Axa Sa Ord

Good afternoon and welcome to Access 2022 full year results presentation. Thanks to those who are here in person and welcome also to those following us on the webcast. Presenting our results today is our group CEO, Thomas Buble. our group deputy CEO, Frederic de Courtois, and our group CFO, Albon de Mainel. We also have in the room the CEO of AXA France, Patrick Cohen, the CEO of AXA Europe and LATAM, Antimo Perretta, and the CEO of AXA Excel, Scott Gunter. After the presentation, we'll have a short Q&A session. Not a short. We'll have a Q&A session. We'll first take the questions in the room, and then we'll go to the questions in the webcast. And with that, I turn to Thomas.

Thank you very much, Anu, and a very warm welcome also from my side to you in London and everybody on the webcam. We are here today to present the full year results 2022. And as you have seen this morning when we published it, AXA has delivered a very strong performance across the whole board. The group is in very good shape. When we look at the key highlights, 7.3 billion group underlying earnings, which is plus 4% relative to last year. And if you were to look at the proper organic development without the pieces that we have sold, this number would have been plus 7%. Plus 12% underlying earnings per share, which is well above the plan number that we have between 3% and 7%. 14.5% return on equity. 215% solvency, which is well above the 190% that we have as a threshold. And 5.5 billion cash remittance. I think we have probably in the history of AXA never seen such a high cash remittance. And it shows you what we spoke about at the half year. The obsession that we have on cash is really showing up now in the numbers. Yesterday, the board has also looked at the question of capital management on dividend, which I come to in a minute, but also on share buyback, because as we told you, the board will look at this once per year to see how can we make sure that we deliver an attractive return. And yesterday, the board has decided that the yearly slice of share buybacks for 2023 will be 1.1 billion. This is the fruit of a very strong and disciplined execution of our new model and certainly when you look at the share buybacks it is a clear sign of a reflection of our very strong operational performance but also of our very confident outlook going forward. We did say clearly that share buybacks are a part of our toolbox and have now shown for the second time that it's also an active part of our toolbox. When we look at what is AXA today, because obviously you who have been following AXA over many years, it has changed significantly. And what we see AXA is today, it's much simpler. much more focused and certainly much more driven towards a very consistent and foreseeable earnings pattern with a high degree of cash. Just to give you an idea of comparison and we looked it up earlier today, in 2016 we had 100 billion revenue and made 5.7 billion of underlying earnings. In 2022, we have again 102 billion revenue and made 7.3 billion euros of profit, 30% more on the same basis of revenue. Why is that the case? Because this was a deliberate strategic choice in making AXA what it is today, which is essentially two main parts. One, we are the largest insurers for companies in the world for their physical assets, which is mainly done through AXA XL, but also for their human assets when we talk about employee benefits. And when you look at going forward, where is the big growth momentum? Where does the uncertainty around us crystallize the most? It is certainly for companies to find solutions for new risks or risks that are far more pronounced that have already been there. So being positioned as this global leader will also give us going forward a great opportunity to use that platform for much more growth. The second very strong and important leg of AXA is its leading positions in Europe and Japan. In those markets, we have always a number one to five position, always focused on our core segments, be it commercial lines, be it protection, be it health, and also have a large and diverse distribution mainly based on proprietary agents, but also linking and investing in those agents to be fully fidgety. On the one hand, have a digital access, but also have a very modern way of serving our customers through digital. All of this has led to a fact that we have a higher profit base, we have a more consistent and foreseeable and stable profit base, and certainly the profit today is much more cash intense than it used to be. This model of being focused as a global leader in insuring companies, but also having leading positions in Western Europe and Japan, which is a very complementary position, is also very different from any of our competitors. And therefore, this new platform gives us a great basis now of thinking beyond the existing plan driving progress 2023, which will end at the end of this year, going forward and saying, look, how can we leverage this platform to grow even more? When we look at growth, gross revenue as a whole have only increased 2%. This is the result of two actions. One, we have pushed growth in the prioritized segments. The prioritized segments today make around 85% of the whole of AXA, so the large majority. There we have achieved a 6% growth, which is a great result in this environment. But we've also got some businesses that we still need to restructure, that we still need to clean up. It is clear that after six years we are towards the end of this exercise of cleaning up and restructuring. So we should expect that this right-sizing of shrinking businesses that are less core for us be it the NatCat reinsurance or traditional general account, that this should be largely done by the end of 2023, which goes back to my point from earlier. As of 2024, we've got the desired mix and the desired base to really focus on making this new platform grow even more. What is great to see that this model has not only worked in calm times, but has also worked in very challenging times. We've delivered a strong performance, and when you look at it beyond the business mix, what I personally value very much is our ability, organization ability, to react extremely fast. with more simplicity and more focus we've also simplified and focused the organization much more so the link and the collaboration and dialogue with our markets is much faster The actuarial models that we have and the technical capacities that we have are much better than we used to have. And so in an inflationary environment, it is absolutely key to spot trends immediately and to decide quickly to react to them. And I think this will be the very important theme in the presentations going forward. This ability to spot and quickly react is basically the result that you see in these numbers. I said earlier that one important element is really driving value for shareholders because one is having good results but also then making shareholders happy. With those results The Board of Directors has decided yesterday to increase the dividend by 10% to €1.70, which equals a 6% dividend yield. And as I said earlier, the discretionary share buyback that is decided once a year has been decided in February of €1.1 billion. Not to forget that there might be another share buyback coming from the German live transaction that we have announced last year and closes this year. The share buyback, and I'm only talking about the 1.1 billion, gives an additional 2% of yield, which sets us for this year at 70% total payout, which is very much in line with what you will see at competitors. I'm now turning it over to Frederic de Courtois, who will give us an update on the key operational priorities.

Good afternoon. I am very pleased with our results in a difficult context. And I'd like to talk to you now about some of our key priorities. Cash, inflation, NatCat, and our asset portfolio. I start with cash. Cash is our top priority. We've already said it. We've improved in 2022, and there is more to come. You see here on the figures on the left that we've had 5.5 billion remittance from our business units, most of them recurring. And if I looked at the future, there are three important factors The first one is we believe that this cash remittance from our operating companies will continue to grow. It will continue to grow because the result of our operating company will grow, and it will continue to grow also because we have some room to further improve the payout from some of these companies, especially Excel, but not only. So the first point is it will continue to grow. The second point is that, as you know, we've made this reinsurance agreement between our holding company, Access SA, and some of our business units to improve the fungibility of the cash. And we have the option, the scope of these reinsurance arrangements, which will further increase the fungibility of the cash within the group. The third important factor, which is well known to you, is that we continue to work hard on enforced transactions. We confirm our target of 30 to 50 billion by the end of 2023. We have the ambition to be closer to the higher part of the range. And this remains a priority after the German transaction that we hope to close by year end, as Thomas mentioned. On inflation, I think that over the past two years, we've been extremely disciplined and we focused a lot on technical excellence. And I think we've been right to be extremely disciplined. Being extremely disciplined has allowed us easier, as Alban will explain, to maintain our technical margin in a difficult context. And we believe that it puts us on the right track to reach the 93% combined ratio, which is our target for 2023. Of course, 93% based on IFRS 4, which means undiscounted. So we believe that we are on the right track to achieve this target in 2023, thanks to what we've done over the past two years, and thanks to the discipline that we will maintain in 2023. So if I look at the price increases over last year, I start with XL, and I'm sure you will have questions for Scott on this, but the message is that price increases are still well ahead of low strengths, and this will lead to further margin increase for AXA XL over the coming years. In the middle, you see that we talk about our mid-corp business, so mainly in Europe. Here again, first, very good momentum on prices, especially at the beginning of 2023. Here again, the price increases is well ahead of the inflation, well ahead of the last trend. And here again, we are convinced that it will lead to further margin improvements for this business. The last business I would like to discuss on the right is the retail business, mainly France and Europe. You see here what our price increases have been on retail. What I can tell you is that first, there is a good momentum because prices have gradually improved over the year and again at the beginning of the year. What you see here is the price effect on the portfolio. So there is a question of definition, which is lower than the price increases that client receive. We can come back to this in the questions if you have questions, but usually the price effect is about two points lower than the price increase. So here for the retail, this is the price effect on the portfolio. What I can tell you is that, and I'm sure we'll come back to this, the price increases in retail in France and Europe in 2022 have been sufficient. And they have been sufficient because you don't need to match with your price increases the headline inflation. You have other effects that you need to take into account. Of course, frequency improvement, you have efforts on procurement, you have the mix effect. But what I can tell you is that these price increases have been sufficient. So we have nothing to catch up in 2023 except a notable exception, which is the U.K., where we have to catch up in 2023. But in all other markets in continental Europe and France, we believe that we've made in 2022 the adequate price increases. Of course, we will remain extremely disciplined in 2023. And as you see, the price increases on the market is accelerating. Alban will show in a few minutes the impact on our claims ratio. Another important topic is discipline on the costs. It's good that we've been disciplined since the beginning of our plan. You know that out of the 500 million expense reduction objective that we have for 2023, we've reached 400 million at the end of the year, which is good. What I can tell you is that in 2023, we will remain extremely focused on this. It will be challenging to reach our 500 million target on costs. What I can tell you is that whatever happens on costs, and we will see based on the inflation in 2023, all of this will be more than compensated by price increases and by the increase in investment income. Last but not least, reserves. And I'm sure you will come back to this in your questions. So I would like first to reaffirm the strength of our reserves. I make a specific comment on Excel. You know that we have this ADC on Excel, and the ADC is still untriggered. But I would like to tell you a bit more about the strength of our reserves. We have a best case scenario and the best case scenario is inflation normalizing in 2025. And what I can tell you is that we are extremely safe with this scenario. We've also stress-tested this base case scenario, and we've stress-tested this base case scenario in two directions. We first looked at what would happen is the normalization of the inflation comes later, one year, two years, three years, and so on. And we've stress test our base case in another direction, which is what happens if the normalization is not at the level we expect. So what happens if we are one, two, three points higher, and so on. And I can tell you we are safe on all these scenarios. My third topic is on NatCat load. So you see here that our NatCat load is broadly unchanged, so two billion or four points. And I need to explain this a bit more because we had impacts in various directions. The first impact is that there is inflation So the load is increasing, of course. The second impact is that there was less capacity on the reinsurance market at the beginning of the year, which also increases the load. The third impact is an action we've made together with Scott is that we've decided that we would reduce significantly again in 2023, the cat exposure of XAXL RE by about 35%. And then we slightly increase the quota share we have with XAXL on property. The sum of this positive and negative, I don't know what is positive and negative, but the sum of all these effects is that the cat load is, as I said, broadly unchanged compared to last year. Last year it was 3.7 points, and it is four points this year, and we are happy with this. A last comment on the impact of increased prices. As you know, we have 50 billion PNC premiums. And what I can tell you that the increased price, the increased price impact at the beginning of the year on the renewal of seeded reinsurance is less than 0.5 points of our PNC premiums. So this is extremely manageable. Asset portfolio, it's difficult to discuss this in a few minutes, but a few messages. First, on our liquid assets, you see that we have cautious asset portfolio. I would insist especially on the fact that we only have 2% of BBB- corporate bonds. Based on the benchmark that I see, we are probably more cautious than most of our peers on this, and we are happy with this. On alternative assets, We've always had a very rigorous process, cautious processes, and here again, we are happy with this. If I comment a bit more on some of the asset class, you know that we have significant exposure to real estate. real estate what what is important for us is quality quality matters so we are focused on only on prime location green assets so i cannot tell you what the real estate market how it will move over the next years what i can tell you is that we will be much better than the market If I look at credit, we have of course a non-liquid credit portfolio. We believe also on this that we are in a good position. We've been extremely disciplined on the guarantees. We've been extremely disciplined on the leverage conditions on this credit. So again, I'm not telling you that nothing will happen, but I'm telling you that we are comfortable with our position. If I look at infra equity and private equity, same speech. Infra equity, we are mostly focused on green projects. Private equity, we are focused on EBITDA positive companies, so very low exposure to VC. So again, overall, an asset portfolio which may have seemed cautious a few years ago, and now which seems adequate, if I may say, given the circumstances. So, conclusion, our priorities are clear. We are focused on discipline execution, and we are going to continue to deliver. Thank you, and I leave the word to Alban.