Lehman/A.M. Best Co. 2nd Annual Conference

"In the United States, with the aging of the population, the number of people turning 50 is incredible--and that's being matched in France, Germany and the U.K." Stan Tulin Chief Financial Officer AXA Financial

Global Affluent Market Is Driving Axa's Strategy

The burgeoning size and spending power of the global mass affluent market are driving the strategy of Axa Group (NYSE:AXA), the French financial services giant, said its executive vice president.

In Europe, 24 million customers have $6 trillion euro ($1 = 1.14 euro ) of investable assets. That picture is expected to enlarge to 42 million customers and a total market of $11 trillion euro by 2005, said Stan Tulin, who is also vice chairman and chief financial officer of Axa Financial Inc., New York, a global financial services organization and a member of the Paris-based Axa Group.

Add to that the U.S. prospects, with 11% of all households having more than $75,000 of investable assets, and the Asian potential, with 1.7 million people with more than $1 million in financial assets in 1999, and the significance of this global market is apparent, said Tulin, who spoke at the second annual Insurance Conference held in New York May 21 and 22, cosponsored by Lehman Bros. and A.M. Best Co.

"In the United States, with the aging of the population, the number of people turning 50 is incredible--and that's being matched in France, Germany and the U.K.," he said. "More and more, there's a need of people to be served by financial advisors."

As a result, big changes are under way, Tulin noted.

"We are starting to see open architecture across Europe with banks opening to third-party products," he said. Also, there is strong development of equity-linked products throughout continental Europe as well as the introduction of funds-of-funds and multimanager products, Tulin said.

"The trends in Europe are similar to what happened in the U.S. in the '90s," he said.

In general, he thinks that banks have missed the opportunity to tap into this market by continuing to focus on deposits and loans, failing to develop a sales culture, fearing disintermediation--or the bypassing of the middleman--and feeling that "they owned the customer," Tulin said.

Axa, on the other hand, is implementing what it calls a "customer-centric, open architecture model" across its global markets. This will entail building lifetime relationships with customers based on trusted financial advice, as well as the sale of Axa products through others' distribution systems; the sourcing of nonmanufactured products to round out Axa's offerings; and sales of nonproprietary products through Axa's distribution system where necessary, Tulin said.

This strategy is already implemented in the United States, and was launched in France and Belgium in 2000. It is being implemented this year in Germany, the United Kingdom, Australia and Spain.

Axa's attempts to build "longer, deeper relationships" through financial planning are already paying off, Tulin indicated. "We're finding that the new financial planning customer is buying more products with us in six months than the old equity life customer would have bought in a career or lifetime," he said. "Axa's objective is to get to three to five products per customer."

For 2000, Axa Financial posted net income of $2.42 billion compared with $1.13 billion in 1999.

Axa Financial, the holding company for Equitable Life Assurance Society of the United States, has approximately $400 billion in assets under management. Its brands include The Equitable Life Assurance Society, Axa Advisors, Equitable Distributors Inc., Alliance Capital Management and Sanford C. Bernstein.

(By Barbara Bowers, senior associate editor, Best's Review: Barbara.Bowers@ambest.com)