Echange entre Alban de Mailly Nesle, Directeur financier d’AXA et Nicolas Chéron, Finfluenceur

So thank you Nicolas, and hello everyone. So what is the role of an insurer? An insurer protects property and people against the financial consequences of an unforeseen event: an accident, an illness, a catastrophe. How does it work concretely? If we caricature and simplify a bit, let's start with the idea of a small village with 10 people. Each can contribute to a fund to protect against life's hazards. Now if the entire village suffers a global problem, a storm, a crop failure, whatever, that's not enough. So the insurer's job is partly to administer this small mutual fund, but above all to mutualize with other villages, other factors, to put it simply. We don't have a typhoon in Japan, a hurricane in the US, and a storm in Europe at the same time. So we organize this mutualization so that we can insure each of our clients. And at certain times, this mutualization is not enough, and the insurer is there with its own funds to cover extreme losses, and precisely major risks. So what is a major risk? It's an event that occurs and is either very intense, or affects many properties or many people, or both. Typically a natural catastrophe, but also a pandemic like COVID we had a few years ago, which cost AXA a certain amount due to health insurance or also the closure of some restaurants, we saw that in France, and AXA was there to cover those risks.

So fundamentally, we think the role of an insurer is to cover risks, and we wouldn't be doing our job if we didn't cover these risks. That's very important to us. But this can only be done with a certain number of conditions. The first condition is that we have sufficient diversification of our risks. Again, if we were only an insurer present in one place and a natural catastrophe struck there, we would be in difficulty. So first, a notion of diversification. The second point is good understanding of risks. What we see with global warming or climate change is that it's the so-called secondary perils that are multiplying. Primary perils are big storms, big hurricanes. Secondary perils are hail, tornadoes, localized floods, as we saw very unfortunately a few weeks ago in Valencia, Spain. These are very local events for which we need excellent modeling. Modeling means understanding both the potential nature of these events and also the quality of constructions, especially when we talk about natural catastrophes that these storms will confront. So knowing well the buildings we insure is essential. We invest heavily in technology to recognize these buildings and in modeling. Then our role as an insurer is also to participate in adaptation and prevention. Prevention: we send SMS to our clients before natural catastrophes that we can detect. Adaptation: I'll give just one example. You remember Katrina in Florida that hit New Orleans? The levees broke, costing the industry tens of billions. Ten years later, a very similar hurricane passed over New Orleans, but the costs were much lower because the levees had been well rebuilt. So adaptation, i.e., where we build and how we build, matters enormously. And the last point is the partnership between the state and insurers. There are times when it is the state's role to take charge of these catastrophes. That's what we have in France, and France probably has the best system in the world for sharing risks between insurers and the national community.

Yes, insurance is a mature business, so generally it will grow like the overall economy. We want to grow a bit faster than that. In addition to our geographic exposure that you know – Western Europe, the United States, Japan, and Hong Kong – we have chosen certain geographies and certain businesses. For geographies, we are very present in a number of emerging countries with large populations: Turkey, Egypt, Mexico, Thailand. By construction, these countries have higher growth than what we can find in our European countries. That's a first angle. The second is that there are certain sectors of insurance, certain products that will grow more than others. I'm thinking of health insurance in particular, health insurance taken out by companies for their employees – we see strong growth there. We can also think of cyber insurance. It's a growing need, a complicated risk because it's new, but a number of people in insurance think that the cyber insurance market will be as big as the property and casualty insurance market in general in 20 to 30 years. So by positioning ourselves on these markets or sectors that grow faster, we boost our growth.

This is obviously a question I get quite regularly. And it's true that the sale of AXA IM left a bit of a taste in our mouths because it's a great success. AXA IM was created from nothing by AXA 30 years ago, and today it manages 800 billion euros, so it's a great success. Nevertheless, we made a lucid observation: asset management is a business where you need a lot of size, a lot of scale, or else be present in a very specific niche. We were too big to be in a niche, and for scale, we thought it's worth what it's worth, but you need to manage at least 1,000 billion. So we decided, rather than increasing our presence in this sector which only represents 5% of our results compared to insurance which makes up the rest, it was better to sell. And we sold to an excellent partner, BNP Paribas, which already has a strong presence in asset management and will complement the offering we can have. Thank you.

These are two quite different subjects, but both are extremely important. On the acquisition side, when you look at what we've done in just the last two years, we bought insurance companies in Ireland, Spain, Turkey, and very recently we announced an acquisition in Italy, for a total of over 2 billion euros. So what are we looking for with these acquisitions? We are looking for more scale, more size in a given market, because we think there are a certain number of investments to be made in our industry, and you need a certain scale to maximize the return on those investments. So that's what we want to do. We don't want to plant new flags on the map; we want to strengthen ourselves in our current countries. Now, technology investments: in our current plan, which runs from 2024 to 2026, we plan to invest 1.6 billion in technology, including data, including artificial intelligence and generative AI. What is AI and generative AI for? Fundamentally two things: automation and augmentation. Automation is the automation of our processes, which allows us to gain efficiency and also for our clients to have faster responses. What we all have in mind is that soon, for those who have a car accident, they will take a photo, send it to the insurer, and within half an hour they will have a transfer for the reimbursement of their claim, all without human intervention. That will be possible. So that's automation. The other thing is augmentation. An underwriter today spends a lot of time reading reports on the company they want to insure. It's long but necessary. Tomorrow, generative AI allows, already today, to have a synthesis of these reports, and it allows underwriters to be smarter, more efficient, and to win business against competitors who don't use the same technology. Better explain, better transmit, better make understood the future policy of the company. Moreover, the policy of redistribution to the people in this room, some of whom are certainly shareholders and very happy.

So if I just take two figures from our previous plan, which ran from 2021 to 2024, the performance of the stock including dividends was a little less than 100%. That is, we doubled. That's better than the CAC 40, better than the stock insurance index, better than many, many indices. And when you look over 10 years, we did 200%, and again better than the indices. So we have a good performance of our stock including dividends. So our redistribution policy is to give back to our shareholders 75% of our results. It's important to keep 25% because that 25% allows us to finance the growth we talked about earlier. So that 25% is calibrated at the right level and allows us to have the revenue growth we want. The 75% we return to our shareholders: 60% in the form of dividends, 15% in the form of share buybacks. And for the 60% dividends, from one year to the next, we have said that we will have a floor, meaning that the dividend of the following year will be at least equal to that of the previous year, even if our results are lower. So that's very important because fundamentally we believe in our model where we have sufficiently diversified our risks to offer low volatility in our results and therefore in our dividend. And we offer a growth in our dividend normally in our plan of 6 to 8% per year.

For our shareholders, what we want to give them is a dividend with regular growth and low volatility, a portfolio value that is not the way insurance is generally considered, but once again, that's the model we are looking for. And for that, we have significantly reduced our risks, particularly our financial risks. You are looking for investors to accompany you in the next 20, 30 years.

It's been 24 years since I joined AXA, so I've been a shareholder of AXA for 24 years, either via a PEE because we have a policy towards our employees to bring them on board. About 4.3% of our capital is held by our employees. There are 40,000 employees worldwide who hold AXA shares. And we also have free shares. I have free shares, which also allows me to have an alignment of interest with our shareholders in the broad sense.

Sorry, I didn't understand your second question.

Sorry. So on the first point, I've been in the group for 24 years, but just before I arrived in December 1999, there were two storms on December 26 and December 28 called Lothar and Martin, which cost us a few hundred million. So as long as the year isn't over, the results aren't done. Nevertheless, as I just said to Nicolas, we propose a floor on the dividend, so logically the dividend next year will be at least equal to the dividend of this year. Now regarding the sale of shares by my CEO, I would say that I imagine he did it because he had particular needs. He didn't confide in me, so I don't know why, but I can tell you that like me, he has a certain number of AXA shares, so we remain very invested in the company.

So we have to be very vigilant on insurance risks, but I don't want to minimize them. We have an extremely diversified portfolio. I mentioned cyber risk, natural catastrophe risk. We need to model them and control them properly. Now what occupies us daily is the execution of our plan, modernization, investment in technologies to offer a quality service better than our competitors to our clients, to be both accurate in our pricing and competitive. And technology gives us levers we didn't have before. Insurance is two things: people and technology and data. So people, obviously, we invest a lot in training, but we also invest a lot, as I said, in technology and data. That's what's very important for us.

So we have 160 billion in government bonds and 100 billion in corporate bonds. First of all, we seek security for our insureds, and that will guide our investment choices. That's why we look primarily at bonds. So from that point, we have access to what is offered to us. That is, if all countries are triple B, we will have to invest in triple B or worse. But we are far from having government bonds that are junk bonds. I remind you that most European or American countries are rather in double A, so we are far from such a degradation. That's why we have 160 billion in government bonds for the security they provide. Now what we also seek is diversification. Earlier we talked about diversification of insurance risks, there is also diversification of investment risks. Our largest line on a single government is 30 billion, which is 7% of our assets. And there is also a temporal aspect in the degradation of bond ratings. We have a lot of time before a bond goes from triple A to double A and then to B and so on.