, approximately 55% of savings, while investment in life insurance is at approximately 19% of savings

Source: Reserve Bank of India, McKinsey

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Life Insurance market in India

Life market continues to display strong growth due to strong growth drivers
India Life Insurance - Premium Trend
108

Life insurance market in India is A$49bn and is the 2nd largest in Asia (ex-Japan) in which AXA has a presence
94

100 80 A $ bn 60
CAGR 27% 57 49 31

CAGR 17% 81 69

64 47 56

40 20 0
15 16 19

24

27 22 2006-07

29 28 2007-08F

38

Though penetration of life premiums has increased from 1.8% in 2000 to 4.1% in 2006, (low as compared to HK 9.5% and SG 6.6% (1)), Indians are still significantly underinsured with per capita premium of only A$41. Penetration is forecast to increase to ~6% by 2012. Life market growth remains buoyant: 95% growth for the year ended March 2007 to A$49b, significantly higher than initial estimates of ~20% at the time of market entry Key drivers for growth are: Large but young population (1095m people, median age of 24.9 years) Strong GDP growth of ~8.6% over last 4 years expected to continue Significant increase in household savings as a % of GDP Indian life insurance market is forecast to grow by ~17% p.a. and reach a size of A$100bn- A$120bn by 2012 - McKinsey 12

9 6 2001-02

11 5 2002-03

14 6 2003-04

16 8 2004-05

20 11 2005-06

30 2008-09F

34 2009-10F

38

44

NBP
Source: IRDA, McKinsey

Renewal Premium

Note(1): Penetration rates. 2006 Watson Wyatt report

2011-12F

2010-11F

AXA Life Outlook Index

The Indian customer : a new found confidence

Beijing

New Delhi

Shanghai Guangzhou Hong Kong

Mumbai China (Beijing, Shanghai, Guangzhou) Hong Kong India (Mumbai, Delhi) Indonesia (Jakarta) Malaysia (Kuala Lumpur) The Philippines (Manila) Singapore Thailand (Bangkok) Jakarta Kuala Lumpur Singapore Bangkok Manila

Launch of a comprehensive Life Outlook Index: Identify current life satisfaction Forecast level of optimism and outlook towards life across Asia Provide an industry measurement and benchmark for forecasting consumers life and financial management needs Give insights on consumers attitudes towards life given current socioeconomic factors Survey of mass affluent population (top 2535% of the population) aged 25-50 in each market Sample size of 2,400 across the region Conducted using online and face-to-face interviews in August 2007

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Current Life Satisfaction

Mass affluent Asians are generally satisfied with life currently 49% are satisfied on regional average India and the Philippines stand out as the most satisfied markets while the more developed markets of Hong Kong and Singapore show the least current satisfaction

CN
%

HK
%

IN
%

ID
%

MY
%

PH
%

SG
%

TH
%

Regional Average Satisfied (Current)

85 44 47 33 41 26 15 51 * 63 53 57

49%
72 41

27 1 70 57

5 4

3 4

Base: All respondents

*denotes less than 0.5%

Satisfied (current) Neutral (current) Not satisfied (current)

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AXA Life Outlook Index overall future outlook

Asians are generally optimistic about their outlook on life over the next five years India, China and the Philippines are the most optimistic in the region

CN
00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
China 75.1

HK

IN

ID

MY

PH

SG

TH
71.6

Regional Average Life Outlook Index

India 87.2
Philippines

85.0

Thailand Hong Kong 67.7

Indonesia

69.9

Malaysia 66.2
Singapore

74.3

59.2

15

Outlook on retirement General attitude towards retirement planning

Mass affluent with the highest optimism are also seen to be the least prepared for their retirement 82% of mass affluent from India and 78% of mass affluent from the Philippines have not started planning seriously or taken action for their retirement In contrast, mass affluent with lower optimism have been driven to better plan for their future retirement 41% of respondents from Singapore, 47% from Hong Kong, and 36% from Malaysia have started planning seriously for their retirement
CN
%

HK
%

MY
%

SG
%

TH
%

IN
%

ID
%

PH
%

69

53

64

59

67

82

78

78

31

47

36

41

33 18 22 22

Base: All Respondents

Planned seriously and taken action already (planner)

* denotes less than 0.5%

Not planned seriously and taken action yet (non-planner) 16

Outlook on retirement Age for retirement

Most Asian mass affluent indicated they start planning for retirement before 40. Hong Kong, Singapore and the Philippines start as soon as early thirties; however India, Thailand and Indonesia are relatively late starters. In the case of Indonesia, retirement planning is started as late as 49, leaving only 10 years prior to likely retirement

CN Age
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 3 0 0 0 3 3

HK

IN

ID

MY

PH

SG

TH

Regional Average Age starting preparation 39 Desired age 58 Realistic age 59

0 0 0 0 0 0 3 0 3 0 0 0 0 0 0 0 0 0

0 0 0 0

0 0 0 0 3 3 0 0

0 0 0 0

3 0 3 0 0 0

Base: Respondents who have started planning Age starting preparation Desired age Realistic age

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Todays presentation
AXA Asia Pacific Holdings a brief Asia profile India Life Insurance market and the India consumer mindset Bharti AXA Life today AXA India market entry journey Key lessons when evaluating India market entry

18

Bharti AXA Life

Strategy
India is a key driver of the Asia strategy
We will provide a comprehensive range of financial protection and wealth management products to mass market, mass affluent and corporate customers We remain well positioned to gain early mover advantage as Asia moves to financial planning We will deliver superior performance by applying AXA global best practices to multiple distribution channels We will drive profitable growth through a single regional platform

Our key imperatives in India to support our Asia strategy are: 1. 2. 3. 4. 5. 6. Grow Distribution in the fast growing, under penetrated and less competitive Tier 2 / 3 / 4 towns through a hub and spoke model Develop multi-distribution channels with agency, bancassurance, direct sales force and corporate agency / broker channels Leverage the large mass market Airtel customer base of 50m (and growing by over 2m per month) and distribution reach across the country (700+ Airtel relationship centres, 4000 distributors, 800,000+ retailers) Leverage and re-use AXAs regional blueprints, systems, products and business capability. Also leverage AXA Business Services, AXA Tech and Bharti Airtels telecom network to quickly achieve scale Be the Preferred company to attract and retain the best talent in India Institutionalize a customer centric culture through a service quality platform
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Bharti Group: a partnership of equals

60 million customers, adding 2.5 million every month Bharti Airtel is amongst the worlds top 10 mobile companies and the fifth largest listed company in India Indias largest GSM operator present in all 23 circles; Covers 60% of Indian population

Amongst worlds 10 best performing companies by Business Week IT100; 2nd Best Employer - Hewitts Best Employers Survey

5th largest listed company with market capitalisation AUD 51bn (April 30, 2008)

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AXA Group : a partnership of equals

Stated aim to be amongst top 5 in every market Present in over 60 countries with 52 million customers 120,000 employees worldwide Rated No. 15 on the Fortune 500 Global list Revenue of around Euro 94 billion Leading Insurance Group in the world & Fifth largest global asset manager

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India
New business index and operations update There has been a rapid expansion of our footprint since the launch of our national operations in December 2006

77 branch offices (2006 6) 13,898 agents (2006 - 631) Exclusive access to Bharti Airtels 60 million customers Launched presence at 308 Airtel Relationship Centres across over 25 cities Over 6000 employees Product range to cater to diverse consumer segments Term, Anticipated Endowment, ULIPs (Single Premium and Regular), Pension Launch of asset management joint venture in Q4 2007 Business relationship with Citi Financial providing access to their 4 million customers Several exclusive distribution relationships Market leading service delivery platform ISO 9001:2000 certification for operations and customer service One of the fastest in policy issuance through smart technology and strategic outsourcing 22 A C Nielsen customer satisfaction scores one of the

(1)100% share

Todays presentation
AXA Asia Pacific Holdings a brief Asia profile India life insurance market and the India consumer mindset Bharti AXA Life today AXA India market entry journey Key lessons when evaluating India market entry

23

AXA India Market Entry Journey

Market entry phaseology
Market scan Q2 2004
Key questions Market growth to be addressed potential and readiness Receptive to AXA capabilities Does the regulatory environment support a level playing field
Strategic Niche

Target business model H2 2004

Partner evaluation & JVA H1 2005

Market entry plan regulatory approvals Q3 2005 to Q2 2006

Pilot and national launch H2 2006

Market Market

Post launch Review Q2 2007

Local partner drivers Detailed competitive Pilot parameters objectives strategy Local partner financial Programme plan or mass market strength and commitment to Expansion plan Pan-India Start-up team business line Ownership and funding Brand architecture and Ready capabilities structure market entry brand Greenfields or acquisition Which implementation building partnerships

acceptance conditions and review of business objectives Management depth and capability Scaleability, vendour performance

Approach

Desktop Market

research

Market

Interviews

analysis

analysis interviews Global team

On-site

Long

list of potentials sheet clarifying responsibilities

Terms

Project

team made up of Complex programme design and build skills management and dedicated project managers Scaleable solutions Pilot monitoring

Shareholder Clarity

alignment of strategy and business capabilities required Recruitment and talent development and retention Implementation partner alignment

Deliverables

Go-

No Go Timelines

Criteria

for local partner Capital requirement

Selection

of partner Agreements

Design

of Day 1 model Regulator alignment

Day

1 launch Monitoring of Day 2 requirements National launch

Organizational

change programme Scale up of operations Risk management

24

Todays presentation
AXA Asia Pacific Holdings a brief Asia profile India Life Insurance market and the India consumer mindset Bharti AXA Life today AXA India market entry journey Key lessons when evaluating India market entry

25

Key Lessons
India is a dynamic market which offers market entrants opportunities to develop new competencies and insights

Be clear on business model before selecting a local strategic partner Complimentary strengths Similar mindset and strategic objectives Value-conscious retail consumers and strong competition across most income demographics makes scale critical Invest in brand and deep-reaching distribution Develop scaleable systems, processes and implementation partners Different mindset required to fully tap the growth potential in the smaller semi-urban and rural towns Understand the underlying economics and consumer behaviour of small town India, take a longer term view Multi-channel capability is important to address heterogeneous customer segments Pan-India players require strong regional structures
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Key Lessons
India is a dynamic market which offers market entrants opportunities to develop new competencies and insights

Prepare for complex challenges in managing talent given the broad range of options for the young professional class Dynamic and rapidly evolving market A phased market entry approach with evaluation checkpoints Requires flexible operating model and nimble execution capabilities Think large - start small scale fast prepare to re-design basis new capabilities developed from the market A clear long term vision and strategy, strong governance model and quality platform will win a long term competitive advantage

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AXA Market Entry in India A case study Tim Thomas Chief Operating Officer, Bharti AXA Life

20 May 2008
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