AXA SA (CS) Earnings Call Transcript & Summary

Good morning. Thank you for standing by, and welcome to AXA 9 Months 2026 Activity Indicators Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Anu Venkataraman, Chief Strategy Officer and Head of Investor Relations. Please go ahead.

Good morning, and thank you very much for joining AXA's 9 Months 2026 Activity Indicators Call. Our Group CFO, Alban de Mailly, will walk you through the highlights of the press release that we issued last night, after which we'll be ready to take your questions. With that, I hand over to Alban.

Thank you, Anu, and good morning to all of you. Thank you for joining the call. So let me begin with the key messages for the first 9 months of 2026. AXA delivered a strong performance over these first 9 months, sustaining the momentum from the half year, supported by the diversity of our business model, the quality of our franchise and continued good performance across key markets. And total revenues increased by 5% to EUR 93 billion with growth well balanced across our businesses. Our Solvency II ratio stood at 213%, demonstrating the resilience of our balance sheet in a more volatile market environment. Let me now turn to our business performance, starting with P&C. P&C revenues were up by 3% to EUR 48.1 billion with a balanced contribution from price and volume. In Personal Lines, revenues were up 7% to EUR 17.2 billion, and momentum remained strong and broadly in line with the first half supported by continued price increases across geographies. We added 2.4 million net new contracts over the period, reflecting an acceleration in customer growth. The growth rate in Personal Lines is calculated with Prima contribution to 9 months '25 as it had already been consolidated and the proportion of the business we captured was the same as in 9 months '26. So Prima contributed EUR 1 billion of gross written premiums in the first 9 months. This reflects both commissions paid to the MGA and the initial recapture of approximately EUR 0.5 billion of the premiums. So EUR 0.5 billion commissions, EUR 0.5 billion premiums. On a stand-alone basis, Prima's revenues increased by 32% to EUR 1.7 billion. Moving to Commercial Lines. Revenues increased by 1% to EUR 28.7 billion with trends across our 2 sublines, broadly consistent with those reported in the first half. In Commercial Insurance, excluding AXA XL, revenues were up by 4%. This was driven by a favorable pricing environment in France and across Europe, with overall pricing up 2%. We also delivered positive volume growth, particularly in France and international markets, reflecting the strength of our franchise and distribution capabilities. And looking ahead, we remain confident in our ability to continue growing this business profitably. At AXA XL Insurance, our approach remains consistent. In a softening market, we will grow where market conditions support adequate returns, while maintaining disciplined underwriting and exposure management where pricing is less attractive. Against this backdrop, AXA Insurance revenues declined by 1%, with pricing also down 1%, broadly in line with the trends reported in the first half. In property, while pricing is softening, minus 7%, margins remain attractive and above our return hurdles. In casualty, rate increases are in line with first half, plus 4.5%. We remain highly disciplined and prioritize margin over volume. In professional lines, pricing is negative, minus 2%, but appears to be bottoming out after several years of declines, and there as well, we remain disciplined. Specialty comprises a number of distinct lines with different market dynamics. Overall, pricing remains broadly stable, and we continue to see attractive opportunities for profitable growth in areas where AXA XL has deep expertise. Our strategy is unchanged: disciplined underwriting, expense management and growth only where returns meet our hurdles. And finally, in reinsurance, revenues were down by 9%. Renewal pricing declined by 4% versus 9 months '25 with pricing down 8% in property lines and stable in the rest of the business, which reflects a relatively resilient outcome in the current market environment. Consistent with our underwriting discipline, we reduced volumes where expected returns did not meet our target. Turning briefly to natural catastrophes. Group experience in the first 9 months was above budget. The third quarter was active in Europe with drought and several hailstorms affecting France and Switzerland, where AXA has high market shares. And as a reminder, we manage nat cats, PYDs and discount benefits together with a focus on maintaining a stable overall contribution to profitability. I now turn to Life & Health. In Life & Health, premiums were up 7% to EUR 44.8 billion. Both our short-term and long-term businesses delivered strong performance. In the long-term business, premium increased by 7%, reflecting strong sales momentum across G/A Savings, unit-linked and protection. And in the short-term business, revenues also increased by 7%, primarily driven by positive price effects in health across all geographies. Net flows were strong at EUR 6 billion in the first 9 months compared with EUR 5.6 billion in the prior year period. Overall, the performance demonstrates the relevance of our product offering and the strength of our distribution capabilities across key markets. Let me now turn to new business metrics. New business CSM grew by 1%, supported by strong volumes in savings and good margins. This was partly offset by lower health sales in Japan amid heightened competition. In Japan, we are shifting our commercial focus from health to protection, where margins are attractive and stable. As in the first half, high interest rates, notably in Japan, weighed on our new business CSM. Excluding this impact, new business CSM would have grown by 4% on a comparable basis. As a reminder, our new business metrics at 9 months are not updated for changes in financial or actuarial assumptions. Those are refreshed at half year and full year. Given the evolution of interest rates since June, particularly in Japan, we expect the full year assumption update to create further pressure on reported new business metrics. I now move to Solvency II. So we continue to operate at a high Solvency II ratio that stands at 213% at the end of September. Our ratio was down 5 points from the first half, mainly explained by the following. So first, 1 point of net capital generation made of 7 points from normalized capital generation and minus 6 points of accrued foreseeable dividends and annual share buybacks and minus 5 points unfavorable impact from financial markets, reflecting increased volatility, notably on interest rates, higher inflation expectations in the Eurozone, the widening of government spreads, including also minus 2 points impact from cross effects. And as a reminder, the sensitivity of our Solvency II to OAT spread widening is minimal. To conclude, so AXA delivered a strong performance over the first 9 months, combining strong growth, disciplined underwriting and continued capital strength. We continue to leverage the strength of our franchise to drive growth in retail P&C and commercial insurance, excluding AXA XL. Together, they grew plus 6%. At AXA XL, we are actively managing the cycle and remain selective, prioritizing returns over volume. AXA XL is well positioned to capitalize on structural growth opportunities and maintain attractive margins. In Life & Health, strong sales momentum and net flows support the continued growth of our future earnings base. And our 213% Solvency II ratio, prudent reserving and high-quality investment portfolio provide resilience in a more volatile environment. So taken together, these elements give us confidence in our ability to deliver the 2026 underlying earnings per share growth at the top end of our 6% to 8% target range. I'm now happy to answer your questions.

[Operator Instructions] The first question is from Andrew Baker, Goldman Sachs.

First one, just on AXA XL insurance. It looks like there was a sequential pricing improvement in the third quarter versus the second quarter. Are you able just to give a bit more detail on what the underlying driver of this was? And then secondly, again, just on third quarter stand-alone, it looked like U.K. and Ireland personal lines pricing was really strong. Again, just curious what you're seeing in the market and what your expectation is for pricing going forward here?

Thank you, Andrew. So on XL Insurance, I would say, overall trends are very much in line with what we saw in the first half. You heard the details I gave by line of business. I think there are probably 2 things. The first one is we do see an improvement in financial lines in 3Q versus the first half. And there is probably a mix effect between the various lines of business. But otherwise, for instance, if I take property, it was minus 7% in the half year and the same in Q3. On your second question, yes, it's true that in the U.K. in particular, we see significant price increases in motor over the third quarter, yes.

The next question is from Michael Huttner of Berenberg.

I've got 2, 1 on Health and 1 on Life. On Health, 7%, which sounds -- you said mostly pricing. Maybe you could be a bit -- just a bit more precise. And you remember -- well, I'm sure you do it, on the 15th of September, you said you expect the combined ratio to improve 1% in the next 3-year plan. To me, the 7% pricing sounds better. Maybe you could explain that? And then on Life, if you could give us a number and say how big Life would need to be to impact your 8% target EPS growth?

So thank you, Michael. On the Health, so the 7% is there, again, very much in line with what we've said at half year. And you can say that it's only pricing on this. We plan very clearly to grow volumes in Health in the next plan. But for the time being, in this quarter, we have kept on focusing on margin. You know that we are, for this plan, a target of reducing our combined ratio in short-term Life & Health by 300 bps, and that's the focus of this plan. By the way, it's also the focus of next plan because we want to improve it by 1 more point. So 7% pricing in Q3 and in 9 months. On Life, look, at this point, we don't have the final number because we've given our customers more time to report on their losses. You should see that as a minor nat cat. It will not be material for the group. I don't know what it would take for that to be material. I count on the French police to make sure that it's not material, and that should be okay.

The next question is from Farooq Hanif, JPMorgan.

So my first question is on Prima. Can you tell us what the percentage level of recapture was in 3Q? And give us an update on how you think that's going, whether it's stronger or in line with the kind of guidance you've given on that already? On volume growth, I mean I estimated that in P&C, the volume growth was a bit less than pricing. I mean, you said it's balanced, but it feels like 2% pricing, maybe 1% volume growth. Do you think that's enough? I mean, are you bullish that you can raise that volume growth outside of Prima because obviously you have 2% pricing, 1% volume growth and approximately 1% Prima every year, it's not getting to your 5%. But if you could just comment on that as well. And then finally, in Life, in your reported new business value margin, I just wanted to understand a little bit more about why that margin was down? I mean you had very good new business growth, but just why is the business margin weaker in Life?

Thank you, Farooq. So on Prima, up to now, we have recaptured EUR 500 million of premiums out of a total written by Prima of EUR 1.7 billion. So we have -- we captured roughly 30% of the premiums written. That's exactly according to our plan, and that should grow to approximately 40%, 45% at the end of the year. And in '27, we will recapture close to 100% of Prima's premiums. And you saw that Prima grew by more than 30% its premiums over the first 9 months compared to 2025. On volume growth, so I'd say we have very strong volume growth in Personal Lines, even when you exclude Prima, and that's true in France and in Europe, and we're happy with that level. Obviously, we have a plan to improve retention and cross-sell. As you know, that's the one that we disclosed a bit more than a month ago, but we're already very happy with that. On Commercial Lines ex-XL, we have a good balance. I think the 4% growth that we have is really slightly more than 2% in price, slightly less than 2% in volumes, but the 2 round up to 2%. Is it good enough? Well, I think we have a plan, again, where we want to grow P&C revenues in the next plan by more than 5. Bearing in mind that XL should be positive in the next plan. It was slightly negative in the current 9 months. So we do see or we do plan for improvement in commercial lines in our plan. And then NBV margin. So the new business CSM overall is up by 1%, 4% if you adjust for the interest rate impact. The reason why you moved to a more muted growth of NBV, it's very much, in fact, the impact of our Chinese joint venture which weighed a little bit on the NBV number because you know that we report ICBC AXA with NBV and not with new business CSM. That's the reason.

The next question is from Iain Pearce, BNP Paribas.

The first one is just on the net flow number. So the Q3 net flow number for the capital-light savings business was nil. I understand there's been some challenges in a couple of markets in particular. But could you just give us a picture of sort of are you seeing anything in terms of outflow or is this lower new business inflow that you're seeing, anything particularly to do with lapse given the slight change in -- or the change in interest rate environment? And the second one is just on the Health new business margin actually as well. So that looks like that was down quite a lot Q3 on half year. Could you just give us some details on sort of what's driving that new business margin in Health in Q3?

So on the net flows, I think the first -- they are still strong at EUR 6 billion. What you see is the following: Clearly, we had a slowdown in inflows at AXA MPS that we attribute to the, I would say, what's happening around the MPS itself. And we also saw a slight slowdown in AXA France in terms of premium inflows. And you may have seen that it's something that is impacting the whole market. It's not specific to our own business. There's a slight slowdown here. I think those are the 2 reasons why you see a lower growth in our net flows in Q3 compared to half year. In Health, new business margin, that's really the fact that we grew our Japanese business less, and therefore, it's a mix effect. I mean, our new business in terms of Health is really Japan and Germany. And here, that's the mix impact of Japan that has a slight impact on the new business value margin. And so why did we do this? It's also the fact that in Japan, as I mentioned in my opening comments, we are focusing more and more on the Protection business as opposed to the Health business, which is a bit saturated and where competition is extremely high.

Okay. So just going forward, the new business margin in Q3, given the mix might look more similar to Q3 going forward should be a good sort of run rate?

In terms of margin, yes, that's probably the right thing, yes. And obviously, you have the impact of interest rates, as I mentioned during my comments.

The next question is from Kailesh Mistry, Bank of America.

A couple. First one is just on retail P&C. Would you say that the price increases that you flagged in the release are keeping up with claims inflation or do you expect more in the coming quarters in order to keep that retail margin flat? And the second one is just to clarify on the Solvency II ratio. I think you mentioned that the OAT bond spread had 0 impact from a mark-to-market perspective. Could you just confirm that following the Solvency II review that sensitivity would remain the same?

Thank you for your 2 questions. So on the retail P&C price versus inflation, at this stage, we see extremely little impact, if any, of the higher general inflation. And so the price increases that we see do more than offset the claims inflation on the retail side, very clearly. On the Solvency II ratio, yes, we have EUR 17 billion of OATs in our balance sheet. And that's the amount such that our solvency ratio is insensitive to the OAT spread widening.

The next question is from Farooq Hanif at JPMorgan.

Yes. So I just wanted to follow up a little bit on -- actually, sorry, apologies, I think you answered my question, apologies for that.

As you wish. No more questions, Farooq?

No. No more questions.

Okay.