AXA SA (CS) Earnings Call Transcript & Summary

Hello, and good morning, everyone. For those who don't know me, my name is Ashik Musaddi and I head the European Insurance Research here at Morgan Stanley. I'm pleased to welcome Thomas Buberl, CEO of AXA Group. Thomas presented a very interesting CMD just a few weeks back. We'll go into all the details. But before that, I guess, one question for you, Thomas. How are you?

Pretty busy times for the last few weeks, I guess. I'm doing good. The weather could be even better, but otherwise I'm doing good. No, it's true. So we had quite a few busy weeks, but good busy, because, as you said, on February 22, we presented our new plan and the presentation of the new plan was also the closure of the previous chapter of almost the last 8 years. And when you look what is called AXA today compared to what it was what was in it 2016, the company still carries the same name, but the content is very different because what has happened over these 7 years, I would say 4 things have happened. Number 1, we shifted the business mix from what was 80% life insurance to today, 20% life insurance, keeping more or less the same revenue of EUR 100 billion, a bit more. But what has happened underneath is that we have 35% more profit and 75% more cash. Second thing we changed was we focused our footprint significantly. In the French tradition, we were basically present in every country, and I always have difficulties to remember the whole list of countries by heart and we looked at how can we make sure that we stay in countries where we have a strong market position and where we are able to compete well, and that led us to a decision of exiting 22 countries, which is not always easy because being in a country or not is a very emotional challenge sometimes. But when you look at what is AXA today after this change, we're a very balanced company, 50% B2B, 50% B2C, being the largest insurer worldwide for companies, hence very strong positions in most European markets, Japan and Hong Kong. The third thing we changed was we completely changed the culture and also the entrepreneurial spirit. We come out of a phase of the founding of AXA, which was very entrepreneurial, probably a bit too entrepreneurial into a phase post financial crisis, which was very much around central control and making sure that you knew every stone that was turned in the company to now having found a balance in which obviously some things remain very central; the brand ordered risk control, the big investments, but where essentially the execution of the business is local with a very clear and simple hierarchy and very clear responsibilities, which made things easier and also significantly increased employee satisfaction. When we first measured employee satisfaction in 2017, we do it in eNPS, Employee Net Promoter Score. The first measurement was minus 1, which is bad. Now we are at 40, which is very good and probably in the benchmark of the best companies. And we need to keep going on that. And then lastly, what we did, the digital revolution that started in insurance in the 2015-'16, we focus this very much around how can we improve our customer interface and increase customer satisfaction because we were at best at the time at market average or below. Today, the market average is the worst performance we have. So everything is above and the market average is tolerated, but I'm not happy to see it. This simplification of the interface, automating our processes, making sure that our agents are digitally enabled and that we have a full sharing of customer data and so on has really changed things. So when we presented our plan on February 22, it was very much to say, look, this chapter is closed, the transformation is done. We are now going into a new phase, which is very much around evolution. So how can we develop this new AXA? And how can we really use the potential because over the last 7 years, my main task was mainly dealing with 7, 8 M&A files at the same time and not looking at how is the pricing done in the U.K. and what can we do better. This has not changed. In the new plan, we want to focus on three axis, more growth, mostly in white spaces that we are not serving yet, more technical excellence based on technology because during that time that I just described, we also tidied up a lot our landscape. Hence, an example, when I was CEO of AXA Germany at the time, had to deal with 7 live systems with 7 printing systems because a merger in insurance has always been done when the logo has been taken off the roof, but that's when the job started and wasn't finished. And so we tidied all of this up, and we have now also got a tech base to do more on the technical excellence side. And obviously when it comes to our operational model, we want to continue the journey around offshoring and near-shoring and making sure that automation is pushed much more. So evolutionary approach in the next phase with a very clear commitment to high shareholder return, 60% [ combined ] ratio on dividend, 15% share buyback, very little to none left for any M&A deals to send a very clear signal.

It's a very comprehensive summary, I would say. And I mean it's been an amazing journey, as you mentioned past 8 years, and I have followed that as an equity analyst as well. And it is really working out well. So thanks a lot for all this effort that you have put in for all these years. Now before we move on to learning more about new AXA, I think that's a most interesting one. But we'll just do a quick polling question to see what's in the minds of investors. I guess the question is very simple is what's the key investment debate on AXA at the moment, margin improvement in P&C, use of excess capital, organic growth, ability to achieve new EPS earnings CAGR and any other topics that you think is relevant. So I'll just do a quick polling. That's very close. But definitely, I was going for #3 and the consensus is #3 and #2 use of excess capital and organic growth. So why don't we kick-off with the organic growth? I think this is definitely, I would say, new AXA for me. As we mentioned that top line has been about EUR 100 billion in the past 5, 6 years. There's a lot of change that has happened, a lot of disposals, some M&A. So how are you seeing organic growth potential at the moment? Because this is what I believe investors are looking for from AXA for a significant rerating of the shares from here. Any thoughts on that would be helpful.

So if you look at -- as I said, growth has not been on our agenda because we had to do other stuff. Growth is now on the agenda because we have the base for it and also we have the time to look after it. And we said growth needs to happen in areas where we are not sufficiently present yet. And obviously, being the largest corporate insurer in the world, you have 2 very important white space that we want to look at. One is obviously on the, let's say, physical risks. We have obviously new risks coming, cyber, climate change, where there's a lot of need for insurance. If you think about all the investment in renewables, for example, if you think cyber having certainly on the ransom side, become a new industry as opposed to occasional criminal activity. When you look into Europe, we have basically two AXAs. We have the AXA XL underwriting knowledge, very much focused on larger companies and what we call the AXA General Insurance for the more retail plus company that are coming from below, above great underwriting knowledge, below great distribution footprint, but there is a big hole in the middle, which we call the mid-market. And so we have started to develop in the markets where this white space was very big, so the U.K., Spain, Italy to work together between the two companies, align incentives and make sure that they capture this market. So this is a typical white space. So this is the area around physical risk. Then when we think about the human risks in the company, so employees. We see that employee well-being post COVID has become a massive issue for companies and offering employee benefits has become a big retention factor. So the whole employee benefits side, proposing health solutions, proposing services around absentees and so on has become a big advantage. And so being the largest corporate insurer and having access to these companies, we can serve those tools. So that's the first area. Then when we look in the second area around our positions in Europe, Japan and Hong Kong, we obviously want to use those market positions to grow again in the health space, in the individual side, in the protection space, in also the life insurance space again, when we think about retirement solutions. So all of what you see in the plan is already in motion. So it was not that we presented on February 22. And on the 23rd, we said, okay, what are we going to do now? This plan has been built bottom-up. So it's basically the sum of all the initiatives by company, a local company of AXA, and they are already in it. So when we spoke speak about this white space in Europe, Italy, Spain, they've already written several hundred millions of volume. So we know it's going to work. And when you look at the top line ambition, it's 5%. If you strip out in the last plan, the restructuring efforts, you've seen that we have actually grown the top line by 6%. So it is possible for us to grow 5%. So everything that is in that plan has somehow been proven already in some space, and it's now how do we multiply it across the whole of AXA.

This organic growth. I mean, that's very clear, I guess, from your presentation and today as well. But there is somehow still a bit of investor skepticism that insurance is a bit of x growth. I mean I disagree with that because, I mean, I have seen dividends growing dividend, which is a tangible proof of the sector. Dividends have grown by 6%, 7% over the last decade, more than that as well. So there is certainly some areas which are growing in access, I mean, your plan is there as well. But would you say that there is growth for the industry as well because there are, I mean, interest rates are going higher, underwriting is getting better. I mean people are getting older. So would you say that there is a clear industry growth and you can capture ahead of that?

So first of all, demography is a positive sign for us. I mean if you look into Japan, which is probably the most remarkable country in terms of population shrinkage, we are doing extremely well in Japan, and Japan is extremely profitable. I think there is growth and profitability in the segments that are growing the most in terms of the underlying risk, but also that are the most protected in terms of competition getting in. And so if you look, what have we done? We have focused on commercial insurance because commercial insurance is a scale game and is a knowledge game, and it's also a game where you need to be well implemented. So if I was coming from Norway and would say, look, we are now capturing the commercial markets and going to try and go into the SME space, well, good luck, if you have no distribution infrastructure, if you have no underwriting know-how, you will not be able to capture it. Into reinsurance, capital flows easily in and out. But in that space, around mid-market SME, it's very difficult to get in. And because we put a lot of our effort of investment on our own agents and keeping brokers very close to us, it's very difficult to get in there. The same is true if you look into the health space. The health market, we are probably the biggest in the health market of our peers. Health is a scale game. If you want to get into it, it's not so easy. So we picked the spaces where we are more protected than, for example, in motor insurance or reinsurance and where we see growth potential because the underlying risk is growing. And as I said earlier, in the commercial space, you have actual risks growing, which means your business is growing on the health and protection side with more need for health coverage because social systems are struggling, example, NHS in U.K. and people wanting to take more care of themselves, you have actual worth. So our positioning was very carefully focused on those areas that will grow where we have actual growth.

That's a very strong confidence, and that definitely help us anchor our views on the sector as well. So thanks for that. Just moving into more areas of growth. I mean, clearly, organic growth is what -- it feels like you're very confident, but you highlighted at the recent Investor Day that there are other areas of earnings growth as well, such as buybacks, such as margin improvement, especially on the combined ratio. I mean there is a bit of skepticism around some of the improvement in combined ratio, which comes from the underlying business rather than just improvement in the pricing in U.K., Germany. So how confident you are around that extra bit of combined ratio improvement.

Very confident. So basically, if I would put it into a simple formula, when you look at our big P&C businesses, there's obviously XL and there is Europe. What we need to do. We need to now do what we did with XL in Europe. What did we do at XL? We basically went through every line of business and applied a very high technical discipline, saying that, okay, every line of business has a very solid backbone in terms of data. Every line of business has a very solid pricing model, only one and every line of business has a high adherence to the pricing model, and we are very quick in following it, making sure that we also have the feedback from claims all the time. Have we applied the same rigor on a scale of 1 to 10 across all the European countries? Not yet. We're good, but we could be better. And so essentially, what we are doing, we're copying the approach that we have done at XL now into Europe. And that is also the reason why the lady who is responsible now and is the first time we have introduced the position of Global Chief Underwriting Officer, Nancy Bewlay, who is the person in charge has been the one who has done it for XL. So her mandate is in a very simple way, you copy what you've done at AXA XL now into Europe, easier said than done, but.

Definitely there's a lot of work. I mean, for you, there's definitely a lot of work for the next plan, no doubt about it. But yes, so far it definitely looks very comprehensive and very well thought. So just moving into other parts of growth, buyback. This leads to a bigger topic about capital, capital allocation, capital management. So any early thoughts on how you're thinking about capital, capital allocation, solvency issue is pretty strong compared to what your hurdle is and...

We have no hurdle anymore.

Still, I mean, 225% is still a pretty healthy number, I would say. And then in addition to that, your capital return is already very attractive if I sum up the dividend and the buyback. So what are you thinking about dividends, et cetera, as in total overall capital management?

So look, first of all, the plan, as I said earlier, is very much an evolutionary plan based on a very solid balance sheet. And also, again, the balance sheet has changed over the last 8 years. If you look, I mean, the solvency level that we see now, we have never seen in the past. The sensitivity of the balance sheet is a third on interest rate sensitivity, what it used to be. The capital that we need to put behind financial risk is half of what we used to have. So it's a very solid balance sheet, very diversified. You haven't heard us mourning about the Credit Suisse and the Silicon Valley banks of this world. And so the aim is to keep that very solid balance sheet, but to be very mindful going forward on our capital usage. As I said, we have a good company now. We have a good strategy, and we have sufficient capital generation to finance our own business. So we don't need to go out and spend money on big acquisitions. Therefore, we said, look, we need to give a very clear commitments on what we give to shareholders and 60% payout ratio on dividends is a clear sign of more confidence because we up it and the volatility of the business is much lower. And I mean, 15% share buyback. If you look into the context of AXA, when I first raised the issue of share buybacks with my Board about 5 years ago, the answer I got was, listen, have you not got any entrepreneurial ideas anymore that you need to come with share buybacks. So we've come a long way. And essentially, the visibility for an investor now is crystal clear for the next 3 years. You know what you get. You know what is left and where it will go. It will be reemployed in the business. And you also know very clearly what our very limited M&A policy is. So we wanted to be crystal clear and also wanted to put ourselves out there with clear boundaries that there is no uncertainty.

But would you still say that there is still room for, I mean, I guess, you clearly ruled out any transformational M&A.

We don't need it.

Yes, you don't need, but would you still believe that there might be some need for some bolt-on M&A. I mean, I think your Laya acquisition is pretty good because it puts you in a very good position in the health space.

We're very happy with it. And look, you see, we've got a significant cash balance at Holding, which we think is going to be more or less the same going forward. So yes, this is basically the pot of money we could use to do bolt-on, but we want to think very carefully like we did. I mean, I think what you've seen now in the Turkish acquisition, the Spanish acquisition, the Irish acquisition, this is the kind of stuff we're looking at. But again, there is no rush, there's no urgency. If there's something interesting, we will look at it, if not and I think the issue around our balance sheet and solvency being so high and solvency, let's say systemically moving up, be happy about it. What is the big deal.

Yes. No, I mean it's not a big deal for you, but we analysts, our role is always to find okay, there's some excess capital. Can we please get some of that. Again, but no, I think you...

There is excess capital because the big regret I have in solvency is that it's not too cash oriented. So the excess capital you have in solvency is a lot of future profits that have not yet turned into cash. And so it's always difficult to explain that. But I think a higher solvency and increasing solvency should be a good sign of confidence.

Yes. But in addition to that, I think you have worked a long way on your cash remittances as well. I think the cash remittances have improved substantially. And if I look at your next plan, it's going up again, 20%, 30% in the next plan as well. So how easy is it to get those remittances from the subsidiaries or is it you really need to fight hard for that?

No. Again, this plan is really based on where we are doing, what we are already doing. So we have finished last year with 79% remittance ratio and the plan says 80%. The reason why there is such a big increase of 50% from [ '14 to '21 ] is the fact that now all the companies are delivering results. And we had some companies in the last plan, in particularly in Asia, Japan and Hong Kong, that were not at the level yet. So this is sorted out. And yes, we can state with quite high confidence that the 80% is possible. Having such a high solvency ratio, obviously, doesn't put you into a regulatory discussion saying, Oh, your solvency is not big enough. You can't remit this money.

Yes. I think it's the other way, you can actually get more remittance out of some of the subsidiaries that might have some extra solvency.

Yes. Look, I mean, the discussions with regulated industry, we had last week, we had our yearly discussion with our home regulator, the CPI in France. And I remember very well my first meeting 8 years ago. When you look at the nature of this meeting versus the meeting last week, it's no comparison.

That's interesting. Well, in the interest of time, I'll just see if there are any questions on the floor. In that case, I mean, I'll just continue. I mean I'll just continue. So clearly, one of the big topical subject for your investment case had been XL. XL had a bit of a rough year because of very high cat losses, social claims inflation, but then you made quite a lot of changes in the company. Where do you see XL position now in the next plan?

So it's true with XL, we had a challenging situation. And basically, we did 4 things, then I can explain to you about your question. So first of all, we had to increase prices, which was obviously -- we had a lot of tailwinds from it, but not only price increases because 2/3 of the change was terms and condition change, which, by the way, will stay when prices might turn less high or the other way. Secondly, we reduced massively cat exposure in XL, but also in particular in XL Re. You've seen we've gone down 60% in Nat Cat exposed and XL Re, which was very much against what the market has done. Thirdly, we reduced the volatility in this -- on the social inflation side, so the reserve volatility on the long-tail risks by, on the one hand, re-reserving, secondly, increasing pricing on the new business, but in particular also getting into the adverse development cover with Enstar at a time where nobody really thought about this, hence probably this would not be possible anymore today. And then lastly, we decreased the net retention progress. 10 years ago, if you were to insure this hotel, you would have probably kept EUR 100 million of retention on that hotel. Today, it probably will be between 50% and 75%. So the large loss volatility has significantly come down. So XL is not only about the increased prices period. We significantly changed the machine. And that's why also in the next phase, the company will be well positioned because it has grown a lot, it is very stable on all of those 4 pillars. And so even if the price increases are not as high anymore as they used to be, the company will be in very solid ground. And that's also why we believe shifting the company more to growth. And when I say more to growth, I would like to see 50% of the growth coming from price increases, 50% coming from real growth, which is more or less what we had already in 2023. So yes, I think that's a good equivalent, and we are well positioned.

I'll come back to this growth, pricing, low cat. But just one thing to get clarification. Do you believe there is more restructuring to be done in XL or more or less you're done.

When 95% of your portfolio earns above cost of capital, by definition, you don't have that much restructuring to be done.

You mentioned like half of the growth should be coming from pricing.

Roughly.

Roughly, yes. Just roughly. What we are seeing that the commercial insurance pricing in U.S. has started to just moderate now after a very strong 4, 5 years of pricing. So how are you thinking about pricing versus inflation in that market, especially U.S. basically?

So I'm not at all fixated on the headline figure on pricing because where 10%, 5% or minus 2% is the right number. It doesn't really matter unless you know the underlying claims inflation. What I look at is the delta between claims inflation and price increases. That delta needs to stay positive. And so if, for example, claims go down 5% and price is 3%, your cushion is still 2%. And so that's what you need to look at. And it's clear that we've seen a massive rally in price increase that was necessary. We use that period in a very disciplined way to reconstitute ourselves and get to a very favorable position. I mean, when you look at XL made EUR 2 billion, almost EUR 2 billion of results. And so going forward, I'm looking at this delta. That's why I said earlier, I want 50% of the growth to come from price increases and technical changes to keep ourselves continuously working on that.

That's clear. I guess this is exactly what is relevant is the net pricing because headline even if it's lower than inflation, then it doesn't help either way.

And look, in some areas like we had in the U.S. professional lines, this market is a very volatile market because you had a lot of specs and M&As -- sorry, IPOs. And now the market is dried out, new competitors came in and look, because we have a very diversified franchise, we decided to pull back and we lost quite a lot of volume there. But did you see anything? No, you didn't. So that's why I think having a very diversified franchise of XL helps us as well. If there's one area where growth is not at the level we want it to be, say, okay, fine, we won't participate in a run. Let's focus our energy somewhere else.

I mean this is definitely an area where we are seeing a bit of polarization where some of your peers, Bermudan peers are still being relatively aggressive in the casualty market. But then if I look at the European reinsurers and some of the European commercial lines like yourself, I mean you're definitely pulling back from that market. Is it mainly because of back-book concerns or would you say it's -- no, actually, we just don't know what the social inflation is going to be. We don't know what the normal inflation is going to be. What is that concerning factor here?

Social inflation will continue in the U.S. And I think people got a little bit blinded in the COVID and early post-COVID era that claims were not really moving. Judges were not really continuing the journey on those files, but now we are back to normal. And remaining very disciplined in the new business pricing, but also watching out on your reserve basis and the reserving of your existing claims is extremely important. And when you look, I mean, as I said earlier, we have re-reserved at the time. We have gone into the ADC, which gives us about EUR 1 billion of cover or 90% to be precise of EUR 1 billion above an excess of EUR 325 million, which we also put to the site. So far, we have not eaten into this cover. And you've also seen that the claims base that we reserved against used to be EUR 11 billion and has now gone down to EUR 5 billion, EUR 6 billion because a lot of claims have actually been processed and done. So I'm relatively comfortable today because we have understood the mechanism, and we watch this stuff very carefully.

Okay. That's clear on XL. Just quickly checking if there's any questions. We have a question here. You can raise your hand. Yes. Thank you.

Could you make a comment on people at XL? I know we had a number of high-profile departures to Convex. Is that kind of flow of people over now? And do you think that people's situations basically stabilized?

So it's absolutely true that I think it was 3 years ago, we had some departures, but they were essentially in two areas. One was in the leadership team because we changed the philosophy from, I would say, a very growth-oriented matrix-oriented company to a profitability-oriented and a simple company and those people had to go because they were not aligned with our philosophy. And then secondly, we lost, I think, 23 people to a new venture in Bermuda, which didn't really hurt us. But with the change of capital markets and interest rates, those recruitment efforts on the other side have also dimmed down. So no, again, look at the results, the results is always done by people and people's action. And I would say, look at one thing at AXA. So over the last years, we've always moved talent from AXA Group or AXA entities into XL. Now it's the other way around. I mentioned earlier, Nancy, the Chief Global Underwriting Officer. She comes out of XL into Group. And I have got a couple of other examples where this the case. So no, the people changes have been good changes. And in particular, having Scott at the Head of XL, who comes from Chubb with exactly that mindset of discipline on profitability has been for us a significant positive change.

Any other questions from the floor? Just continuing with XL, I guess one thing I want to check is around Nat Cat. Now clearly, Nat Cat has been -- we have seen like record 6, 7 years of cat losses like above EUR 100 million. Even though last year, we never had even a single big launch event like Ian, but it was still EUR 100 billion. So how are you looking at the Nat Cat exposure? I mean you have cut significantly in reinsurance, but overall in the business?

So we've also cut in XL. So AXA Insurance, that was the first area to cut, and I remember very well. I mean, at the time we went through all the detailed exposures. So for example, when we looked at, okay, what do we ensure in the shorelines, we don't insure anything anymore that is 6 miles to the shore line. We had a lot of business -- U.S. business that was, I wouldn't say dumbed but placed in Lloyd's, London wholesale, which couldn't be placed in the U.S. So we got rid of that business. And so we have significantly reduced our exposure in XL insurance, in XL reinsurance, and we would like to do something similar now in Europe. As I said to you earlier, the mandate of Nancy is to do exactly the same that she did in XL insurance and reinsurance in Europe. So our cat exposure has significantly been reduced overall. We want to continue that journey because I still don't believe that cat risk is well priced. The cat risk on the very large, very rare events is probably fairly priced. So the 1 in 20 or 1 in 50-year event. But when I look at the 1 in 2 year, 1 in 5-year events, [ storms ], wildfire, floodings, you don't get a right amount of money.

Yes, that's interesting. Because clearly, this leads into the reinsurance market, which still looks very hard. Pricing keeps going higher. And I guess, for the same reason that cat is still properly not priced. But how are you thinking about your reinsurance strategy from your business XL Re and from buying reinsurance as well. So from both perspective because when on one hand, you have made a lot of effort to turn around XL Re, it's very profitable now. On the other hand, you still have a very good market. I mean, in terms of pricing, it still got pretty good, but then you want to reduce the volatility. So how are you trying to balance that?

I mean, we significantly restructured XL Re, and I was very pleased to see that I think it was the best combined ratio in the group with 81.4%. And yes, we have finally turned it around. It finally makes a profit. And size doesn't matter for this operation because often when you have a stand-alone reinsurance, size matters because of your balance sheet strength. Here, we have an operation that is smaller than what it was when we bought it. But that benefits from the balance sheet rating of AXA Group. So they can perfectly live a very comfortable life in being a little bit smaller than what they used to be, but being far more focused. And so we have restructured it now. We are going to develop it in a controlled way, but we will not take more on that cat risk.

Okay. That's clear. One question I want to ask maybe from an industry perspective, actually, you have clearly shown, okay, this is a combined ratio going to be investment income, top line, et cetera. But one thing that puzzles me is if I always think about how management should think about or management thinks about making money is you have an underwriting element and you have an investment income element. Now clearly, investment income element has gone up, which is probably going to stay. And underwriting has improved a lot in past, say, 5, 6 years, thanks to all the efforts that management have put through. So would you say that there is a possibility that underwriting element could be relaxed a bit going forward because we are making a lot of money on investment income. Would you say that from your discussion with other peers, et cetera, that's not happening. There is a bit of difference now the way management is looking at it.

So I do not believe that you see a significant relaxation on the technical side because number one, when interest rates increase, it takes some time for us to benefit from it because we are not traders and say we sell everything one day and then reinvest. We obviously manage our balance sheet according to our liabilities, which means that probably you reinvest 10% of your balance sheet at max every year. And so if interest rates come again down a little bit, yes, we have a delta that remains positive. But yes, I don't think you will see it that quickly, number one. Number two, in this period of repricing, certainly in those areas where you have fewer players, many players have exited. So I don't know, whereas if you want to today ensure a marine cargo or marine hull risk, 10 years ago, you had a lineup of 9 insurers. Today, if there's still 4 pitching, you're lucky. And this will probably remain like this. So the number of the market has shrunk in terms of number of players. And if you look also the distribution of the new business market shares versus in-force market shares is much more concentrated. Then you have some regulatory developments that do demand more discipline; one is IFRS 17, which demands more discipline and the other one is the Solvency II revision coming and the end of transitional models in Europe on the solvency, which means that if you are a mutual and you need to somehow have a higher capital buffer at the end of your transitional period and the Solvency II revision, the only way you can do it is through discipline on your underwriting side.

Yes. That's good. I'll come back to this point because this is very interesting. But before that, I'll just see if there's any question on the floor. We have 1 question here.

1 question on the XL integration. Obviously, results have been very positive. What are the key lessons learned? And what would you have done differently in the whole process?

So I mean, the integration of XL was obviously a very complex undertaking because you had a multinational company being in 60 countries and the underwriting of larger risk is very much driven by the underwriters that are there. And so finding the fine line between integrating it and not, let's say, discouraging people. But on the other hand, making sure that you also put your foot down when it comes to how to manage profitability was a very fine line. In hindsight, you can always say, well, I should have made the change in management earlier than I did. But the question would have been, okay, what would have meant, and that's what your colleague behind you ask for losing people. Because there was -- I had to make myself a big effort at the beginning, seeing underwriters to understand would they be ready to make this change. And we were in a very fortunate position in a way that previously XL before it came together with Catlin was actually a company that was very disciplined on the underwriting side. And the majority of underwriters still come from that period. And at the time, what has happened when the merger with Catlin came, they increased the net retention. So my hotel example from earlier, they were on EUR 50 million, and they went to EUR 100 million. They pushed the Nat Cat and the underwriters on the ground were not happy with it. So once I toured all the locations, I was pretty sure that when making the change at the top, I would have support at the bottom. And those underwriters will not be out the door tomorrow. But to do the integration and to get the approval of 60 regulators to make sure that you align the companies culturally and that you get the support of the ground staff to help to support you in a change is not evident. And so I would probably do the same thing again. But yes, the question you could ask yourself, should I have acted earlier on the management change? Probably yes, but you don't know what would have happened to the support line of the underwriters.

Just one more minute left. So I just have one question, simple question. IFRS 17 and Solvency II must be a painful way to get there. But do you think it's good for the sector or would you say maybe.

So whether it's good or not, I think I would look at it from the end customer perspective because at the end of the day, a regulation should be done in favor into the protection of the end customer and the end customer should also see, okay, the investment for this regulation is X, and my benefit is Y. If I take that perspective, we obviously had significant change to Solvency II, and we had significant -- we just had significant change to IFRS 17, and we might still have significant change to something else that is coming, which is the revision of Solvency II and potentially ICS, International Capital Standards. If I make all the sum of this, I would say the business case for the end customer is probably not a positive and nevertheless, I'm a big believer in Solvency II because it has finally instilled discipline in our action. And I also do hope that IFRS 17 will instill more discipline in particularly on the life side. And yes, we have other disadvantages. I mean, I was always a big fan of lower volatility in our business now with IFRS 17 and the discounting and the unwind of the discount we have, unfortunately, again, in still an element of volatility. But look, let's see how it goes over-time if the interest rate situation does calm down and we find a new normal that is more sustainable over-time, we might hopefully also have less volatility from it.

Thank you. Thanks, Thomas. That was really very insightful. First of all, congratulations for your coming out of the plan and all the best for execution of the plan. We are pretty confident it will work under your leadership.

Thank you.