AXA Group

The French Life Insurance market declined by 11% in 2008, especially on Individual lines business (-12%) whereas Group Life business decreased by 1%. This negative market evolution was principally due to the financial crisis and the economic downturn. In this context, AXA outperformed the market on individual savings business (-5%), despite a drop in unit-linked funds sales. AXA underperformed the market on Group business, as a result of an exceptional level of large retirement contracts in 2007 (€777 million vs. €187 million in 2008), partly compensated by Group Life and Health performance in 2008 (respectively +8% and +11%) thanks to a good level of new Health contracts. AXA ranked third in the French Life & Savings market in 2008.

(1) Source: FFSA.

In the Life insurance market, total Life industry sales were down 3% for the first nine months of 2008 as compared to the same period last year. The equity market downturn had a strong negative effect on industry Variable Life product sales, resulting in a decline of 16% for the first nine months of 2008. Industry Universal Life sales also saw a decline during the same period, falling 2%, partly attributable to price increases across the industry. In addition, for the nine month period, Whole Life insurance sales increased 4% and Term Insurance sales decreased 1%. In the annuity industry, Variable Annuities were negatively impacted by the fall in equity markets as industry sales declined 10% through the first nine months of 2008. Conversely, Fixed Annuities benefited from the difficult market environment as consumer preferences shifted to more conservative investment vehicles, leading to an industry sales increase of 41% for the first nine months of 2008. In Life, AXA ranked 13th overall for the same period, as increased pricing in Universal Life products impacted sales considerably. AXA's Variable Annuity business maintained its 2007 year-end market share, ranking third overall through nine months.

(2) Please note that the numbers quoted for the market data (Life and annuity) are for the nine months ended September 30, 2008. Source: LIMRA and VARDS (Morning Star).

New annualized business (new regular premiums plus 10% of single premiums) was 6% lower than the same period in 2007. Concerns over global economies, the banking sector and a subsequent equity price collapse, alongside the impact of changes to capital gains tax announced in the Pre Budget Report, adversely affected Wealth Management business volumes (down 16%). Individual Pre and Post Retirement products are no longer benefiting from the post A-Day impact experienced in 2007 or the migration into Self Invested Personal Pensions, however other opportunities still exist in these markets. Fund Supermarkets and Wrap platforms continued to attract advisers and investors alike, while the transition to fee based advice gathered momentum. Annuity sectors faced significant threat from low interest rates. Protection market volumes were depressed as mortgage sales fell sharply driven by the ongoing'credit crunch'. AXA's Protection sales (which represented 3% of AXA Life APE in 2008) rose by 15% over the first nine months of 2008 vs. the same period in 2007, capturing market share of 7.3% (vs. 6.7% in 2007) while the market fell by 4%. Within the United Kingdom, the traditional IFA and multi-tie channels represented collectively 77% of total market new business. AXA's market share remained at 7.7% in 2008.

(3) Please note that the numbers quoted for the market data are for the nine months ended September 30, 2008. Source for market share: ABI/MSE© 2008 Association of British Insurers.

The Life insurance market declined by 3% due to lower annuity sales following turbulent market conditions. Bancassurance sales also suffered as a result of the new regulatory constraints making insurance products with strong investment characteristics more difficult to sell. Falling asset values combined with decreasing interest rates should trigger many insurers to review their annuity product features. Competition in the high margin medical segment continued to intensify with both life & non-life insurers continuing to aggressively target this market. The industry did welcome the conclusion of the review into Increasing Term (a key product for a number of insurers) tax deductibility which, while halving deductibility for new business, resolved uncertainty and enabled the industry to relaunch the product. As in 2007, AXA ranked 10th in the market based on premium income (3rd for number of inforce Medical policies). AXA's market share was 2.8%.

(4) Source: Insurance Research Institute. Statistics of Life Insurance Business in Japan. Fiscal Year 2007. Premium income growth in 2007 excludes Kampo Life which reported for the first time in FY2007.

The Life & Savings market increased by 1% in 2008. The trend away from traditional products in favor of unit-linked annuity products continued, but inverted in the last quarter due to the financial crisis. The increase in short-term and mediumterm investment products, which compete directly with banking products, continued in 2008 (+35% in terms of single premiums). The core products of the Retirement Earnings Law ("Alterseinkünftegesetz"), the "Rürup" pensions, declined by 10% in terms of regular premiums. In the "Riester" business, the regular premiums increased by 71% thanks to fiscal incentive in 2008. German Private Health insurance market grew by 3%. In 2007, AXA ranked 5th in the Life market (considering all companies part of the Group of Public Insurers independently) and 4th in the Health market.

(5) Source: GDV (March 2009).

The Life market was flat . In Group Life, growth was slightly positive mainly caused by intrinsic drivers such as salary increases. Switzerland was still impacted by competitive re-investment activities of autonomous pension "foundations" even though they started suffering from the financial crisis due to their higher exposure to equities than traditional companies like AXA Winterthur. AXA Winterthur held the leading position in Group Life with a market share remaining above 30%. In Individual Life, the financial markets turmoil in 2008 increased sales in guaranteed traditional products with annual premiums and the low interest rate level reduced the attractiveness of traditional single premium products. Although large portfolios matured in traditional Insurance business in 2008, the low reinvestment rate resulted in a slightly negative assumed growth rate in Individual Life. AXA Winterthur ranked second in Individual Life with a market share remaining above 14%.

(1) Source: FOPI (Federal Office of Private Insurance).

In Life, 2008 is expected to be flat or even down in terms of written premiums, due to the increase in interest rates and the turmoil on the financial markets. Individual Life is expected to decrease sharply, while Group Life kept on growing driven by new legal requirements on pension contracts. In 2008, Fortis, Dexia, KBC and Ethias were recapitalized by the Federal State. AXA ranked second in 2007 with a market share remaining above 14%³.

(2) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2008 figures.
(3) Source : AXA Belgium.

Italy. The market evolution (-18%⁴ in new business production) was impacted by financial markets mainly in corporate and index linked products. Spain. The market, with a +15%⁵ growth, was characterized by the intense competition from bank deposits, stemming from the liquidity crisis initiated in 2007, and which appealed to domestic consumers who have traditionally a short term approach to saving. The industry saw the formation of large bank insurance JVs leading to a change in Top 5 players. Mexico. Life insurance market continued to grow by 10-13%⁶ , mainly driven by Individual products, the banks continuing to gain market share in Individual Life (from 37% to 41%), while losing market share in Group Life (from 22 to 20%). Turkey. The Life insurance market growth was up 2%⁷, mainly driven by Private Pension Plan (PPP) companies, which have been very competitive since 2003. In Health business, despite a low penetration rate the market profitability remained low in a competitive environment, especially due to group policies. Portugal. Investment contracts were up 18% and insurance contracts up 3%⁸. Greece. The market increased by 14%⁹. Morocco. The market evolution in 2007 showed a strong double digit growth of 42%¹⁰.

In Italy, AXA ranked 8th, in Spain 10th, in Mexico 7th, in Turkey 6th¹¹, in Portugal 7th, in Greece 8th, and in Morocco 5th. (Dec 2007).

(4) Source: Italian Association of Insurance Companies: ANIA as of Nov 2008.
(5) Source: Spanish Association of Insurance Companies: IC EA as of Dec 2008.
(6) Source : AMIS Asociacion Mexicana de instituciones de Seguros.
(7) Source: Turkish Association of Insurance Companies as of Dec 2007.
(8) Source: Istituto de Seguros de Portugal as of Dec 2008.
(9) Source: Greek Private Insurance Supervisory Committee as of Dec 2008.
(10) Source: Moroccan Association of Insurance Companies as of Dec 2007.(11) Source: Turkish Association of Insurance Companies as of Dec 2008.

Despite the considerable challenges posed by the current investment and economic environment, the fundamental characteristics that make the Wealth Management and Financial Protection markets attractive across Australia and New Zealand remained unchanged. During 2008 the Australian Wealth Management market was significantly impacted by the financial markets downturn, funds under management levels dropping 16% ¹². AXA maintained a 4th place ranking for net funds flow during this period ¹³. Despite stronger than expected uptake of the Government led KiwiSaver scheme, New Zealand retail funds under management levels fell 21% ¹⁴. Financial Protection product markets in Australia have experienced solid growth during 2008 with inforce premiums increasing 13% ¹⁵. This was the result of a shift in focus to financial protection and insurance needs in the midst of falling asset values. In New Zealand inforce premiums for insurance increased by 5% ¹⁶ reflecting strong group sales. The top 10 companies continued to dominate the market, accounting for almost 90% of inforce annual premiums. AXA maintained its 6th ranking in financial protection with 9% market share in Australia and third in New Zealand with 13% market share¹⁷.

(12) Source: Plan for Life as at September 2008 c.f. December 2007.(13) Source: Plan for Life, 12 months ending September 2008.
(14) Source: AXA New Zealand, as at 31 December 2008.
(15) Source: Plan for Life, 12 months ending September 2008.
(16) Source: ISI statistics as at 30 September 2008.
(17) Source: Plan for Life as at 30 September 2008, ISI statistics as at 30 September 2008.

The economy's growth slowed down with GDP growing by 2% ¹⁸in 2008. Hang Seng index dropped by 48% due to the financial market turmoil. Hong Kong remained a very attractive Life insurance market with high savings ratios and moderate Life insurance penetration. Individual Life market new business sales increased by 13% ¹⁹for the first nine months of 2008. Life insurance premiums increased over the past few years partly because of growing products "à la carte", strong growth in unit linked savings plan and the entry of banks and new distribution channels in the market. Hong Kong Life insurance market is relatively concentrated, with 54% of individual Life new business sales stemming from the top 5 companies and 75% from the top 10 players. Following recent acquisitions and strong organic growth, AXA is now number four for inforce premiums and five for new business.

(18) Source: 3rd quarter 2008 year-on-year % change in real terms (latest).
(19) Source: OCI statistics, 2007Q3YTD and 2008Q3YTD.

The climate deteriorated towards the end of 2007 as a result of issues in the US economy. The life insurance business in China performed well in the first nine months of 2008 growing by 67%¹ in total premiums largely on the back of strong bancassurance business². AXA was number thirty-three for inforce premiums and twenty-seven for new business . The life insurance sector in Indonesia also performed well in the first half of the year with 39%³ growth in terms of new business index. AXA was number six for inforce premiums and three for new business⁴. Thailand, a market with a relatively low Life insurance penetration of 3%, grew to €633 million in annual Life premiums for the first eight months of 2008. AXA was number eight for inforce premiums and seven for new business⁴. The Philippines remained a similarly attractive market⁵ with very low Life insurance penetration of 1.1%. AXA was number two for total premium income⁴. Singapore, which is characterized by large bank deposits and an affluent but underinsured population, recorded new business index of over €800 million⁶ for the nine months ended September 2008. AXA was number nine for inforce premiums and eleven for new business⁴.

(1) Source: CI RC Statistics.
(2) Source: Watson Wyatt AP Life Update. For China, data as of August 2008 for total weighted premium income and 2007 data for weighted new premium income. For Indonesia, Life Insurance Federation of Indonesia ("AAJI"), data from January to June 2008. For Thailand, Thai Life Assurance Association (data from January to July 2008).For the Philippines, Insurance Commission based on 2007 data; ranking based on total premium income (unweighted). For Singapore, LIA annualized statistics (2005-2008) based on 2008 figures which are annualized (as per policies inforce as at June 30, 2008).
(3) Source: Watson Wyatt report, September 2008.
(4) Source: TLAA Statistics.
(5) Source: Watson Wyatt report, September 2008.
(6) Source: Singapore LIA Statistics.

Due to the financial crisis, between the first half of 2008 and the end of 2008, Life market growth declined from +12% to 0% in Poland⁸ (excluding short term products), to -9% in Hungary⁹ and went from +10% to +6% in Czech Republic¹⁰and Slovakia. AXA's market share over the region was stable at 2.4%. AXA ranked 9th in Hungary, 10th in Czech Republic and 6th in Poland. In the Pension Funds market, AXA's position improved. AXA ranked 1st in Slovakia, 2nd in Czech Republic and 5th in Poland and Hungary, with a market share of 7.8% over the region (as compared to 7.4% in 2007).

(8) Polish Financial Supervision Authority site.
(9) Report of the Association of Hungarian Insurance Companies (Mabisz).
(10) Czech association of insurance companies.

In 2008, market grew by an estimated 3%. In 2008, Motor business was estimated to have increased by 1%, after 2 years of decrease. Household business was estimated to have increased by 5% due to the high increase of property index (+5.4% estimated at end of November). Commercial business was estimated to have increased by 3% mainly thanks to Liability and Construction lines. AXA ranked 2nd in the French Property & Casualty market.

(11) Source: FFSA.

The general deterioration of economic conditions impacted market growth, especially on mortgage linked accounts within Corporate Partners. Despite this, market tariffs continued to be under pressure given competitive pressure and focus on retention. AXA continued to be ranked 4th in the personal lines market with continued growth in Motor through Swiftcover and in household. AXA's Commercial lines revenues were flat reflecting difficult market conditions. In a competitive flat Healthcare market, AXA grew by 8% driven by strong new business and retention through product innovation and service, broadening distribution and further growth in International business. AXA further grew its share of the Healthcare market and remained ranked 2nd. In Ireland, AXA ranked 5th overall or 3rd in its core market of Motor. Throughout 2008 the market remained soft with average prices for Motor 40% lower than 2002. With declining profitability in the past few years, price increases did occur in late 2008 and early in 2009 but further significant rises are expected across the market during the course of 2009.

In 2008, total business increased by 0.2%. Personal and Commercial Motor lines fell by 2.0% in 2008 in the context of an intense price competition. Personal and Commercial Liability remained stable. In Personal non-Motor the situation was mixed: Accident slightly increased (+1%), Property increased considerably (+5%), caused by rate increases resulting from high claims in building in 2007, industrial property continued to decrease (-0.3%), suffering from ongoing pressure on prices. AXA ranked third (considering all companies part of the Group of Public Insurers independently) in the total Property & Casualty market in 2007.

(13) Please note that the full year figures are preliminary estimation as of end February 2009. Source: GDV.

The Property & Casualty market was flat¹⁴due to fierce competition and price pressure mainly in Motor business and Commercial lines. AXA Winterthur was the market leader in P&C with a stable market share at 15%.

The Property & Casualty market is expected to increase by 3% in 2008. In Motor, the growth should reach approximately 2%, still impacted by the high competiveness of this market. Household & Property should grow by 2% versus 8% in 2007, due to the non recurrence of the implementation of the natural disaster guarantee in Household policies. Liability should grow by 3% while Workers Compensation is expected to grow by 3%. Tariff increases fuelled the increase in Health (approximately +7%). AXA continued to rank first in 2008 with a 22.5% market share.

(15) Derived from the nine months ended September 30, 2008 figures (source: Assuralia (Belgian Professional Union of Insurance companies)).

In Italy the market remained stable as the non Motor business (+3%) was offset by Motor (-3%), impacted by the slowdown in car sales¹. In Spain the market, +2%², showed clear signs of deceleration with the economy in recession, an important rise of unemployment, a drop in car sales (-28%) and the fall of the construction industry. In Mexico the growth of the market is expected to accelerate (13-15% vs. CAGR03-07 of 10%). Health is expected to continue to grow (15-20%). As of Q3 Motor grew about 12%, the large players remained with a stable market share, however, Q4 expected to slow down growth (yearly growth expected about 10%). In the other lines of business the growth is mainly driven by government business (8-10%). In Turkey, the market increased by +16%³ but is expected to be impacted by the economic deterioration (GDP recession, inflation stabilized around 10% and the explosion of unemployment rate). In Portugal the market decreased by 2%⁴ mainly explained by Motor branch (-7%) and workmen compensation (-3%) impacted by the economic deterioration. In Greece the market increased by 4%. In Morocco the market increased by 11%⁵ driven the economic growth. In Gulf Region market continued growing strongly (18-20%) driven by regulatory changes, investments in infrastructures and population inflows, with an increasing price competition.

In Italy, AXA ranked 7th, in Spain 2nd, in Mexico 3rd, in Turkey 1st , in Portugal 2nd, in Greece 11th, in Gulf Region 6th, and in Morocco 1st. (Dec 2007).

(1) Italian Association of Insurance Companies: ANIA (Nov 2008).
(2) Spanish Association of Insurance Companies.
(3) Source: Turkish Association of Insurance Companies as of Dec 2007.
(4) Istituto de Seguros de Portugal.
(5) Moroccan Association of Insurance Companies (Dec 2007).

The Property & Casualty market increased by a robust 12% in 2008. However, the Motor market growth was only 4%, a much lower level than 2007, due to a strong contraction of the market in the second half of the year as the economic crisis affected car sales, as well as a fierce competition, with most insurers decreasing their tariffs following the relatively stable loss ratios enjoyed over 2007/2008. Premiums for long-term products (which include all contracts with a maturity above 3 years, in particular Health, Medical and Accident) grew by a remarkable 17%, despite the economic recession, even if new sales slowed down compared to previous years. Kyobo AXA ranked 1st in the Direct Motor insurance market or 6th in the total Motor market, increasing its market share from 4.4% in 2007 to 4.7% in 2008. Within the total P&C market, Kyobo AXA ranked 12th. Japan. The Property & Casualty market declined by 3%¹¹ in the year ending March 2008. Compulsory Automobile Liability Insurance and Personal Accident Insurance experienced the sharpest drops, while Motor insurance recorded a mild decrease of 1%¹¹. The Motor market further contracted in the second half of 2008, driven by decreasing car sales and the continuing shift of customer preferences towards small cars. AXA Direct ranked 3rd² in the Direct insurance market in September 2008, with a market share of around 17%¹². AXA Direct ranked 14th¹² among all insurers for Motor insurance. Singapore¹³. The insurance market grew by 14% in gross written premiums in the first three quarters of 2008. The growth was observed in most lines of business in particular, Motor, Workmen Compensation, Health and Bonds. AXA ranked 3rd for motor and 2nd for Marine Cargo in 2007 with a market share of 8% as at 3rd quarter 2008. Malaysia¹⁴. The P&C industry grew by 10.1% in gross written premiums for the first three quarters of 2008, mainly contributed by growth in Motor and Property lines of business. AXA Malaysia ranked 15th with 3% of market share in 2008. Hong Kong¹⁵.The P&C industry grew by 12.3% for the three quarters of 2008, mainly attributable to the strong economic growth during the first half of 2008. AXA ranked 8th with 3% of market share in 2007.

(7) Data based on insurance companies reports submitted to FSS, as of November 2008.
(11) General Insurance Association of Japan (data as of March 2008).
(12) Rankings based on companies' disclosures as of September 2008.
(13) Monetary Authority of Singapore.
(14) Insurance Services Malaysia Bhd.
(15) Office of the Commissioner of Insurance.

In 2008, overall premiums grew by an estimated 3%. The market was very fragmented and very competitive with a continuing pressure on prices. In Personal lines, the growth was estimated at 3% driven mainly by an increase in volume. In Commercial lines, the pressures on prices and margins were offset by the inflation impact of values to be insured. AXA ranked 6th¹⁷ in the P&C market.

(16) Growth information provided by the Office of the Superintendent Financial Institutions (OSFI).
(17) Canadian Insurance 2008 Annual Statistical issue.

AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to worldwide Property and Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance. Since 2005, after several years of rate increases and program restructurings, the market had experienced soft underwriting conditions on these lines of business. 2008 confirmed the slowdown of this trend and a general upturn of pricing cycle is expected with January 1, 2009 renewals already showing rate increases in specialty lines of business. AXA Corporate Solutions Assurance is among the top five large corporate risks insurers in Europe¹⁸.

(1) Lehman Brothers, Merrill Lynch, JP Morgan, KBW Annual Reports.

In 2008, the decline in global equity markets accelerated throughout the year, as the crisis in the financial markets expanded to the broader economy. With the US recession, investors increasingly moved away from risk and all global equity markets were impacted, as many investors were forced to raise cash and continued to look for safe havens. As a result, the 4th quarter of 2008 saw a continuation of significant stock price declines and credit market turmoil. As risk and deleveraging became the dominant criteria driving many investment decisions, stock price movements became strongly correlated. Given the anticipated increase in weak economic underpinnings, corporate earnings will continue to be negatively impacted into the foreseeable future, making global asset management a difficult, yet highly opportunistic, endeavor. Beginning in 2008 and continuing in 2009, governments around the globe and related central banks have aggressively taken actions designed to expand credit and liquidity, thereby creating demand for goods and services to ultimately spur a recovery. By stabilizing asset prices, the deflationary de-levering and the resulting recession that the global economy is currently experiencing can be addressed and help the real economy begin to level out. While global asset managers face significant headwinds in 2009, signs of sustainable economic recovery could spur investment activity. The lag that usually exists between capital market improvement and the return to risk by investors is expected to weaken asset flows in the near term. This weakness is expected to be most acute for retail oriented platforms and/or asset managers with inferior investment results. However, when the health of global economies improves, investors will and should begin to take advantage of attractive risk/return opportunities to the ultimate benefit of global asset managers. On a broader note, the necessity for world economies to save more aggressively continues to be evident. Investor sentiment towards controlling risk through diversification should be of tremendous benefit to global asset managers who offer a broad range of choices that are prudently managed with a focus on the long term.