Axa_aibc Paper Melb 20 May Final

7/31/2019 Axa_aibc Paper Melb 20 May Final

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AXA Market Entry in India a case study

Tim ThomasChief Operating Officer, Bharti AXA Life

JBC Australia India Summit 2008

Melbourne

20 May 2008


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2

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


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Operating Earnings 1 Illustrative value of inforce1

AXA Asia Pacific GroupRegional profile

(1) As at / 12 months to 31 December 2007

AXA Asia Pacific Holdings operates in Australia, New Zealand, Hong Kong, Singapore, Indonesia,Philippines, Thailand, Malaysia, China and India

Illustrative value of new business 1


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AXA Asia Pacific GroupFinancial performance

Profit after tax, before investmentexperience and non-recurring items, up12% to A$604.8m

Operating Earnings up 20% to A$543.7m


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AsiaOverview of Operations

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

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

China

Thailand

Indonesia

Philippines

Singapore

China

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 andShenzhen

Hong Kong 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

Thailand JV (AXA APH share: 50%)

with Krung Thai Bank -leading government bank withover 766 branches

#7 for new business Total premiums: A$72m

Philippines JV (AXA APH share: 45%)

with the Philippines largestfinancial conglomerate,Metrobank Group, with 544branches

Top 5 in new business Total premiums: A$47m

Hong Kong Indonesia 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

Asia (ex Hong Kong)Total premiums: A$390mnFUM: A$3.9bn

India JV (AXA APH share:

26%) with BhartiEnterprises to access theIndian life market

Commenced operationsend of August 2006

Total premiums: A$18m 77 branches in 66 cities Over 13,000 agents and

advisers

India

Malaysia

Malaysia JV (AXA APH share: 49%) with Affin

purchased Tahan Life to access US$4.2bnMalaysian life market through 81 branches

Operations commenced in September 2006 Total premiums: A$2.8m


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AsiaOur Strategy

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

Our vision

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 corporatecustomers

Deliver superior performance by applying AXAs global best practices tomultiple 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






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India at a Glance

2006 Population: 1.1bn, growing at 1.4% per annum

Size: Seventh largest country by area, 40% of the size ofAustralia

2006 GDP: A$1,102bn ranked 13th

2006 real GDP growth rate: 9.0% (2nd fastest majorgrowing 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 witha GDP of A$34 trillion (Source: Brics Report GoldmanSachs)

Services sector comprises 55% of GDP with financialservices contributing 14% of GDP


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Overview of India - Macroeconomics

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

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 yeargovernment bond yields

Lower inflation and interest rates coupled withhigher savings resulting in investment led growth

Growth in India is domestic consumption led unlikeother Asian economies which are export driven

Forecast to be worlds 3rd largest economy by 2050with a GDP size of A$34 trillion, below China only(Source: BRICS report, Goldman Sachs 2007)

Strong earnings growth of Indian Companies witha 5 year CAGR of 24.9% for Index stocks, drivingstock market performance

.00

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0000 0000 0000 0000 0000 0000 0000 0000 0000 0000

CAGR 1980-2001: 5.6%

CAGR 2001-07: 7.3%

3 year average

GDP Growth

Source: Reserve Bank of India

Note(1): Source: Citigroup, Lehman Brothers


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Overview of India - Macroeconomics

The savings rate is still lower thanChina at about 50% and similar to HK30% and SEA between 20% to 30%(1)

Increasing affluence among middleclass population with per capita incomeincreasing by ~7% over the last 5 years,is leading to huge increase inhouseholds with discretionary spendingpower and savings ability

Increase in savings rate has happeneddespite interest rates reducing by 350Bps from ~11% in 2000 to 7.5% in 2006

based on 10 year government bondyields

The savings rate in India has increased from 24% in 2001 to 32% in 2006

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

Savings rate

3 yr avg.

Avg. growth since 1980 (24.5)

1970 1975 1980 1985 1990 1995 2000 2003 2007

15.0

20.0

25.0

30.0

35.0

Actual & 3 year average savings rate

Average growth since 1980 (24.5)

Savings rate

3 yr avg.

Source: Reserve Bank of India


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Overview of India - Demographics

The wealth of general population have increased with average per capita incomeincreasing by ~7% to A$985 per year in 2006

Young population with a median age of only 24years. Approximately 55% of the population isexpected to be wage earning in 2013

Population below poverty line is declining sharplywith the population earning below A$3K reducingfrom 80% of the population in 1995 to


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India Life Insurance - Premium Trend

6 5 6 811

2228 30

34 3844

9 11 1416

20

27

2938

47

56

64

0

20

40

60

80

100

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08F

2008-09F

2009-10F

2010-11F

2011-12F

A$

bn

NBP Renewal Premium

Life Insurance market in India

Life market continues to display strong growth due to strong growth drivers

Life insurance market in India is A$49bn and is the 2ndlargest in Asia (ex-Japan) in which AXA has apresence

Though penetration of life premiums has increasedfrom 1.8% in 2000 to 4.1% in 2006, (low as comparedto HK 9.5% and SG 6.6% (1)), Indians are stillsignificantly underinsured with per capita premium ofonly A$41. Penetration is forecast to increase to ~6%by 2012.

Life market growth remains buoyant: 95% growth forthe year ended March 2007 to A$49b, significantlyhigher than initial estimates of ~20% at the time ofmarket 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 yearsexpected to continue

Significant increase in household savings as a % ofGDP

Indian life insurance market is forecast to grow by~17% p.a. and reach a size of A$100bn- A$120bn by2012 - McKinsey

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

Source: IRDA, McKinsey

81

108

69

57

49

3124

191615

CAGR 27%

CAGR 17% 94


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AXA Life Outlook IndexThe Indian customer : a new found confidence

Launch of a comprehensive Life OutlookIndex: Identify current life satisfaction Forecast level of optimism and outlook

towards life across Asia Provide an industry measurement and

benchmark for forecasting consumerslife and financial management needs

Give insights on consumers attitudestowards life given current socio-economic factors

Survey of mass affluent population (top 25-35% of the population) aged 25-50 in eachmarket

Sample size of 2,400 across the region

Conducted using online and face-to-faceinterviews in August 2007

Mumbai

Singapore

Shanghai

Beijing

Hong Kong

Kuala Lumpur

New Delhi

Guangzhou

Manila

Jakarta

BangkokChina (Beijing, Shanghai, Guangzhou)

Hong Kong

India (Mumbai, Delhi)

Indonesia (Jakarta)

Malaysia (Kuala Lumpur)

The Philippines (Manila)

Singapore

Thailand (Bangkok)


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Current Life Satisfaction

*denotes less than 0.5%

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

4433

85

47 41

72

2641

51

63

15

53 57

27

70

57

5

43

1

4

1

*

*

Base: All respondents

Regional Average

Satisfied (Current)

49%

CN HK IN ID MY PH SG TH% % % % % % % %

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

0

00

00

00

00

00

00

00

00

00

000

CN HK IN ID MY PH SG TH

India87.2

HongKong67.7

China75.1 Indonesia

69.9

Singapore

59.2

Philippines85.0

Thailand

74.3

Regional AverageLife Outlook Index 71.6

Malaysia

66.2


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Mass affluent with the highest optimism are also seen to be the least prepared for their retirement 82% of massaffluent 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 theirretirement

Base: All Respondents

* denotes less than 0.5%

31 47 36 41 33

18 22 22

69 53 64 59 67 82 78 78

CN HK MY SG TH IN ID PH% % % % % % % %

Planned seriously and taken action already (planner)

Notplanned seriously and taken action yet (non-planner)

Outlook on retirementGeneral attitude towards retirement planning


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Regional AverageAge starting preparation

39Desired age

58Realistic age

59

Most Asian mass affluent indicated they start planning for retirement before 40. Hong Kong, Singapore and thePhilippines 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

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0033 00 3300 00

0000 00 00

00 00

0

00

00

00

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00

00

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Base: Respondents who have started planning

CN HK IN ID MY PH SG TH

Realistic ageAge starting preparation Desired age

Age

Outlook on retirementAge for retirement


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Todays presentation






Bh i AXA Lif


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Bharti AXA Life

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

India is a key driver of the Asia strategy

Our key imperatives in India to support our Asia strategy are:

1. Grow Distribution in the fast growing, under penetrated and less competitive Tier 2 / 3 / 4 towns through a huband spoke model

2. Developmulti-distribution channels with agency, bancassurance, direct sales force and corporate agency /broker channels

3. Leverage the large mass market Airtel customer base of 50m (and growing by over 2m per month) anddistribution reach across the country (700+ Airtel relationship centres, 4000 distributors, 800,000+ retailers)

4. Leverage and re-use AXAs regional blueprints, systems, products and business capability. Also leverage AXABusiness Services, AXA Tech and Bharti Airtels telecom network to quickly achieve scale

5. Be the Preferred company to attract and retain the best talent in India

6. Institutionalize acustomer centric culture through a service quality platform


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Bharti Group: a partnership of equals

Bharti Airtel is amongst the worlds top10 mobile companies and the fifth

largest listed company in India

60 million customers, adding 2.5

million every month

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

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


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AXA Group : a partnership of equals

120,000 employees worldwide

Leading Insurance Group in the world &Fifth largest global asset manager

Present in over 60 countrieswith 52 million customers

Rated No. 15 on the Fortune 500 Globallist

Revenue of around Euro 94 billion

Stated aim to be amongsttop 5 in every market

India


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IndiaNew business index and operations update

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 acrossover 25 cities

Over 6000 employees

Product range to cater to diverse consumer segments Term, Anticipated Endowment, ULIPs (Single Premium andRegular), Pension

Launch of asset management joint venture in Q4 2007

Business relationship with Citi Financial providing access totheir 4 million customers

Several exclusive distribution relationships

Market leading service delivery platform

ISO 9001:2000 certification for operations andcustomer service

One of the fastest in policy issuance through smarttechnology and strategic outsourcing

A C Nielsen customer satisfaction scores one of the

(1)100% share

There has been a rapid expansion of our footprint since the launch ofour national operations in December 2006


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Todays presentation


India life insurance market and the India consumer mindset





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AXA India Market Entry Journey

Key questionsto be addressed

Market growthpotential andreadinessReceptive to AXAcapabilitiesDoes the regulatoryenvironment supporta level playing field

Strategic objectivesNiche or mass marketPan-IndiaReady capabilitiesGreenfields or acquisition

Local partner driversLocal partner financialstrength and commitment tobusiness line

Detailed competitivestrategyExpansion planOwnership and fundingstructureWhich implementationpartnerships

Pilot parametersProgramme planStart-up teamBrand architecture andmarket entry brandbuilding

Market acceptanceMarket conditions andreview of business objectivesManagement depth andcapabilityScaleability, vendourperformance

Approach Desktop researchInterviewsMarket analysis

Market analysisOn-site interviewsGlobal team

Long list of potentialsTerms sheet clarifyingresponsibilities

Project team made up ofdesign and build skills

Complex programmemanagement anddedicated projectmanagersScaleable solutionsPilot monitoring

Shareholder alignmentClarity of strategy andbusiness capabilities requiredRecruitment and talentdevelopment and retentionImplementation partneralignment

Deliverables Go- No GoTimelines

Criteria for local partnerCapital requirement

Selection of partnerAgreements

Design of Day 1 modelRegulator alignment

Day 1 launchMonitoring of Day 2requirementsNational launch

Organizational changeprogrammeScale up of operationsRisk management

Market

scan

Q2 2004

Market entry phaseology

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

Post launch

Review

Q2 2007


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Todays presentation







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Key Lessons

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 demographicsmakes 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 alonger term view

Multi-channel capability is important to address heterogeneous customer segments

Pan-India players require strong regional structures

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

K L


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Key Lessons

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 developedfrom the market

A clear long term vision and strategy, strong governance model and quality platformwill win a long term competitive advantage

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


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AXA Market Entry in India A case study

Tim ThomasChief Operating Officer, Bharti AXA Life

20 May 2008

Axa_aibc Paper Melb 20 May Final

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