«Be to B» - Jean-Daniel Laffely, CEO de Vaudoise Assurances

Just that. Just why didn't you do it? You are well informed. Why? Well, during my studies I was a fan of math, it's true, and then at that time I asked myself some questions about my future profession. The first was that I was going to be a schoolteacher. So when I was 15 I was on the students' side, at 16 I went into the teachers' lounge and all the teachers called me by my first name. I thought that seemed nice, but I quickly came back saying that maybe it would be more interesting to have another job. And it's true that I was a fan of math in high school, statistics appealed to me a lot. Besides, at HEC, the studies I did involved a lot of statistics and operations research as well. And at that time I indeed asked myself many questions about my future. But I also have a second part of my personality that is less mathematical, perhaps linked to my Italian origins, and that is more oriented toward human contact. The fact of being around people appeals to me a lot as well. And so my choice fell on HEC in business management.

I am Cartesian, yes, yes of course, I am Cartesian but I need human contact, which brings me back to the second part of my personality. Yes, indeed. What did you like about math? Is it finding a solution to a problem or the reasoning itself? Both, both. The solution. So we are all different. I remember in exams sometimes incredible events. You feel like you're stuck on a problem for a while and you can't find the solution, and five minutes before the bell and the end of the exam you find it and then you write very quickly in general. So indeed it's perhaps the adrenaline of finding the solution to a problem and at the same time the reasoning that I liked a lot, if you'll excuse the term, a grammar, a grammar perhaps a bit more complex than simply putting water in a glass.

Because indeed it was a fairly clear option on my side as well. In high school I had a math teacher who didn't give too much written work, who really let us go far in reasoning, which gave me pleasure but few grades. And my rational side made me say that if I went to EPFL, the first year would be very difficult. I come from a rather modest family and because of that I also needed to enter the workforce. I told myself EPFL 4 years plus one year because unfortunately the first year would be difficult, that makes 5 years versus 3 years HEC. The choice was made. What complex problems fascinate a Cartesian mind? You spoke of the Internet as the greatest discovery of the last 100 years. We talk a lot about artificial intelligence in 2023. Is that one of the themes that fascinates you?

It's a theme that interests me. To say it fascinates me is a big word, perhaps. It interests me a lot. Yes, the Internet is a very beautiful discovery. But there is also a downside, both on the Internet and on artificial intelligence. Artificial intelligence, we have to see how far we exploit it, and on that side I think there is a downside. What downside do you see? Well, the extreme use we can make of it. I was listening this morning to a personality who was against the accelerated development of artificial intelligence for the simple and good reason that it will kill a lot of existing jobs, in professions that are rather intellectual, that make our brains work. And we are afraid that at some point our way of reasoning will evolve perhaps inappropriately because we will gradually fall asleep on the machine's ability to replace us in other areas.

My father. My father played football, hockey and table tennis. So he was a coach in my home village of Saint-Prex, a village of 6000 inhabitants, more than a village. And so he was coach of the juniors, he was goalkeeper for the first team and everything. And so he told me at one point when I was 10 years old: 'Jean-daniel, go ahead, the time is yours, you need to create a team.' So I created a team and I stopped fairly quickly because of knee problems. On the other hand, those who were in my age group continued, they became presidents of the club, they played much higher than I could have. So there you go. Table tennis you also did, you were Swiss university champion on your 25th birthday. One more word about football: do you still follow it? Of course. Do you have a favorite club? Still have Swiss clubs? LS inevitably because we are in the region, and also inevitably abroad, well I like to watch the big matches, I don't have a preference club. And then I like to watch national teams, obviously Switzerland, hoping they get good results for the Euro qualification. It would be worrying if they don't qualify. And the Italian team obviously. And I also like flamboyant football, it could be Brazil when I was little I was a fan of Brazil, it could be Argentina, it could be France which also plays very beautifully.

Oh, I don't really know how to comment on that. I'm not completely a fanatic of those elements. But we shouldn't be hypocritical either. In Europe, clubs like Manchester City and others also have major shareholders from Arab countries in the broad sense. So inevitably they also have the right to go play there. So it's not a particular issue. There shouldn't be a fight between Europe and other countries. After all, it's true that football, Europe is the cradle of football globally. What might bother a little is rather the end of career with pharaonic contracts, and indeed I think there are financial limits to the remuneration of these players. Do you fear a disinterest for football? No, I don't think so. Football will remain a global sport, always at the top of sports practiced in the world. It's a global sport and we know that FIFA, the international federation based in Zurich, also has a lot of politics. The French government apparently wants to attract FIFA to Paris. Do you see a real competition to take away some of Switzerland's jewels, if we consider FIFA a jewel? Do you think FIFA could leave Switzerland one day? Honestly, I don't know. I hope not. It's not so much linked to its president. I hope indeed that it stays in Switzerland in the future. It's not the first time there have been stirrings about sports associations. Some have even left Switzerland in certain sports. I also recall the story of the IOC, historical, where originally it was in Paris and came to Lausanne. So history repeats itself a bit. But today I am rather confident that FIFA will stay in Switzerland. But that also means nothing is acquired. One can talk about it, absolutely. Before moving to the second part of this program, perhaps a moment that will remain engraved in your memory forever? The 3-3 of Switzerland against France. It played out at the last moment and it was a big emotion for me. It's not that I am against France, but it was an emotion for Switzerland. The statistics: did you give Switzerland a chance that day? At 1-0 plus the missed penalty, I gave them an important chance. Before the match, not at all. At that moment, yes. And then at 3-1, 0.1% chance. Statistician? No, very very very low. I should point out that in my origins I am Swiss, Italian on my mother's side, and my maternal grandmother was French. So to say that these are countries that are dear to me anyway. But it was a beautiful emotion because it's the little David beating the big brother, the neighbor. So it was important at that moment. It was a very beautiful match, from Switzerland's side obviously, but even from France's side it was a beautiful match, really a very beautiful Euro match.

Because we are very close to the client. There is a need for insurance that has always existed but tends to strengthen. I think it's also linked to the elements of social media and the press, not only economic press but the press in the broad sense, which is sometimes a bit anxiety-inducing and pushes everyone to be properly insured. So you encourage the press to be anxiety-inducing? That brings you clients? No, that's not the point of my comment. No no no. It's that indeed there is an anxiety-inducing side and inevitably there is a need for insurance. In Switzerland, these statistics also include the savings part of the second pillar, which only grows, which is quite logical. It dates from the 80s, so relatively recent, so the volume increases. But in the imagination of the general public, when we talk about the financial center, it's really the banks that come to mind, whereas in reality insurers are very high in the share of GDP. Indeed, insurers, I think including reinsurance, are more important than the banking sector today. I contradict a bit, but it's more important today, but it was not the case 15 years ago. Not at all. So there is a clear evolution in this area.

It is an important challenge for the insurance branch in the broad sense, but the branch is well organized in the sense that we have a pool for natural damage which allows a proportional distribution according to our market share. This means that this pool between insurers works very well in Switzerland, sort of a common pot. Everyone puts in the common pot, each keeps a deductible like your health insurance deductible, but that speaks to everyone as an image. And then above that, we would be proportionally distributed by market share. For example, if we have a claim of 1000 francs, we keep 200, the 800 francs go into the common pot. If we have 5% market share, we will recover 5% of those 800 francs. But how does climate change translate? Are there more claims? It is quite visible. Well, it's always difficult, you really need a very long time horizon to determine the increase in frequency of these claims. In terms of frequency, we are seeing more in recent years in any case, and the intensity of natural damage tends to increase. Everyone can see that. I can give an example: this year we had hail in Ticino. The average damage per hail claim in automobile is between 3 and 6 thousand francs historically. Well, in Ticino it evolved. At the beginning we talked about 25,000 francs per car, it went to 15,000, today the valuation is 8,000 and we are at the end of our valuation. So it's clearly more than double what it used to be. So yes, clearly we are above double. Does that mean premiums will rise? Premiums have already increased this year, not only at our company but at our competitors as well. So there is an inevitable repercussion on the final client because the increase is there. However, it remains relatively modest as a type of increase compared to other sectors. And inflation, we talk about it a lot. Does it have consequences for you? Inevitably, insurers are also affected by inflation. We are a bit of a reflection of the economy, delayed in time. But in what way? First, in the accident and health branches, payrolls increase with inflation, assuming the repercussions on salaries of employees in companies increase the payroll and also increase the corresponding benefits. That's the first point. The second point is that it also influences repair costs. In automobile, over the last 6 years there has been between 25 and 30% increase in costs on raw materials and parts. For example, the parts you mentioned that damage the hoods, as long as the hood needs to be replaced, there are no alternative techniques used there. So that's a second practical example. The third example is costs concerning buildings, where there has been a fairly strong increase post-COVID due to supply chains that were not available. In such a case, there is also an increase in costs linked to inflation which is quite marked. So these are three fairly clear examples I can provide.

Indeed, for the financial sector, we have always said it's very good news because negative rates were not very efficient for our business. Now, what happens between banks and insurers? Insurers have relatively large balance sheets relative to the size of our revenues, and because of that we have an adaptation phase when rates rise. We can no longer start selling bonds because we take losses on our profit, and so we have to block our actions a bit. So we do a lot of asset-liability management, meaning we look at our liabilities and then we look at what we have as assets on our balance sheet (stocks, bonds, etc.) and we must try to match the two. So when rates rise, it's not very simple for us, and so there is a small management that must take place over a few years. Does this translate concretely into pressure on your margin, or on the contrary does it give you some possibilities? I would say there is a loss of opportunity because we cannot directly make new investments. There are some nuances; I won't go into too technical details, but there is also some nuance on foreign currencies that must be managed in an insurer's balance sheet. So it's a somewhat more complicated phase to manage in the short term. Afterward, obviously the rise in interest rates is a positive element, typically in insurance, in provident, because what we can credit to our insured is more important. So does that mean we have to wait another 6 or 12 months before you can? For our balance sheet, it's longer, it's several years, 3 to 4 years. On the other hand, for offers made now to clients, it's much faster. We have already implemented, it was already the case in 2023, better remuneration of savings.

Good question. Not simple. We do some fairly detailed studies with my communication and branding specialists. We know that someone might still not know the name Vaudoise Assurances. Well, we know that awareness is well perceived. For example, two things: if you talk about the Vaudoise Arena, the name came quite quickly into everyone's minds, except sometimes some television people who forbid themselves from saying it, but fundamentally it's a name that has taken well. There is a link with the canton of Vaud, it associates well. And today obviously everyone knows that Vaudoise Arena and Vaudoise Assurances have a strong link, it's quite obvious even if the logo is not the same. That's one example. For impact studies, we try to do impact studies. We use these platforms also for our client relations, it's extremely important for us. So both for our existing clients: we invite clients because it's also to maintain relationships for sustainability, we invite our partners because we have many business partners, and at the same time there are also prospects who are present. So it's important for these client events. It also allows us to give information about insurance aspects. That's a first element. The second element is awareness; obviously it has an impact. Despite what they say, television remains the most watched and most interesting medium to increase the visibility and awareness of a company. Awareness doesn't change in a few minutes, it takes a little time for it to evolve gently. So it's a long-term effort.

I'll give a mini-company that you don't know. Why not? Let's say our neighbor, the Banque Cantonale Vaudoise, because it's a recognized Vaudois institution that has made a lot of progress since the 2000s.

Interesting question. Historical personality or current? General Guisan, who marked history.

The canton of Vaud is already very diversified economically. I think there is a healthy balance between left and right within the canton. What is missing? Yes, public transport. Strengthening public transport.

The Montreux Jazz Festival, since we are the main sponsor. We must soon be the oldest main sponsors of Montreux Jazz. So we frequent it a lot, we love it, very proud to be a sponsor of this magnificent event.