AXA ASIA PACIFIC announces sale of AXA Health Insurance

AXA Asia Pacific Holdings (AXA APH) announced today that it has reached agreement with Macquarie Bank Limited (Macquarie) to sell AXA Health Insurance, which operates as HBA in Victoria and Mutual Community in South Australia.

The purchase price for the business is $595 million. In addition, AXA APH and Macquarie have agreed to a profit sharing arrangement where, under certain circumstances, AXA APH can participate in profits upon a subsequent sell down of equity and/or a sale of the business for a period of up to 18 months.

It is anticipated the sale will complete in August 2002 following confirmatory due diligence and regulatory approvals. AXA APH will receive an initial payment of $58million on completion and further proceeds of $537 million 6 months later.

Macquarie will, within 6 months, seek to sell down the equity to a consortium of investors, including the UK’s leading private health insurer, British United Provident Association (BUPA). In the longer term the consortium intends to investigate options to on-sell the business.

“This move represents the best combination of maximising value for AXA APH shareholders and positioning AXA Health Insurance to realise its long term future potential”, said Les Owen, Group Chief Executive of AXA APH.

“AXA Health Insurance has delivered outstanding performance in recent years. This move will place AXA Health Insurance in a situation where it can continue to set the benchmarks for member value and operational efficiency.

“Over the past two years we have established a very clear strategic direction for AXA APH. This transaction provides us with greater financial flexibility to grow in wealth management.”

The transaction will not affect AXA Health’s members or the day to day running of AXA Health, which will continue to operate on a business as usual basis under existing management. It is our expectation that all staff will be retained.

For further information please contact

Media: Francine McMullen Manager Corporate Affairs	03 96184985 0412 223485
A Investor Relations: Andrew Penn General Manager Operations	A 03 9617 2883
A Matthew Slatter Chief Finance Officer	A 03 96163897

Attachment

Transaction Details

The transaction provides AXA APH with an underwritten sale price of $595m and enables AXA APH to share, in certain circumstances, in additional upside that arises from an on-sale, within 18 months.

The key features of the transaction are as follows:

1. AXA APH will exchange its shares in AXA Health Insurance in return for $58 million cash up front and an issue by Macquarie Health Acquisition to AXA APH of $537million of vendor shares. Proceeds from the vendor shares will be received after a 6 month period.
2 The six month period enables Macquarie to effect an operational separation of the AXA Health Insurance business from the AXA APH group and to finalise its investor consortium. AXA APH’s proceeds are guaranteed through a put option over the vendor shares arranged by Macquarie, and supported by investment grade rated OECD banks.
3 AXA APH and Macquarie have also agreed to a profit sharing arrangement. Under certain circumstances, AXA APH will participate in profits upon a subsequent sell down of equity and/or a sale of the business for a period of up to 18 months.

Financial Impact

There is expected to be a dilutive impact on operating earnings subsequent to the underwriting period. This dilution impact is estimated to be approximately 1.6 cents per share or 6% based on analyst’s consensus 2003 forecast consolidated earnings. However, we expect the overall value of our portfolio of businesses to be maintained with a corresponding increase in our price earnings ratio. This reflects the strategic shift of our business to higher growth retail wealth management.

Due to the required application of AASB 1016 “Accounting for Investment in Associates”, the profit on sale will not be reported in AXA APH’s accounts until the end of the underwriting period. During the underwriting period in accordance with the Standard, AXA APH will continue to recognise the earnings of AXA Health in its accounts. These earnings will then reduce the profit on sale recognised at the end of the underwriting period.