All the Axa AGM action

February 2, 2010

Dear Mayne Report subscribers,

The old National Mutual AGMs used to be grand affairs with a stack of press, several hundred shareholders and plenty of lively debate. Axa Asia Pacific Holdings is now a $9.4 billion company but French control has taken the heat right out of the shareholder engagement.

Only AAP bothered to turn up this morning to file this very rudimentary report and the debate lasted just 45 minutes with only four shareholders taking to the microphone.

But despite all that, we had several cracking exchanges and landed a few hits on some of the time-serving has beens on the board who still came up for a friendly chat after the meeting.

Breaking down the audio

We've edited down our exchanges to 12 minutes of highlights and recommend them in the following order:

Time for chairman Rick Allert to retire

Why is conflicted, non-independent Centro director Paul Cooper still a director?

Allert's relationship with the French

Michael Butler: the conflicted director who lost heaps competing with Mick Gatto

Opening four questions on ASX conflicts, pollution in China and ethical investing

Some questions for the American who represents the French

Director retirement schemes and a job well done

The Rick Allert retirement debate

Rick Allert first joined the National Mutual board way back in 1992, which makes him one of the longest serving non-executive directors of a top 20 Australian company.

I put it to Rick in the politest of terms that he was making the same mistake as John Howard by seeking what will be a seventh term. After 15 years of service which has maximised the retirement payout, why would you go around again for another three year term at the age of 65?

Whilst length of service is an issue, it is Rick's chequered record which causes more concern. I duly told the meeting that after the shambles of recent years at Coles Myer plus the $1 billion Southcorp write-off after the Rosemount acquisition, it was time for Rick to quietly shuffle off his last public company board.

The shareholders, including those silly proxy advisers who couldn't see the value of adding Steve Harris to the WA News board, clearly disagreed because Allert was re-elected with 1.1 billion votes in favour and only 1 million against. At least the remuneration report copped an 18 million against vote - presumably because the retirement schemes for Allert and fellow time-server Paul Cooper are still running.

Rick declared that he still had plenty to offer and had come through a board review with flying colours. Now there's a surprise. After the meeting he was keen to defend the Coles Myer record, but I avoided the argument because it was Stan Wallis who made the really big mistake of hiring John Fletcher as CEO in 2000.

Whilst Axa has performed well over the past eight years and Rick did the right thing rejecting the French mop-up bid three years ago, it is time that he found a suitable Australian successor and moved on.

The debate about Axa director Paul "Centro" Cooper

The really bizarre thing about the re-election of Rick Allert was that the resolution was chaired by Paul Cooper, who copped this shellacking
earlier in the meeting. Here we had a Centro director recommending the former Coles Myer chairman for another three years at the top of one of our biggest funds management companies. I give up.

Cooper's sins are three-fold. To start with, he was the Freehills partner who represented the French when they bought 51% of National Mutual at the knock down price of $1.25 a share way back in 1995. Now he claims to be independent and Allert points out that he hasn't been a Freehills partner for 12 years.

Length of service is another problem for Cooper seeing as he's been there since 1995 but then there's the conflict of interest and reputational embarrassment of all that has happened to Centro.

The funds management industry seems to have a squadron of directors who double dip in the industry. I just can't work out how a huge property investor like Axa Asia Pacific, can allow one of its directors to join another property funds management board in Melbourne.

Allerts reckons it is fine because Axa has out-sourced all its funds management operations to Dexus and Alliance Bernstein. Yes, but Axa Asia Pacific owns 50% of that Alliance joint venture and the business still controls tens of billions in property, just like Centro manages $26 billion of retail shopping centres.

The biggest argument against Cooper is the sheer embarrassment of being associated with Centro, the company which managed to mis-state $1.5 billion of current liabilities when it first released the 2007-08 profit figures.

Amazingly, Cooper came up for a chat after the meeting and was quite friendly. I told him the call for his resignation was just a formula based on the principle that anyone who losses billions should quit other boards. And at least Cooper fronted today, unlike Centro chairman Brian Healey who didn't turn up at the Incitec Pivot AGM last December, just days after Centro smoked $5 billion in one day.

Will the French mop up the Australian arm?

Rick Allert claimed today that he meets face-to-face with the global AXA CEO Henri De Castries twice a year and they also chat over the phone from time to time.

However, he singled out new Axa Asia Pacific director John Dacey, who runs AXA's regional business from Japan and sits on the global management committee, as being someone who keeps him in tune with the global empire.

When Dacey came up for re-election, I asked him how attractive a mop-up bid would be and whether AXA SA was whethering the global credit crisis to the point where it could handle more acquisitions.

His answer was quite bullish as he stressed Axa hadn't suffered any major hiccups and was still landing recent acquisitions, such as a 35% stake in a major Russian property and casualty insurer along with 100% control of Mexico's third biggest general insurer.

As for spending $5 billion mopping up the 47% stake in the Aussie-listed business it doesn't owns, Dacey was giving nothing away but even after a recent sell-down, today's closing price of $5.54 is well above the $3.75-a-share that was offered in August 2004.

The straight shape of National Mutual today

National Mutual used to be right at the centre of the Melbourne business establishment. These days it is a strange looking beast. The chairman lives in Adelaide, the CEO Andy Penn is a Pom. It is controlled by a French insurance giant that is represented by one Englishman, one American and one Australian on the board.

Indeed, the Australian, Paul Sampson, is about to be added to our 50 most successful Aussie expats list as he's apparently done a great job turning Axa's Japanese business into its most profitable in the world.

A new director was also announced today in Tony Froggatt, an Australian who spent the last five years as CEO of Scottish & Newcastle PLC. He's being added to that list as well and has now seriously arrived in the Australian directors' club after also landing board seats at Brambles and Billabong.

Froggatt looks like the man most likely to succeed Allert because Cooper is tarnished by Centro and the two other independent directors, Michael Butler and Patti Akopiantz, don't have the reputations or gravitas to pull it off.

Indeed, I gave Butler this tickle up for also having a conflict in serving on the board of APN Property, plus losing plenty of cash for the shareholders in crane hire company Verticon, which has clearly struggled to compete with Mick Gatto's Elite Cranes.

Akopiantz has done okay, but that spot on the Coles Myer board doesn't look great.

In Conclusion

All up, it was a lively debate and Axa Asia Pacific is performing well in a difficult environment. It was interesting that Rick Allert used his speech to call for reform of stock lending rules and CEO Andy Penn used his to call for greater regulation of mortgage brokers.

Funny how there was no call for a crackdown on the legions of financial planners and agents who service Axa.

I asked Allert if he agreed with QBE about the need for the ASX to be stripped of its regulatory powers and he refused to buy in.

As for calling for improved disclosure laws, that would have been awkward given the very poor disclosure by Axa's man on the Centro board, Paul Cooper.

Past battles with Axa

Finally, here are some links to past battles at AXA AGMS.

2001 (ran for board and got 1.1% of vote)
Polled poorly given French parent but mounted a strong argument - see results, campaign pitch from Crikey and The Australian.

2006: Would have been a dead AGM but for our questions - see Crikey.

2007: Always fun to test the French parent and chairman Rick Allert - see Crikey.

That's all for now. We'll be attending the last ever Oxiana AGM tomorrow morning and will report back to subscribers in the afternoon.

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.