摩根大通：澳大利亚保险行业研究报告2009年9月

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Life Insurance
Part 3: Cooper Review threats in Australia vs. Value in
Asia & Corollary of Views
Insurance
Siddharth ParameswaranAC
(61-2) 9220 1596
siddharth.x.parameswaran@jpmorgan.com
Paul Mobilio
(61-2) 9220-1920
paul.d.mobilio@jpmorgan.com
J.P. Morgan Securities Australia Limited
See page 26 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
AXA vs. AMP: Possible % impact on
Group Earnings following 15% / 5%
decline in WM / IM revenues
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
AXA AMP
Source: J.P. Morgan estimates, Company data.
Administration (platform) + Investment
management fees by Fund Type in 2008
for different account balances
1.67%
1.12%
0.83%
0.62%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
50,000
Account Balance (A$)
Retail Corporate
Industry Public
Source: Chant West Research
• This is the 3rd and final note in our 3 part series examining investment issues l
affecting the share prices of AXA/AMP. In Part 1, we concluded AMP’s
operating performance was much better than AXA’s and the broader industry.
In Part 2, we concluded that AXA/AMP's earnings aren’t as levered to markets
as is commonly perceived (but AMP is slightly more levered than AXA).
Whilst share prices for the stocks were co-related, this was driven by PE reratings
rather than earnings re-ratings. This note examines the potential impact
of the Cooper Review, value in Asia and our overall thoughts on valuations.
• Implications of the Cooper Review: We believe the Cooper Review will lead
to lower revenues for retail funds, and as a consequence lower profits. A bigger
threat is a move to ‘best interest test’ for planners, which we believe will result
in long term fee pressure. AMP is much more affected by the findings of the
Cooper Review given that 48% of earnings are derived from wealth and
investment management operations compared to AXA of only 6%. As a
scenario, we hit both AMP’s and AXA’s FY10 revenues in platforms / planners
and investment management by 15% and 5% respectively (without any
offsetting cost savings), AMP's FY10 earnings under those scenarios may fall by
up to 18% vs. AXA of 10% (6% if the exited platforms). Whilst fee pressures
would emerge over time (say 3 years post the review) rather than the immediate
hit assumed here, the order of magnitude we believe is not unreasonable, and
would be coupled in our view with a PE de-rating of the stock as well.
• Value in Asia: Whilst AMP has focused on its domestic operations, AXA has
expanded into Asia. This is a market where we believe AXA is achieving real
value growth, without immediate regulatory risk – but for the moment –also
with earnings to show. This is because their profitable operations in South East
Asia are offset by their subscale but growing operations in India and China.
• Valuation: AMP and AXA appear fair value on 1 year forward earnings metrics
relative to their history. We believe this is not cheap given risks from the Cooper
review. Whilst the stocks appear cheaper on a 1yr forward PE basis relative to
the broader market, we believe this is a misleading metric as wealth manager
earnings tend to precede broader economic earnings during an economic
recovery.
• We continue to prefer GI over Life as regulatory issues are absent and
premium rates are rising – at least in Australia. As such we prefer SUN and IAG
over the other large caps in our coverage universe. We acknowledge that both
AXA and AMP’s share prices do react in line with broader equity markets. As
such, if investors do seek Beta exposure through one of them (rather than the
broader market), we prefer AXA over AMP due to more compelling valuation
metrics and less exposure to the Cooper Review. While AMP’s operational
performance is much better relative to AXA, other than rising markets, we see
few positive catalysts.

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