Group Chief Financial Officer, AXA SA
Le monde est-il encore assurable ? I Alban de Mailly Nesle, CFO d'Axa I Parole de Dirigeant
Pour en savoir plus sur la société Axa, rendez-vous sur cette page https://bit.ly/3VAT1Qy Replay de l'interview d'Alban de Mailly ...
Transcript (24 segments)
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Nicolas Chéron0:07
We are now on the political part of shareholder distribution. Yes, how to reward your shareholders, what distribution policy? At that point, I wanted to say we have many shareholders in the room, very likely AXA shareholders. You are one of the main ones, so here you are. Are you an AXA shareholder? How long have you been one? Maybe a little final word on this subject: alignment of interests between the people we are talking to. 24 years that you have been a shareholder, and yes, with an alignment of interests, and free shares because we are also compensated on that. So that gives an alignment of interest. Hello everyone, the sound works, it's perfect. Hello everyone and welcome to this special Masterclass with Alban. Hello Alban, hello Nicolas, the CFO of AXA, one of the men who shapes this great French group. For those who don't know me, I am Nicolas Chéron, independent stock market strategist, working with AXA in partnership for this interview. The goal is to bridge the gap between individual French investors, especially those present on social media today (they are more and more numerous), and a large French company. I also thank all those who participated in the survey and the questions asked through my newsletter and on social media. You were very numerous in responding, you had many questions, we had to sort them. Today we will dive into the subject: we will discuss varied and complex topics touching on everything from insurance issues to new technological trends. We have a first part with Alban on the environment, sustainability, resilience. The environmental subject was at the heart of many questions from our readers due to recent climate events. In this context, we see that the role of the insurer is evolving and becoming more and more central in society. Naturally, we ask several questions about the sustainability and effectiveness of these actions in a complex, ever-changing world. So the first questions from our subscribers on social media were: explain to us, what is the role of an insurer and what is a major risk?
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Alban De mailly nesle2:45
Thank you Nicolas, and hello everyone. So the role of an insurer is to protect property and people against the financial consequences of a foreseen event: an accident, illness, or disaster. How does it work? If we simplify, imagine a small village of 10 people, each contributing to a fund to protect against life's hazards. If the whole village suffers a global problem, that's not enough. The insurer's job is to mutualize with other villages so that we don't have a typhoon in Japan, a hurricane in the US, and a flood in Europe at the same time. We organize this mutualization to insure our clients. When mutualization isn't enough, the insurer uses its own funds for extreme losses. A major risk is an intense event affecting many properties or people, like a natural disaster or pandemic such as COVID, which cost AXA due to health insurance and business closures. We covered those risks. How does AXA plan to maintain profitability and insurability given the increase in natural disasters? Are we reducing exposure in some areas? Fundamentally, we believe our role is to cover risks, but only under conditions: sufficient diversification, good understanding of risks (especially secondary perils like hail, tornadoes, floods, which require excellent modeling), and participation in adaptation and prevention. For example, after Hurricane Katrina, levees were rebuilt, so a similar hurricane later caused much less damage. Also, partnership with the state is crucial; France has the best system for sharing risks between insurers and the national community.
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Nicolas Chéron8:02
Magnificent, thank you for those answers on sustainability and long term. Another subject that interests our readers is growth, technology, and competitiveness. Among the questions, we had: which region and market represent your priorities for growth? Since we have seen good growth, how to maintain it over time?
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Alban De mailly nesle8:33
Insurance is a mature business that generally grows with the economy. We want to grow a bit faster by focusing on certain geographies and sectors. In addition to our presence in Western Europe, the US, Japan, and Hong Kong, we are very present in emerging countries with high populations: Turkey, Egypt, Mexico, Thailand, which naturally have higher growth. Second, we target faster-growing segments like employer health insurance and cyber insurance, which many believe will become as large as property insurance in 20-30 years.
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Nicolas Chéron10:09
Magnificent. So this is a question you've probably been asked several times already this morning: you recently announced the sale of AXA IM. Why sell your asset management division and how do you plan to optimize investments without this structure?
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Alban De mailly nesle10:29
It's a question I get regularly, and the sale of AXA IM left a bit of a bitter taste because it's a great success story created from scratch 30 years ago, now managing 800 billion euros. Nevertheless, we made a lucid observation: asset management requires huge scale or a very specific niche. We were too big for a niche and needed at least 1 trillion for scale. Since it only accounts for 5% of our results, we decided to sell to an excellent partner, BNP Paribas, which already has strong asset management. For your last point, what matters is keeping the allocation of our assets.
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Nicolas Chéron13:48
Question number 5: what is your external growth policy? M&A, and more broadly, what investments does AXA plan in AI and digital transformation?
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Alban De mailly nesle14:10
These are two different but important subjects. On acquisitions, in the last two years we have bought insurance companies in Ireland, Spain, Turkey, and recently announced one in Italy for over 2 billion euros. We seek more scale in given markets because we need a certain size to maximize returns on investments. We don't want to plant new flags but strengthen in our current countries. On technology, from 2024 to 2026 we plan to invest 1 billion euros in technology, including data and AI. Generative AI has two aspects: automation and augmentation. Automation will allow, for example, a client to send a photo after a car accident and receive payment within half an hour without human intervention. Augmentation means underwriters can use AI to synthesize reports, making them more efficient and competitive.
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Nicolas Chéron14:43
Better explain, better transmit, better understand tomorrow's policy of the company. And also the policy of redistribution to the people in this room, some of whom are shareholders and very happy. Let's now talk finance. Can you comment on the evolution of your stock price over the past year and the actions taken to keep it so high?
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Alban De mailly nesle14:56
In the previous plan from 2021 to 2024, the total shareholder return including dividends was just under 100%, doubling, outperforming the CAC 40 and the insurance index. Over 10 years, it's 200%, again better than many. Our distribution policy is to return 75% of our results to shareholders: 60% as dividends and 15% as share buybacks. We keep 25% to finance growth. We have a floor for dividends: the next year's dividend will be at least equal to the previous year's, even if results are lower. We believe our diversified model offers low volatility, and we target dividend growth of 6-8% per year.
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Nicolas Chéron16:49
You have I think answered the next question on how you reward your shareholders. There's also the notion of dividends and free shares. How do you reward shareholders?
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Alban De mailly nesle17:07
What we want to give our shareholders is a dividend that grows regularly with low volatility, a core portfolio value. That's the model we seek, and to achieve it we have significantly reduced our risks, especially financial risks. We seek investors to accompany us over the next 20-30 years.
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Nicolas Chéron17:39
Exactly what I see. Are you yourself a shareholder of AXA? How long have you been a shareholder? You probably have a PE as an employee.
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Alban De mailly nesle17:53
I joined AXA 24 years ago, so I've been a shareholder for 24 years, either through a PE because we have a policy to make our employees co-owners. About 4.3% of our capital is held by employees, 40,000 worldwide. And I also have free shares, which aligns my interests with our shareholders.
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Nicolas Chéron18:25
Magnificent, thank you very much Alban for these detailed answers and transparency, even on a personal level, regarding all the questions we had prepared. Thank you once again to all who sent questions for this interview. I remind you that this speech will be recorded and published on social media. And I think some will have many questions to ask you, so we'll take one or two from the cubic. You'll be present part of the afternoon on the AXA stand just behind. So for all who wish to meet Alban, you can follow us to the AXA stand.
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Audience Member19:15
Good evening. I have just two current questions. We are almost at the end of the year, so you have a good idea of the final results. Can you tell us today how much the dividend will be? I'm not talking about the 60% part, but the part you know. And the second question is the sale by your CEO, Estelle. Is that a sign? How should we interpret it?
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Alban De mailly nesle19:53
On the first point, I've been in the group 24 years. Just before I arrived in December 1999, there were two storms, Lothar and Martin, which cost us a few hundred million. So the year is not over; we have the Q3 results. Nevertheless, as I told Nicolas, we have a dividend floor, so logically next year's dividend will be at least equal to this year's. As for the CEO's stock sale, I imagine he did it because of specific needs; he didn't disclose it to me, so I don't know why. But like me, he holds a significant number of AXA shares, so we remain very invested in the company.
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Nicolas Chéron20:55
Yes, it's a fact that insider sales are always closely watched. But we often forget that what counts is the overall percentage and total amount. When an executive sells 2-3-5% of their shares, they too are long-term investors and may need liquidity or have other projects.
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Audience Member21:15
Hello, my question is: what are the main challenges and risks that AXA must face to be able to deliver this plan?
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Alban De mailly nesle21:31
We must be very vigilant on insurance risks, but I don't want to minimize them. Our portfolio is extremely diversified. I already mentioned cyber and natural catastrophe risks; we need to model and control them properly. What occupies us daily is execution of our plan, modernization, investment in technology to offer quality service and be competitive. Technology gives us levers we didn't have before. Insurance is about people, technology, and data. So we invest heavily in training, technology, and data—that's key.
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Audience Member22:51
I have a question about reserves. As a major insurer, AXA must set aside reserves of about 450 billion. I believe about half consists of government bonds originally rated AAA, but with the financial situation of these states, they might be downgraded to junk. What would happen to the 250 billion in reserves? Would provisions be required? And what have you organized to avoid that?
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Alban De mailly nesle23:56
We have 160 billion in government bonds and 100 billion in corporate bonds. First, we seek safety, which guides our investments. We are far from junk; most European and US governments are rated double-A or higher, so downgrading to junk is unlikely. Diversification is also key: our largest single government exposure is 30 billion, only 7% of our assets. Also, downgrades take time, and we have long time horizons.
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Nicolas Chéron25:29
I see we have gone a bit over time; we'll have to wrap up. Thank you all for coming to listen. Thank you, Alban, and for all who wish, you can find us on the AXA stand.
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Alban De mailly nesle25:59
First, you need to know yourself before looking for a job, to know what you like and don't like. What drives me is curiosity, touching many things. I have successively been CFO of a part of the group, Group Chief Risk Officer, and Group CFO. All these roles allow me to touch many things. My recent days include budgets for subsidiaries for next year, modernization of the finance function with technology, investment plans, team management, speaking to investors. It's about accounting, tax, business, investments, many different things. You need to want that and be able to communicate that vision to the rest of the executive committee.