Axa Sa Ord

Hello everyone and welcome to AXA's full year 21 results. It's great to be back here live in London. A big welcome to all of you in the room. I think we have all of the London sell side here with us today in person. So thank you all for coming. It's great to have you and it's great to be all in the same room together. So thanks for that. And a big welcome also to those of you joining on the webcast. And it's great to have you with us as well today. Here with us in London this morning, this afternoon, we have our CEO, Thomas Beuvel. We have our Deputy CEO, Frederic de Courtois. We have our CFO, Albon Demainel. We have also our CEO for France, Patrick Cohen. And we have our CEO for Europe and LATAM, Antimo Perretta. So thank you all for being here as well. There will be a Q&A session, obviously, at the end of the presentation. We'll give preference to those of you who are here in the room with us. But we're also very happy to take questions from the webcast. So just send your questions in writing and we'll make sure they're read out. And now... For the eighth year, it's my great pleasure to hand over to Access CEO, Thomas, for his introductory remarks.

Thank you very much, Andrew, and good afternoon to all of you. I'm very happy to be with you again here in London. It seems like a long time ago since COVID was a very intense time. And so very glad to be with you and to exchange in person. But most importantly, to present very strong results of AXA in 2021. And 2021 for us was a very decisive and pivotal year. Decisive because it determined for us how would we come out of this very difficult crisis. And you've seen in the numbers that we came out in a very strong way. Pivotal because we come to the end of a transformation phase in which we have shifted the company significantly and it looks very different from what we've seen in 2016. What are the highlights? 100 billion revenue a very symbolic number it's a level of revenue that is higher than what we've seen pre-covid and certainly having grown six percent versus last year is a very good performance and what makes me even more confident is when you look into a detail all of the engines have contributed to it there is not one single one that is lagging behind We have achieved all of this on a very strong balance sheet. 217% Sovereignty 2 ratio, 17 points up from last year, is a tremendous achievement and is one of the elements that I mentioned earlier when we talk about the question of how do we come out of this crisis in a reinforced way. Certainly, when I look at the underlying earnings, I'm very happy to see that based on a normalized 2020, we have progressed 9%. And we certainly again see that all the markets are contributing to this very good result. And one particular area I would like to focus on, since we have been focusing on over the last years, is AXA XL. We have achieved the 1.2 billion, which was a target that was not easy to achieve over the last couple of years. and I'm going into detail afterwards, but with the very clear and determined underwriting actions that Scott and his team have undertaken, we have now achieved a target. So very strong results across all dimensions. When we now look at what does it mean in terms of underlying earnings per share and certainly also what does it mean in terms of dividends, On the underlying earnings per share, we see that it's also a progression of 7%. And as you remember, we had a range between 3% and 7% for our current plan, Ambition 2023, which means that we are in 2021 at the upper end, which is the good news. It is also on that basis that the Board of Directors has met yesterday and is proposing a dividend per share of €1.54, which is an increase of 8%. And when you look at the payout ratio, very well settled in the corridor that we have given ourselves. So I'm very pleased with these results and also would like to use this opportunity to thank our teams for this great result and for this excellent performance because everybody contributed to it. And without the help of everybody, this would have not been possible. Where are we today? Because I said earlier that we see 2021 as well as a pivotal change. We are now in a place where we have a new AXA that is very different to the AXA that you've known 10 years ago, you've known 6 years ago. Why is it different? Because it's now simplified and it's focused. Why is it focused? It's focused because we are in less geographies, but it's also focused on very attractive business. 90% of our earnings come today from technical earnings and fee-based business, which is very different to what we have seen after the financial crisis of 2008, where 80% of our earnings came from financial market results. We've also, with this shift of business mix and the simplification, created a very strong leader in Europe and France. And I'm happy to be here with Antimo and Patrick. We've secondly created the number one platform globally for corporate risks. Scott Gunter will be with us digitally later on. And we also created one of the strongest health franchises across the world. Those areas give us a very good basis to capitalize on it and make that platform grow even more. When you look at where are we with this new platform in the current ambition 2023 driving progress. We set ourselves at the time five goals. Number one was we want to grow our health business 5% or more. We've achieved this in 2021 where the health and protection business has grown 5%. We secondly said we want to work on our efficiency. We want to reduce our cost base by 500 million between end of 2020 and 23. By the end of 2021, we have achieved 300 million of this reduction of the cost base. We certainly said we want to improve technical performance. And again, everywhere, be it in France, be it in Europe, and certainly at XL, we've worked on this topic and we've achieved to be better. And in particular, what I said earlier, what is outstanding for me is the technical improvement at AXA XL and achieving those 1.2 billion. The fourth topic and aim was for us to be even more of a leader on the climate transition side. Two elements I would highlight. One is the lead that we have taken in the Net Zero Insurance Alliance, which is an association of global insurers in order to also focus our underwriting decisions on how can we accompany the climate transition in a positive way. But we've also taken new commitments when it comes to oil and gas. And lastly, we want to increase the cash remittance. When you've seen what we have done, we are clearly also on a very good journey. So I'm very happy with the process. We have made excellent progress on our Ambition 2023, which sets us up for a great way of achieving the plan the way we want it to. Let me go a bit into detail on AXA XL because, as I said, it was not easy to get to the 1.2 billion. We've done it. And the one reason why we've done it was very hard work of Scott and his team over the past two years in really re-underwriting this portfolio. They've taken... Every contract in an in-depth view, increased prices, resized the lines so that we have less net risk and also were very courageous in exiting unprofitable lines. This has led us to a combined ratio improvement of 5.1 points in 2021, which to my mind is a really great achievement. And this sets us up now for the next step, which is a more balanced development between keeping the absolute priority on underwriting profitability, but making sure that in some areas in which we believe it's attractive to grow, we also seize more opportunities to grow. 2021 has also been a year in which we have experienced severe natural catastrophes. It was the fourth worst year since 1970. That is also why we have decided that the reinsurance results at AXA XL, given the experience we had, were too volatile. And we've taken a very courageous decision to cut the property cut exposure by 40%. We have started to implement this at the 1st of January, so this is already done. And obviously, as you can imagine, for the other renewals that are coming this year, we will apply exactly the same level of reduction, because we want to make sure that we continue to reduce the volatility after having done it every year by minus 10%, but we wanted to really go further with the minus 40%. Where are we on this journey to the plan driving progress 2023? We have, as you've seen, a very strong growth momentum around the revenues. P&C Commercial Health and Protection, our preferred segments, grow 5% versus 2020. And on the unit length and asset management side, I'm very pleased to see a growth that is even double-digit, 24%. The technical performance, as I said earlier, has been strengthened and we managed to reduce the current year combined ratio and loss ratio by 1.6 points. Making sure that we don't only look at how do we optimize the technical result in terms of claims results, but also making sure that we are delivering on our commitments to reduce our cost base. I mentioned it earlier, we have achieved 300 million of reduction of cost base. So this sets us up very nicely to deliver within the target range of 3% to 7% underlying earnings per share. And certainly, if you look where we are today, we are more delivering towards the higher end of this target range, which is obviously a very good position to be in. When we look then at the question of cash, One of the aims of the transformation of AXA was how do we get to much more business that is driving and generating a much higher cash. And you've seen that this has worked. Having 90% of our profits from technical risks and from fee-based risks means that the cash generation has increased And we could end the year with a cash-at-holding of 4.5 billion, which is well above the aim that we have between 1 and 3 billion. We've also concluded one of the two share buybacks that we have announced in November last year. One was the 1.7 billion in order to compensate for the dividend in 2020 that we could not pay out due to COVID restrictions, the 50%. This is completed by February of this year. And we have also now closed the necessary disposals in order to confirm today the second share buyback of 500 million, which concerns three disposals. And you've seen recently that the largest one of those three, Singapore, was also successfully closed. So this will now start as well. What does it mean for the overall cash trajectory? We gave you an indication on the 1st of December 2020 in terms of our cash projection that we said, look, cash upstream will be around 14 billion. We can say today with good confidence that we will be exceeding those 14 billion. Why? Because we've focused even more than we thought in 2020 on those lines of business that are highly cash generative. And secondly, despite the fact that we've already gone a very large journey in reducing our in-force on the live site, think about what has happened with IPOing Equitable, with Antimo working very hard in Switzerland on the GL 2020 transformation. Those were big moves. Nevertheless, We have identified some more in-force actions, and you've seen some of them already that have come into place, be it the reinsurance transaction in Hong Kong, be it another transaction in Switzerland and another one in Belgium. So this will be a continuous journey. Another element that I would highlight for you in the topic of cash generation is also the transformation of AXA SA, so a holding company, into a reinsurance company. This is something that is very common in our industry and most of our peers have already done it. We can do it now because we've got the right business mix to do it, and it gives us an ability of enhanced fungibility in P&C, and certainly, as Alban and Frederik will point out later, an additional lever of cash generation between 2022 and 2026. We've also been very clear at the December meeting IR Day in 2020 on how do we deploy cash. And what we clearly said that we have now a very focused AXA, a very focused footprint. We will look at M&A in a very disciplined manner, but only in places where it adds to the existing footprint and where it has high synergies. And we've also been very clear that the use of cash is always benchmarked against share buybacks, which means that share buybacks remain and are an ongoing part of our toolkit. When we look at where we are positioned today and what is the setup for the future, We've got today a very strong growth momentum. And this is also represented in a great bench strength of talents that we have at the group, in the local entities. And I'm very confident that the growth momentum we have achieved, certainly in the preferred lines, can be kept up because we have an inherent demand of our customers for these risks. Health has become a very large interest of people post-COVID. We've got on company side many, many more risks, certainly another one as of this morning. And so there is a high demand for insurance solution, a high demand for advice in order to make sure that the risk management of the company is well managed. So growing in those very attractive cash-generative businesses is what we are going to pursue as of now on this transformed, newly structured platform AXA. All of this happens on an excellent balance sheet. 217% of solvency without, by the way, any equivalence is something that we have probably hardly ever seen at AXA. The target range that we have set for ourselves, the 3% to 7% underlying earnings per share, is, from today's perspective, very feasible. We've delivered earnings growth per share already at the higher end of that range, and I will expect as well, if we continue that journey, that we will remain at the higher end. And what I said to you earlier, I am of the firm belief that the guidance we've given you around the 14 billion cash on the 1st of December 2020 is something that we will be exceeding due to the fact that we focus our growth on highly cash-generative business and that we also continue our work even further on enforced transactions. So across all the dimensions of our setup, of our plan, we are well positioned, the group is in great shape, and our outlook is excellent to succeed even more. I would like to end here and hand over to Frédéric, who will now go into more detail, and I'm looking forward to the discussion with you. Thank you.

Good afternoon. It's good to be with you in London. And I would like now to discuss with you about three operational priorities. The group is really in very good shape. And I would like to tell you more about capital and cash management. I would like to tell you more about NatCat exposure reduction, especially in AXA-XLE. And I would like to tell you more about business performance, which has been excellent in 2021 in all our four business lines. Let's move to capital management. We had already discussed in the past about enforced actions. We started to implement it. You see that we've signed three small transactions in 2021, Hong Kong, Switzerland, and Belgium. You see what they represent, so 8 billion of general account reserves. closed in 2022, but I'm confident that you will see a lot closed by the end of 2023. So why do we do it? I mean, you know this well. We do it to reduce our exposure to financial risks. We do it to release locked up capital and upstream cash to the holding company. So on this front, things are going well. A second initiative, which is new, is the initiative we have on the P&C side. You see that we are going to transform our holding company, AXA-SA, into a group internal reinsurer. We are going to merge our internal captive reinsurance company with AXA-SA. And we are going to reinsure through quota share treaties most of our PNC companies to this holding company with a quota share at 25%, which is not set in stone, but we start with 25%. So, of course, everything is subject to regulatory improvements. And we are confident that we will obtain these regulatory improvements over the coming weeks. And everything will be implemented for the operation at the end of June. And the reinsurance treaties will start from January the 1st, 2022. So again, this is, it seems to be a complex operation. It is not, this is only an internal restructuring. So everything is in our hands and we are extremely confident to be able to implement everything by the end of June. It has a significant impact on cash. You see here that it has a $2 billion impact. around $2 billion cash impact by the end of 2026. We are saying that it has a $1 billion cash impact by the end of 2023. Out of this $1 billion, 0.7 is due to the cash that we had in the internal captive reinsurance company, and 0.3 is due to the upstreaming or the beginning of the upstreaming of the positive capital impact of this reinsurance transaction. And again, we will have the other 1 billion upstreaming in the following years. So, In a nutshell, we have an ambitious plan on the live side. We have an ambitious new plan on the PNC side, on cash generation and upstreaming of cash. And this is one of the reasons we are confident to overshoot on our $14 billion target on remittance. Second topic of the day, cat exposure and cat volatility. So we are taking decisive actions to reduce our cat exposure for two reasons. And the first one is to reduce volatility. The second one, because we believe that in many areas, CAD pricing is still not adequate, especially in the context of climate change. So we are very selective on our CAD exposure. You see here on the left side, and this is important that you understand it, at the end, our main CAD volatility is coming from AXA XLV. We've exceeded our budget on AXA XL RE on CAT by almost eight points, which is a significant deviation. But on the contrary, you see that despite the fact that Stomas said we had a very bad CAT year, AXA XL insurance and our general insurance business in Europe And again, it has been a heavy year on cat in Europe, has exceeded, have exceeded their cat budget, but not so much. So again, the volatility mainly come from axillary. And it explains why we've taken decisive action at the end of 2021 before the renewal. So what have we done? We've been extremely selective on the renewal on cats. We have reduced our cat exposure by 40%. And we have the plan to continue to reduce it during the year, for the further renewals during the year, so that at the end of the year, we have reduced our global cat exposure for the whole portfolio by 40%. You will see that it reduces our cat exposure at the group level by 10%. And it is important to say that it preserves the AXA XL re-expected earnings. Why so? Because, of course, on one hand, we reduce our exposure, which has a negative impact. But we've increased pricing. And we've reduced the retro prices. And I would say that more or less, the two are compensating. And we believe that we've entirely preserved the XIXL expected earnings for 2022. Moving to... our four business lines and again we've performed well on our four business lines this year so i'll start with the with the first one which is pnc so solid growth on the pnc business so three percent growth last year if you look at the commercial business five percent growth And here I'd like to make comments first on France and then on AXA XL. So excellent performance in France in the context of good pricing. So we've grown the French business by 11% on commercial lines last year. And we've achieved. And we've even overachieved our objective on AXA XL insurance and AXA XL RE on pricing. You see that last year, pricing have increased by 15% on AXA XL insurance, on 9% on AXA XL RE, which, by the way, leads to an average commercial increase for the pricing by 7% last year. And the renewals at the end of 2022 also went well. So we had price increases for AXA XL insurance of 11% on January the 1st. And we had price increases for AXA XL RE by 8% on January the 1st this year. And we are happy with this. If you look at the personal lines activities, so the personal lines business increased by 1% with the pricing, which is stable overall, which is, I would say, a good performance in the context of very much reduced frequency last year and the year before. Looking now at the PNC profitability, so the PNC profitability for the PNC business, excluding COVID, increased by 29%. So 29% compared to last year. Obviously, the main impact is a much better underwriting impact. AXA Excel has really delivered. AXA Excel has really delivered on their underwriting performance. So we are extremely happy with the underwriting performance of AXA Excel this year. And again, the price increases that we've achieved last year and on January the 1st, which you do not fully see in the results, will be seen over the coming years, as you can imagine. We have a stable investment income on the PNC side, which is also a good performance in the context of lower yield on our assets. If I look more precisely at the combined ratio, so the combined ratio is significantly increasing, and this is the consequence of what I've said, then there are a lot of moving pieces and quite a lot of exceptional items in the combined ratio. So I'll try to make a list of these exceptional items. I have a list of four. We had excess cats. Thomas said it. That was the fourth item. worst cat year since 1970. So this is obviously a negative impact. We had some frequency benefit linked to the lockdown situation, especially in Europe. And this is obviously a positive impact. We had the claim, the deal we've made with the French restaurants last year, and it has a negative impact. And we have PYDs somewhat above guidance. This is a positive impact. I would say, by chance, all these exceptional impacts are compensating each other. And this is globally a wash. And to make it simple, you can consider that the 94.6% is a clean 94.6% with no negative impact. In reality, the sum of all the four is a minus 50 million negative impact. But globally, again, the 90.4.6 is clean, and it makes us confident that we will achieve the 93% combined ratio in 2023, and we believe we are on the right track to achieve this 93%. Let's move to the – I don't have the screen anymore. I don't know why, but I'll make it – Anyway, the. No. Okay. So it will come back. So volumes on the live business. So volumes increase by 9%, which is a strong performance. I would highlight very much the business mix, which is exactly the business mix we want to have with strong growth on protection business, strong growth in uniting business, and strong growth in capital light general account business. I'd like to highlight here a few points. First, the excellent performance in France. So France business has increased last year by 17%, very much driven by the savings business. Why so? We had strong sales of Unitec business. We had strong sales of retirement business. And we had strong sales of the Euro croissant business. You know that the Euro croissant business are... Capital guaranteed business at maturity only. So these are capitalized business and this is a business which we are strongly developing in France. And by the way, this is a type of business we are also strongly developing in other European countries. If you look at the ratio of Unitlink and Eurocrescence on ratio divided by our total business, they represent 56% of our total business, which is 15 points above the market. So why did we have, the screen is back, why did we have a strong growth last year in France? We had excellent performance from our proprietary workforce, Salesforce, so agents and salaried networks. The second point I would like to highlight is the strong performance in Asia. We had a strong performance in Asia in Japan and in Hong Kong with protection business and capital light general account business and some unit link business in Japan. The screen is, I know the screen is, yeah. Yes, the screen is back. So we're happy with this performance in Asia. You see that the net inflow is exactly the one we want. So positive net inflow globally, very positive on our preferred lines of business and negative on the traditional general account business. Moving to new business and NBV. So this is the consequence of what I've said. So new business increases a lot. So 13 percent acceleration during the second half of the year on the new business. This is, again, what I've said. And I insist on the quality of the mix. You see that the highest growth comes from protection and health, unit linked, and capitalized business. All of this translates in a good NBV margin, so with an 8% growth of the NBV margin. I would say an immaterial decrease of the NBV margin, which is mostly due to a higher mix of good business on the health business line, especially in Hong Kong, which slightly decreases the NBV margin globally. But the NBV margin on protection and unit-linked is increasing. Life and savings profitability. So the life and savings profitability is increasing by 3%. It is increasing by 5% at constant scope. Constant scope means if you restate for the companies we've sold, so Central and Eastern Europe, Greece, and the reinsurance transaction in Hong Kong. So again, 5% growth at constant scope. At the end, why did it increase? It's a mix of various impacts, so increase of the technical margin with good performance, claims performance on the protection products. An extremely resilient investment margin, which is, I would say, good news because you see on the right side that the investment margin is in 2021 was slightly above our guidance for the plan. So 66 basis point compared to 55 to 65 range that we had given in our plan. And we are confident that this investment margin will stay resilient and close to the high end of the range for the investment margin. Last but not least, the third impact is revenues and uniting products or fees and uniting products. And here it increases because of good inflows and because of good performance of the markets. So again, a very solid result on the left side. On the health business, on the following slide, you see that we continue with our strategy of profitable growth. So growth revenues have increased by 5%, which is our objective on this business. We especially had a strong growth on group business, especially in France, with performance up by 12%. because we explained that our employee benefit offering in France and also good performance in Hong Kong, as I've said. We have a very slight deterioration of the combined ratio on the health side. You have two impacts here. We had a lower frequency last year on the health business because of the lockdown, which of course has an impact on this. And we had a negative impact this year on the frequency in Mexico, which is a big health market for us, linked to COVID. So all of this linked to a 0.4 point increase of combined ratio, which we believe is immaterial. And again, it's linked to these two specific impacts, which I have mentioned. So underlying earnings at the end increased by 2%. And you see that health represents about 10% of our global earnings. Fourth and last business line, which has gone extremely well, asset management. I'd like to spend some more time on asset management. So you see that the average asset under management increased by 5%, which is a mix of market impact, and net inflows, you see that our net inflows have increased by 12 billion. We had 12 billion positive net inflows last year, especially on the alternative business, especially in the GVs in Asia. and especially in Korea, and we had a negative net inflow on the core, in the core business unit, negative net inflow, which is the consequence of what I've said before, because we have negative inflows on our general account products, and we had the Hong Kong reinsurance transaction. So at the end, nothing unexpected. The mix has improved because we had strong positive inflows on third-party clients with higher margins. And we had, again, positive net inflow both on the alternative business and the core business. We had also strong inflows on the core business on the third-party business. Moving to margins, so all of this is the consequence of what I said before, so 20% increase of the gross revenues, which is a mix of higher asset under management and better mix, so third-party business and strong growth of the alternative business. So you see here that our management fee on average increased by 0.7 basis points, which is Good news. So the cost-income ratio also mechanically increases because our revenues have increased, but also because we had a good discipline on the cost in XIM, which leads to close to four points improvement of the cost-income ratio, and which... leads to a 25% increase of our underlying earnings, very much driven, again, by the excellent performance of our alternative franchise. So last word on our alternative franchise. which I think you know well. I would like to repeat that we are the first European franchise on the alternative business. So this is an important subject. So we are the first real asset franchise in Europe. This is my first message. My second message is that the strong performance last year is not one-year performance. If you look at the performance over the past five years, you see constant high performance for this alternative franchise. We had 54 billion net inflow in our alternative franchise over the past five years, which is an excellent performance. And our plan is to continue to develop this high margin business. And I would like to highlight that we have a strong pipeline of client commitments in 2021. So we are confident that, again, the net inflows will be strong in 2022. So, again, to conclude on this, strong performance so far. four business lines and now i give the word to albon on the financial performance thank you