AXA Group

French Life Insurance market declined by 3% in 2007, especially on Individual lines business (4%) whereas Group Life business increased by 7%. This negative market evolution can be explained by the impact of new law on inheritance tax enacted in 2007 and by some positive regulatory impacts (Fourgous, PEL...) which explained the exceptional growth in 2006 (+17%). In this context, AXA outperformed the market on individual lines business (+1.5%), in particular with the successful launch of Capital Resources (APE: €23 million). AXA France maintained its market position on Group business with a growth of 1.9% after an exceptional growth in 2006 (especially on retirement). On the total Life market, AXA ranked third.

(1) Source: FFSA.

In the annuity market, variable annuities were the product of choice with industry sales up 15% through the first nine months of the year, primarily driven by the demand for guaranteed living benefit riders. Industry fixed annuity sales continued to decrease (8%) over the same period as a result of the continued low interest rate and competition from products such as bank certificates of deposit. In the Life insurance market, total Life industry sales were up 7% for the first nine months of 2007. Strong first half equity market performance, higher universal Life prices, greater tax clarity on some Group Life policies and expansion into other distribution channels buoyed variable Life sales (+8%) through the first three quarters of 2007. Life insurance products, such as universal Life, continued their strong sales in the first nine months of 2007, with industry universal Life sales up 10%. For the same period, fixed whole Life insurance sales increased by 1%, and term insurance sales increased by 7%. AXA gained market share, ranking second in the variable annuity market and ninth in the variable Life market for the first nine months of 2007.

(2) Please note that the numbers quoted for the market data (Life and annuity) are for the nine months ended September 30, 2007. Source: LIMRA and VARDS (Morning Star).

New annualized business (new regular premiums plus 10% of single premiums) were 16% higher than the same period in 2006. Despite mild stock market instability, and concern over the proposed changes to capital gains tax announced in the Pre Budget Report, "Wealth Management" markets held up. Popularity of open architecture investment vehicles (Wrap and Self-Invested Personal Pensions) continued. Stock market falls commenced at the end of the period. The positive effects from individuals and corporates reviewing existing pension arrangements resulting from "A Day" Pension Simplification changescontinued throughout the period. This also influenced increased activity in drawdown and annuity products. Large numbers of final salary scheme reconstructions also drove Corporate Personal Pensions growth, although the market fell off at the end of the period. The Protection market remained flat as mortgage sales were depressed by the ongoing credit crunch. Within the UK, the traditional IFA and multi-tie channels represented collectively 76% of total market new business. AXA's market share was 7.8% (as of September 2007).

(3) Please note that the numbers quoted for the market data are for the nine months ended September 30, 2007.

The Life insurance industry faced two main challenges during 2007: (i) the March 2007 announcement of a substantial reduction in the tax deductibility of the Increasing Term product (a key product for a number of insurers) led to most insurers discontinuing the product, and (ii) the regulator mandated retrospective review of all medical claims paid in the past five years which, following most insurers identifying claims which had been unpaid or underpaid, generated significant negative sentiment in the press for the industry. Whilst these conditions impacted many insurers, individual annuity sales sourced from bancassurance distribution channels continued to generate growth for a number of insurers. Changes in deregulation (notably bancassurance and the postal service privatisation), social infrastructure (including a population that is both ageing & declining) and customer sophistication are expected to continue to influence market dynamics. Being one of the most mature insurance markets, Japan continues to be a highly competitive market. AXA is 10th in the market based on the number of inforce policies (3rd for Medical products).

(4) Source: Insurance Research Institute. Statistics of Life Insurance Business in Japan. Fiscal Year 2006.

In 2007, German Life & Savings market was flat. The trend away from traditional products in favour of unitlinked annuity products (+20% in terms of regular premiums and +75% in terms of single premiums) kept going on. 2007 was impacted by the increase in short-term and mediumterm investment products (increase by 26% in terms of single premiums) which competed directly with banking products. The core products of the Retirement Earnings Law ("Alterseinkünftegesetz"), the "Rürup" pensions grew by 100% in terms of regular premiums. "Riester" products decreased by 25% in terms of regular premiums in 2007 due to one-off effect last year as 2006 benefited from fiscal incentives. In the Life market, AXA ranked sixth (2006 figures including DBVWinterthur in terms of gross revenues). German Private Health insurance market grew by 2.9% impacted by two opposite effects, on the one hand the increases of the premium rates for Public Health insurance which favoured the switch from Public to Private and on the other hand the more stringent rules of the Health reform relating to the income threshold. In the Health market, AXA ranked fifth (2006 figures including DBV-Winterthur in terms of gross revenues).

(5) Source: GDV. Please note that the full year figures are preliminary estimations

The Life market was flat. Switzerland was impacted by a low interest rate level with tighter margins and highly competitive re-investment activities of banks and autonomous pension "foundations". Estimated Group Life market growth in 2007 of +1.5% was mainly caused by intrinsic drivers such as salary increases and favourable economic environment. Customers benefited from increased pricing competition and enhanced customer retention services. The estimated Individual Life market growth of +1.6% derived from significantly increased unit-linked insurance product sales (+12.9%) and good re-investment opportunities due to large portfolio maturities in traditional insurance business. After the AXA Lausanne integration, AXA Winterthur ranked second both in Group Life and Individual Life.

(1) Source: the Swiss Insurance Association statistics.

The Life market returned to a normal trend in 2007 with a growth of approximately 9%, following a 2006 market downturn in Individual Investment and Savings, due to several tax changes. The growth was mainly attributable to non unit-linked market increase, estimated around +23%, whereas the unit-linked market sharp decline was estimated at around -31%. Corporate Life was expected to grow by nearly 13%. AXA ranked 4th (3).

(2) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2007 figures.
(3) Source: Assuralia (Belgian Professional Union of Insurance companies) (data as of 2006).

In Spain, the liquidity crisis and the domestic debt levels, along with a new fiscal law which removed tax advantages from insurance, led to growth of 2.1% (4) . In Italy, 2007 market forecast (5) for new business showed a 7.0% decrease, especially on bankinsurance (-10%) and agents networks (-19%) impacted by the strong drop in corporate contracts (-43%). After the recession started in 2003, the Portuguese economy started to recover, though the unemployment rate remained at high levels. The Life & Savings market grew by 6.9%(6). Greece experienced a rapid growth, remaining as one of the European insurance markets with a low penetration rate. In this context, the Life & Savings segment grew in 2007 by 6.6% (7). The Turkish economy maintained a fast growth. However, the competition of Private Protection Plan's companies led to a decrease of the savings business. In Morocco, the penetration rate remained very low and the market experienced a boost in the Bankinsurance business in the last years focused on capitalization and traditional risk products. In Spain, AXA ranked 9th; in Italy, it ranked 13th in a highly concentrated market; in Portugal, AXA was the 7th player in a market dominated by Bankinsurance channels; in Greece, AXA was ranked 10th; in Turkey, it ranked 4th; in Morocco, it ranked 3rd (combining both Property & Casualty and Life & Savings segments).

(4) ICEA source.
(5) IAMA source as of November 2007.
(6) Source: Portuguese Insurance Association.
(7) Source: Hellenic Association of Insurance Companies as of September 2007.

Regulatory change and complexity, the continuing shift of financial responsibility from government to individuals and the poor savings behaviors of most households drove demand for quality financial advice and, in turn, the need for comprehensive support services for advisers. Growth in the wealth management product markets in Australia and New Zealand continued to be driven by the ageing population, government support for self funded retirement and strong investment markets. Major regulatory changes in both countries in 2006 and 2007 aimed at encouraging retirement savings were expected to maintain momentum with market growth rates forecast of 11% per year (8) for the next five years. Financial protection product markets were underpinned by rising incomes, asset appreciation and widespread under-insurance, with expected growth rates of 10% per annum (9). Both Australia and New Zealand have open, competitive and relatively concentrated markets. The top 10 companies accounted for around 60% of retail funds under management, 75% of net retail funds flow and close to 90% of new and in-force annual premiums in Australia (10). AXA ranked 4th for retail wealth management and 5th in financial protection in Australia. AXA is unique amongst major competitors in operating across the entire wealth management and financial protection value chain asset management, products, platforms, adviser services and financial advice. With open competition at each stage of the value chain, this end-to-end presence allows AXA to capture more overall margin and be less sensitive to the shifting of margin between different parts of the value chain.

(8) Source: Plan for Life as of September 2007.
(9) Source: DEXX&R.
(10) Source: Plan for Life as of September 2007.

The economy of Hong Kong continued to be strong in 2007 with GDP growing by 6.2% (11) and the Hang Seng index growing by 39.3% in 2007. Hong Kong remained a very attractive Life insurance market, with high profit margins, high savings ratios and moderate Life insurance penetration. Individual Life market new business sales increased by 30% (12) for the nine months to September 2007. Life insurance premiums increased over the past few years partly because of growing product options, 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 53% of individual Life new business sales stemming from the top 5 companies. Following the acquisition of MLC Hong Kong in May 2006 and Winterthur Life (Hong Kong) in April 2007, and strong organic growth, AXA is now number three for inforce premiums and five for new business.

(11) 3rd quarter 2007 year-on-year % change in real terms.
(12) Source: OCI statistics, 2006Q3YTD and 2007Q3YTD.

Strong economic growth momentum was observed in South East Asia throughout 2007, as GDP of the four middle-income ASEAN countries (13) grew by 5.7% in the first and 6.2% in the second half of the year. Neighboring expanded its GDP at an even faster pace (+11.5%) on the back of strong investment, solid consumption and resilient exports (14). This strong macroeconomic environment set the stage for continued growth in the South East Asian Life insurance markets where AXA is currently present. In particular, Indonesia's Life insurance market returned to strong growth of 48%, with total premium income of €2.03 billion for the nine months ended September 30, 2007 (2006 €1.37 billion) (15). The Philippines remained a similarly attractive market with over €0.75 billion in Life insurance premiums and very low Life insurance penetration of 1%. Thailand, a market with a relatively low Life insurance penetration of 2.7% (16) grew to €3.73 billion (17) in annual Life premiums, a 41% increase versus prior year. Last but not least, Singapore a market that can be characterized by large bank deposits and an affluent but underinsured population recorded gross life premiums of €3.26 billion (18) for the nine months ended September 2007. Likewise, China kept its attractiveness, currently being the fourth largest Asian Life insurance market (after Japan, South Korea and Taiwan) with €36.66 billion (19) in annual Life premiums and a low Life insurance penetration rate of 2%.

(13) Middle-income countries of the Association of South east Asian Nations: Indonesia, Malaysia, Philippines and Thailand.
(14) Asia Development Bank, Asia Economic Monitor, December 2007
(15) Indonesia Life Insurance Industry (AAJI).
(16) Thai Life Assurance Association (TLAA).
(17) Thai Life Assurance Association (TLAA).
(18) Singapore Life Insurance Association.
(19) CIRC publication, 2006 (www.circ.gov.cn).

The Life market benefited from a strong development (respectively +9% in Poland (20), +13% in Hungary (21) and +14% in the Czech Republic (22)). AXA's market share over the Region increased from 1.9% in 2006 to 2.5% in 2007. AXA ranked ninth in Hungary, tenth in Czech Republic and twelfth in Poland. Pension Funds market followed the same trend. AXA ranked second in Czech Republic and Slovakia and fifth in Poland and Hungary with a market share of 7.4% over the region (as compared to 5.0% in 2006).

(20) Polish Financial Supervision Authority site.
(21) Q3 2007 report of the Association of Hungarian Insurance Companies (Mabisz).
(22) Czech association of insurance companies.

In 2007, premiums grew by an estimated 2%. Motor business was estimated to have decreased by 0.5% in 2007 (1% in 2006) due to a very competitive market with a continuing pressure on prices. Household business is estimated to have increased by 5% due to the high increase of property index. Commercial business is estimated to have increased by 3% mainly thanks to Liability and Construction lines. In the Property and Casualty market, AXA was the second player.

(9) Source: FFSA.

Hardening of the United Kingdom market commenced, led by Motor which had modest upward trend throughout 2007. Household and Commercial remained soft, but Property lines were expected to harden following the summer floods. Liability lines were expected to be last to turn, with increases only offsetting claims inflation by 2009-2010. Within AXA, Personal Lines saw significant growth within Motor following the acquisition of Swiftcover and organic growth in household. Commercial lines revenues were flat reflecting difficult market conditions. AXA was up one position to 4th in the market. Overall growth in the Healthcare market remained limited and competition was intense but AXA growth of 12% was driven by new business deals, strong growth in International and product innovation. AXA continued to rank 2nd in the market, with a 1% growth in market share to 25.5%. In Ireland, the Motor market remained soft with intense competition and rates continued to fall. AXA ranked 4th in the Irish market (3).

(2) The ranking figures are based on publicly available Interim Reported Results presentations, and are generally on an IFRS basis. They are reported on a different basis to statutory reporting through FSA Returns (which are UKGAAP).
(3) Based on data from Irish Insurance Federation 2006 fact files

In 2007, total business decreased by 0.4% (to €55 billion). Personal and Commercial Motor lines fell by 1.8% in 2007 in the context of an intense price competition. Personal and Commercial Liability grew by 0.5%. Personal non-motor lines remained flat (property +0% and Accident +1%) as penetration was already high. Industrial property gross written premiums decreased by 5% due to pressure on prices. In the P&C market, AXA ranked fourth (2006 figures including DBV-Winterthur).

(4) Please note that the full year figures are preliminary estimations. Source: GDV.

The Swiss P&C market ranked first worldwide in both premiums per capita and premiums in % of GDP. While the market grew by 2.6% in 2006, mainly due to tariff increases in the Motor and Liability business lines, it started softening in 2007 at an expected 1% due to fierce competition. Motor business (25% of the market) should grow by 1.5%. Both Property and Workers Compensation lines of business slowed growth to about 0.9%. AXA Winterthur ranked first with a market share above 15%.

(5) Based on a report by Swiss Re.

The Property & Casualty market 2007 growth rate was still fuelled by the introduction of the natural peril coverage in mid-2006 and tariff increases in Health. The Motor market, which represented 32% of total Property & Casualty market was estimated to have grown by approximately 1.5%, following significant market pressure, while household premiums estimated growth was about 9% (natural peril). The Workers' compensation market should confirm its growth pace in 2007 at around 4%. AXA continued to rank first in the market.

(6) Derived from the nine months ended September 30, 2007 figures (source: Assuralia Belgian Professional Union of Insurance companies).

In Spain, the relative slowdown of the economy had an impact on the car sales industry which showed a slight deceleration and on the building industry. Price competition continued in the Motor insurance market, which registered a 2.7% (7) growth. In Italy, 2007 market forecast in P&C (8) showed a 1.9% gross written premium increase. In Portugal, insurance activity faced an unfavourable economic environment (+0.1% in P&C (9)). After the recession started in 2003, the Portuguese economy started to recover, but the unemployment rate remained at high levels. New regulation allowed clients to cancel their policies without mandatory notification, which increased cancellations and new business. Greece remained as one of the European insurance markets with a low penetration rate, and its P&C segment grew in 2007 by 8.5% (10) . The Turkish economy maintained a fast growth. Thus, Turkish P&C segment increased by 17% (11). In Morocco, the penetration rate was still very low. In Spain, AXA ranked 2nd in the non-life market; in Italy, it ranked 8th in the market; in Portugal, AXA ranked 2nd; in Greece, it ranked 10th; in Turkey, AXA ranked 2nd; in Morocco, AXA ranked 3rd (combining both Property & Casualty and Life & Segment segments).

(7) Q3 2007 report of the Association of Hungarian Insurance Companies (Mabisz).
(8) Czech association of insurance companies.
(9) Source: FFSA.
(10) Hellenic Association of Insurance Companies as of September 2007.
(11) Association of the Insurance and Reinsurance Companies of Turkey source as of September 2007.

Singapore. The insurance market grew by 12% in gross written premiums in the first three quarters of 2007 as compared to the same period last year. Underwriting results remained profitable but declined due to higher incurred loss ratios particularly in motor class of business. AXA ranked 4th with 7.2% (1) of market share (3rd for motor and 2nd for Marine cargo). Hong Kong. The P&C industry grew by 4.7% in Gross written premiums for the first three quarters of 2007). However, Motor business contracted by 3.9% despite the increase in number of insured vehicles due to the soft market. Underwriting results remained profitable although lower than prior year, which was mainly due to higher claims and management expenses. AXA ranked 8th with 3.1% (2) of market share. The company was the 1st for Motor in 2006. Malaysia. The P&C industry grew by 3.9% in gross written premiums for the first three quarters of 2007. However, underwriting results showed a small loss in the same period, attributable to higher claims ratio particularly in Motor. AXA Malaysia ranked 18th with 2.6% (3) of market share.

(3) Source: Monetary Authority of Singapore.
(4) Source: Office of the Commissioner of Insurance.
(5) Source: Insurance Services Malaysia Bhd.

AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to Property and Casualty insurance of large multinational corporations, and to Aviation, Marine and Space insurance worldwide. After several years of rate increases and programs restructuring, the market experienced soft underwriting conditions on these lines of business from 2005 onwards. 2007 confirmed this trend on rates, which is to some extent due to low occurrence of major natural disasters in the recent years. AXA corporate Solutions Assurance is among the top five large corporate risks insurers in Europe (5).

(7) Sources: Lehman Brothers, Merrill Lynch, JP Morgan, KBW, Annual Reports.

Starting in mid-2007, increasing subprime mortgage delinquencies led to recessionary fears in the US, resulting in a pronounced decline in residential construction and consumer confidence. Reimbursment defaults notably in structured products used to re-fund the loans hit the financial markets which faced significant outflows as the institutional investors needed cash to back losses or wanted to shift away from risky corporate debt. This liquidity crisis led numerous European investors to sell "dynamic" monetary funds while underlying assets were not liquid. These developments generated concerns that global economic growth would slow, which in turn, had caused volatility in global equity markets as headlines about subprime losses, credit tightening and reduced liquidity persisted. In this context, the credit market registered a major spread widening due to assets illiquidity. Financial institutions became also increasingly cautious about extending credit, as they sought to maintain sufficient collateral coverage and capital to absorb potential losses, causing global growth to decelerate. The coordinated response of the central banks through rate cuts or increased liquidity were an important factor in addressing this crisis. In this environment, global asset managers continued to face near-term challenges such as deteriorated investment returns and heightened volatility. However, offsetting this threat are positive longterm demographic trends reflecting the continuing shift of retirement assets from corporate and government programs to defined contribution and individual plans. This social transfer and the increasing number of global baby boomers approaching retirement represent tremendous opportunities for asset management firms. Global investors shifted increasingly their focus, raising demand for outcome-oriented advice and services, such as lifecycle and lifestyle funds designed to ensure the preservation of retirement assets. In Europe, in particular the continuing shift to open architecture provided opportunities for asset managers to grasp some of the current captive pools of assets. In addition, a dramatic widening of risk premiums provided the basis for enhanced absolute and relative investment returns, benefiting investors worldwide. The rise in demand for more sophisticated global investment solutions, including alternative investments such as hedge funds and private equity, created expanded opportunities and a distinct advantage for large, globallydiversified asset managers.