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.