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INVESTMENT MANAGEMENT -AXA MANSARD PERSPECTIVE

Feb., 2016

AXA Mansard Investments Limited

CONTENTS

2 |

1. Domestic Economic & Market Review

2. Investment Management for the Insurance Industry

3. About Us

1Domestic Economic & Market Review


Nigeria: Low oil price, policy uncertainty stifling the economy & markets

4

4 |

6,8%6,2% 6,5% 6,2% 5,9%

4,0%

2,8%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

8,0%

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 3Q15

Real GDP growth slowed to 2.8% in 3Q151 2 External Reserves remain under

pressure – dips 17% YoY to $28 billion

Inflation near double-digit: @ 9.6% in December 20153 4 FAAC dwindles – avg. @ N450b

and 35% short of sufficiency level

588 666

777 721 685

909 851

731 673 621 610 629 580

500 568

435 388 418

565

-

200

400

600

800

1 000

7,60

8,00

8,40

8,80

9,20

9,60

déc-

14

janv

-15

mar

s-15

avr-1

5

juin

-15

août

-15

sept

-15

26,00

28,00

30,00

32,00

34,00


Forex: Desperate times require desperate measures (unmet demand in excess of $6-8billion)

5

US Fed increased benchmarkinterest rate by 25bps in Dec-2015as investors dump emerging andfrontier markets assets.

External reserves shed 4% in 4Q15(dipped by 16% to N29.1 billion inFY15) given the seasonal festivedemand pressure as well asintensified activities of round-trippers.

USDNGN exchange ratedepreciated by 11% and 14% toN199.30 and N240 at the interbankand BDC markets, respectively inFY15. Parallel market and NDFclosed FY15 at N266 and N265/$1(after touching a high of N285/$1in Nov -15).

Average financial system liquidityincrease 3-fold to N473 billion in4Q15 from 3Q15.

5 |

Desperate timesDesperate measures

US dollar rationing by the apex bank infavor of matured LC, refined petroleumproducts and key raw material imports.

Presidency announced plans for theCBN to introduce some FX flexibility inFY16 to encourage FX inflow.

CBN stop sale of US dollar to BDCs.

The apex bank, in conjunction with thebanks, introduced varying measures tostem demand including:

Reduction to the annual US dollarlimits from $50,0000 – some bankscut down to as low as$10,000/annum.

Increasing transfer charges viadebit card channel from 0-5% toas high as 25%.

Introducing a daily offshoretransaction limit via Naira debitcards.


Monetary Policy – clearly loosing the FX battle… confused?

6

6 |

200

220

240

260

280

300

2829303132333435

Dec-‐14

Jan-‐15

Feb-‐15

Mar-‐15

Apr-‐15

May-‐15

Jun-‐15

Jul-‐1

5

Aug-‐15

Sep-‐15

Oct-‐15

Nov-‐15

Dec-‐15

Dec-‐15

Ex. Reserves 12M NDF

050

100150200250300350400

Jan-

15

Feb

-15

Ma

r-15

Ap

r-15

Ma

y-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

No

v-15

Dec

-15

Jan-

16

Feb

-16

INTER-BANK PARALLEL MKT

-

200 000,00

400 000,00

600 000,00

800 000,00

1 000 000,00

1 200 000,00

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Aug

-15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

CBN cut CRR twice in 4Q15 to 20%;; in addition to reducing MPR by 2pps to

11%.

Liquidity spike following the CBN’s dovish policy in 4Q15

Parallel market FX rate trade away from official rate Offshore investors bet on currency devaluation


Traditional Assets – Return under intense pressure

7 |

20 000,00

25 000,00

30 000,00

35 000,00

40 000,00

9101112131415161718

20yrs Bond 10yrs

Yields have dipped by an average 300bps across the yield curve following the CBN’s dovish policy

Risk–off posture across the world, weak economic fundamentals, rising default risk weigh on equity market – shed 31% from the highest level last year

2Investment Management for the Insurance

business


Source: NIA Digest Swiss Re Sigma 3/14 CBN Website NAICOM Website 2013 EFInA Report

Growth has not compared favourablywith other sectors where regulatoryreforms have been strongerà Nigerian banking sector – 39%

CAGRà Telecoms - 88% CAGR

Penetration issues are drawn form thefollowing factors:

Poor awareness/credibilityHigh costs with high combinedratios (+100%)Sub-par product development

-‐

50

100

150

200

250

300 Industry GPW N‘bn

Nigeria Insurance industry: Largely underpenetrated

Industry operatorsà Reinsurers – 2à Underwriters – 58à Brokers – 577à Loss Adjusters – 54

Number of insured individuals – 1.5million(2012)Insurance Penetration - 0.3% (2014)Insurance Density - $10.0 (2014)Both insurance penetration and densityrate are a far cry from the African average(Penetration 2.8% and Density $61)

Industry Growth Trends Industry Fact Sheet

Major African Insurance Hubs

CountryGPW $ million

Penetration Rate %

Life Penetration

Rate %

Non -Life Penetration

Rate % Density $South Africa 49,159 14 11.4 2.7 925Morocco 3,400 3.2 1.1 2.1 102Egypt 1,968 0.7 0.3 0.4 24Nigeria 1,790 0.3 0.1 0.2 10Kenya 1,784 2.9 1 1.9 39Algeria 1,597 0.7 0 0.7 40Angola 1,142 0.8 0 0.8 52Namibia 931 7.2 5 2.2 396Tunisia 888 1.8 0.3 1.5 80Mauritius 766 6 4.1 1.9 613

9 | 8 |


Top-Down + Bottom-Up Approach =

Performance e

t

Historical Nigeria Insurance Industry Average Return on Investment

6,94%

8,62%

8,94%

8,25%

5,91%

5,00%

5,50%

6,00%

6,50%

7,00%

7,50%

8,00%

8,50%

9,00%

9,50%

2010 2011 2012 2013 2014

10 |


However, Private Equity continues to provide respite for investors

9 |

Source: ACA, Private Equity Growth Capital Council, 2015

AXA Mansard Investments Limited12 |

Constructing tailored solutions

Distilling the opportunities with Insurance-Appropriate Lenses

Leveraging on strong research capability

Regulatory Capital ConsumptionÈ Solvency requirements È Other NAICOM guidelinesÈ Appropriate capital allocation

AccountingÈ Optimize income (IFRS)È Realized loss limitsÈ Downside risk

Client-Specific Input and GuidelinesÈ Asset/liability managementÈ Liabilities reflective asset allocation

strategyÈ Maximize risk adjusted returnsÈ Sustainability and governance

Optimal PortfolioReflecting unique risk/return considerationsReview opportunities across the

global markets

Insurance investment management – driven by regulatory guidelines, diligent research and risk-return considerations



Performance e

t

A restrictive insurance industry… Investment managers leading the charge

Some provision in insurance guideline Recommendations by the investment managersReinsurance arrangement (oil & gas) –deductible must be more than 2.5%and 5% of shareholder fund forconstruction and operational riskrespectively where excess loss ofreinsurance is purchased. The reverseapply for proportional treaty/facility.

5% cap may be to restrictive as borrowing maybe a cheaper source of funds. Some insurancecompanies currently have up to 30% gearing.

Defines “investment and relatedfunctions’ as core activities that cannot be outsourced.

The definition contradicted another provision that“no insurer can outsource its investment functionwithout an approval from the commission”.

A provision in the guideline also require a writtencontract between the insurer and asset manager.

The need to include registered mutual funds andother alternative assets as the industry evolves.

14 |



Performance e

t

• Focus: Allows the insurance company leverage on its underwriting strength leaving investment management to the experts

Benefits of outsourced investment business

• Cost savings: No need to replicate functions/departments required for asset management.

• Research: Investment managers are experts in rigorous fundamental and technical research; enabling the insurer stay ahead of change

• Regulatory evolution: Investment managers possess extensive experience to help insurance companies meet regulatory requirements, risk management and reporting

13 |

3About Us


GRO

SS P

REM

IUM

WRI

TTEN

EV

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TION

IN N

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–20

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IND

USTR

Y RA

NKI

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97th 28th

INV

ESTO

RSKE

Y BU

SIN

ESS

DEV

ELO

PMEN

T

> Commenced bancassurance operations in partnership with GT Bank

> Started Asset Management activity

> Bancassurance partnership agreement signed with FCMB

> Opening of 4 Mansard Welcome Centres in Lagos and a full branch in Abuja

>Commercial real estate sector entered with Mansard Place

> Launch of Mansard HMO

> Gains NAICOM approval to offer micro insurance products

> Acquired Pension Fund Administrator

CO

RPO

RATE

M

ILES

TON

ES

> Underwent restructuring and recapitalisation

> Listed on the Nigerian Stock Exchange

> Rebranding of GT Assurance to become Mansard Insurance

> Brand upgrade to become AXAMansard Group

136 488 1,0672,062

4,1445,378

7,521

10,005

12,44413,594

17,400

2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A

EXIT

Ranked in the Top 10 Insurers in Nigeria

ENTRY

16

AXA Mansard: Our journey so far …

8 5 4 3

16 |


Retail Business Division

Health InsuranceInstitutional Business Division

Asset Management

Pension Fund Administration

Shared Services

Risk Investment

SynergiesDistribution

AXA-Mansard

1717

AXA Mansard: Currently segmented into 5 distinct businesses


Our investment philosophy: to secure the future for our clients

18 |

Experience Innovation

Risk Management Execution

Value for client

Our experienced team across asset classes seek market opportunities; but more important are the creative approaches and best executions to

capture best risk-adjusted returns on behalf of our clients.


Standard solutions for varying risk profiles

20 |

High

Returns

Medium

AXA Mansard Balance Portfolio

AXA Mansard Income & Growth Portfolio

AXA Mansard Fixed Income Portfolio

Low AXA Mansard Money Market Portfolio

LowMedium High

Risk

AXA Mansard Dynamic Portfolio

AXA Mansard Strategic Portfolio

THANK YOU

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