AXA SA

PAR:CS

Earnings Call Transcript 2022-Q4

[Operator]

Good afternoon, and welcome to AXA's 2022 Full Year Results Presentation. Thanks to those who are here in person, and welcome also to those following us on the webcast. Presenting our results today is our Group CEO, Thomas Buberl, our Group Deputy CEO, Frederic de Courtois; and our Group CFO, Alban de Mailly Nesle. We also have in the room, the CEO of AXA France; Patrick Cohen, the CEO of AXA Europe and LATAM; Antimo Perretta and the CEO of AXA-XL Scott Gunter. After the presentation, we'll have a short Q&A session, not a short, we'll have a Q&A session. We'll first take the questions in the room, and then we'll go to the questions on the webcast.

And with that, I turn to Thomas.

[Thomas Buberl, Group Chief Executive Officer]

Thank you very much, Anne, and a very warm welcome also from my side to you in London and everybody on the webcam. We are here today to present the full year results 2022. And as you have seen this morning when we published it, AXA has delivered a very strong performance across the whole board. The group is in very good shape.

When we look at the key highlights, € 7.3 billion group underlying earnings, which is plus 4% relative to last year. And if you were to look at the proper organic development without the pieces that we have sold, this number would have been plus 7%, plus 12% underlying earnings per share, which is well above the planned number that we have between 3% and 7%, 14.5% return on equity, 215% solvency which is well above the 190% that we have as a threshold and €5.5 billion cash remittance. I think we have probably in the history of AXA, never seen such a high cash remittance. And it shows you what we spoke about at the half year, the obsession that we have on cash is really showing up now in the numbers.

Yesterday, the Board has also looked at the question of capital management on dividend, which I'll come to in a minute, but also on share buyback because, as we told you, the Board will look at this once per year to see how can we make sure that we deliver an attractive return. And yesterday, the Board has decided that the yearly slice of share buybacks for 2023 will be €1.1 billion.

This is the fruit of a very strong and disciplined execution of our new model. And certainly, when you look at the share buybacks, it is a clear sign of a reflection of our very strong operational performance, but also of our very confident outlook going forward. We did say clearly that share buybacks are a part of our toolbox and have now shown for the second time that is also an active part of our toolbox.

When we look at what is AXA today, because obviously, you who have been following AXA over many years, it has changed significantly. And what we see AXA is today, it's much simpler, much more focused and certainly much more driven towards a very consistent and foreseeable earnings pattern with a high degree of cash.

Just to give you an idea of comparison, and we looked it up earlier today. In 2016, we had €100 billion revenue and made €5.7 billion of underlying earnings. In 2022, we have again €102 billion revenue and made €7.3 billion of profit, 30% more on the same basis of revenue.

Why is that the case? Because this was a deliberate strategic choice in making AXA what it is today, which is essentially two main parts. One, we are the largest insurers for companies in the world for their physical assets, which is mainly done through AXA XL, but also for the human assets when we talk about employee benefits.

And when you look at going forward, where is the big growth momentum, where does the uncertainty around us crystallize the most, it is certainly for companies to find solutions for new risks or risks that are far more pronounced that have already been there. So being positioned as this global leader will also give us going forward a great opportunity to use that platform for much more growth.

The second very strong and important leg of AXA is its leading positions in Europe and Japan. In those markets, we have always a number one to five position, always focused on our core segments, be it commercial lines, be it protection, be it health and also have a large and diverse distribution mainly based on proprietary agents, but also linking and investing in those agents to be fully fidget [ph] on the one hand, have a digital access, but also have a very modern way of serving our customers through digital.

All of this has led to effect that we have a higher profit base, we have a more consistent and foreseeable and stable profit base. And certainly, the profit today is much more cash intense than it used to be.

This model of being focused as a global leader in insuring companies, but also having leading positions in Western Europe and Japan, which is a very complementary position is also very different from any of our competitors. And therefore, this new platform gives us a great basis now of thinking beyond the existing plan driving Progress 2023, which will end at the end of this year.

Going forward and saying, look, how can we leverage this platform to grow even more. When we look at gross, gross revenue as a whole have only increased 2%. This is the result of two actions. One, we have pushed growth in the prioritized segments. The private segments today make around 85% of the whole of AXA. So the large majority, there we have achieved a 6% gross, which is a great result in this environment.

But we've also got some businesses that we still need to restructure that we still need to clean up. It is clear that after 6 years, we are towards the end of this exercise of cleaning up and restructuring. So we should expect that this rightsizing of shrinking businesses that are less core for us, be it the nat cat reinsurance or traditional general account that this should be largely done by the end of 2023, which goes back to my point from earlier, as of 2024, we've got the desired mix and the desired base to really focus on making this new platform, grow even more.

What is great to see that this model has not only worked in calm times, but has also worked in very challenging times. We've delivered a strong performance and when you look at it beyond the business mix, what I personally value very much is our ability, organization ability to react extremely fast. With more simplicity and more focus, we've also simplified and focused the organization much more.

So the link and the collaboration and dialogue with our markets is much faster. The actuarial models that we have and the technical capacities that we have are much better than we used to have. And so in an inflationary environment, it is absolutely key to spot trends immediately and to decide quickly to react to them. And I think this will be the very important theme in the presentations going forward. This ability to spot and quickly react is basically the results that you see in these numbers.

I said earlier that one important element is really driving value for shareholders because one is having good results, but also then making shareholders happy. With those results, the Board of Directors has decided yesterday to increase the dividend by 10% to €1.70, which equals a 6% dividend yield. And as I said earlier, the discretionary share buyback that is decided once a year has decided - has been decided in February of €1.1 billion.

Not to forget that there might be another share buyback coming from the German Life transaction that we have announced last - closes this year. The share buyback, and I'm only talking about the €1.1 billion gives an additional 2% of yield, which sets us for this year at 70% total payout, which is very much in line with what you will see at competitors.

I'm now turning it over to Frederic de Courtois, who will give us an update on the key operational priorities.

[Frederic de Courtois, Group Deputy Chief Executive Officer]

Good afternoon. I am very pleased with our results in a difficult context. And I'd like to talk to you now about some of our key priorities: cash, inflation, nat cat and our asset portfolio. I'll start with cash.

Cash is our top priority. We've already said it. We've improved in 2022, and there is more to come. You see here on the figures on the left that we've had €5.5 billion remittance from our business units, most of them recurring. And if I looked at the future, there are three important factors. The first one is we believe that this cash remittance from our operating companies will continue to grow. It will continue to grow because the result of our operating company will grow, and it will continue to grow also because we have some room to further improve the payout from some these companies, especially XL, but not only. So the first point is it will continue to grow.

The second point is that, as you know, we've made this reinsurance agreement between our holding company Excise SA [ph] and some of our business units to improve the fungibility of the cash, and we have the option, the scope of this reinsurance arrangements, which will further increase the fungibility of the cash within the group.

The third important factor, which is well known to you is that we continue to work hard on in-force transactions. We confirm our target of €30 billion to €50 billion by the end of 2023. We have the ambition to be closer to the higher part of the range and this remains a priority after the German transaction that we hope to close by year-end, as Thomas mentioned.

On inflation, I think that over the past 2 years, we've been extremely disciplined, and we focused a lot on technical excellence, and I think we've been right to be extremely disciplined. Being extremely disciplined has allowed us this year as Alban will explain to maintain our technical margin in a difficult context. And we believe that it puts us on the right track to reach the 93% combined ratio, which is our target for 2023. Of course, 93% based on IFRS 4, which means undiscounted. So we believe that we are on the right track to achieve this target in 2023, thanks to what we've done over the past 2 years and thanks to the discipline that we will maintain in 2023.

So if I look at the price increases over last year, I start with XL, and I'm sure you will have questions for Scott on this. But the message is that price increases are still well ahead of loss trends. And this will lead to further margin increase for AXA XL over the coming years.

In the middle, you see that we talk about our mid-court business, mainly in Europe. Here again, first, very good momentum on prices, especially at the beginning of 2023. Here again, the price increases is well ahead of the inflation, well ahead of the loss trend. And here again, we are convinced that it will lead to further margin improvements for fees business.

The last business I would like to discuss on the right is the retail business, mainly France and Europe. You see here what our price increases have been on retail. What I can tell you is that, first, there is a good momentum because prices have gradually improved over the year and again at the beginning of the year.

What you see here is the price effect on the portfolio. So there is a question of definition, which is lower than the price increases that clients receive. We can come back to this in the questions if you have questions. But usually, the price effect is about 2 points lower than the price increase. So here for the retail, this is the price effect on the portfolio.

What I can tell you is that, and I'm sure we will come back to this, the price increases in retail in France and Europe in 2022 have been sufficient and they have been sufficient because you don't need to match with your price increases, the headline inflation, you have other effects that you need to take into account. You have of course, frequency improvement, you have efforts on procurement, you have the mix effect. But what I can tell you is that these price increases have been sufficient.

So we have nothing to catch up in 2023, except a notable exception, which is the U.K., where we have to catch up in 2023. But in all other markets in Continental Europe and France, we believe that we've made in 2022 the adequate price increases. Of course, we will remain extremely disciplined in 2023. And as you see, the market - the price increases in the market is accelerating. And Alban will show in a few minutes, the impact on our claims ratio.

Another important topic is our discipline on the cost. It's good that we've been disciplined since the beginning of our plan. You know that out of the €500 million expense reduction that we - objective that we have for 2023, we've reached €400 million at the end of the year, which is good. What I can tell you is that the - in 2023, we will remain extremely focused on this.

It will be challenging to reach our €500 million target on costs. What I can tell you is that whatever happens on costs, and we will see based on the inflation in '23, all of this will be more than compensated by price increases and by the increase in investment income.

Last but not least, reserves, and I'm sure you will come back to these in your questions. So I would like first to reaffirm the strength of our reserves. I make a specific comment on XL. You know that we have this ADC and XL and the ADC is still untriggered, but I would like to tell you a bit more about the strength of our reserves.

We have a best case scenario and the best case scenario is inflation normalizing in 2025. And what I can tell you is that we are extremely safe with this scenario. We've also stress test this base case scenario, and we've stressed test the scenario – this best scenario in two directions. We first looked at what would happen is the normalization of the inflation comes later, 1 year, 2 years, 3 years and so on. And we've stress test our best case in another direction, which is what happens if the normalization is not at the level we expect. So what happens if we are 1, 2, 3 points higher and so on. And I can tell you we are safe on all these scenarios.

My third topic is on nat cat load. So you see here that our nat cat load is broadly unchanged, so €2 billion or 4 points. And I need to explain this a bit more because we had the impact in various directions.

The first impact is that there is inflation. So the load is increasing, of course. The second impact is that there was less capacity in the reinsurance market at the beginning of the year, which also increases the load.

The third impact is an action we've made together with Scott, is that we've decided to - that we would reduce significantly again in 2023, the cat exposure of AXA XLRE by about 35%. And then we slightly increased the quota share we have with AXA XL on property.

The sum of this positive and negative, I don't know it is positive and negative, but the sum of these office [ph] effects is that the cat load is, as I said, broadly unchanged compared to last year. Last year, it was 3.7 points and it is 4 points this year, and we are happy with this.

The last comment on the impact of increased prices . As you know, we have €50 billion P&C premiums. And what I can tell you that the increased price - the increased price impact at the beginning of the year on the renewal of ceded reinsurance is less than 0.5 points of our P&C premiums. So this is extremely manageable.

Asset portfolio, it's difficult to discuss these in a few minutes, but a few messages. First, on our liquid assets, you see that we have a cautious asset portfolio. I would insist especially on the fact that we only have 2% of BBB minus corporate bonds. Based on the benchmark that I see, we are probably more cautious than most of our peers on this, and we are happy with this.

On alternative assets, we've always had a very rigorous process, cautious processes. And here, again, we are happy with this. If I comment a bit more on some of the asset class, you know that we have a significant exposure to real estate.

On real estate, what is important for us is quality, quality matters. So we are focused on only on prime location, green assets. So I cannot tell you what the real estate market, how it will move over the next years. What I can tell you is that we will be much better than the market.

If I look at credit, we have, of course, a non-liquid credit portfolio. We believe also on this that we are in a good position. We've been extremely disciplined on the guarantees. We've been extremely disciplined on the leverage conditions on this credit. So again, I'm not telling you that nothing will happen, but I'm telling you that we are comfortable with our position.

If I look at infra equity and private equity, same speech, infra-equity we are mostly focused on green projects. Private equity, we are focused on EBITDA positive companies. So very low exposure to VC. So again, overall an asset portfolio, which may have seen cautious a few years ago and now which seems adequate, if I may say, given the circumstances.

So conclusion, our priorities are clear. We are focused on disciplined execution, and we are going to continue to deliver. Thank you, and I'll leave the word to Alban.

[Alban de Mailly Nesle, Group Chief Financial Officer]

Good afternoon to all. So I will take you the results line by line, and I will start with P&C. The P&C revenues are up 2% with different dynamics. Commercial insurance is up 5%, mainly driven by France and Europe, which are up, respectively, 11% and 6%, with a good mix of volumes and price increases, as Frederic just mentioned.

On the reinsurance side, we're down 27%, and that's very much the reduction of our nat cat exposure, obviously mitigated by some price increases, but very much in line with our strategy. And Personal Insurance, up 4%, mainly price increases but also positive net new contracts. I won't comment the right-hand part of the screen, simply because Frederic mentioned it, and I think it's more interesting to look at the impact on our loss ratio when you look at, for instance, personal motor.

So when you want to do the bridge between '21 and '22 of our loss ratio, you need to remember that in '21, our loss ratio was 70.2%. But you also remember that we had significant COVID frequency benefits that represented roughly €500 million or 4.8% of loss ratio. So the normalized loss ratio in '21, if you leave aside those frequency benefits was 75%.

Then obviously, you have the impact of inflation, 1.9%. And that impact here on the screen is net of our procurement actions, our orientation action, but it still is 1.9%. But we have frequency benefits that are not linked to COVID. They are not one-offs that are simply the trend that we see year after year of lower frequency simply for - because of security, because of better cars. If you compare '22 with 2019, overall, our frequency is down 8%, and you see that trend.

And then you have the price effect that is minus 1.5 points. And if you sum up all this, you see that our loss ratio in personal motor went from a normalized 75% to a published 73.9% in '22. It's the same mechanism for non-motor. I won't comment on it, but we can come back to that during the Q&A, if you want.

So now if you zoom out and look at the overall profitability of our P&C business. First thing to say is that our combined ratio, obviously, is flat, 94.6%, as you see. But it is in a context with several headwinds. When you look at nat cat, '22 was, again, a heavy year in terms of nat cat, but our cat load went down from 5.7% to 4.9%. And that's notably thanks to the efforts made at XLRE to reduce the cat load efforts that, again, will be furthered in '23.

Now if you focus on the attritional loss ratio, including large losses, it's up 1.1 point. But you need to keep in mind two headwinds. One is the motor frequency benefit that I just mentioned, and that's worth one point at group level. And Ukraine, that cost us €400 million, and that's another 0.8 point. So we have 1.8 point headwind, and you see that the increase is only 1.1 point.

Why is that? Simply because we saw a significant improvement in underwriting results in attritional loss ratio, notably at XL. XL, as such, represents 0.5 points decrease in our loss ratio at group level. Then expenses - the expense ratio is down 0.6 points. And that's an effect of what Frederic described in our expense reduction plan and the fact that we reach overall €400 million expense reduction in '22.

So that's the technical part. If you add to that, the significant increase in investment income, €350 million, we have underlying earnings that grew by 5%. Why did investment income grow significantly? Two reasons, mainly. The first one is inflation, but in the positive sense because we have a number of assets that are inflation-linked in Turkey, but also in Western Europe and notably in Belgium.

And the second reason is simply that we start seeing the benefit of reinvestments at higher yield. And you see that notably in the balance sheet that have a shorter duration like the U.K. So overall, 5% increase in the - in our P&C earnings. And as Frederic said, we are on track for the 93% target that we have for '23.

Moving to Life. So on the Life side, revenues are down by 5%. Protection is up by 3%, and that's mainly driven by Japan, where our protection with unit-linked product meets significant success. It is also Switzerland with our Group Life business that still produces significant APE growth as well.

On the unit-linked side, minus 12%. That's mainly due, as I said already at half year, I think, to a large corporate contract that we had at AXA France in '21, and we didn't have the repeat of that contract in '22. When you look at retail, sales are roughly flat. They are down in Hong Kong because of fewer MCVs coming to Hong Kong.

On the capital-light side, it's down minus 11%. That's Japan where we had a significant product there that is selling less. Again, I think I explained that also at half year for FX reasons. And traditional GA is down by 16%.

But what matters to us is what is on the right-hand side, which is the net flows. And you see that we have significant positive net flows in the lines that we target, protection, unit-linked, capital light GA. It's very negative in traditional GA. I think what is important to keep in mind is it's not because of higher surrenders, surrenders are flat. It's because we write less traditional capital-heavy GA.

On profitability, so life profits are up 11%, which is a very good performance, mainly driven by technical margin. So what happened in '22? First, in '21, we had some negative one-offs that they didn’t repeat in '22 and notably in Japan and in France.

Second, we reviewed some material assumptions, notably in France, and that led us overall to an increase of roughly €300 million profits in technical margin. Our investment margin is resilient at 63 bps to 64 last year. And I want to also insist on the €61 million of fees and revenues less expenses because - because of the capital markets that were down, our unit-linked fees were down. You saw that in some lines of business, our revenues were down as well, so fees were a bit down as well, but that was compensated by the efforts we made on expenses. So overall, underlying earnings are up 11% on the life side.

Moving to Health. So gross revenues on the Health side are up 16%. But that includes two large legacy international contracts written by AXA France. So they were 3-year reinsurance contracts, that grew significantly. They were quota [ph] shares, but didn't meet our profitability targets. We are not satisfied with the claims experience. So we terminated those two contracts at the end of '22. If you adjust for those two contracts, growth would have been 7% for the whole group on Health, on the revenue side.

Combined ratio is up 1.3 points. Underlying earnings are down 11% for two reasons. One is those two contracts that I've just mentioned. And the other one is COVID claims that we had in Japan. You know that we sell whole life medical products in Japan and the Japanese government determines the diseases that are to be indemnified under those policies.

COVID was on the list until last fall. We can see the result of that, but it has been removed from the last fall, and therefore, we will not see that again in '23. So those two impacts that we had on our Health business, the French legacy contracts and COVID in Japan, you won't see that in '23.

Last of our business lines, Asset Management. So obviously, it was the rough year for Asset Management given capital markets, but earnings are broadly flat, minus 2%. So we had a decrease in our assets under management because of higher rates because of lower equities, minus €100 billion. But we had very good net inflows, notably on the ALKS [ph] platform, €15 billion, but also on the others.

And we had an average management fee that went up, thanks to a better mix within AXA. And you see that cost containment was also quite efficient because our cost income ratio was up only by 0.3 points. And that explains how we manage to keep our underlying earnings at AXA IM [ph] broadly flat in '22.

So if I summarize all this on this slide, 5% for P&C, plus 11% for Life & Savings, minus 11% on Health to minus 2% on Asset Management. That's a growth of the underlying earnings of 4%. But you will remember that we sold a number of companies because we wanted to simplify the organization. That's what Thomas described at the beginning. So when you look at the real organic growth, leaving aside those - the impact of those disposals, we are up 7%, which is a very good performance. The net income is down 11%, and that's mainly due to funds, fixed income funds that are fair value through P&L and had a negative impact because of the rise in interest rates.

Moving from underlying earnings to underlying earning per share. So you have the 4% earnings growth, which, as you know, we show at constant FX. If you add to that, the positive FX impact 4%,- and the capital management impact due to share buyback, another 4%, you come to the 12% EPS growth that we had in '22.

Now moving to balance sheet items. Cash remittance, 5.5, Frederic mentioned it. The important thing for us is it is between 5 and 6, which was our '23 target. So we are in that target that we're one year ahead, and most of that comes from traditional remittance dividends from our subsidiaries. And the various impacts, you know them, dividend last year of €3.5 billion, share buyback, so bear with me for a second because that's a number of share buybacks that we did last year. There was the €0.8 billion, which was sort of half the €1.7 billion we had decided the previous year. There is €0.5 billion, which was the anti-dilution buyback that we announced a year ago. And there is the €1 billion discretionary buyback that we announced in August. So all that sums up to €2.3 billion.

Holding costs and interest, €1 billion, as always. Debt issuance, as we told you, we issued a net debt of €1 billion, which is in line our plan - with our plan and €600 million coming from disposals. At the end of the year, we have €4.5 billion at the holdco level above our one, two, three target level.

Now moving to Solvency. Quite a few things to say on that slide. First, at the end of it, our Solvency II ratio remains at a very good level of 215%, which is significantly above the target level that we have said, which is 190%.

We had very good capital generation in '22, 23 points. And you see that like before, this capital generation comes without higher capital requirements because our growth is done with capital-light products and with also the benefits of, for instance, the reduction in general account, which is capital heavy. So very good capital generation.

Dividend and share buybacks, that's minus 24 points, but here, again, we have, obviously, the dividend to be paid this year, €3.9 billion. But we also have 2 years of buyback. We have the €0.5 billion and the €1 billion of last year and the €1.1 billion of this year. So it is a significant use of our solvency when you sum that up.

We benefited from regulatory changes. You will remember that's mostly the change that we had in Japan -- Japan solvency when we couldn't use [indiscernible] swap any longer. That was a 5 point benefit, and you see that.

And by the way, in Q1, there will be two regulatory changes. One is that we will lose that benefit because the AOPA [ph] has now said that we should get back to swap, and that would cost us the 5 points that we saved the last year. And there is also a change in the reference portfolio of the AOPA with less weight put on government bonds and corporate bonds. And therefore, the dynamic VA will be less efficient in '23, and that will be a cost for 4 points.

Now there are probably two or three things that you could not see from the outside when trying to determine our solvency. So I'm not talking about the market sensitivities because I think that we were in line, and we - you saw that market movements cost us 3 points and those 3 points are plus 18% from higher interest rates, minus 11% from higher volatility, equity and interest rates. And then minus 10 from equity down, larger spreads, inflation and other. But that's in line with our sensitivities.

When you apply that country by country, bearing in mind that, for instance, in Japan, interest rates hardly moved up. So that's not what I wanted to discuss, but I wanted to describe the three aspects that you couldn't say from outside.

The first one is, at the holding company level, we had a tax litigation and we lost that tax litigation. It was a 15-year-old litigation, and that cost us 2 points of solvency without any cash impact without any P&L impact.

The second aspect is the fact that as we have equity hedges, those equity hedges are taken pro-rata temporis [ph] In other words, if it's a 1-year hedge, then I take 100% of it, if it's a 6-month hedge only take half of the benefit. So that benefit reduced a little bit over the year. But it's completely in our hands to change that and to regain those solvency benefits if we want to.

And the third aspect is on our reserves. We moved the equivalent of 2 points of solvency from our excess reserves to our best estimate results ahead of the move to IFRS 17. And as you know, our excess reserves one already in our capital base for Solvency II. So reducing it obviously has an impact on solvency. And that excess reserve will disappear with IFRS 17.

So those are the various aspects on our Solvency II results. So overall, a good set of earnings and a robust balance sheet. I can only insist on what Frederic said earlier and the fact that notably on inflation will be extremely vigilant in '23. Thomas, if you want to conclude.

[Thomas Buberl, Group Chief Executive Officer]

Thank you, Alban. So concluding, you have seen from all three of us, AXA is in great shape. The new platform, which is simple, focused and really cash-oriented works. We are well on our way in the plan driving progress 2023, both on the underlying ones per share, plus 12% last year, which brings us to plus 10% over the 3 years from 2020 to '22, 1 year to go, but it should be relatively clear that we will exceed this target range.

When you look at the return on equity at 14.5%, also well in the limits of the boundary of 13 to 15, on the Solvency II ratio, well above our 190% target capital ratio with 215%. And what Alban said was very important when you look at the drivers of solvency, both in terms of the capital generation after dividend, but also the much reduced sensitivity to market movements due to our new business mix. It's a very healthy development and generation of solvency. And certainly, the cash remittance, as I said earlier, 5.5% is something that we have never seen beforehand. We set ourselves a target of €14 billion community over those 3 years and there as well without being too far reaching. I'm sure we will achieve and overachieve that target as well.

Thank you very much for listening, and we are now moving to your questions and our answers.

[Thomas Buberl, Group Chief Executive Officer]

Let's start with Michael Huttner. I think you are the most senior person in the room because you have been following AXA for the longest. There you go.

[Unidentified Analyst]

Thank you so much. Congratulations, these are record numbers. I only have two questions. So I detect, but I may be wrong, you've just been skiing. And so my question is 2023 and beyond from when you were skiing and waiting for the Q, whatever it is, what does it look like the next plan?

And then the second on cash. I love cash. I think it's fantastic. $5.5 billion is real - is an amazing number. You alluded to lots of possibilities, including XXL. Could you give us a few more hints about 2023?

[Thomas Buberl, Group Chief Executive Officer]

Good. Thank you, Michael. So just to repeat your questions. The first one was on what the next plan could look like? And second one on cash. I'll talk about the next plan and Albon, if you could talk about some more highlights on cash.

So as I mentioned earlier, we are now in the last year of the Driving Progress 2023. So full attention is really to get this plan to a good ending. You've seen that on two KPIs, we have already exceeded the good ending on the others. We need to make sure that we are staying in the line, but you see from all three of us and also my colleagues at the table over there that we are very confident to achieve that plan.

Nevertheless, we want to think ahead. And so what I said earlier is that with this - the end of this plan, very significant transformation of AXA comes to an end because for those of you who have not been in the room for as long as Michael has been in the room, after the financial crisis, we were 80% in financial risk. At the end of this year, hopefully, we will be less than 15% in financial risk, keeping the same revenue of €100 billion.

So this gives us a new focused, a more simple platform that is much more cash generation rating as our old business mix used to be. And the focus of the next plan will clearly be around how do we make this platform grow.

We don't want to think about this next year. So because in about a year's time, we will publish that plan. We are starting to think about this already now. Those three gentlemen that sit over there. We are in regular discussions already with what are their growth in shifts? How can we already fund them now so that we basically flow into a new plan, which is very much focused on growth. Obviously, notwithstanding that the question around expense discipline and the success that we have had on technical discipline will continue. Alban, on cash.

[Alban de Mailly Nesle, Group Chief Financial Officer]

So on cash, there are a few items to take into account. First, the transformation of AXA SA into a reinsurer. We had said that we would have €1 billion by the end of '23 million. We had €300 million in '22. So that gives you an idea of what's left to be done in '23.

Then on usual remittance and you know that usual remittance includes part of that benefit because that, that transformation allows to reduce the capitalization of some entities. But the usual remittance should grow more than our earnings. That's very much in line with what Frederic said. And you also have some in-force transactions for which we will have the benefit also in '23.

So - on - well, on AXA XL, so I believe the - today, the remittance ratio for AXA XL is around 60%. And it can grow in 2023. I'm looking at Scott for that, but I count on him.

[Scott Gunter, Chief Executive Officer of AXA XL]

Let's stay at the same table and go to Andy.

[Andrew Sinclair, Bank of America]

It's Andrew Sinclair from Bank of America. Three for me, please. Firstly, just on reinsurance and cat risk management. I saw there was an increase in the retentions for U.S. hurricane and U.S. earthquake. But on Slide 27 in the appendices, I saw that the 1 in 5, 1 in 10-year scenario is unchanged on the downside, 1 in 20 barely changed desire wondered how is there not more risk from hurricanes coming through in those numbers. And is that a big derisking of the book on an underlying basis? So that's question one.

And secondly is on XL, I just really wondered about ability to grow XL's exposures in 2023 looks like exposure has still been shrinking slightly on the insurance side is the insurance side going to move to exposure growth in '23.

And thirdly was on holding company cash. Lovely to see a buyback, great, but I'm medially going to push you for more. Looking at the cash that's coming from the reinsurance changes, looking from higher remittances in '23, I mean, you've got €1 billion to €3 billion holdco cash target. You've got 4.5% now. It sounds like you'll be in the region of €6 billion by the end of '23. What are your thoughts on that cash and you seem to be building it faster than returning it? Thank you.

[Thomas Buberl, Group Chief Executive Officer]

Very good. So Frederic, for you, the first question around reinsurance cat net, the retention increase. Scott, how can we make XL grow in terms of exposures, so not only in terms of prices? And then Albon, if you can talk about the question on holding cash, maybe Andy, around this holding cash, we are very happy about being above the €1 billion to €3 billion. We are in a period that is colored by a lot of uncertainty and having a good cash position, and that's usually well at night. Frederic?

[Frederic de Courtois, Group Deputy Chief Executive Officer]

So I'll start on reinsurance. As I said, we faced various challenges during the reinsurance renewals. So there was a lack of capacity for the lower tranches with very few exceptions, we don't have holes in the -- what we call the tower. And you should not forget on the other side of the equation that we've significantly reduced our exposures, especially in AXA Excel.

So the sum of all of this has an impact on the cat load. Of course, it has an impact also on the 1 to 10 and 120 scenarios. What I can tell you is that on the 1 to 10 and 120 scenarios, the impact is not more than 6% to 7% on these scenarios.

[Thomas Buberl, Group Chief Executive Officer]

Thank you, Scott. Growth of AXA XL in 2023.

[Scott Gunter, Chief Executive Officer of AXA XL]

Sure. And just on the exposure for us, exposure a couple of different ways. One is the value increases or revenue increases of those clients. For the most part, as you know, that trails the inflation. So the inflation goes up and then we get the value increases sort of as the accounts come up for renewal. So we expect to see positive exposure growth in the lines that have values. For example, property, marine cargo, those kind of growth areas.

The other lines that have exposure such as revenue turnover, that depends on the economy and depends on what's happening, but we do expect to see positive exposure growth in the renewal portfolio. Another piece of exposure that we're looking at is working closely with our colleagues at acts at GI. We're looking to grow our exposure in the middle-market business, particularly in Europe, U.K. and in the U.S. So that exposure for those middle market clients, we expect to see that exposure from a risk standpoint, growth for XL next year.

[Thomas Buberl, Group Chief Executive Officer]

Alban, on the cash projections.

[Alban de Mailly Nesle, Group Chief Financial Officer]

So on cash, a few thoughts. One, all the cards on the table to determine what will be the cash at the end of the year because we talked about the remittance. You know that we issue €1 billion net debt, and you saw the dividend and the buyback that we want to do this year.

Second, we are happy to be in that position cash-wise. But fundamentally, the question you're asking is the question for our Board next year when we have that cash at holdco and they determine what they want to do with it in terms of dividend, buybacks or other. But we're happy to be...

[Andrew Sinclair, Bank of America]

On that €1 billion of net debt issuance, do you still want to be issuing net debt when you've got that level of cash?

[Alban de Mailly Nesle, Group Chief Financial Officer]

So I think it's also a question of solvency. That's what we said for this plan. We might review that for the next plan, but we'll tell you about this next year.

[Unidentified Analyst]

Peter from Kepler Cheuvreux. Three from me, please. just on the minus 4 points from the reference portfolio to come. I mean I know some of the weightings have changed and some of them have gone down, but I was struggling really to sort of get to 4 points. And I'm just wondering if you could say sort of which particular bucket is that caused that. I mean Japanese govies maybe went down a bit, but I'm just trying to see what should impact you more than others in the changes that we've seen there?

The second question was on the Life technical margin, great result, obviously, and take your comments on the French changes. If I look, actually, I mean, every region pretty much has come up with a record year on that front. And it was also sort of very much sort of H2 loaded. So if we look at the H2 run rate, I think it was like €1.7 billion. I'm just wondering if there's anything else we should normalize in that or how you would look at that on an ongoing basis?

And then maybe the third one, share buyback. Thomas, your comments at the start made it sound like it was a sort of an annual decision on the discretionary. I guess in the past, we've seen announcements that Q2 or Q3 are a little bit more ad hoc. So it sounded like maybe that was a little bit of a change in approach. I was just wondering if you could clarify how we should think of that.

[Thomas Buberl –]

Thank you, Peter. So I suggest, Alban, you take the first two questions around the reference portfolio and the Life technical margin, and I'll answer Peter's question on the Shabayek [ph]

[Alban de Mailly Nesle, Group Chief Financial Officer]

So on the first question on the reference portfolio. I can't see why we would be more affected than competitors because the reason for that is simply when spread widens, as you know, you take the reference portfolio spread and you sort of apply it to determine your risk adjustment -- so the change in weight in the reference portfolio just means that overall, that spread widening for the reference portfolio will be smaller. And therefore, there would be less contrast cyclical, but that applies to everyone. That's not us, in particular. We are just saying that ahead so that you can determine what our solvency will be at the end of.

On the Life technical margin, I signaled that in France, there was a one-off coming from a change in actual assumptions. But the rest, and in particular, the good growth that we had in Japan with protection with unit linked, that's stable.

[Unidentified Analyst]

And it's not at all specific to Japan. It's really our bond portfolio and the reference portfolio, which is more European than Asian or whatever.

[Alban de Mailly Nesle, Group Chief Financial Officer]

On the share buybacks. So our policy is relatively clear. The Board has set out to say, look, AXA wants to deliver an attractive return to shareholders, which is benchmarked also with competition. The Board has determined this year that 70% is the number that they want to go for. And you've seen the 10% increase in dividend and the €1.1 billion share buyback.

The Board takes once a year look on this and looks at what are we doing with the available excess cash in order to get to that attractive capital return to shareholders. So the decision has been taken in February this year, and we will look at this again next year when the new round is starting. -- obviously, the share buybacks that are there to offset dilution of earnings because we have sold a portfolio or a company.

That's a different story. I mentioned earlier, the German life book. There, the policy was always when we sell something and it has been announced at the point of closing. There's a share buyback happening in order to offset the dilution, which is still the case for the open case of the German Life portfolio, if it was to close this year, and that's very much dependent on regulatory approval, then the dotted box that you saw on the slide is exactly that discretionary share buyback of the €300 million, should it be the €300 million at closing, right? It's an annual decision. -- so let's move here to Dominic and we'll go to the backlog.

[Unidentified Analyst]

Damiani, BNP Paribas. Three for me as well, please. First, just wondering if you -- very helpful to hear that the lapse experience is roughly normal during full year '22. Could you just give us an update whether there's any change so far in full year '23? Or is the lapse experience continuing to be sort of normal? Second was just on life investment margins, which I think came in at 63 basis points for the year, which clearly is good and in your range. It was quite a lot higher at half year. I think it was 70 bps a half year. Just wondering whether there's something we need to think about for our forward-looking numbers, what sort of run rate it is, whether something happened in H2?

And then third question, you're going to call me greedy. But just on the cash topic. If I look at the 5.2% organic remits and I strip out the €1 billion of Holdco costs, I think that's about a 60% payout on full year '21 earnings. Is that -- I'm trying to work out whether that's you folks been conservative and thinking well ahead of your target anyway or whether there might be a factor holding back cash remittance, which [indiscernible] is whether you could share it with us.

[Thomas Buberl, Group Chief Executive Officer]

Very good. So I suggest that because Alban has already spoken about the lapse experience, let's zoom into a market. And this topic often comes up in France. So I would like to ask Patrick to talk about the beginning of this year, and his lapse experience or non-lapse experience, I suggest, in France. And then Alban, if you could take the second question around the Life margin. Is it sustainable? And Frederic, if you could take the third one around the cash development and upstreaming to the entities since you've spoken about it before.

[Patrick Cohen, Chief Executive Officer of AXA France]

Yes. Thank you for the question, and good afternoon, everyone. So in terms, first of TOCF, it is stable in France. And I think what is important to notice is that the diversified saving strategy that we're pursuing is working quite well. To the extent that we have a positive TCF of EUR 2.2 billion on unit linked. We have a positive COCF of €1.8 billion on oral Cassons [ph] which is our capital-light GA and minus 5.1% on the general accounts. Now if you look overall at the GA labs, it is stable in our proprietary networks.

That's a combination of many things, even given the raise on the Libre, which is now at 3%. First, it's, I'd say, the expertise of our very specialized agent network, their proximity, the long tenure they have where their customers. The second, there are some parts of the product in terms of tax benefits on inheritance benefits that I would say, contains a lot the potential lapse effect in France. So we do not expect lapses to increase also in 2023.

[Thomas Buberl, Group Chief Executive Officer]

Alban on the Life investment margin?

[Alban de Mailly Nesle, Group Chief Financial Officer]

So you're absolutely right. It was higher at half year, but there is seasonality because in the first half, that's when you get the dividends on the equities. And there was also more distribution from funds and in particular, private equity fund. And you didn't have that on the second half of the year while you had the distribution or the provision for distribution to the policyholders. That explains the difference between H1 and digital. It is -- I think it's fair. Now going forward with IFRS 17, it would be difficult to follow. But yes...

[Thomas Buberl, Group Chief Executive Officer]

Yes, that was that as well, IFRS 17. Frederic, on cash.

[Frederic de Courtois, Group Deputy Chief Executive Officer]

On cash, Dominique. First, I'm not sure to understand your 60%, but anyway give an answer. And so the remittance from our local companies today is at 73%. So if I take all my BUs, they pay 75% as a dividend, 75% of the IFRS result. We believe it will improve, as I've said. And we have especially 4 areas where we are working, and we believe we can have improvements -- the first one I already mentioned is we believe we can significantly improve the -- this remittance ratio at AXA XL already from 2023.

The second one, which is more difficult to solve, but on which we are working hard is AXA Hong Kong because AXA Hong Kong only has a 40% remittance ratio for regulatory reasons. And together with Thomas, with Albon, with all the team, we are working hard on this. We've already improved it because it was 25%. So we moved up to 40%, and we have hope to continue to improve it. The third one is Japan on which we've made a good job. We've progressively increased the payout in Japan to 70%. We probably have some more way to go -- and the last one that Alban mentioned is Citadel [ph] So you know that Citadel so the reinsurance arrangement between AXA SA and the business units. First, it doesn't cover the full scope of our entities.

So some of our entities are out. And Belgium is out for various reasons. The European business at ICE is out for various reasons, but we're going to look at this again. And the quota share is 25%, and we believe subject, of course, to regulatory approval. But based on what we know that we have some room to improve it, which will again improve the remittance ratios. I don't know if I have answered...

[Thomas Buberl, Group Chief Executive Officer]

Andrew, and let me guess your question will be on solvency.

[Unidentified Analyst]

It not. -- bad guess. A couple of questions really on reserve releases. I think you had a 1 billion PYD reserve release, and you've got €1.3 billion still above the buffer, best estimate buffer. Should we expect that to come down to the best estimate buffer over this year? And I suppose related to that, you've had such strong pricing in Commercial Lines and reinsurance. It would not be a surprise if you were building a bit of caution into the current year reserve setup. I mean is there any -- there's no way we can analyze that, but is there any comment you'd like to make on that?

And finally, on the P&C investment income, that was up €350 million. obviously, reinvestment rates, you're going to be continuing to reinvest at higher rates. What likely benefit are you likely to get on investment income this year in P&C?

[Thomas Buberl, Group Chief Executive Officer]

Thank you, Andrew. So Alban, I suggest you take all 3 questions. On the first one, the €1.3 billion buffer above best estimates. Second one, the question around commercial line pricing and the cushion, which covers XL, but also the other geographies. And then the question around P&C investment income and the uptick from high yields.

[Alban de Mailly Nesle, Group Chief Financial Officer]

So on the reserve -- on the buffer, the €1.3 billion excess reserves. Unfortunately, that disappears with IFRS 17. That's the part where we showed when we showed you the opening balance sheet that was already in net assets. So that part will not go to P&L. The -- are we cautious in our current year? I'd say we are cautious in our current year like we are cautious in our reserves. There's not -- we want to have prudent reserves that's even under IFRS 17, even with our best estimate, it will err on the side of [indiscernible] but there's no particular caution in addition to that, for our current year. And on P&C investment income. So overall, we invested that 2.90% in '22.

The last -- in December, that was 4.4%. I'm not sure we'll be able to have that the hole of €23 million -- but that gives you an idea of the additional investment income that we may have. But bear in mind that in the 350, a significant part came from inflation. So it depends on how much inflation we'll have in Europe and in Turkey. I say that because you saw probably that our yield on P&C went from 2.6% to 2.8%. If you strip out Turkey and Colombia, which are 2 high inflation countries, it went up from 2.4% to 2.6%. The 2.6% is closer to the yield that we have, say, in Western Europe and XL overall. Let's go back to Ashih.

[Unidentified Analyst]

Nahik Musaddi [ph] from Morgan Stanley. Just have a couple of questions, actually. I mean, first of all, on solvency, I mean your solvency was pretty high at north of 220%. And those levels are pretty comfortable because your sensitivity to interest rates are still high, but falling below 210 now, if I include the 9 points at you're flagging, so you'll be at 205 somewhat.

But if interest rates fall, I mean you can easily go below towards 190 even a bit lower. So what is your thinking around that? Is there any way to lock in interest rate benefit so that your sensitivities reduce and we don't see any potential negative? So can something be done on that would be the first question

And secondly, I guess there was some mention about quota share. You have increased the quota share agreements, et cetera. Can you just elaborate a bit more as to where it was earlier and what has happened? And how does that change the cat exposure?

[Thomas Buberl, Group Chief Executive Officer]

Thank you, Ashih. So I suggest, Alban, you talk about the first question around the solvency roll forward after the technical adjustments that we have on Iba and reference portfolio. And Frederic, if you could go back to Scott, okay. Let's do Scott on the core of share because it's an ex related question.

[Alban de Mailly Nesle, Group Chief Financial Officer]

So several items. First, -- when you look at our solvency creation in a given year, if you look at this year, we created 23 points. But after dividend, you still have 9 points remaining. So that would offset before any potential share buyback next year, but that would offset the impact of the two regulatory changes I mentioned. That's the first point.

Second point, when you look at the benefit of higher interest rates, it's 18 points. But we keep a duration gap, which is low, around 0.5%, but we could reduce it further and even come to the other side of the duration gap, which, as you said, would lead us to lock in those benefits. And that's something that we are thinking about. We need to find a moment when we would do that.

Third, a significant part of that 18 point benefit was offset by the higher volatility in equity and interest rates. If at some point, for a given level of interest rates, just volatility comes down because that stabilizes, we would regain part or all of those 11 points. So that also needs to be kept in mind.

[Thomas Buberl, Group Chief Executive Officer]

And I guess, Alan, we could also decide to reinstall the equity hedges, which will again add solvency Scott, on the quarter sales...

[Scott Gunter, Chief Executive Officer of AXA XL]

Yes, on the quota share. We purchased a quota share for our property business that's North America as well as Europe and Australia Asia. And due to the improvement in our portfolio, I noticed the 2-point improvement in the attritional loss ratio improved for AXA-XL -- we got significant interest in reinsurers offering more capacity for this property quota share.

So we took -- the pricing was appropriate. So we took the advantage of buying a little more quota share. That quotes also includes cat cover. So it includes wind, it includes earthquakes. So as a result, we get a little bit of more help on the cat side when we purchase more quota share.

[Thomas Buberl, Group Chief Executive Officer]

Let's move to Faruk.

[Unidentified Analyst]

Thank you very much. You mentioned in quite big front in your presentation, the 70% payout ratio. And you said this is in line with our peers. Is this now a kind of a philosophy to be in line with peers on payout ratio, whatever that means in the new world? That's question one.

Question two for Scott. Looking right at the back at the slide, Slide B 28, where you show the lines of business. I mean you seem to have derisked everywhere, look at specialty, primary casualty, financial lines, -- there's been contraction of premium versus pricing. It's been really big. So in 2023, you're doing further XL re-contraction -- are you also going to contract, apart from the quota Shaw, are you going to sort of from a written basis also going to continue contracting line sizes in other areas?

And the last question on higher yields in P&C. So if you could just help technically, if we move to a IFRS 17 world where you have an immediate discount rate, which reflects current yields. And if you net off the impact of the inflation-linked bond benefit, is that still an immediate jump that we get in earnings because yields have gone up. I'm just curious

[Thomas Buberl, Group Chief Executive Officer]

Very good. So let me quickly start with the 70%. I mean, obviously, the Board of Directors will always look at what is an attractive capital yield for the investor, which is this year being determined to be 70% and in the components you have seen. Again, -- this is something that happens on an annual basis because these things might change. The 70% are not fixed.

This is this year's view. It might change next year. But I think as an approach, it's a good orientation to say, look, we want to be an attractive dividend yield. We compare ourselves to competitors, and we will engineer dividend and a potential share buyback depending on what the Board decides on a yearly basis to a reasonable and attractive level. Scott B28 around, will there be more contraction? Yes or no.

[Scott Gunter, Chief Executive Officer of AXA XL]

The simple answer is there won't be more contraction. If you look at that chart, the one that stands out is the financial lines line. And what that is, that's the impact in 2021 with the IPO SPAC marketplace in the United States at the time. We're one of the largest writers of public D&O. So we were able to take advantage of that marketplace. It was very robust, read a lot of business, but it's a onetime deal, right? You sort of write it, it was for IPO, it was for a packs and then it doesn't renew, right? So as a result, we took a pretty significant reduction in volume just because the market kind of froze up, there wasn't any IPO.

So that volume wasn't really a risking issue. That was just -- it just disappeared, right? The other pieces of the business you'll that property basically held flat. So new balance loss be sort of flat relative to rate. Casualty, we did a little more work on some line sizing, particularly in the European casualty business because it's starting to get impacted by some of the social inflation factors, so we kind of reduced some exposure there. But we've essentially done that work. right? So we're -- on the insurance side.

On the reinsurance side, as Fredrik and Thomas and Alan mentioned, we continue -- continuing to knock out some cat exposure. We're reducing our cat exposure, another round of cat exposure reduction, but we do expect the other lines to grow to offset that reduction. And with the rate and the offset, we expect to kind of be pretty close to flat on the reinsurance business.

[Thomas Buberl, Group Chief Executive Officer]

Alban, higher yields in the discounting in IFRS 17?

[Alban de Mailly Nesle, Group Chief Financial Officer]

So I wouldn't like to spoil the pleasure of the discussion we'll have in May when we present the 22 IFRS 17 numbers, but a few things. One, Investment income stays the same for most asset classes under IFRS 17 compared to IFRS 4. The big difference is equity capital gains, which as you will remember from our November presentation, will not go to P&L, but go directly to capital -- to balance sheet.

But you will have effectively the benefit of the discount on the '22 numbers. And since we're talking of IFRS 17, one or two things to add. One is we steered the '22 numbers to IFRS 4. RPYDs, as you will see in the appendix, and we referred to that are made of the excess reserves and those excess results under IFRS 17 do not exist. So that will also create a difference compared to IFRS 4.

So we have time for one more person to ask because you've always got more than one question. Let's go into the middle to will I forgot one thing, just to be clear because I saw you raising your hybrids on this. Investment income stays the same, but you have the unwind of reserves that I forgot that will come also in IFRS 17. And so for the two people, Hadley and William, who still have got questions, we will make sure by the time you exit this building. Your questions have been answered.

[Unidentified Analyst]

Okay. I'll try and make it quick. Personal Motor, it looks like it's performing exceptionally well relative to peers. Are you doing anything differently, geographic mix, dispersant explanation. We hear lots of phrases like inflation loads being thrown around. Do you think you're already capturing that in attritional.

Second one is just perhaps helpful to provide some color on German Swiss January pricing renewals from personal lines and what you're currently pricing in U.K. Motor is a year-on-year trend? You mentioned it's a challenging market.

[Thomas Buberl, Group Chief Executive Officer]

Thank you, Willis. Antimo, these are two questions for you. You have the pleasure to answer the last two questions. The first one on Personal Motor. What are we doing differently? And since you are looking at many markets, you can also maybe give some examples of some concrete markets. And the second question was around German Swiss repricing, nobody's better placed than you.

[Antimo Perretta, Chief Executive Officer of Europe & LATAM]

So first, what we are doing better. So it's clearly that we have a strong footprint in P&C, retail, special motor. We are working on different elements. The first is put a lot of innovation insights. I'll give a couple of examples. Second is also the relationship with car dealer with tied agents, helps a lot to put, I would say, the retention rate very high. And then also the discipline and the process in the liquidation of the claims. We are working really fast and in a very good customer satisfaction manner. So this is the 3 levels that we are working.

And if I go to the innovation, so we are working a lot with new tools that an example is in Switzerland, OMOs. It's a start-up that we have built with image recognition, where we can with -- after damage, we can really look at the damage, have really quick the answer is covered or not. And we can also organize very quick the repair, and we can also go to a settlement.

And if you go to a settlement, normally, what you're paying is 20% less. So that's a little bit the way that we are working. And in this way, what we are also doing is when the customer has one contract with us, we are trying to develop the customer to more contract because then the retention rates and it will increase. So this is about the P&C and motor business. The second question, please?

[Unidentified Analyst]

Was about Swiss and German renewal pricing.

[Antimo Perretta, Chief Executive Officer of Europe & LATAM]

Yes. So in Swiss and German renewal prices, if I look to the inflation is that we have seen that in Switzerland, we didn't have inflation in the market, so in the claims that we see that our price, we adapt the price very quick. We put new innovation products on the market, and this has helped us a lot to have good renewal in the P&C retail but also in commercial line.

And the second element in Germany is working also with adoption on the price, not one per year, but every month. And this has helped us a lot because we are doing price increase pass adoption every month, and this helps also to have a different system compared to our competitors because our competitors all the renewal comes at the end of the year.

And in Germany, we are coming every month. So the attention for us is not all the portfolio should be renewed at the end of the year, but we have this distribution between all the months on the year. And this has helped also a lot. So overall, I think technical capability on an underwriting, a good relationship, innovation in the product. This has helped a lot to do more retention compared to our peers in the markets.

[Thomas Buberl, Group Chief Executive Officer]

And will it also goes back, I think the secret is it goes back to our organizational model. because we are simpler because we are focused, we have less priorities to look at, and we can really drill down. And in a period like this, where things are changing so quickly, having your eye on the ball very quickly but also deciding the reaction very quickly is absolutely key. And I think this is the secret behind the numbers. You see a very high fluidity in the team, very strong, challenging and connection and quick reaction.

[Thomas Buberl, Group Chief Executive Officer]

And this is also the way we want to continue. I'm sorry that we have to interrupt here. I know we still have questions in the room. So you will get your answer before you leave the building. And I'm also sorry that if there were any questions on the webcast, so we will make sure that you get your answer in writing. Thank you very much for having been here today. Thank you for asking questions, and we wish you now a great rest of your afternoon and evening. Thank you.