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AXA's Pacific New 3 Year Growth Strategy Outlined

AXA Asia Pacific Announces its Half Year Results

New three-year growth strategy outlined

AXA Asia Pacific Holdings Limited today announced an operating profit for the six months to March 31, 2000 of $145 million after tax and before abnormals, down 14 per cent from $169 million for the corresponding period last year.

The Directors declared an unchanged interim dividend of 4.5 cents per share which will be franked to 60 per cent.

Australia and New Zealand

Operating profit in Australia and New Zealand was $50 million compared to $121 million for the corresponding period last year. Operating earnings were $38 million ($43 million last year) but investment earnings were $35 million, well down on $84 million last year which benefited from a non-recurring profit on the sale of the company's interest in CGU. In addition, $23 million of provisions and non-recurring costs, particularly in respect of Y2K, the implementation of the GST and Business Tax Reform have been taken this year.

Income protection business in Australia recorded product losses of $13 million compared to $15 million for the same period last year. The major impact was continuing poor claims experience.

International Businesses

Profit in AXA China Region was $135 million, up 65 per cent on last year ($82 million) with particularly strong growth in investment earnings, up 208 per cent to $77 million ($25 million in the same period in 1999). The results were boosted by strong equity markets coupled with an asset shift to equities made earlier in the financial year.

The results benefitted from a $6 million profit from AXA Life Singapore following its acquisition last year from AXA SA.

Total Group Profit

Total profit, after tax, for AXA Asia Pacific was $254 million, up from $198 million last year. This increase was significantly impacted by two large abnormal items. The first was an abnormal accounting profit of $149 million arising from the transfer of the holding in AXA China Region to NMLA, and the subsequent application of market value accounting.

The second was an abnormal provision of $40 million after tax against expected writedowns as a result of planned sales of non- core businesses in New Zealand, costs related to the rationalisation of the distribution management structure in Australia and the planned reorganisation and transformation of the Australian and New Zealand businesses.

Commenting on the results, and on prospects for the future of the company, the new Group Chief Executive, Les Owen, said:

"The overall result has been affected by taking a cautious approach in a number of areas. There are some disappointments. Further losses from income protection business, whilst reflecting the general experience in the Australian market, are disappointing. We are taking further rigorous action in pricing, policy design, underwriting standards and claims management. I expect that other players in the market will also take action to return this business to profitability. However we are, if necessary, prepared to see some reduction in market share.

"There are several encouraging features. In particular, the performance from the health business has been strong with total premiums up 9.4 per cent to $338 million ($309 million last year). Membership has increased by more than 6 per cent over the first six months and is still growing ahead of the introduction of Lifetime Cover on July 1, 2000.

"Profit from AXA China Region is well up, helped by strong growth in investment earnings. However, investment markets are volatile and recent rises in interest rates sound a note of caution for the second half.

"New business in Australia has increased in the first half helped by the Summit Master Trust which grew by 158 per cent and a continuation of the recent improvement in investment performance in our key funds. Annuity business has also performed well.

"In mainland China, AXA Minmetals, the Group's joint venture company in Shanghai, now has more than 700 agents selling a full product range. This makes AXA Asia Pacific the only Australian based life company now participating in writing business in mainland China.

"AXA Minmetals is progressing well and following changes in regulation now provides a platform to expand to other parts of China. Our investment in this business offers great potential and we have decided that we will not separately pursue further licences in China," Mr Owen said.

In Japan, AXA Asia Pacific has decided not to take a shareholding in the AXA Group's life insurance company, AXA Nichidan.

"We have decided that taking a controlling interest would involve too great an investment in this market relative to our current market capitalisation and would detract from our focus on improving our performance in Australia and New Zealand"

Future Strategy

"Turning to the future, it is clear to me that a major programme of change and transformation is needed if we are to become the reference company in the Australian and New Zealand markets," Mr Owen said.

"Our aspiration is to be one of the top 20 performing companies in Australia and New Zealand over the next three years measured by total return to shareholders.

"Our primary markets will be retail investment, superannuation and risk protection.

"We have set out a strategy which focuses on growing profitable new business, increasing retail funds under management and significantly improving our current expense ratio. We are determined to deliver excellence in investment performance, product design and innovation, customer service and distribution relationship management. Our targets over the next three years are to: *Double the value of our new business *Reach the top 5 in terms of net retail funds inflow *Reduce our management expense ratio by 50 per cent *Be rated in the top 5 in terms of service in the Assirt service rankings *Be judged in the top quartile in terms of employee satisfaction, measured by the global AXA Group employee survey."

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