Axa Sa Ord

Good morning and welcome to AXA's first half results conference call. Presenting today are Thomas Boubel, Group CEO, Frederic de Courtois, Group Deputy CEO, and Albon de Mainel, Group CFO. After the presentation, we'll open up the call to Q&A. Joining us for the Q&A session will be Scott Gunter, CEO of AXA Excel, and Guillaume Boury, CEO of AXA France. With that, I turn over to Thomas.

Thank you, Anu, and good morning to all of you. Thank you very much for joining our call today. And I would like to start with the key highlights of our results for the first half of 2024. The first half of 2024 was a very good start of our new strategic plan, Unlock the Future. As you can see, the business is doing very well. We show an organic growth of 7%, and we have to go far back in the history of AXA to see when we last had such a high growth. The underlying earnings per share are up by 4%. and the return on equity is at 16.6%. All of these results have been achieved on the basis of a very strong balance sheet with a high solvency-to ratio at 227%, and you'll see that also part of this high solvency reflects our strong capital generation capacity. Alban will detail this later a bit more. You see, the organization is fully focused on the execution of the new strategy. The first half of 2024 has worked very well, and we are therefore confident to achieve for 2024 an underlying earnings per share growth that is in line with our three-year plan target range of six to eight percent. The second highlight that you see on the slide is obviously the strategic decision to sell AXA Investment Managers to BNP for 5.4 billion. This follows a strategic review and in the light of the rapid consolidation that we see in the asset management industry, it was important for us given that we have high ambitions for our life and savings business to be part of that consolidation and also to be able to be served for our ambitions on the life and savings business by an asset manager that has got the necessary scale and the necessary product breadth that we need to be successful. In addition, obviously, we are continuing to simplify our model because we are even more focused now on the insurance business. As you have seen, a large part of these proceeds will be used for share buybacks to offset earnings dilutions, and this is very much in line with the capital management policy that we have published with our new plan in February 2024. We also announced, and that's the third announcement today, the acquisition of Nobis Group to expand our P&C operations in Italy for $0.5 billion. We remain very committed to delivering value to our shareholders with a very disciplined deployment of our capital. If I go to the next page, we delivered 4.2 billion of earnings in the first half, which I said is an excellent start to our plan, in particular given this very uncertain context. We have a very high-quality business. that has produced strong performance with plus 7% of earnings growth across all lines of business, P&C, life and health, and asset management, and also across all geographies. And I would particularly like to mention the strong technical profitability that we see across the board, notably on the one hand with being back on track with the margin improvement in P&C retail and UK health. You remember we had some issues around P&C health in Germany and the UK and UK health. We have put strong actions in place and we are back on track. And the second piece is around the continued strong profitability in commercial lines, both in Excel, but also in our European entities. We also have put in place a strong strategic long-term investment at the holding in technology and data and in our growth initiatives, very much in line with what we announced with our new plan in February 2024. And this should really enable the good and continued execution of our plan. And when you look at the cost as such of the holding, they will be now stable for the rest of the plan. It's normal that you have to do the investments necessary at the beginning and then benefit from them over time of the plan. Further margin improvement is to come in the second half in P&C Retail and Health. This is obviously then the second phase of the margin improvement program in P&C Retail and UK Health, combined obviously with sustained margins in the P&C commercial line business. So we will continue the disciplined execution of our plan as we have started to do it in the first half of 2024. So in summary, the operating business business is performing well across all geographies, across all lines of business. We have made strong progress on the short-term priorities and at the same time invest for the long term. And this new business model of AXA, which is highly diversified, 50% B2C, 50% B2B, it's an attractive model to be able to deliver predictable earnings growth in an uncertain environment. On page seven, you will see the detail again around the strategic decision to sell AXA Investment Managers and entering into a long-term investment management partnership with BNP. We have announced that decision today. because we have seen that scale has become absolutely essential in a rapidly consolidating and competitive asset management industry. And in this context, we have done, as I said earlier, a strategic review where we looked at all options for our asset management business. We concluded that the sale was the best option to realize the value of the franchise that we have developed while also giving AXA-IM a platform to grow and remain competitive. With this sale, we can further simplify our model and focus even more on our core business, which is insurance, P&C, life and savings, and health, while having a limited impact on the group's earnings profile. The terms of the transaction are very attractive for the group. The total cash consideration is 4.5 billion euros, which represents a multiple of the earnings of 15 times. Secondly, we enter into a long-term strategic partnership with BNP, which does ensure a strong continuity in our business model and also gives us access to a wide range of high-performing funds and investment solutions. And obviously, the share buyback is put in place at closing. to offset the earnings dilutions, which is very much in line with our capital management policy. If we were to do the share buyback today, the estimation would be around 3.8 billion, but as I said, the share buyback will be put in place at closing, and obviously the market condition and share price of AXA will be then the determining factor on what exactly this amount will be. So AXA will remain full authority in the asset allocation, as we do today. We have about 300 people working in the CFO department to define risk appetite, the asset liability management, and product design. So this will not change at all tomorrow. And our ambitions on the life and savings strategy remain absolutely intact because we will now benefit even from superior investment capabilities of the combined operations of AXA Investment Management and BNP Paribas. Obviously, with this transaction, we also reaffirm the main financial targets of our plan Unlock the Future. For us, this was a unique opportunity for AXA-IM to join forces with another strong player and create a leading asset management platform in Europe, but also to maintain ties and strong ties with this new combined asset manager, which benefits the group model. Creating shareholder value through this transaction was absolutely key for us, and with this attractive valuation and the disciplined cash deployment, we are putting this in place. I will now hand over to Frédéric de Courtois, who will give us some more details around the business performance of the first half of 2024.

Thank you, Thomas. Good morning to you all. Pleased to be with you today. I'd like first to comment on the first pillar of our strategic plan, which is the organic growth. As you know, we have a strong focus on top-line growth. Revenues increased by 7% to 60 billion, slightly above plan. You remember that we didn't have a specific target on the organic growth, but we had given an indication of a 5% annual growth. And we have organic growth across all our lines of business and all our geographies. P&Cs up plus 7% with good pricing dynamics across commercial and retail. If I look at commercial, so the increase is about 60% price and 40% volumes. If I look at personal lines, the increase is more than 100% on price. You know that we had to increase price a lot in the UK and Germany. Life and health is also up by 7%. with a good momentum in our EB franchise, but also good momentum on the savings business. If I look more specifically at where the growth comes from on health, on EB, the growth is 75% about price and about 25% of volume. And on individual health, we have more than 100% on price. You know that we also had to strongly increase prices in the UK after the difficult results in 2023. Asset management is up by 5% from higher management and performance fees. So at the end, We are a well-diversified group, and all our geographies and all our business lines are performing well. Worth noting on the right part of the slide, the very good performance of our Asia and emerging market, up 13 percent, and also very good performance at AXA XL, up 7 percent. I would add that we are making good progress on our growth initiatives. If I may comment only on the mean market initiative, we see, after the investments we've made in 23, double-digit growth in some geographies and businesses, so double-digit growth at AXA Excel, double-digit growth in Germany and Italy, and we are satisfied with this initiative and how it's developing. So again, very good top-line momentum across the board, and we are well on track with our plan, and we are well on track to execute our growth strategy. I'd like now to move to the second pillar of our plan, which is about technical excellence. We have a very strong focus on technical excellence. And as you see on this slide, we are on track to deliver on our margin improvement targets. As you know, these targets are against full-year 2023 levels. If I look first at P&C commercial lines, so margins improved by 0.6 points in the first half of 2023. We see good margin expansion in SME and mean market in Europe, where the backdrop remains conducive. We are maintaining strong margins at AXA XL with pricing overall in line with loss trends. If I look at property, pricing is ahead of loss trend following recent repricing. If I look at casualty, pricing is firming in line with loss trend. And if I look at the financial lines, pricing is soft. We still have a profitable business, and we've seen over the past months a better trend. Overall, AXA Excel delivered excellent technical results in line with best-in-class peers with a combined ratio at 87.7% without the need to release PYDs. Overall, we expect AXA XL margin to remain broadly stable in the second half of the year, and we expect to see further margin expansion in SME and mean market in the second part of the year. In retail P&C, margins recovered by 1.7 points versus full year 23, following extremely strong repricing actions in the UK, so we've increased prices by 55%, and in Germany, where we've increased prices by 13%, combined with strict re-underwriting measures, which has led to lower volumes on profitable business, especially in the UK. Globally, the pricing environment in Europe in retail remains positive. especially in Spain where the market was a bit late and we've seen price increases by 11%. But again, overall, including Italy, France, and in all markets, the pricing environment remains fine. So we expect further margin improvement in the second half of the year as higher pricing continues to be earned through while inflation is slowing down and motor frequency stable. We see similar positive progress in the short-term life and health, with margin improving by 1.4 points, reflecting first a strong focus on restoring profitability in the UK through pricing actions and improved claim triage process. So we are absolutely on track in the UK, if not a bit ahead. And the market, we've not seen further deterioration of the market. So we are positive on the UK trend. But we also see positive pricing conditions across the board. So similar to retail P&C, we expect margins to further improve in the second part of the year on the short-term life and health business. So conclusion of all of this, all our businesses and countries are delivering strong technical profitability. Pricing conditions remain favorable across the board. The only points of retention are North America professional lines, where pricing is soft but slowly improving, and cyber. And here, the recent Microsoft event could act or should act as a positive for the markets. So if I compare to our plan, I see positive trends. We are probably ahead of our plan, and it makes us confident to deliver our plan. If I look now at the third page, which is the fourth pillar of our plan, which is capital management and cash. So on capital management, we remain disciplined and consistent with our plan, and it will stay so. So first, you've seen that we've completed our €1.8 billion share buyback program. Then we intend to launch a share buyback following the sale of AXA-IM to offset earning dilution in line with our commitments. As of today, this is expected to reach 3.8 billion, and it may vary a bit before we launch it in about one year after the closing, but again, the order of magnitude is this one. We have a clear M&A framework, and basically we want to strengthen our existing insurance business. they are good opportunities, and this is what we've done with the Nobis acquisition. And in any case, we will remain extremely disciplined. To say a word on Nobis, Nobis is an acquisition we like. It's a PNC acquisition with 1% gain of market share for us, and they have a strong know-how, which for us is useful in other markets, type of distribution channels, so car dealerships, travel agencies, and this is something also that we could export to other countries. By the way, this is the opportunity also for me to tell you that all the acquisitions we've made over the past two to three years are developing well, and we are happy with these acquisitions. We continue to operate at a high solvency to ratio at 227%. And I would insist on our 16 points capital generation in H1, slightly above our target range, reflecting also seasonality in our earnings. So at the end, and to conclude, we want to be a simple group. And we've made another step on this. focused on insurance risk and leader in all our key markets. We reaffirm the financial targets of our plan Unlock the Future. So growth of the earning per share at 6% to 8%, return on equity between 14% to 16%. We also confirm the 21 billion cumulative cash remittance even without AXA-IM dividend for 2025 and 2026. And we obviously confirm our 75 total payout. So count on us to continue to maintain a strong balance sheet and a disciplined capital management. Again, an excellent first half. And I give the word now to Alban.

Thank you, Frederic. Good morning to all of you. So let me take you now through the details of those results. And as always, I will start with P&C. As Thomas and Frederic pointed out, we had an excellent performance in P&C this first half. So you see here the growth in revenues. Total revenues, PNC, were up 7%. Commercial lines, in particular, grew by 7% with a good balance between pricing and volumes. We had strong new business and higher retention in property and in casualty at AXA XL. We see also the start of the benefits coming from growth initiatives in mid-market in Europe, and that also is helping us. We have pricing conditions that remain favorable for SMEs and mid-market in Europe, and you know that it is a business where we have limited cyclicality. and we are confident in our ability to continue to pass higher pricing, including from indexation. As Frederic said, at AXA XL Insurance, prices are holding well, but pricing trend varies line by line, and we are managing the cycle proactively, as we told you in February. So in short tail lines, we see continued favorable pricing, notably in the U.S., where we have plus 10% in North America property, but we also have 5% in international property. On the casualty side, we see ongoing repricing with plus 10% in U.S. casualty and 6% in international casualty. And again, as Frédéric pointed out, North America professional lines remain soft, but we see a slowing pace of deceleration. On the personal line side, revenues are up 6 percent, and that's driven by the higher pricing of 11 percent coming mostly from the U.K. and Germany. Frederic has explained that, so I will not come back to that, but obviously that also explains the reduction in volume. And at AXA Excel Re, we continue to have favorable pricing. So strong numbers across the board and a positive environment. That's very important. If we move to the next slide on the combined ratio, we had excellent technical results and high quality. And I will insist on this. It's good to see that the improvement in the combined ratio by 0.7 point comes entirely from the undiscounted current year loss ratio. You know that we... as much as possible plan to manage all together NATCAT, PYDs, and discount, and you see that the sum of those three elements is exactly the same between 1H23 and 1H24. One word also on NATCAT. You know that the way we report on NatCat, we put absolutely all weather events, be they big or small. Some of our competitors show only the events above 20 million. If we were to report it that way, then NatCat for us would be only 1%. The rest is small weather events. So we have good improvement in the undiscounted current year loss ratio. That comes mainly from commercial lines versus 1H23. And what's good to see as well is that in retail lines, we are back to the 1-ish-23 profitability. We are slightly below, the loss ratio is slightly below 0.1 point, which means that we have significantly improved versus full year 23 in personal lines, and that's what Frédéric showed you. And on the last item is the expense ratio, which is slightly up. That's entirely coming from commissions, and that change in commission rate is simply due to a mix of business, which has slightly evolved since last year. Moving to the next slide and the earnings. So obviously we benefit from that significant improvement in earnings in margin in the underwriting result, but we also had better than expected investment income coming from a number of items. Obviously, the fact that we reinvest at higher yields on the long term, but we also benefited from inflation protections in Turkey, for instance, and we also had better funds distributions. and that more than compensated the higher insurance finance expenses. On taxes, you will notice that they increased a bit more than proportionally, simply because we have now the OECD tax that affects mostly Bermuda and therefore mostly Excel. So overall, P&C earnings increased by 7% compared to 1H24. If we move to the following slide on the revenues in life and health, there again, a very good picture, because we grew significantly in the businesses that we like, so 11% for Unitlinked, 15% for Capital Light GA, and between 5% and 10% for health, be it individual or group. Protection, we grew at 3%, and only a small one for traditional general account. So we have a very good mix of business. across the board, and that also shows in our net flows where you see that protection and health contribute significantly, positively, and traditional GA, as always, and in line with our strategy, is negative. One word on employee benefit that you see at the bottom. You probably have noticed that we start reporting, and you will see that in our financial supplement, on our employee benefits business. So that's a mix of life and health products, and premiums are up 9% in this semester compared to last year. Moving on to PVEP and NBV, reflecting the growth that we have notably in protections in France and in Japan and in group health in France, you see PVEP up 12 percent. It's a very good number. You see that the NBV margin is slightly down. That's a question of mix. As proportionally to the rest of the business, we have sold less health products in Japan. And you know that health is a business with significant margins, significant NBV margins. And so overall, with better PVP but a slightly lower NBV margin, our NBV is up 6%. Moving to the CSM, and you know this graph, a few things to comment on it. The first one is the scope. So we have reinsured, as you know, two books of business, Accel Life Europe and a book in France, and that reduces the CSM by 600 million. Conversely, You remember the AXA Germany book that we wanted to sell and at the end of the day didn't sell? We didn't lose the CSM, but it was hidden somewhere else in the health for sale accounts. So we are reintegrating it, and that's why we have a plus 200 million that compensate a little bit the changes in scope. The main item, as always, is the normalized CSM growth at plus 3 percent, new business CSM and underlying return in force, more than compensating the CSM release. Economic variance minus 0.6, that's almost entirely due to the widening of government bond spreads, and you will see the same when I comment on the solvency later on. And operating variance plus 0.8 billion, that's simply the recognition of, through changes of assumptions and models, of the better profitability that we have on the business. And finally, FX, that's the weakening of the yen. And you have in mind, obviously, that Japan is a significant contributor to our CSM. Moving on to the earnings themselves. So I won't repeat what I said on scope. On the CSM release, so that's worth spending one or two minutes on this. The positive new business that we have in H124 is offset, in fact, by the negative impacts of the net outflows that we had The second half are 23. Now, if we project ourselves to the end of the year, we are confident that our CSM release will have grown by 3% full year versus full year. If I look at the health and life earnings separately, on the health side, you see a significant improvement, 42% versus one-inch 23%. That's obviously due to the significant recovery that we have in the U.K., And when you look at health, it's 1%, but it's plus 3% if you take into account, if you exclude the reinsurance treaties that I mentioned. And that's obviously what we should be doing, given that we did share buybacks to offset the dilution coming from those treaties. Last business line is asset management. So we will carry on consolidating asset management until the closing, and that will be in our underlying earnings. For this first half, we had an increase of 2 percent of our assets under management, and it's a good mix of market effect and net flows. coming from AXA itself and our Asian JVs. Revenues increased by 5% above the growth in assets simply because we had good performance fees in addition to management fees. And last, the cost-income ratio improved, which allowed us to have a growth in underlying earnings of 8%. So if I summarize all this in the next slide, good growth in earnings in all our lines of business, between 7% and 8%. You see that the line holdings and other negative amount increased by 154 million. That's due to two things. One, we had some positive tax one-offs last year that didn't repeat this year. And second, we are investing in technology and in growth initiatives, and the holdings, notably XISA, bear part of those costs. Net income is at $4 billion. That includes realized capital gains on real estate, but that also reflects the negative impact from an impairment relating to and the consolidation, obviously, of the earnings. Underlying earnings per share are up 4% like underlying earnings. because we had the benefit from capital management, from share buyback, but that was compensated by forex, and again, mainly the yen depreciation, but also the fact that we have higher undated debt expenses, and that comes from the Tier 1 issues that we had at the beginning of the year. So a few things to have in mind for the second half. As Frédéric said, we will have continued margin recovery in retail P&C and in health, and still a good momentum in commercial lines. We are still planning or budgeting for 4.5 points of NatCat for the whole year, because you know that there is seasonality. Second half is generally not as good as first half. We also have some seasonality in investment income, the first half being generally better than the second half, notably because of dividends, and same for the discount benefit where there is also a slight skew. And so overall, we expect our underlying earnings per share growth for the full year to be between 6% and 8%. If we move now to balance sheet items, as you know, in the first half, we there again have seasonality because we have the impact of the dividend and the share buyback and only half the annual earnings. So shareholders' equity is probably at a low point, and that has an impact on our debt gearing. That is at 22.1%. It's also the fact that for the gearing that we issued on a net basis 1 billion of debt in the first half, but overall we plan to keep our debt constant over the year. So you will see our gearing back to 20% probably at the end of the year. The seasonality on equity also has an impact on the ROE, which is at 16.6%. But that's obviously good earnings, but that's also, as I mentioned, the low point in net assets. And then the last word on our solvency. Solvency is at 227%. You saw that normalized capital generation stands at 16 points. So at the upper end of the range that we have given, but then bear in mind also that the seasonality that I mentioned is also reflected in the capital generation. But it's good to see that the amount of capital required for the very strong growth we had in the first half was contained. One more comment on the roll forward. It's the economic variance. I mentioned it for the CSM. It's even a bit bigger here for the solvency because the spread widening for sovereignty includes also the Japanese swath spread increase that we don't have in the CSM. Last point, on the sensitivities, they have not changed significantly. They're very much in line with what we saw in previous periods. So my conclusion before I leave the floor to Thomas for the general conclusion is that we showed this first semester very good earnings. We showed the discipline on the personal line side as we had promised, and we keep a very robust balance sheet.

Excellent. Thank you very much, Alban. In conclusion, a very good first half year combined with a confident outlook for 2024. As I said, the key of this three-year plan is focused on execution and implementing what we have shown to you in February this year. We are on a very good journey of that, and I would like to highlight four points again. Number one, we now have a simple and diversified business model, 50% B2C, 50% B2B, focused on execution geographies in which we are very strong and all of these geographies and line of business are delivering predictable results first point second point we've seen strong organic growth across all lines of business this has not really been visible over the last years where we were transforming the portfolio and the model that we have had and it was always um colored by restructuring transactions. Here, we have a very clean sheet of the new AXA, and 7% growth, as I said earlier, is something we haven't seen for many years. And because the 7% is very balanced in terms of all geographies and all lines of business, I remain very confident that this will continue in the same way. Third topic, we have shown a good progress on margin improvement. In particular, when it comes to the turnaround of the portfolios in P&C retail, notably in Germany and the UK, and health in the UK, combined with the implementation of the sustained investment for the long-term growth. And lastly, the balance sheet remains of high quality with a high solvency-to ratio, and Alban just showed that the sensitivities are also at a very limited level, which is very important for a time that remains volatile and uncertain. And we have also continued to show our very rigorous and disciplined approach to capital management, in particular in conjunction with the share buyback that has been announced with the transaction around AXA-IM. Thank you very much and we can now move to all your questions and hopefully our answers. So who would like to start?

First question is from James Schack of Citigroup. James, please turn on your microphone and go ahead.

Excellent and good morning everyone. My question might seem a bit unfair given the disposals you've made, and I think you probably earned the right to make the small acquisition in Novus. But I'm just interested in the PE that you're paying for that, because there's 11 times. Again, I know it's a small acquisition, but I was always under the impression that you would measure acquisitions versus the hurdle rate versus buybacks. So clearly this seems a small departure from that, but given the amount of solvency involved, build that you have and the stock of solvency, one might expect more acquisitions further down the road. So just to clarify that you will continue to use that as a hurdle rate when it comes to slightly larger acquisitions, please. Thank you.

Thank you, James, for your question. I might take this directly. So with the publication of the new plan, we have established a very clear order of priorities, which is First, the 60 percent payout ratio on dividends. Secondly, the share buyback, which should amount to 15 percent. And everything that remains is being ideally used for the investment in our own business, be it organic growth or be it M&A. We want to obviously remain very disciplined on this M&A. but we have not anymore the link of this M&A to our own multiple. And nevertheless, if you look at the acquisition of Nobis of 11 times PE, including synergies, and obviously the synergies are always calculated in a very conservative manner, this is certainly a deal. that is absolutely defendable because also it helps us to increase our market position in Italy. We are moving from player number five to player number four. And to the second half of your question, James, yes, I mean, we have a clear target to increase our presence in the markets that we are in. If we find deals, and you have seen now the fourth one with Nobis, with Laya, with Groupama in Turkey, and with Credit Mutuel in Spain, they are all exactly in the same logic. we will continue to look and we will continue to act because scale matters and we want to make sure that we remain at sufficient scale in all our core markets. We are moving to the next question.

Okay, next question is from David Barma from Bank of America. David, please turn on your microphone and go ahead.

Good morning. Thank you for taking my question. So I wanted to ask about non-life reserving. I think it will have been a nice surprise that Excel released some reserve overall in H1. But could you tell us about what you've seen specifically on casualty reserve developments? And when I look at slide 33 in your pack, it looks like the strength of reserves has softened a bit since we've moved to IFRS 17. Could you give us some color on that, please? And then secondly, on debt. So you have a target to keep your debt stack flat. Should we actually expect you to reduce the absolute amount of debt now, given your balance sheet will be smaller? So should we think about the cash and expense from the XIM deal to be potentially used for that, or do you have other plans for that cash? Thank you.

I suggest, thank you, David, for your two questions. The first one will be answered by Frederic around the reserve casualties and the second will be answered by Alban around the debt. And when it comes, I think, to what are we doing with potential cash resources that we've got, I would refer you back to the second half of my answer to James, which would be exactly the same. So, Frédéric, on reserves and casualty.

So casualty reserves. So first, we've done, as we do every year, a reserve review at half-year at AXA XL, and there is absolutely no change in our reserve level. We need to do a bit of history on this, so you remember that when we've taken over AXA XL, we had reinforced the reserves by one billion. Then you remember also that we've protected the pre-19 years with NEDC. Having said that, we take into account the last trends on claims in our reserves and in our pricing. So this is what we are doing, and we are absolutely comfortable with this. And what you've seen is that the results at AXA Excel are very good, and we didn't need to release any PYD. So again, we are extremely comfortable with our reserve position at AXA XL, including on casualty, despite the fact that we've seen some peers and we've seen on the market some adjustment on reserves. But again, all of this for AXA, I think, is explained by the history and by the fact that we've been extremely disciplined.

And I think your question on reserve was also on the ratio of reserve to premium. You mentioned IFRS 17 as the potential cause. You've seen in the appendix that when we moved to IFRS 17, that ratio did not go down. It slightly went down this semester simply because we have – higher premiums with a growth of 7% that you saw. And by definition, reserves do not increase at the same pace because we carry on the reserves of the the last 10 years, and that's the only reason why you see a small decrease in our reserving ratio as shown on the slide on the screen at first half. On the debt side, we were very clear indeed that we don't want to increase our stock of debt. But it's true that we will have 1.3 billion of cash more after we've sold AXA-IM and we've done the share buyback. But we don't incur debt as a funding mechanism. We incur debt for our solvency. And so, yes, instead of raising senior debt, we might simply use our cash, but we need Tier 1 and Tier 2. And you know that Tier 2 and Tier 1 debt are needed for our insurance business and not so much for our asset management business. That's why it doesn't have an impact.

Thank you, Alban and Frédéric. And we go to the next question.

question is from Andrew Crane of Autonomous Research. Andrew, please turn on your microphone and go ahead.

Thank you, and good morning. Three questions, if I can. Firstly, just as a long-term question, I know, Thomas, you've been de-emphasizing financial risk for some time, sale of U.S. Life and AB, all those closed-book actions, and now the sale of the asset management business. Is that largely done in terms of the structure of the business? Are you where you want to be in terms of structure? So that's the first question. Second question is, Can you give us a bit more detail on the financial lines business within Excel? How big is it? And what's its combined ratio relative to the 89%, which the whole of Excel's doing? And then thirdly, a technical question around the buyback. I mean, obviously, you've got the normal regular buyback to do. And then from mid-year on, you kick off with this 3.8 billion buyback. Do you have any sense as to how long it will take in 2025 to get through all those buybacks? Will you have completed them by the end of the year, do you expect?

So, Andrew, thank you for your question. I suggest I'll take the first one. Scott Gunther is taking the second one, knowing that we are not giving details on how big the financial line business is and how profitable it is. Scott can talk about it more in general. And then, Alban, if you can take the third question around the share buybacks next year once the transaction is hopefully closed. So, Andrew, on the first question around de-emphasizing financial risks, yes, this was probably the last element to de-emphasize financial risk because, remember, We are coming from a portfolio that was 80% driven by financial risks post-financial crisis in 2008. We are probably now at around 15% considering the sale of AXA-IM done. And so this is a mixed component. that we believe is the right one. We do, however, as I said earlier, have clear ambitions to continue our journey on life and savings. But when I talk about life and savings, I'm not talking about guarantee-heavy business. I'm talking very much around capital light business, protection, unit-linked, unit-linked with guarantee. And that's the journey that we are going now. And I feel very confident about the business mix that we have got, both in terms of geographies both in terms of type of customers, businesses versus end customers, B2C, individual customers, and also the question, what is the composition of our portfolio in terms of line of business? Scott, on financial lines, maybe?

Sure, I'll just, a couple of comments on that. You know, it's a, Financial lines is an important part of our portfolio, but we're certainly not, we don't feel we're overweight in that area. And as Frederick mentioned, while the rates remain negative, they're starting to ameliorate and We think it's going to see some improvement eventually in that portfolio, but we're very selective on what we write on new business and on renewals. And so from a margin standpoint, it continues to perform at expectations. But we do remain very, very selective in terms of what we're doing there.

Thank you, Scott. And when we go to Albon on the Shababix.

So thank you, Andrew. Obviously, we have very strict rules so that the share buyback doesn't have an impact on our share price, and that limits the daily volumes that we can buy. I would say, given the experience we had for the recent years in share buybacks, it's probably five to seven or eight months that it will take to complete the 3.8 billion share buyback.

Thank you, Alban and Scott. So we go to the next question.

Next question is from Michael Hotner of Berenberg. Michael, please turn on your microphone and go ahead.

Fantastic. Thank you so much. And well done for shaking us up last night. I have two questions, if I may. One is a normal one, and the other one is a kind of fluffy one. The normal one is 21 billion reiterated, even though you won't have the cash contribution from asset management for two years out of the three. So I work out that this is very roughly back in the envelope, 4% uplift. Can you talk a little bit about the cash profile, what gives you the confidence, where it's coming from? Kind of give us a story with as much detail as possible. That would really, really help. My feeling is it's moving ahead way, way beyond what you'd hope, but I don't know. And then the kind of more softer question is, I really do enjoy speaking to the asset managers at AXIM. can you tell us what's going to happen there thanks

Thank you, Michael, for your two questions. And I hope the shakeup you had yesterday was a positive one. So on the first question around the 21 billion, I suggest that Alban is answering on the more fluffy question, as you pointed out. Look, you are happily invited to continue to speak to the AXA-IM guys, and they're happy to speak to you. because for the next year they will still remain under the flag of AXA-IM, and thereafter they will be in the combined entity of BNP and AXA-IM. You must have seen that the business mix of both entities is very complementary. And therefore, we believe that the creation of this new company is a combination that will make both of them stronger. So you should even have a better discussion once the deal is closed. Albon on the 21 billion.

Thank you, Michael, for your question. As you pointed out, it's 4%. It's not massive. And I think we are confident because of two reasons. First, we had a good start of the plan this first half, and that gives us confidence on our ability to achieve our targets. And second, we are simply, I mean, every day discussing with our entities on further optimization and use of their capital. So there's no magical recipe. It's simply that we believe we can further improve by being at it every day. Thank you, Alban.

We'll go to the next question.

Next question is from Farouk Hanif of JP Morgan. Farouk, please turn on your microphone and go ahead.

Hi, everybody. Thank you very much. Firstly, I wanted to talk about your investment income. So I can see that there are some seasonality and there's some one-off in the inflation-linked investments. But when we look at your reinvestment yield, it still seems well above book yield. So are you... I mean, do you have a feeling that the net financial income from both P&C and life is tracking a lot better than your initial guidance? I guess that's kind of question one. Question two as well, you know, similar question on the combined ratio. It feels like there are not many areas where. your pricing is less than lost cost inflation. And there's a surprise in how quickly you've achieved the margin improvement. So there again, what is the upside risk, for example, in your 200 basis point overall P&C margin expansion? And then finally, it's nice to see a positive operating variance in the CSM for a change. I was wondering what exactly was driving that. Thank you.

Thank you, Farouk, for your three questions. I suggest the first and the third question will be answered by Alban, and the second question by Frederic.

Thank you, Farouk. So on investment income, It's true that we achieved a better outcome in this first half than what we had planned for. And as I said, it's due to inflation and also short-term rates that were higher than what we thought they would be. And we are indeed reinvesting at a higher rate. So I would say, yes, probably we'll have a better outcome. Bear in mind, though, that we are probably discounting our claims at a slightly higher rate as well. And, for instance, when you look at what we had said in February, on the growth of the unwind. Implicitly, we would say that we would take the brunt of the increase this year, and that's what we are saying, but it would be closer to 100 million next year. In fact, next year, the unwind will probably increase by closer to 200 million. So you have the two effects that you need to keep in mind, but it certainly is a good outcome for the first half.

Okay, Frederic, second question. So on the combined ratio, so first, you're right that we had said that we would improve the combined ratio by 200 basis points. If we look at where we are after the first half, and if I normalize CAT, I have achieved already 140 basis points of the 200, which is a good result. How did we do this? I have to say we've been... more than extremely disciplined. We've even been tough, if I may say. And if I look at the issues that we had in UK retail, in UK health, and Germany motor, we've been extremely tough, and we've accepted sometimes to lose portfolio in order to improve margins. And again, no regret. It has worked, and this is our stance. So now if you look at our portfolio globally, it's true that I have no issue. In other words, my technical profitability is good everywhere, sometimes better than in other places. But if I look at my thresholds, which we measure compared to our cost of equity, the profitability is really good. We shouldn't be complacent. In other words, we are aware that from a technical profitability point of view, the market is good. The market will be able to pass inflation increases. So we are also preparing for potentially tougher times, investing in technology, investing, improving our pricing, and so on. So again, No issue around the world at AXA. We are going to continue to manage in a very disciplined way. But we know it may not last, and we are preparing for this if necessary.

And then on the operating variance of the CSM, it's really many different things. I will give you examples. We see, for instance, in France that lapses have come down. We see also that there are more top-ups, so that also increases the CSM. In a number of entities, we have probably lower costs than were originally projected. So that's the kind of things where it is a sum of positive things in a number of entities.

Thank you, Albon, and thank you, Faouk, for your questions. We go to the next question.

Next question is from Will Hercastle of UBS. Will, please turn on your microphone and go ahead.

Thanks for taking the questions. Slide 10 is really helpful, thanks, on that technical margin improvement. And as you say, it certainly seems that we're ahead of the around 50% of improvement you anticipated in 2024. I guess just thinking about the trade-off from here, how should we think about the trade-off between potentially further margin expansion versus increasing competitiveness? And would that be different at the moment in your thinking across the commercial, the retail and the short-term life and health divisions? And just perhaps going a little bit more granular on the UK, could you help us to understand how much UK volume has reduced in that? I know you're saying business mix as well. And I guess just really as we enter second half, are you operating in the UK at target margins you'd want to be operating on a written basis, or is there still a bit more action to go? Thanks.

Thank you, Will, for your two questions. I suggest that Frederic will take them because the first one certainly is a direct follow-up of Farouk's question.

So thank you, Will, for your two good questions. So your first question is really our daily life, if I may say. So what is the trade-off between margins and volumes or margins and competitivity. It is clear that we believe that in the first half we've achieved a good trade-off, if I may say, because we've been able to grow organically at a good pace and we've been able to achieve good margins and to improve margins, which again in the insurance business is an ideal world. So moving ahead, We see the market as disciplined, be it on retail and commercial lines. Again, we've discussed about cyber and North America financial lines, but this is a bit of an exception, and we see that the market is continuing to be disciplined. Why is it so? Maybe because the reinsurance market is disciplined and reinsurance prices are high. maybe because all insurers have become disciplined thanks to solvency requirements, thanks to your pressure, guys, from investors. But we don't see the necessity to make other tradeoffs than what we've been doing now. So we will stay extremely disciplined and focused on margins. Of course, we will look at volumes, but priority number one is margins. In the UK, when I've said that we've been extremely tough, we've accepted to lose 30% volumes. But again, we've increased prices by 55%. And so what we've done is a mix of price increases and pruning. And we have absolutely no regrets. We should be profitable in the UK retail market. And we will be absolutely fine at year end.

Thank you, Frederic. And thank you, Will, for your questions. We go to the next question.

Next question is from William Hawkins of KBW. William, please turn on your microphone and go ahead.

Hello. Thank you for taking my call. On AXA Investment Manager's sale, Thomas, why did you decide to sell the business outright? I mean, the alternative could have been that you could share in the benefits of this great opportunity through a joint venture or a merger. So I'm interested in your thinking on that, please. And then secondly, sorry, Freddie, because you've kind of already answered this, but I did want to come back on the issue about reserve movements in AXA Excel and across the group. Did you say specifically that you have not changed casualty loss picks? So you're reserving for casualty is unchanged? Or did your answers allow for the fact that maybe you have changed your casualty, but it's been offset by other stuff? I wasn't quite clear about whether you were just talking about the net figure or the moving parts. And if I could append to that, has the ADC attached yet, please? Thank you.

Thank you, William, for your questions. I will answer the first one, and Frederic will answer the second question with all its sub-questions. So look, on AXA-IM, we obviously looked at very different options of a future because, as I said earlier, We have a very ambitious life and savings strategy for this to be successful. We need a scalable asset manager, and we looked at different options from growing the business ourselves to combining in a true joint venture with somebody else or selling the business. We have decided that the best option from a business perspective, but also from a shareholder perspective, is to sell the business to a like-minded partner that we have a strong relationship with and a long-term relationship with, which is BNP. And let's say the option space is not that big at the end of the day because if you look, AXA-IM has both liquid assets, in particular in our case fixed income, and alternative assets. The market is not going in a direction of a combination of those two, but more in a separation of those two and excluding, let's say, a potential split of AXA-IM into alternatives and liquid business. We focused ourselves on who can we partner with that has a combined business model, and there you don't have many options. And therefore, we concluded that the sale is the best place, and as I said earlier, it also related to Andrew Queen's question, it also helps us to do one of the last steps around focusing our business model more on insurance and focusing our business model less on financial risk, which, as you know, has been the core of our strategy over now a long period. Frederic, around the reserve movements XXL and the ADC.

Sorry, William, if I've not been clear. So, yes, we've changed our loss peaks in casualty U.S. to take into account last trends, and the impact has been absorbed by buffers that we had above the previous loss peak. In other words, our level of reserves has not changed, but we had enough reserves above our previous best estimate to absorb this. And the ADC has not attached.

Clear. Thank you. And thank you, William, for your questions. We go to the next question.

Next question is from Dominique Omani of Exxon. Dominique, please turn on your microphone and go ahead.

Hello, folks. Thank you for taking our questions. Three for me, if that's okay. Just on the tax rate, understand the point about the OECD rate. I think the tax rate in France and Europe is also a bit higher than it was in full year 23. Is that the same thing or is there something else going on? And do you expect those geographies to have a higher tax rate than last year going forwards? Second question was, I wonder if you might just reflect a bit on protection and health claims experience. You mentioned that the UK health situation is stabilised, which is great. I observed some other players globally, so for instance in Asia, having some challenges in claims experience. I wonder if you could just share your reflections on what you're seeing on the claims in protection and health experience. more globally but then final question uh alban you mentioned uh you're on track for the six to eight percent um eps in in 2024 um which of course is better than the four percent in the half um i just wanted to to understand are you suggesting that it is is the point you're making that it we shouldn't limit ourselves to the four or that it won't be better than the eight because clearly the frontier is above current expectations. I'm just reflecting on what that might mean. Thank you.

Thank you, Dominic, for your three questions. I suggest that Alban is taking the first and the third question, and just a little hint to the third question. Half a year times two is not what you should be doing. And then Frederic will take the second question on the health claim in the U.K., but also then Asia.

Thank you, Dominique. On the tax rate, there's always a bit of volatility in our tax rate depending on some investment income that sometimes is not taxed, notably in the first half, but that varies. So I would say the OECD tax for the group is probably one point of tax rate structurally, one point more, obviously. But then there is volatility, and I would say that this first half is probably a high point in terms of tax rate globally. Shall I take directly the one on the EPS? So I think you're quite perceptive on this, Dominique, because what I meant was exactly that, that yes, we think we will be within our target range, but given seasonality, you shouldn't double the half-year earnings, and you shouldn't, I believe, expect that we would be above 8%. I think 6% to 8% is already a good outcome.

Dominique, your question on protection and health is not an easy one. First, because protection and health, and I will come back to this, are two different businesses, and then we see some... We have some local specificities. On protection, apart from what we've seen on COVID and we've seen protection is mainly mortality and longevity at the end. And apart from what we've seen on COVID and with especially strong impacts for some US players or some US exposed players, we don't see now any specific trends. Again, you have to look at the mortality and longevity experience, but we don't see specific or notable trend. Health, apart from the fact that we continue to see significant health inflation worldwide, we don't see any global specific trends. We may see here and there specific trends on chronic diseases. This is maybe the case in Asia. We've seen the specific trends in the UK, and we are confident now that it's going back to normal. But again, these are more local trends. We continue to see our health business as a business that we need to manage in an extremely disciplined way, and this is why also we've created this health global business unit. I mean, we want to be specialist player on the health business. And we believe we have margin for improvements looking at our results. And we know that we operate in a high inflation environment on health expenses.

Thank you, Dominique, for your question. And we move to the next question.

Next question is from Andrew Sinclair from Bank of America. Andrew, please turn on your microphone and go ahead.

Thank you very much, everyone. First was actually on XL Re. How much do you actually have in the numbers and the attritional, I guess, for Baltimore bridge losses? I think you'd mentioned it could be up to 100 million. If I stripped out 100 million from your attritional, you'd be under 60% attritional. So just trying to get a handle on that. That's my first question. Second, is this on AXA-IM and the solvency impact of the disposal? I suppose maybe a little bit surprised it was only neutral for what seems a pretty good deal. Just wondering if you can tell us a little bit. I guess you lose maybe a bit of diversification, but why is it only neutral given the amount of extra cash you'll have lying around? And then finally, it was just... Interested to know what the disposal of AXA-IM means for your thoughts on life books in general, both back books and open books. Does that change your thoughts if you're not capturing asset management revenues as well? Just thoughts on that. Thank you very much.

Thank you, Andrew, for your three questions. I suggest that Scott will answer the first question on the Baltimore loss. And remember, the 100 million or below 100 million was for the whole, not just AXA-XLV, but Scott can explain more. Secondly, Alban, if you could talk about AXA-IM and the only neutral effect on solvency. And then, Frederic, if you want to talk about... the world post AXA-IM ownership with regard to open and closed live books. Scott.

Thank you, Thomas. Andrew, as Thomas mentioned, the 100 million, under 100 million net is both for the insurance and the reinsurance pieces of it. And actually, we just did the review and the update, and we have no changes to that number at this time. So we remain confident that that number holds.

Thank you, Scott.

So, Alban.

Yes, so on the solvency, the simple way to look at it is that between the price we received, the 5.4, and the share buyback and the fact that we need to pay taxes, we'll receive 1.3 billion of cash. On the other hand, today, AXIM is included in our SCR calculation because They are included in our EOF and they are also included in the SCR because you know that asset managers, even if it's capitalized, need to hold some capital. The net between the two, the EOF contribution and the SCR requirement, is a billion. So I have 1.3 billion of cash in the end, but I had 1 billion positive coming from AXA-IM today. And therefore, the difference is the 300 million, which roughly equates to two points of solvency that we have.

On AXA-IM and the life business, the short answer is fundamentally it doesn't change our view. But let's Let me be a bit more explicit. First, on new business, I would like to highlight the fact that the life business for us remains and is extremely strategic, and we believe we can do better than what we are doing now. In other words, we have built and we are building an acceleration plan on the life business. We believe that there are a lot of opportunities on protection, on savings, on on retirement. And we believe that growth can accelerate compared to what we are doing with only a bit more of investments and focus. And the fact that AXIM is not part of the group anymore doesn't change the picture. I would say, on the contrary, AXIM was an excellent franchise, but not excellent everywhere. And BNP has... higher retail focus than AXA-IM, which was an institutional player. BNP had a higher equity focus than AXA-IM. So BNP has an ETF range which we didn't have at AXA-IM. So it will give us some more opportunities on the new business. On the back book, no, it doesn't change our perspective. you know that we've done some transaction over the past plan. We've said that we may do some more over the next plan, but more on an opportunistic basis. And again, it doesn't change our perspective. For us, this is our financial transaction. But the fact that we have or we don't have XIM doesn't change the picture.

Thank you, Frédéric. And thanks, Andrew, for your questions. We go to the next question.

Next question is from Henry Heffield of Morningstar. Henry, please turn on your microphone and go ahead.

Good morning, all. Thank you for taking my questions. So just on AXA-IM, I'm really – I'm just trying to get my head around the strategic decision here. You mentioned there that BNP Paribas was better in retail and equities. It just seems – to me like for a long-term savings business, asset management is really important. So I was wondering why you didn't consider then building out those kind of retail and equities expertise internally or buying someone else like you sort of did with AXA Framlington and preserving that kind of part of the business. And then second question is, have you had discussions with shareholders so far on this and how has the reception been in those discussions? And then third question, if I could, just on the buyback, that 3.8 billion, I assume that's going to be on top of the 15% that you have outlined in your capital kind of allocation framework. So is that kind of coming in at around 4.9 billion under your estimates? Thank you.

Thank you, Henry, for your three questions, which I am going to answer. So the first question around the strategic decision, as I was saying earlier, we looked at various options, what is the best future for AXA-IM, and obviously one of them would have been to build out the missing expertise ourselves. We must just not forget that in doing that, it would have needed a significant sum of M&A. And as you know, the multiples in asset management are very different to the insurance multiples, i.e. higher. And going back to James' question from earlier, if you want to be disciplined, and we are disciplined in M&A, it is almost impossible to build AXA-IM out ourselves. And therefore, again, we looked at all different options and came to the conclusion that this strategic decision is the best one and the right one, and that we will clearly have, as Frederik mentioned earlier, a better access to a broader suite of products that we haven't had beforehand because AXA-IM is very strong in fixed income, very focused and selected in equities, and not present at all in what is multi-asset and the passive space. On the alternative space, we are obviously very strong on the real estate and private debt, but private equity was not very developed. So with this combination, we will have access to all of these product expertise, which is important for our life and savings strategy. and our life and saving strategy, both in terms of ambition and realization, will not be compromised through the sale of AXA-IM. The discussion with shareholders so far has gone very well. They see this in a very positive light because it's a further focus of our footprint around focusing more on insurance because The asset management segment is a very small segment. And secondly, our shareholders have very much applauded the very disciplined capital management strategy. We put in action what we said we would do in February with this buyback. And then your third question. This buyback does come on top of the 15% and it will come at the point of the closing of the transaction. I suggest we take one last question and we'll finish the session afterwards.

Last question is going to be from Kelish Mistry of HSBC. Kelish, please turn on your microphone and go ahead.

Thank you for taking my question. I've just got a very quick one on investments. I think Thomas mentioned 1.6 billion of investment spend over three years in his video. Could you just help us understand how much will be expense versus capitalised through the P&L? And will this go through the P&L equally in the next three years? And just lastly, related to that, on the innovation element of that investment spend, are there sort of any particular markets we should be looking at for evidence of progress already made that you intend to, if you like, export to the rest of the group? Thank you.

Thank you for this question. So on the investments, these are obviously the organic investments that we are doing on the tech side in particular. The 1.6 are very important for us because we obviously this fuels the growth and profitability improvement over the next plan. Those investments are basically deployed in all of our markets because The new plan, Unlock the Future, was composed of a clear action plan of each of the different markets. And so you will see this happening everywhere. And I would suggest, if you want to have more detail, to go back to our presentation that we've done at the end of February where we have detailed exactly the areas in which we deploy the tech investments and where they will appear. And, Alban, around the question of what is annual spend versus what is capitalized, maybe you can give a quick overview on that.

I think we will need to come back to give a precise number because I don't have it with me.

good so we'll do that and unfortunately we're coming to the end of the session I think there is one open question left we don't want to discourage you so please feel free to contact the IR team with your remaining question we really want to answer it but we have to unfortunately close the session thank you very much again for all your good questions and for having attended the session again we are very happy with those first half year results. And we wish you now a great rest of your day and a great summer and hope to see many of you soon to discuss these results in even more detail. Thank you very much.