AXA's first half of 2024 results showcased a strong start under its new strategic plan, with the company reporting organic growth of 7% and a rise in underlying earnings per share by 4%. CEO Thomas Buberl emphasized the robust performance during the earnings call, underpinned by a high Solvency II ratio of 227%. AXA's strategic moves included the sale of AXA Investment Managers to BNP for €5.4 billion and the planned acquisition of Nobis Group to bolster its P&C operations in Italy. The company also announced an upcoming share buyback program valued at €3.8 billion, following the sale of AXA IM.
Key Takeaways
- AXA reported a strong start to 2024 with organic growth of 7% and a 4% increase in underlying earnings per share.
- The Solvency II ratio stood at 227%, reflecting a strong balance sheet.
- AXA announced the sale of AXA Investment Managers to BNP for €5.4 billion and plans to acquire Nobis Group for €0.5 billion.
- The company aims for an underlying earnings per share growth of 6% to 8%, aligning with their three-year target.
- AXA XL's combined ratio was a favorable 87.7%, with expectations of stable margins and further expansion in SME and mid-market segments.
- The company plans to launch a €3.8 billion share buyback program post the sale of AXA IM.
- Despite lower sales of health products in Japan, overall net book value increased by 6%.
- AXA anticipates continued margin recovery in retail P&C and health, with underlying earnings per share growth expected to be between 6% and 8% for the full year.
Company Outlook
- AXA targets underlying earnings per share growth in line with their three-year target range of 6% to 8%.
- The company expects margin improvement in the second half of the year, especially in retail P&C and health sectors.
- AXA is focused on disciplined capital management and aims to reduce gearing to 20% by year-end.
Bearish Highlights
- Sales of health products in Japan were lower, affecting the net book value margin slightly.
- The economic variance negatively impacted by widening government bond spreads.
Bullish Highlights
- AXA XL delivered strong technical results with a combined ratio of 87.7%.
- The company reported a 42% increase in health earnings and an 8% growth in underlying earnings, driven by asset management revenue and improved cost income ratio.
- AXA's strategic acquisitions aim to strengthen its position in the insurance market.
Misses
- The company noted a slight softening in reserve strength due to the transition to IFRS 17.
Q&A Highlights
- AXA plans to maintain a flat debt stack and may use cash from the AXA IM sale to reduce debt.
- The share buyback program is estimated to take 5 to 8 months to complete.
- AXA's €21 billion investment plan is off to a good start, with confidence in achieving targets.
- Investment income has seen better-than-expected outcomes due to inflation and higher short-term rates.
- The company remains disciplined in its approach to improving combined ratios and is investing in technology for future growth.
AXA (ticker: AXA) has conveyed a confident outlook for the remainder of the year, backed by strategic decisions to streamline their business model and focus on insurance. The company's strong balance sheet and disciplined approach to capital management are poised to support its growth ambitions and offer value to shareholders through the planned share buyback program.
InvestingPro Insights
AXA's assertive moves in the first half of 2024 have been bolstered by a solid financial foundation, as evidenced by key metrics from InvestingPro. With a market capitalization of $76.81 billion and a low price-to-earnings (P/E) ratio of 9.99, the company is positioned as an attractive investment, particularly when considering its near-term earnings growth potential. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a similar level of 9.77, reinforcing the value proposition offered by AXA's stock.
InvestingPro Tips highlight AXA's commitment to shareholder returns, with the company having raised its dividend for four consecutive years and maintained dividend payments for 45 consecutive years. This track record is a testament to AXA's financial resilience and strategic foresight. Furthermore, the company's significant dividend to shareholders, coupled with its status as a prominent player in the insurance industry, aligns with its robust performance and strategic acquisitions aimed at strengthening its market position.
In addition to these insights, there are 9 more InvestingPro Tips available that provide a deeper analysis of AXA's financial health and market standing. These tips can offer investors a comprehensive understanding of the company's prospects and are accessible through InvestingPro's platform.
The company's gross profit margin for the last twelve months as of Q2 2024 stands at 15.1%, indicating room for improvement when compared to industry standards. Despite this, AXA's liquid assets exceed short-term obligations, suggesting a solid liquidity position that can support both ongoing operations and strategic initiatives like the share buyback program.
AXA's strategic decisions, including the sale of AXA Investment Managers and the acquisition of Nobis Group, are underpinned by a strong balance sheet and a disciplined approach to capital management. InvestingPro Data reflects a company that is not only profitable over the last twelve months but also one that analysts predict will continue to be profitable this year, aligning with the optimistic outlook presented by the company's CEO.
Full transcript - Axa Sa OTC (AXAHF) Q2 2024:
Operator: Good morning. And welcome to AXA’s First Half Results Conference Call. Presenting today are Thomas Buberl, Group CEO; Frédéric de Courtois, Group Deputy CEO; and Alban de Mailly Nesle, 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 XL; and Guillaume Borie, CEO of AXA France. With that, I turn over to Thomas.
Thomas Buberl: Thank you, Anou, 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 II 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 planned target range of 6% to 8%. 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 & Savings business, to be part of that consolidation and also to be able to be served for our ambitions on the Life & 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. And 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 & 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 U.K. Health. You remember we had some issues around P&C Health in Germany and the U.K., and U.K. 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 XL 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 U.K. 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 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 7, 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 a 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. Excuse me, 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. Excuse me, with this sale, we can further simplify our model and focus even more on our core business, which is insurance, P&C, Life & 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, 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, it would -- 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 determinant 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 & 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 (OTC:BNPQY). 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.
Frédéric de Courtois: 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 topline 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 U.K. and Germany. Life & 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. On Individual Health, we have more than 100% on price. You know that we also had to strongly increase prices in the U.K. 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 markets up 13%, and also very good performance at AXA XL up 7%. I would add that we are making good progress on our growth initiatives. If I may comment only on the mid-market initiative, we see after the investments we’ve made in 2023, double-digit growth in some geographies and businesses, so double-digit growth at AXA XL, double-digit growth in Germany and Italy, and we are satisfied with this initiative and how it’s developing. So again, very good topline 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 mid-market in Europe, where the backdrop remains conducive. We are maintaining strong margins at AXA XL with pricing overall in line with low strengths. If I look at Property, pricing is ahead of low strength following recent repricing. If I look at Casualty, pricing is firming in line with low strength. 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 XL 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 mid-market in the second part of the year. In Retail P&C, margins recovered by 1.7 points versus full year 2023, following extremely strong repricing actions in the U.K., 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 unprofitable business, especially in the U.K. 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 & Health, with margin improving by 1.4 points, reflecting first a strong focus on restoring profitability in the U.K. 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 U.K. 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 & 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 attention are North America Professional Lines, where pricing is soft but slowly improving, and Cyber. And here, the recent Microsoft (NASDAQ:MSFT) 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, and 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 we -- 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 still one. We have a clear M&A framework, and basically, we want to strengthen our existing insurance business if there 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. We -- it’s a P&C acquisition with 1% gain of market share for us, and they have a strong knowhow, which for us is useful in other type of distribution channels, so car dealership, 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 two -- over the past two years to three years are developing well, and we’re happy with these acquisitions. Finally, we continue to operate at a high Solvency II ratio at 227%, and I would insist on our 16% -- 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.
Alban de Mailly Nesle: Thank you, Frédéric. 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 Frédéric pointed out, we had an excellent performance in P&C this first half. So you see here the growth in revenues. Total revenues, P&C, 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 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 Frédéric 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 10% -- 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%, and that’s driven by the higher pricing of 11%, coming mostly from the U.K. and Germany. Frédéric has explained that, so I will not come back to that, but obviously that also explains the reduction in volume. And at AXA XL 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 altogether Nat Cat, PYDs and discount, and you see that the sum of those three elements is exactly the same between 1H 2023 and 1H 2024. One word also on Nat Cat. You know that the way we report on Nat Cat, 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 Nat Cat 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 1H 2023. And what’s good to see as well is that in Retail Lines, we are back to the 1H 2023 profitability. We are slightly below -- the loss ratio is slightly below 0.1 point, which means that we have significantly improved versus full year 2023 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 the -- 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 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 had -- 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 increase a bit more than proportionally, simply because we have now the OECD tax that affects mostly Bermuda and therefore mostly XL. So, overall, P&C earnings increase by 7% compared to 1H 2024. If we move to the following slide on the revenues in Life & Health, there again, a very good picture, because we grew significantly in the businesses that we like. So 11% for unit linked, 15% for capital light G/A, 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 G/A, 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 & 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%, so 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 that Health is a business with significant margins, significant NBV margins. And so, overall, with better PVEP 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, AXA 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 compensates a little bit the changes in scope. The main item, as always, is the normalized CSM growth at plus 3%, 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 reform [ph]. 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 H1 2024 is offset in fact by the negative impacts of the net outflows that we had in the second half of 2023. 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 & Life earnings separately, on the Health side, you see a significant improvement, 42% versus H1 2023. 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% 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, and which allowed us to have a growth in underlying earnings of 8%. So if I summaries 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 in this year. And second, we are investing in technology and in growth initiatives, and the holdings, notably AXA, 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 a Reso Garantia and the consolidation, obviously, of the Reso Garantia 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 issue 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 Nat Cat 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 point. 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 go-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 solvency includes also the Japanese swap 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.
Thomas Buberl: 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 focus 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 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 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 U.K., and Health in the U.K., 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 II 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?
Operator: First question is from James Shuck of Citigroup. James, please turn on your microphone and go ahead.
James Shuck: 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 Nobis, but I’m just interested in the P/E 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 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.
Thomas Buberl: 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% payout ratio on dividends. Secondly, the share buyback, which should amount to 15%, and everything that remains is being ideally used for the investment in our own business, be it organic growth or be it M&A. And 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 P/E, including synergies, and obviously, 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 #5 to Player #4. 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 Crédit 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.
Operator: Okay. Next question is from David Barma from Bank of America. David, please turn on your microphone and go ahead.
David Barma: 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 XL released some reserve overall in H1. But could you tell us about what you have 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 have 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 spends from the AXA IM deal to be potentially used for that or do you have other plans for that cash? Thank you.
Thomas Buberl: I suggest, thank you, David, for your two questions. The first one will be answered by Frédéric around the reserve Casualties and -- the Casualty reserve, sorry. 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 have 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 casualties.
Frédéric de Courtois: So, Casualty reserves. So, first, we have 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 have taken over AXA XL, we had reinforced the reserves by €1 billion. Then you remember also that we have 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 XL 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.
Alban de Mailly Nesle: 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 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.
Thomas Buberl: Thank you, Alban and Frédéric. And we go to the next question.
Operator: Question is from Andrew Crean of Autonomous Research. Andrew, please turn on your microphone and go ahead.
Andrew Crean: 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. 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, can you give us a bit more detail on the Financial Lines business within XL? How big is it and what’s its combined ratio relative to the 89%, which the whole of XL is 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?
Thomas Buberl: So, Andrews, thank you for your question. I suggest I’ll take the first one. Scott Gunter 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. But Scott can talk about it more in general. And then, Alban, if you can take the third question around the share buybacks in 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 & Savings. But when I talk about Life & Savings, I’m not talking about a guarantee-heavy business. I’m talking very much around a 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, commercial, sorry, individual customers, and also the question, what is the composition of our portfolio in terms of line of business? Scott, on financial lines, maybe?
Scott Gunter: Sure. I’ll just -- a couple of comments on that. It’s -- 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 Frédéric 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.
Thomas Buberl: Thank you, Scott, and then we go to Alban on the share buybacks.
Alban de Mailly Nesle: 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 months to seven months or eight months that it will take to complete the €3.8 billion share buyback.
Thomas Buberl: Thank you, Alban and Scott. So, we go to the next question.
Operator: Next question is from Michael Huttner of Berenberg. Michael, please turn on your microphone and go ahead.
Michael Huttner: Fantastic. Thank you so much and well done for shaking us up last night. And 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 years. 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 we’d hoped, but I don’t know. And then the kind of more softer question is, I really do enjoy speaking to the asset managers at AXA IM. Can you tell us what’s going to happen there? Thanks.
Thomas Buberl: 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. Alban on the €21 billion.
Alban de Mailly Nesle: Well, 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 capital. So, there’s no magical recipe. It’s simply that we believe we can further improve by being at it every day.
Thomas Buberl: Thank you, Alban. We’ll go to the next question.
Operator: Next question is from Farooq Hanif of JPMorgan. Farooq, please turn on your microphone and go ahead.
Farooq Hanif: Hi, everybody. Thank you very much. Firstly, I wanted to talk about your investment income. So, I can see that there’s 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, yeah, 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.
Thomas Buberl: Thank you, Farooq, for your three questions. I suggest the first and the third question will be answered by Alban, and the second question by Frédéric.
Alban de Mailly Nesle: Thank you, Farooq. So, on investment income, it’s true that we are -- that we achieved a better outcome in this first half than what we 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 certainly is a good outcome for the first half.
Thomas Buberl: Okay, Frédéric, second question.
Frédéric de Courtois: 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 basis points, so 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 U.K. Retail, in U.K. 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, we’ve been 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.
Alban de Mailly Nesle: 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.
Thomas Buberl: Thank you, Alban, and thank you, Farooq, for your questions. We go to the next question.
Operator: Next question is from Will Hardcastle of UBS. Will, please turn on your microphone and go ahead.
Will Hardcastle: 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 & Health divisions? And just perhaps going a little bit more granular on the U.K., could you help us to understand how much U.K. 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 U.K. at target margins you’d want to be operating on a written basis or is there still a bit more action to go? Thanks.
Thomas Buberl: Thank you, Will. For your two questions, I suggest that Frédéric will take them, because the first one certainly is a direct follow-up of the -- of Farooq question.
Frédéric de Courtois: 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 guides from investors. But we don’t see the necessity to make other trade-offs 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 U.K., when I’ve said that we have become -- 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 U.K. Retail market and we will be absolutely fine at year-end.
Thomas Buberl: Thank you, Frédéric, and thank you Will for your questions. We go to the next question.
Operator: Next question is from William Hawkins (NASDAQ:HWKN) of KBW. William, please turn on your microphone and go ahead.
William Hawkins: Hello. Thank you for taking my call. On AXA Investment Managers 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, Frédéric, because you’ve kind of already answered this, but I did want to come back on the issue about reserve movements in AXA XL and across the group. Did you say specifically that you have not changed Casualty loss picks, so your 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.
Thomas Buberl: Thank you, William, for your questions. I will answer the first one and Frédéric 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 & Saving 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 this the -- 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, and 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 Crean’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. Frédéric, around the reserve movements, AXA XL and the ADC.
Frédéric de Courtois: 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.
Thomas Buberl: Clear. Thank you, and thank you, William, for your questions. We go to the next question.
Operator: Next question is from Dominic O'Mahony of Exane. Dominic, please turn on your microphone and go ahead.
Dominic O'Mahony: Hello, folks. Thank you for taking our questions. Three for me, if that’s okay. Just on the tax rate, I understand the point about the OECD rate. And I just -- I think the tax rate in France and Europe is also a bit higher than it was in 2023. 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? And the second question was, I wonder if you might just reflect a bit on Protection and Health Claims experience. You mentioned that the U.K. Health situation is stabilized, which is great. And 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 more globally. Then final question, Alban, you mentioned you’re on track for the 6% to 8% EPS in 2024, which of course is better than the 4% in the half. I just wanted to understand, are you suggesting that -- is the point you’re making that we shouldn’t limit ourselves to the 4% or that it won’t be better than the 8%, because clearly the print here is above current expectations. I’m just reflecting on what that might mean. Thank you.
Thomas Buberl: 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 year times two is not what you should be doing. And then Frédéric will take the second question on the Health Claim in the U.K., but also then Asia.
Alban de Mailly Nesle: Thank you, Dominic. On the tax rate, I mean, 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 1 point of tax rate structurally, 1 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, which I think directly the one on the EPS. So I think you’re quite perceptive on this, Dominic, 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 the fact that, and you shouldn’t, I believe, expect that we would be above 8%. I think 6% to 8% is already a good outcome.
Frédéric de Courtois: And Dominic, 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 especially, 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 U.S. players or some U.S. 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. I mean, this is maybe the case in Asia, we’ve seen the specific trends in the U.K. 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 see 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 a 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.
Thomas Buberl: Thank you, Dominic, for your question, and we move to the next question.
Operator: Next question is from Andrew Sinclair from Bank of America. Andrew, please turn on your microphone and go ahead.
Andrew Sinclair: Thank you very much, everyone. And first was actually an XL Re and how much do you actually have in the numbers in 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 could 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, I 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, and does that change your thoughts if you’re not capturing Asset Management revenues as well? Just thoughts on that. Thank you very much.
Thomas Buberl: Thank you, Andrew, for your three questions. I suggest that Scott will ask -- 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 XL Re, but Scott can explain more. Secondly, Alban, if you could talk about AXA IM and the only neutral effect on solvency. And then Frédéric, if you want to talk about the world post-AXA IM ownership with regard to open and closed Life books. Scott?
Scott Gunter: 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.
Thomas Buberl: Thank you, Scott. So Alban.
Alban de Mailly Nesle: Yes. So on the solvency, the simple way to look at it is that, between the price we received, the €5.4 billion 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, AXA IM is included in our SCR calculation, because they have -- they are included in our EOF and they are also included in the SCR because you know that asset managers, even if it’s capital light, need to hold some capital. The net between the two, the EOF contribution and the SCR requirement is a €1 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 billion, which roughly equates to 2 points that -- of solvency that we have.
Frédéric de Courtois: On AXA IM and the Life business, the short answer is fundamentally, it doesn’t change our view. But 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’re building an acceleration plan on the Life business. We believe that there are a lot of opportunities on Protection, on Savings, 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 AXA IM is not part of the Group anymore doesn’t change the picture. I would say, on the contrary, AXA IM was an excellent franchise, but not excellent everywhere. And BNP has a higher retail focus than AXA IM, which was an institutional player. BNP had a higher equity focus than AXA IM. So BNP had -- 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 transactions 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, these are financial transactions, but the fact that we have or we don’t have AXA IM doesn’t change the picture.
Thomas Buberl: Thank you, Frédéric, and thanks, Andrew, for your questions. We go to the next question.
Operator: Next question is from Henry Heathfield of Morningstar. Henry, please turn on your microphone and go ahead.
Henry Heathfield: 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.
Thomas Buberl: 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. And 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’s 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 Frédéric 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 in 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 & Savings strategy, and our Life & Savings 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.
Operator: Last question is going to be from Kailesh Mistry of HSBC. Kailesh, please turn on your microphone and go ahead.
Kailesh Mistry: 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 expensed versus capitalized through the P&L and will this go through the P&L equally in the next three years? And just lastly, related to that, are there -- 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.
Thomas Buberl: 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 billion 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.
Alban de Mailly Nesle: I think we will need to come back to give a precise number because I don’t have it with me.
Thomas Buberl: 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.
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