AXAHY - AXA SA (AXAHY) Q4 2023 Earnings Call Transcript
2024-02-22 22:59:09 ET
AXA SA (AXAHY)
Q4 2023 Earnings Conference Call
February 22, 2024 9:30 AM ET
Company Participants
Anu Venkataraman – Chief Strategy Officer and Group Head of Investor relations
Thomas Buberl – Group Chief Executive Officer
Frédéric de Courtois – Group Deputy Chief Executive Officer-Finance, Operations, Strategy, Risk, Underwriting
Alban de Mailly Nesle – Group Chief Financial Officer
Scott Gunter – Chief Executive Officer-AXA XL
Patrick Cohen – Chief Executive Officer-AXA Europe
Guillaume Borie – Chief Executive Officer-AXA France
George Stansfield – Deputy Chief Executive Officer
Hassan El-Shabrawishi – Chief Executive Officer, International Markets
Conference Call Participants
Andy Sinclair – Bank of America
Farooq Hanif – JPMorgan
Peter Eliot – Capital Cheuvreux
Andrew Crean – Autonomous
William Hawkins – KBW
Dominic O'Mahony – BNP Paribas Exane
Hadley Cohen – Deutsche Bank
Presentation
Anu Venkataraman
Good afternoon, and welcome to AXA's Presentation of its New Strategy Plan for 2024 through 2026. A special welcome to those who are here in-person, who have braved the bad weather outside. Thank you. And thank you also for those joining us on the webcast. Presenting today will be our Group CEO, Thomas Buberl; Group Deputy CEO, Frédéric de Courtois; and our Group CFO, Alban de Mailly Nesle. For Q&A, they'll be joined by other members of our management team. So they won't necessarily stand up now, but they'll – you'll see them later. So we have Patrick Cohen, who's CEO of Europe for AXA; Guillaume Borie, who's CEO of AXA France; Scott Gunter, who's CEO of AXA XL; Hassan El-Shabrawishi, who is CEO of our International Markets. We also have George Stansfield, who's Deputy CEO. As you know from last year, Hong Kong and Japan report to George. We also have Alexander Vollert, who's our Group COO. So with that, I turn to – oh and AXA – I am – AXA Investment Managers, Marco Morelli. I'm so sorry, Marco.
So with that, I turn over to Thomas.
Thomas Buberl
Thank you, Anu, and good afternoon to all of you. Very happy to be with you in this room. And first, what I would like to do before we look forward and unlock the future, let's quickly look backward again, what has happened over the last seven years. Because as you well know, because you have accompanied the journey of transformation, what is called AXA today is very different to what AXA was seven years ago. What is AXA today? AXA is a company that is much simpler, with a much more focused footprint, a company that is focused towards technical risk, coming very much from market risk and financial risk, and certainly focused on cash generation.
What we see over that period is that revenues have roughly been stable, plus 3%, however, underlying earnings have progressed by 34%, and organic cash has progressed by 75%. So the business today is a high quality business that generates sustainable earnings, but in particular has a very high cash conversion. The business is a distinctive franchise and certainly very balanced. As a result of this transformation and the simplification, it's a business that relies 50% on commercial insurance, 50% on retail insurance, and within we have focused ourselves on fewer positions, fewer geographies, but with leading positions. So if you look on the commercial insurance, which is 50%, we are today the largest global underwriter of corporate risks, both for physical risks, buildings, the production plants, but also for the human assets of companies.
Or when we look into the 50% retail insurance, we see that we are almost everywhere top three in Europe with a very strong agent distribution and a multi-line approach, but we are also strong in Japan, Hong Kong, and in 15 emerging markets, where we are amongst the top five. As I said earlier, this business is very focused on high return on equity and high cash generation, but what is very distinctive and particular about it, that we are very close to our customers. Having predominantly agent distribution and having it very decentralized means being close to our customers, and that is also one of the reasons why our net promoter score has been increasing over the last year. So it's a very distinctive franchise if you look at what else is around in the market.
When we look back for the last time, into the existing plan that comes to the end, Driving Progress 2023, we can clearly say that it has happened in a challenging environment, because I remember when we launched this plan three years ago, we were alone in the room, we had masks on because it was in the middle of COVID. And since then we have seen plenty of crisis, and one can clearly say that our model, that I described earlier, has been tested and validated because it has delivered a very strong and consistent performance in this very challenging environment. When we look at the four objectives we have set ourselves, we can clearly say that we have met one and exceeded three of them, which I think is a very good result and wasn't so obvious at the beginning of this plan.
When we look in particular what we have achieved in terms of shareholder return, we have returned roughly €13 billion in dividend and share buyback, which if you go back to the market's cap of at the beginning of this plan represents roughly 30%. So this strong delivery is a consequence of the very deliberate strategic choice that we have made in order to shape the business as a business that is become far – has become far more reliable, far more consistent, but certainly a big generator of cash.
Looking forward now, we come out of an uncertain environment and we believe that the macro environment going forward will remain very similar to what we have seen in the last plan. And this is why it's important to have a company that is well diversified and well balanced. And we've seen over the last plan that the group has proven to be solid in this difficult environment and prudence and diversification were absolutely key for that. If you look at our asset allocation in terms of prudence, if you look at our very high solvency in terms of strength of the balance sheet, but also if you look at the limited sensitivity, for example, to interest rates, which is now roughly a third of what it used to be.
And so we have also been very swiftly managing topics like inflation, topics like increase in interest rate through clear discipline around tariffication, but also through discipline around the cost side. When we look at this unstable environment, there is also a lot of upside because what we see is that in many areas, tectonic shifts are happening. So for example, when you look at retirement at healthcare, we see that there is big opportunity for us where we can capitalize on what we have, or if you think about the big new phenomenon about generative AI, we are a business that is working a lot with unstructured data.
Up to now, we have had no chance to really use this data in a more scaled fashion. With gen AI, we are for the first time able to use both on the risk assessment side, but also on the claims side, this data. And then lastly, when you think about risks that become more difficult to ensure, for example, natural catastrophes or cyber, being able to offer prevention and risk consulting services will help us to keep these risks insurable. So the business has proven very resilient in a difficult environment and has shown that it can, despite this environment, deliver very predictable earnings. And I believe we are very well placed for this next phase, both in terms of continuing this very consistent and stable return delivery, but also capitalizing on these long-term trends that I just mentioned.
This new plan is called Unlock the Future. Unlock the Future means that it is an evolution, not a revolution. We come probably out of a more revolutionary approach with the transformation over the last seven years. But as I mentioned earlier, we have got a platform now that works well. We want to continue the same strategy in scaling up what we have been doing well now. And this means that the focus in the next phase is very much on rigorous execution of the best practices. We want to address three different levers in this plan. Number one, driving higher organic growth. We believe that there are some areas where we can expand more, some wide spots, but we also believe that growing our distribution will enhance organic growth further....
AXA SA (AXAHY) Q4 2023 Earnings Call Transcript