AXA SA (CS) Earnings Call Transcript & Summary

Next on stage with me this morning, I have the pleasure of being joined by Thomas Buberl from AXA, the CEO of AXA. As you know, AXA reported a strong set of first half '26 results. The business is on track to meet its 2026 ambitions. And to keep everyone on their toes, last week, Thomas and his team launched AXA's new strategic plan as it seeks to grow from a position of strength. So now is a great time to catch up with Thomas. So Thomas, thank you. Thank you for being here with us today.

So let's start with the strategic plan, if that's okay. Could you just quickly talk us through what you feel are the main highlights of that plan and what you think people are -- should be focusing on?

Yes. Thank you, and good morning to all of you. Very nice to be with you and perfect timing, as you just indicated. The plan that we have launched last week for the period of 2027 to '29 is called Growing Forward. And I think those two words, more or less say it all, it's a combination of going forward. So a plan that is very focused on organic growth that is very focused on the continuity with a clear accentuation of growth. So the pillars of this plan are growth, technical excellence and productivity and cost excellence amplified by AI. We want to make sure that we use our good position in which all lines of business, all countries are in good shape to now focus more on growth and more on market share gain in most lines of business, and we are very confident that with the tailwind we've got from the existing plan that we'll be able to implement it and also on AI. We have given, I think, for the first time, a very clear road map of what we want to do and where also benefits come from.

Okay. And one place where in this set of strategic planning cycles, I guess, you've been quite different is introducing a book value target. Could you just talk a little bit about the message you and the Board are trying to convey by introducing that particular target?

Yes. I mean we have a capital management policy that is, by the way, unchanged for the next plan, which is 60% dividend, 15% share buyback and then the rest is being reinvested, and the reinvestment is 25%, more or less. And it's a large part of the shareholders' money, and we want to make sure that there is a clear measure as well, how is this being invested, how is this performing. And we've seen that over the past years, it has been performing quite well. And therefore, we said, look, there needs to be a specific target on the retained earnings as well that are being reinvested on behalf of the shareholder, and the aim is to be mid-teens as a progression of this portfolio.

And when we sort of step -- put the financial targets aside, what does success look -- look like outside of those financial targets, i.e., what does AXA's business model look like outside of that as you go through this cycle?

I mean we have announced it that we want to have a 100 million customers and a much larger insurance company than we are today. We have added a bit more than EUR 20 billion if you roll forward to the end of this year. Over the last 5 years to the top line, we started at EUR 100 billion now a little bit at the end of this year, over EUR 120 billion. So first of all, it's a good proof that organic growth really gets you somewhere and you can make a big difference. And so in -- over the next plan, we want to replicate the same thing again. We've got a good business mix. We've got a good country mix and making sure that AXA by the end of this plan is bigger and is more profitable.

And if we could just move on a little bit to the organic growth initiatives in the plan. Effectively, your volume growth targets imply that you should capture some market share. Can you talk a little bit about why a customer will choose AXA over its competitors? And which type of incumbents do you expect to take that share from?

What you see in general is that there is a flight to size in the market. So the larger insurance companies are benefiting at the expense of the smaller ones. And this is very much to do with the question around regulation and who has the ability to react to regulation, but it's also true and first and foremost, true to the question around AI. Because AI demands a lot of investment. AI needs talent and the people that we are trying to recruit are more likely to go to a larger and more trusted brand than to a local brand. And so we do expect that over the next years, share and new market share focus will be on fewer insurers and the bigger ones because they are the ones who can cope with the additional complexity and the financial necessity of this complexity, but we can also make sure that they implement it. And therefore, we will see a shift in the market structure. And yes, we have already seen in this current plan that in the countries where we didn't have any major restructuring or turnaround to do. It is possible to grow. It is possible to gain market share. And we just want to continue and replicate what we have already done in many markets. I'll remind you that for example, in the retail space, we have gained market share. We have had a net new inflow over 2 million contracts. So this is really -- going back to my first words, Growing Forward. Growing Forward, of something that we have already done. And the same is true, for example, on AI. If you look at the AI agenda, it's a very, I would say, low-risk AI agenda in the way that we say, look, we have tested many use cases, and we are just replicating what has been done well in one country at scale across the other countries. So no risky experiments in AI.

And I guess another element is the idea of customer acquisition, customer retention. If I get this right, I think acquisition was more the newer markets, the international markets, retention in the established markets. How have you prepared to adapt, whether it's products, distribution incentives and so on and so forth in order to try and deliver some of those ambitions around retention and acquisition in particular?

I mean, first of all, we've got a very diversified mix of distribution channels. And in particular, we are very strong in our own agents, which are mostly agents. And so your customer access is much more direct and much more controlled than if you were selling, for example, through an aggregator, where you're very far away from your customer. And so when we look at retention opportunities, technology will give us a very different way of doing retention. So I used to be ahead of distribution 20 years ago. And I remember very well when we were trying to push our agents to do retention, it was always a nightmare because he was sending them paper list and say, "Look, you need to go to these customers. You need to renew a contract." And this was always seen as a very unattractive task because you only got 1/3 of the commission of a new business. You didn't know what the customer was doing and these lists were very mechanical. Each customer was treated in the same way. Today, this is very different. You get technology to analyze, okay, which customer is most likely to renew and which is not and where is the likelihood of a customer leaving, higher or lower. So technology will give you a much more focused way that when you go to a customer, it's much more likely that you have success. And all of a sudden, the equation between I run after new business versus I'd rather spend time to retain customers has changed and you see it in the agent base today. And so I believe that given my own experience as head of distribution, we can do better in retention and retained customer is always a better customer because you know he or she from the history of your portfolio, and it's much easier to convince somebody to stay rather than to get somebody new who you don't know, to get on board. And therefore, we said, look, there is a big opportunity for us to do more retention, which ultimately leads to higher growth because you lose less customers.

And another aspect of the sort of organic growth was some of the structural growth opportunities you highlighted around autonomous vehicles, energy, infrastructure, so on and so forth. Of those long-term structural sort of drivers, which ones are you most excited about for the group? And how do you win in some of those markets? Or what sort of positioning have you put in place already?

So I think the core message is the biggest growth comes from our portfolio. So retention and growing with our existing customers. However, we want to make sure that in some very defined spaces, we make an extra effort to grow. And so if you look -- if I start in the retail space, certainly, in the area of social inclusion, we believe that there is a big growth opportunity, just to give you an idea. In a market like France, roughly 20% of French citizens today do not have access to insurance because it's either too expensive or they are not deemed to be a good risk or desired risk. And so instead of neglecting these customers, we said, look, a couple of years ago, what can we do to reinvent our product and make it a growth initiative to get into that segment at the same margins as we have in the base business. And we basically started this with 0 customers, and we now have 24 million customers. You mentioned autonomous vehicles. The same thing we have shifted towards more corporate risks a couple of years ago because we believe that many car insurance risks will turn from a private individual contract to a liability of a company when you think about autonomous vehicles. And so obviously, there is no history around how does an autonomous vehicle drive in San Francisco or L.A. and so on. And so we are, in some cases, the innovation partner of these companies to help them to build insurance, and it's kind of like insurance as you go. You learn with the company, you adapt the prices as you go and as you have history. And I think the combination of being global because these companies don't want to deal with 60 different insurers across their 60 countries, they want to have one global company that they do everything with coupled with the deep -- deeply localized and understanding local tissue in particular through our agents is extremely important. Last example take direct insurance. And we have done direct insurance quite a lot traditionally, but haven't really put such a great effort on it with the purchase of Prima last year and also with the shift in customer needs that more customers are going direct. We said, look, we actually -- we found out we've got the biggest franchise in direct across Europe. And so we have now made a concerted effort in growing this franchise more. And certainly, with the acquisition of Prima, we also have a different way of doing it in a much smarter way than just saying, okay, I'm taking my traditional products, and I'm putting them in my online shop, but they remain the same products and they remain the same processes.

And just on that point on Prima, is that model exportable across other markets? Or is the focus at the moment to concentrate on the Italian market and succeed there a bit more?

Prima is now very big in Italy, and they have been very successful. And if you look at the initial business case versus where we are today, we're extremely pleased because it's doing much better than we have expected. But Prima is also today in Spain and the U.K. and our focus is now to make the Spanish market the next success because essentially, Prima needs a good brand, access to repair networks and access to agent networks because Prima is not only a direct insurer as they sell direct, direct but they also use their product in the agency sales force. If the agency sales force cannot sell with the traditional tariff of their mother company, they use Prima to sell because Prima has a very, I would say, risk-based pricing without looking at any social considerations. So the 25-year-old driver pays much more at Prima than he or she would pay as a traditional insurance company. And so this trade-off works extremely well in the agency sales force.

Okay. Can we move on a little bit to dig into your plans of effectively scaling AI across the value chain? And in particular, I guess, if we start with how does sort of the AXA reshaped business model in your mind look in 3 to 5 years' time?

So the honest answer is probably -- probably I don't know because we are at the beginning of AI and you discover every day and what you -- where you are in the years, you laugh about what you have done so far. And I think that's very good because you need to be humble and say, "Look, I'm going on a journey that is unknown." I think the business model will, at the end of the day, not look so different. We will be able to deploy AI across the different sectors. So one is the area around efficiency, where we automate a lot, where we simplify the customer interface, where we personalize more, my example around retention from earlier. The second area is we use technology to increase margins on the technical side. So when it comes to pricing sophistication, when it comes to fraud detection and so on, but we will also use AI to grow more. Retention is one example, but you can also think about other areas where we use AI. So for me, it's important that we use AI across all the different segments and not only focus on cost savings, and that we really make sure we use AI because the challenge in AI is not a tech challenge. The challenge in AI is a leadership challenge, how do you motivate and encourage all your people to use it and to use it without fear and to use it for the benefit of the customer and the shareholder. And that's where I focus my time mostly on and when you ask me, how would AXA look differently, it would look differently in a way that, yes, many, many more people are using out of their own motivation AI because they believe it simplifies their daily business, and it simplifies also the customers' daily dealings with us. And there's also new opportunities. I said AI needs to be -- also be focused on growth. And prevention will play a much more important role going forward and prevention means how to use technology to prohibit and avoid the next claim and that is very much a tech play. And there, I believe AI will play a big role. So when you look at the mix shift of AXA in 10 years, the pillar of prevention will play a much more important one.

And in the latest plan, obviously, you had put out a gains number of between EUR 500 million to EUR 700 million --

After investments?

After investments. Could you talk about basically how you arrived at that number, i.e., is there a big amount of that is related to costs? Or is it about improved productivity and more products per customer, so on and so forth that you're thinking about?

So first of all, I mean, we've been working on this plan for quite some time. And why did we take so much time because we wanted to involve the local entities in it. And so we've been working on this plan for more or less 1.5 years -- and when you look at the plan, it's an aggregation -- literally an aggregation of all the plans that the entities have given us. And so when we look at the AI initiatives, we were -- we had several rounds with the local entities to get to the right mix because at the very beginning, it was very much focused on automation and cost savings because that is something that all of us know, there is almost certain investments. But we said, no, we want to have a better mix. And so today, about 40% of the initiatives are focused on cost savings automation and the other 60% are focused on margin improvement and growth. So for me, it's important that we have a good balance and that we continue to learn. Again, if in a year's time, we have become smarter and have further developed our AI initiatives. I'm actually quite happy that this is the case. I don't want to be stuck in today and yesterday, I want to ask all to develop and to learn every day and to understand the opportunities of AI better every day.

And do you feel what you've estimated -- because obviously, there's some overlap with the, as I understand it, some of the noncommission expense reduction plan as well. Do you feel that the estimate is relatively cautious conservative? Is there much more that you can do on that front as we go beyond the plan?

No, I think it's realistic as we speak today, how I will look on to it in a year's time, I don't know. I hope, again, that we have learned a lot and that we will further progress. But for me, it was important that in this Investor Day, we are putting out a very clear agenda around AI. What are we going to do and how are we going to do it and that also there needs to be a number attached to it because what doesn't get measured, doesn't get done. Would I be happy if it was more than that? Obviously.

I guess before we go on to the business units, are there any questions in the audience that we can take at this stage? No? Okay. So if we go on to the businesses, perhaps if we start with P&C. How should we think about how you're thinking about managing through this part of the cycle from an underwriting perspective and also utilizing some of your clear reserving strength as well?