7/31/2019 Axa_aibc Paper Melb 20 May Final
1/28
AXA Market Entry in India a case study
Tim ThomasChief Operating Officer, Bharti AXA Life
JBC Australia India Summit 2008
Melbourne
20 May 2008
7/31/2019 Axa_aibc Paper Melb 20 May Final
2/28
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
3/28
3
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
4/28
4
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
5/285
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
6/286
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
7/28
7
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
8/28
8
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
9/28
9
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
.00
.00
.00
.00
.00
.00
.00
.00
.00
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
10/28
10
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
11/28
11
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$3K reducingfrom 80% of the population in 1995 to
7/31/2019 Axa_aibc Paper Melb 20 May Final
12/28
12
India Life Insurance - Premium Trend
6 5 6 811
2228 30
34 3844
9 11 1416
20
27
2938
47
56
64
0
20
40
60
80
100
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08F
2008-09F
2009-10F
2010-11F
2011-12F
A$
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
13/28
13
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)
7/31/2019 Axa_aibc Paper Melb 20 May Final
14/28
14
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)
7/31/2019 Axa_aibc Paper Melb 20 May Final
15/28
15
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
16/28
16
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
17/28
17
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
0033
0033
0000 00
00
33 0000 00
0033 00 3300 00
0000 00 00
00 00
0
00
00
00
00
00
00
00
00
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
18/28
18
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
Bh i AXA Lif
7/31/2019 Axa_aibc Paper Melb 20 May Final
19/28
19
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
20/28
20
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
21/28
21
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
22/28
22
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
23/28
23
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
24/28
24
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
25/28
25
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
26/28
26
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
27/28
27
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
7/31/2019 Axa_aibc Paper Melb 20 May Final
28/28
28
AXA Market Entry in India A case study
Tim ThomasChief Operating Officer, Bharti AXA Life
20 May 2008