Hello and good morning, everyone. For those who don't know me, my name is Ashik Musaddi, and I head the European Insurance Research here at Morgan Stanley. I'm pleased to welcome Thomas Buberl, CEO of AXA Group. Thomas presented a very interesting CMD just a few weeks back. We'll go into all the details, but before that, I guess, one question for you, Thomas. How are you? Pretty busy times for the last few weeks, I guess.
I'm doing good. The weather could be a bit better, but otherwise I'm doing good. No, it's true. So we had quite a few busy weeks, but good busy, because, as you said, on the 22nd of February we presented our new plan, and the presentation of the new plan was also the closure of the previous chapter of almost the last eight years. And when you look what is called AXA today, compared to what it was in 2016, the company still carries the same name, but the content is very different. Because what has happened over these seven years, I would say four things have happened. Number one, we shifted the business mix from what was 80% life insurance to today 20% life insurance, keeping more or less the same revenue of EUR 100 billion, a bit more.
But what has happened underneath is that we have 35% more profit and 75% more cash. Second thing we changed was we focused our footprint significantly. In the French tradition we were basically present in every country, and I always had difficulties to remember the whole list of countries by heart. We looked at how can we make sure that we stay in countries that are where we have a strong market position, and where we are able to compete well, and that led us to a decision of exiting 22 countries, which is not always easy because being in a country or not is a very emotional challenge sometimes.
but, when you look at what is AXA today after this change, we're a very balanced company, 50% B2B, 50% B2C, being the largest insurer worldwide for companies and, having very strong positions, in most European markets, Japan and Hong Kong. The third thing we changed was, we completely changed, the culture and also the entrepreneurial spirit.
We come out of a phase, of, you know, the founding of AXA, which was very entrepreneurial, probably a bit too entrepreneurial, into a phase post, financial crisis, which was very much around, central control and making sure that, you knew every stone, that was turned in the company, to now having found, a balance in which, obviously some things remain very central, the brand, audit, risk control, the big investments, but where essentially the execution of the business is local, with a very clear, and, simple hierarchy, and very clear responsibilities, which made things, easier and, also, significantly increased, employee satisfaction. When we first measured employee satisfaction in 2017, we do it in eNPS, Employee Net Promoter Score. The first measurement was -1, which is bad. Now, we are at 40, which is very good and probably in the, benchmark, of the best companies.
We need to keep going on that. And then lastly what we did, the digital revolution that started in insurance in the 2015-2016, we focused this very much around how can we improve our customer interface and increase customer satisfaction because we were at best at the time at market average or below. Today, the market average is the worst performance we have. So everything is above, and the market average is tolerated but not. I'm not happy to see it. And this simplification of the interface, automating our processes, making sure that our agents are digitally enabled and that we have a full sharing of customer data and so on, has really changed things. And so when we presented our plan on the 22nd of February, it was very much to say, "Look, this chapter is closed. The transformation is done.
We are now going into a new phase, which is very much around evolution. So how can we develop this new AXA and how can we really use its potential? Because over the last seven years, my main task was mainly dealing with seven to eight M&A files at the same time and not looking at how is the pricing done in the U.K. and what can we do better.
Yeah.
This has now changed. In the new plan, we want to focus on three axes: more growth, mostly in white spaces that we are not serving yet; more technical excellence, based on technology because during that time that I just described, we also tidied up a lot our landscape. To give you an example, when I was CEO of AXA Germany at the time, I had to deal with seven life systems, with seven printing systems because a merger in insurance has always been done when the logo has been taken off the roof, but that's when the job started and wasn't finished. So we tidied all of this up, and we have now also got the tech base to do more on the technical excellence side.
And obviously when it comes to our operational model, we want to continue the journey around offshoring and nearshoring and making sure that automation is pushed much more. So evolutionary approach in the next phase with a very clear commitment to high shareholder return, 60% payout ratio on dividend, 15% share buyback, very little to none left for any M&A deals to send a very clear signal.
It's a very comprehensive summary, I would say. And I mean, it's been an amazing journey, as you mentioned, past eight years, and I have followed that as an equity analyst as well. And, it is really working out well. So thanks a lot for all this effort that you have put in for all these years. Now, before we move on to learning more about new AXA, I think that's a most interesting one. But I'll just go we'll just do a quick, polling question to see what's in the minds of investors. I guess the question is very simple: what's the key investment debate on AXA at the moment? Margin improvement in P&C, use of excess capital, organic growth, ability to achieve UEPS, earnings CAGR, and any other topics that you think is relevant. So we'll just do a quick polling. That's very close.
But definitely, I was going for number 3, and the consensus is number 3 and number 2, use of excess capital and organic growth. So why don't we kick off with the organic growth? I think this is definitely, I would say, new AXA for me. As you mentioned, that top line has been about EUR 100 billion in the past five to six years. There's a lot of change that has happened, a lot of disposal, some M&A. So how are you seeing organic growth potential at the moment? Because this is what I believe investors are looking for, from AXA for a significant rerating of the shares from here. Any thoughts on that would be helpful.
So if you look, as I said, growth has not been on our agenda because we had to do other stuff. Growth is now on the agenda because we have the base for it, and also we have the time to look after it. And we said growth needs to happen in areas where we are not sufficiently present yet. And obviously being the largest corporate insurer in the world, you have two very important white spaces that we want to look at. One is obviously on the, let's say, physical risks. We have obviously new risks coming: cyber, climate change, where there's a lot of need for insurance. If you think about all the investment in renewables, for example, if you think cyber having certainly on the ransom side become a new industry, as opposed to occasional criminal activity. When you look into Europe, we have basically two AXAs.
We have the AXA XL underwriting knowledge, very much focused on larger companies, and what we call the AXA General Insurance, so the more retail-plus company that are coming from below. Above, great underwriting knowledge. Below, great distribution footprint, but there is a big hole in the middle, which we call the mid-markets. And so we have started to develop in the markets where this white space was very big, so the U.K., Spain, Italy, to work together between the two companies, align incentives, and make sure that they capture this market. And so this is a typical white space. So this is the area around physical risk. Then when we think about the human risks in a company, so employees, we see that employee well-being post-COVID has become a massive issue for companies, and offering employee benefits has become a big retention factor.
And so the whole employee benefits side, proposing health solutions, proposing services around absenteeism and so on, has become a big advantage. And so being the largest corporate insurer and having access to these companies, we can serve those two. So that's the first area. Then when we look in the second area around our positions in Europe, Japan and Hong Kong, we obviously want to use those market positions to grow again in the health space on the individual side, in the protection space, in also the life insurance space again when we think about retirement solutions. So all of what you see in the plan is already in motion. So it was not that we presented on the 22nd of February and on the 23rd we start, "Okay, what are we going to do now?" This plan has been built bottom up.
So, it's basically the sum of all the initiatives by company, a local company of AXA, and they are already in it. So, when we speak about this white space in Europe, Italy, Spain, they've already written several hundred million EUR of volume. So we know it's going to work. And when you look at the top line ambition, it's 5%. If you strip out in the last plan, the restructuring efforts, you've seen that we have actually grown the top line by 6%. So it is possible for us to grow 5%. So everything that is in that plan has somehow been proven already in some space, and it's now how do we multiply it across the whole of AXA?
Now this organic growth, I mean, that's very clear, I guess, from your presentation and today as well. But there is somehow still a bit of investor skepticism that insurance is a bit of ex-growth. I mean, I disagree with that because, I mean, I have seen dividends growing, dividend which is a tangible proof of the sector. Dividends have grown by 6%-7% over the last decade, more than that as well. So there are certainly some areas which are growing, and AXA is, I mean, your plan is there as well. But would you say that there is growth for the industry as well because there are, I mean, interest rates are going higher, underwriting is getting better, I mean, people are getting older? So would you say that there is clear industry growth and you can capture ahead of that?
So first of all, demography is a positive sign for us. I mean, if you look into Japan, which is probably the most remarkable country in terms of population shrinkage, we are doing extremely well in Japan, and Japan is extremely profitable. I think there is growth and profitability in the segments that are growing the most in terms of the underlying risk, but also that are the most protected in terms of competition getting in. And so if you look, what have we done? We focused on commercial insurance because commercial insurance is a scale game and is a knowledge game, and is also a game where you need to be well implemented. So, if I was coming from Norway and would say, "Look, we are now capturing the commercial markets, and going to try and go into the SME space," well, good luck.
If you have no distribution infrastructure, if you have no underwriting know-how, you will not be able to capture it into reinsurance, capital flows easily in and out. But in that space around mid-market, SME, it's very difficult to get in. And because we put a lot of our effort of investment on our own agents and keeping brokers very close to us, it's very difficult to get in there. The same is true if you look into the health space. The health market, we are probably the biggest in the health markets of our peers. Health is a scale game. If you want to get into it, it's not so easy. So we pick the spaces where we are more protected than, for example, in motor insurance or reinsurance, and where we see growth potential because the underlying risk is growing.
As I said earlier, in the commercial space, you have actual risk growing, which means your business is growing on the health and protection side with more need for health coverage because social systems are struggling, example, NHS in the U.K., and, you know, people wanting to take more care of themselves, you have actual growth. So our positioning was very carefully focused on those areas that will grow where we have actual, actual growth.
That's a very strong confidence, and that definitely helped us anchor our views on the sector as well. So thanks for that. Just moving into more areas of growth, I mean, clearly organic growth is what it feels like you're very confident. But you highlighted at the recent Investor Day there are other areas of earnings growth as well, such as buybacks, such as margin improvement, especially on the Combined Ratio. I mean, there is a bit of skepticism around some of the improvement in Combined Ratio, which comes from the underlying business rather than just improvement in the pricing in the U.K., Germany. So how confident you are around that extra bit of Combined Ratio improvement?
Very confident because, so basically, if I would put it into a simple formula, when you look at our big P&C businesses, there's obviously XL and there is Europe. What we need to do, we need to now do what we did at XL in Europe. What did we do at XL? We basically went through every line of business and applied a very high technical discipline, saying that, "Okay, every line of business has a very solid backbone in terms of data. Every line of business has a very solid pricing model in only one. And every line of business has a high adherence to the pricing model. And we are very quick in following it, making sure that we also have the feedback from claims all the time." Have we applied the same rigor on a scale of one to 10 across all the European countries?
Not yet. We're good, but we could be better. And so essentially what we are doing, we're copying the approach that we have done at XL now into Europe. And that is also the reason why the lady who is responsible now, and it's the first time we have introduced the position of Global Chief Underwriting Officer, Nancy Bewlay, who is the person in charge, has been the one who has done it for XL. So she, her mandate is in a very simple way, you copy what you've done at AXA XL now into Europe. Easier said than done, but that.
Well, it's definitely there's a lot of work. I mean, for you, there's definitely a lot of work for the next plan, no doubt about it. But yeah, so far it definitely looks very comprehensive and very well thought. So, just moving into other parts of growth, buyback, this leads to a bigger topic about capital, capital allocation, capital management. So any early thoughts on how you're thinking about capital, capital allocation? Your solvency ratio is pretty strong compared to what your hurdle is, and your.
We have no hurdle anymore, so.
Okay. But still, I mean, 2.25% is still a pretty, pretty healthy number, I would say. And then in addition to that, your capital return is already very attractive if I sum up the dividend and the buyback. So, what are you thinking about dividends, etc., as in, total overall capital management?
So look, first of all, the plan, as I said earlier, is very much an evolutionary plan, based on a very solid balance sheet. And also again, the balance sheet has changed over the last eight years. If you look, I mean, the solvency level that we see now, we have never seen in the past. The sensitivity of the balance sheet is a third on interest rate sensitivity what it used to be. The capital that we need to put behind financial risk is half of what we used to have. So it's a very solid balance sheet, very diversified. You haven't heard us moaning about the Credit Suisse and the Silicon Valley banks of this world. And so the aim is to keep that very solid balance sheet, but to be very mindful going forward on our capital usage.
As I said, we have a good company now, we have a good strategy, and we have sufficient capital generation to finance our own business. So, we don't need to go out and spend money on big acquisitions. Therefore, we said, "Look, we need to give a very clear commitment on what we give to shareholders." And 60% payout ratio on dividend is a clear sign of more confidence because we up it, and the volatility of the business is much lower. And I mean, 15% share buyback, if you look into the context of AXA, when I first raised the issue of share buybacks with my board about five years ago, the answer I got was, "Listen, have you not got any entrepreneurial ideas anymore that you need to come with share buybacks?" So we've come a long way.
Yeah.
Essentially the visibility for an investor now is crystal clear for the next three years. You know what you get. You know what is left and where it will go. It will be reemployed in the business, and you also know very clearly what our very limited M&A policy is. So we wanted to be crystal clear, and also wanted to put ourselves out there with clear boundaries that there is no uncertainty.
But would you still say that there is still room for, I mean, I guess you clearly ruled out any transformational M&A without?
You don't need to.
Talk about it. Yeah, you don't need, but would you still believe that there might be some need for some bolt-on M&A? I mean, I think your Laya acquisition is pretty good because it puts you in a very good position in the health space, so.
We are very happy with it. Look, you've seen we've got a significant cash balance at holding, which we think is going to be more or less the same going forward. So, yeah, this is basically the pot of money we could use to do bolt-on, but we want to think very carefully like we did. I mean, I think what you've seen now in the Turkish acquisition, the Spanish acquisition, the Irish acquisition, this is the kind of stuff we're looking at. But again, there is no rush, there is no urgency. If there's something interesting, we'll look at it. If not, if not, and I think the issue around our balance sheet and solvency being so high and solvency, let's say, systemically moving up, be happy about it. What's the big deal?
Yeah. No, I mean, it's not a big deal for you, but we are analysts. Our role is always to find, "Okay, there's some excess capital. Can we please get some of that again?" But no, I think your capital.
There is excess capital because what the big regret I have in solvency is that, it's not too cash-oriented.
Yeah.
So the excess capital you have in solvency is a lot of future profits that have not yet turned into cash. And so it's always difficult to explain that. But I think a high solvency and an increasing solvency should be a good sign of confidence for you.
Yeah, but in addition to that, I think you have worked a long way on your cash remittances as well. I think the cash remittances have improved substantially. And if I look at your next plan, it's going up again 20%-30% in the next plan as well. So, how easy is it to get those remittances from the subsidiaries, or is it you really need to fight hard for that?
No, again, this plan is really based on where we are doing what we are already doing. So we have finished last year with 79% remittance ratio, and the plan says 80%. The reason why there is such a big increase of 50% from 14 to 21 is the fact that now all the companies are delivering results. We had some companies in the last plan, in particular in Asia, Japan, and Hong Kong, there were not that were not at a level yet. So this is sorted out, and yeah, we can state with quite high confidence that the 80% is possible.
Okay.
Having such a high solvency ratio, obviously, doesn't put you into a regulatory discussion saying, "Oh, your solvency is not big enough. You can't, you can't remit this money.
Yeah, I think it's the other way. You can actually get more remittance out of some of the subsidiaries that might have some extra solvency.
Yes. Look, I mean, the discussions with regulators is interesting. We had, last week, our yearly discussion with our home regulator, the ACPR in France. And I remember very well my first meeting eight years ago. When you look at the nature of this meeting versus the meeting last week, it's no comparison.
That's interesting. Well, in the interest of time, I'll just see if there are any questions on the floor. In that case, I mean, I'll just continue. I mean, yeah, I'll just continue. So clearly, one of the big topical subjects for, for your investment case had been AXA XL. Now, AXA XL had a bit of a rough year because of very high CAT losses, social claims inflation, but then you made quite a lot of changes in that, in that company. So where do you see AXA XL positioned now, in the next plan?
So it's true. With AXA XL, we had a challenging situation, and and basically we did four things. Then I can explain to you about your question. So first of all, we had to increase prices, which was obviously, you know, we had a lot of tailwinds from it, but not only price increase because two-thirds of the change was terms and conditions change, which, by the way, will stay when prices might turn, you know, less high or the other way. Secondly, we reduced massively the net CAT exposure in AXA XL, but also in particular in AXA XL Re. You've seen we've gone down 60% in net CAT exposure in AXA XL Re, which was very much against what the market has done.
Thirdly, we reduced the volatility in this on the social inflation side for the reserve volatility on the long-tail risks by, on the one hand, re-reserving, secondly, increasing pricing on the new business, but in particular also getting into the adverse development cover with Enstar at a time where nobody really thought about this, and probably this would not be possible anymore today. And then lastly, we decreased the net retention per risk. So, you know, 10 years ago, if you were to insure this hotel, you would have probably kept $100 million of retention on that hotel. Today, it probably will be between $50 million and $75 million. So the large loss volatility has significantly come down. And so AXA XL is not only about we increased prices, period. We, you know, significantly changed the machine.
That's why also in the next phase, the company will be well positioned because it has grown a lot. It is very stable on all of those four pillars. So even if the price increases are not as high anymore as they used to be, the company will be in very solid ground. That's also why we believe shifting the company more to, you know, to growth. And when I say more to growth, I would like to see 50% of the growth coming from price increases, 50% coming from real growth, which is more or less what we had already in 2023. So yeah, I think that's a good equivalent, and we are well positioned.
I'll come back to this growth pricing low CAT, but just one thing to get clarification. Do you believe there is more restructuring to be done in AXA XL, or more or less you're done there?
If 95% of your portfolio earns above cost of capital.
Yeah.
By definition, you don't have that much restructuring to be done.
Okay. Now, you mentioned that's very clear, but you mentioned like, half of the, growth should be coming from pricing. So, I mean.
Roughly.
Roughly, yeah, yeah. Just roughly. What we are seeing is that the commercial insurance pricing in the U.S. has started to just moderate now after a very strong 4-5 years of pricing. So how are you thinking about pricing versus inflation in that market, especially U.S., basically?
So I'm not at all fixated on the headline figure on pricing because whether 10%, 5%, or -2% is the right number doesn't really matter unless you know the underlying claims inflation. What I look at is the delta between claims inflation and price increases. That delta needs to stay positive. And so if, for example, claims go down 5% and price is 3%, your cushion is still 2%. And so that's what you need to look at. And it's clear that we've seen a massive rally in price increase that was necessary. We used that period in a very disciplined way to reconstitute ourselves and get to a very favorable position. I mean, when you look at AXA XL, it made almost EUR 2 billion of results. And so going forward, I'm looking at this delta.
That's why I said earlier I want 50% of the growth to come from price increases and technical changes to keep ourselves continuously working on that delta.
That's clear. I guess this is exactly what is relevant is the net pricing because a headline, even if it's lower than inflation, then it doesn't help either way. So very clear.
Look, in some areas like we had in the US professional lines, this market is a very volatile market because you had a lot of SPACs and M&As, sorry, a lot of IPOs, and now the market is dried out. New competitors came in. Look, because we have a very diversified franchise, we decided to pull back, and we lost quite a lot of volume there. But did you see anything? No, you didn't. So, that's why I think having a very diversified franchise of XL helps as well if there's one area where growth is not at the level we want it to be to say, "Okay, fine. We won't participate in a run. Let's focus our energy somewhere else.
No, I mean, this is definitely an area where we are seeing a bit of polarization where some of your peers, Bermudan peers, are still being relatively aggressive in the casualty market. But then if I look at the European reinsurers and some of the European commercial lines like yourself, I mean, you're definitely pulling back from that market. Is it mainly because of backbook concerns, or would you say it's, "No, actually, we just don't know what the social claims inflation is going to be. We don't know what the normal inflation is going to be"? What is that concerning factor here?
No, social inflation will continue in the U.S. And I think people got a little bit blinded in the COVID and early post-COVID era that, you know, claims were not really moving, judges were not really continuing their journey on those files. But now we are back to normal and remaining very disciplined in the new business pricing, but also watching out on your reserve basis and the reserving of your existing claims is extremely important. And when you look, I mean, as I said earlier, we have re-reserved at the time. We have gone into the ADC, which gives us about $1 billion of cover or 90% to be precise of $1 billion above an excess of $325 million, which we also put to the side. So far we have not eaten into this cover.
You've also seen that the claims base that we reserved against used to be EUR 11 billion and has now gone down to EUR 5-6 billion because a lot of claims have actually been processed and done. I'm relatively comfortable today because we have understood the mechanism and we watched this stuff very carefully.
Okay. That's clear on AXA XL. Just, quickly checking if there's any question. Yes, we have a question here. You can raise your hand again. Yep. Thank you.
Thank you. Could you make a comment on people at XL? I know we had a number of high-profile departures to Convex. Is that kind of flow of people over now? And do you think that people's situation's basically stabilized?
So it's absolutely true that, I think it was 3 years ago we had some departures, but they were essentially in two areas. One was in the leadership team because we changed the philosophy from, I would say, a very growth-oriented, matrix-oriented company to a profitability-oriented and simple company. And those people had to go because they were not aligned with our philosophy. And then secondly, we lost, I think, 23 people to a new venture in Bermuda, which didn't really hurt us. But with the change of capital markets and interest rates, those recruitment efforts on the other side have also dimmed down. So no, again, look at the results. The results is always done by people and people's action. And I would say look at one thing, at AXA. So over the last years, we've always moved talent from AXA Group or AXA entities into AXA XL.
Now it's the other way around. I mentioned earlier Nancy, the Chief Underwriting Officer. She comes out of AXA XL, into Group. And I have got a couple other examples where this is the case. So, now the people changes have been good changes. And in particular, having Scott at the head of AXA XL, who comes from Chubb with exactly that mindset of, you know, discipline on profitability, has been for us a significant positive change.
Thank you. Any other questions from the floor?
Just continuing with AXA XL, I guess one thing I want to check is around net CAT. Now, clearly, net CAT has been we have seen like record six, seven years of CAT losses, like above $100 billion, even though last year we never had even a single big large event like Ian, but it was still $100 billion. So, how are you looking at the net CAT exposure? I mean, you have cut significantly in reinsurance, but overall in the business?
So we've also cut in XL. So XL insurance, that was the first area to cut, and I remember very well. I mean, at the time, we went through all the detailed exposures. So, for example, remember when we looked at, "Okay, what do we insure in the shorelines?" You know, we didn't insure; we don't insure anything anymore that is six miles to the shoreline. We had a lot of business, U.S. business that was, I wouldn't say dumped, but placed in Lloyd's London wholesale, which couldn't be placed in the U.S. So, we got rid of that business. And so we have significantly reduced our exposure in XL insurance, in XL reinsurance. And we would like to do something similar now in Europe. As I said to you earlier.
Yeah.
The mandate of Nancy is to do exactly the same that she did in XL insurance and reinsurance in Europe. And so our CAT exposure has significantly been reduced, overall. We want to continue that journey because I still don't believe that CAT risk is well priced. The CAT risk on the very large, very rare, events is probably fairly priced, so the one in 20 or one in 50-year event. But when I look at the one in 2-year, one in 5-year events, so droughts, wildfire, floodings, you don't get the right amount of money for it now.
That's, yeah, that's interesting because, clearly, this leads into the reinsurance market, which still looks very hard. Pricing keeps going higher, and I guess for the same reasons that CAT is still properly not priced. But how are you thinking about your reinsurance strategy from your business, XL Re and from buying reinsurance as well? So from both the both perspective, because when on one hand you have made a lot of effort to turn around XL Re, it's very profitable now. On the other hand, you still have a, very good market. I mean, in terms of pricing, it's still pretty good. But then, you want to reduce the volatility. So how are you trying to balance that?
I mean, look, we significantly restructured XL Re, and I was very pleased to see that. I think it was the best combined ratio in the group with 81.4%. And, yeah, we have finally turned it around. It finally makes a profit. And, size doesn't matter for this operation because often when you have a standalone reinsurance, size matters because of your balance sheet strengths. Here, we have an operation that is smaller than what it was to where it was when we bought it, but that benefits from the balance sheet rating of AXA Group. So, they can perfectly live a very comfortable life, you know, in being a little bit smaller than what they used to be but being far more focused. And so, we have restructured it now.
We are going to develop it in a controlled way, but we will not take more net CAT risk.
Okay. That's clear. One question I want to ask, maybe from an industry perspective, actually. Nancy, clearly you have shown, okay, this is the Combined Ratio going to be investment income, top line, etc. But one thing that puzzles me is if I always think about how management should think about or management thinks about making money is you have an underwriting element and you have an investment income element. Now, clearly, investment income element has gone up, which is probably going to stay. And underwriting has improved a lot in past, say, five, six years, thanks to all the efforts that management have put through. So would you say that there is a possibility that underwriting element could be relaxed a bit going forward because we are making a lot of money on investment income?
Or would you say that, from your discussion with other peers, etc., that's not happening? There is a bit of difference now the way management is looking at it.
So I do not believe that you see a significant relaxation on the technical side because, number one, when interest rates increase, it takes some time for us to benefit from it because we are not traders and say we sell everything one day and then reinvest. We obviously manage our balance sheet according to our liabilities, which means that probably you reinvest 10% of your balance sheet at max every year. And so if interest rates come again down a little bit, yes, we have a delta that remains positive. But yeah, I don't think you'll see it that quickly, number one. Number two, in this period of repricing, certainly in those areas where you have fewer players, many players have exited. So I don't know.
Whereas if you want to today insure a marine cargo or marine hull risk, 10 years ago, you had a lineup of 9 insurers. Today, if there's still 4 pitching, you have, you're lucky. And this will probably remain like this. So, the market has shrunk in terms of number of players. And if you look also at the distribution of the new marine business market shares versus in-force market shares, it's much more concentrated. Then you have some regulatory developments that do demand more discipline. One is IFRS 17, which demands more discipline.
And the other one is the Solvency II revision coming, and the end of traditional transitional models in Europe on the Solvency, which means that if you are a mutual and you need to somehow have a higher capital buffer at the end of your transitional period and the Solvency II revision, the only way you can do it is to discipline on your underwriting side.
Yep. That's good. I'll come back to this point because this is very interesting. But before that, I'll just see if there's any question on the floor. We have one question here.
One question on the XL integration. Obviously, results have been very positive. What are the key lessons learned, and what would you have done differently in the whole process?
So, I mean, the integration of XL was obviously a very complex undertaking because you had a multinational company, being in 60 countries. And you know, the underwriting of larger risk is very much driven by you know the underwriters that are there. And so finding the fine line between integrating it and not, let's say, discouraging people, but on the other hand, making sure that you also put your foot down when it comes to how to manage profitability was a very fine line.
In hindsight, you can always say, "Well, I should have made the change in management earlier than I did." But the question would have been, "Okay, what would have meant?" And that's what your colleague behind you asked, for losing people because there was, I had to make myself a big effort at the beginning seeing underwriters to understand would they be ready, to make this change. And we were in a very fortunate position in a way that, previously, XL, before it came together with Catlin, was actually a company that was very disciplined on the underwriting side. And the majority of, underwriters still came from that period. And they at the time, what has happened when the merger with Catlin came, they increased the net retention. So my hotel example from earlier, they were on $50 million, and they went to $90 million- $100 million.
They pushed the net CAT, and the underwriters on the ground were not happy with it. So once I toured all the locations, I was pretty sure that when making the change at the top, I would have support at the bottom, and those underwriters will not be out the door tomorrow. But, you know, to do the integration, and to get the approval of 60 regulators to make sure that you align the companies, culturally and that you get the support of the, you know, ground staff, to help, you know, to support you in the change is not evident. And so I would probably do the same thing again. But yeah, the question you could ask yourself, should I have acted earlier on the management change? Probably yes, but you don't know what would have happened, to the support line, of the underwriters.
Thank you. We just have one more minute left. So I just have one question, simple question. IFRS 17 and Solvency II. Must be a painful way to get there, but you think it's good for the sector, or would you say maybe?
So whether it's good or not, I think I would look at it from the end customer perspective because at the end of the day, a regulation should be done in favor and to the protection of the end customer. And the end customer should also see, "Okay, the investment for this regulation is X, and my benefit is Y." If I take that perspective, we obviously had significant change through Solvency II, and we just had significant change through IFRS 17, and we might still have significant change through something else that is coming, which is the revision of Solvency II and potentially ICS, International Capital Standards. If I make all the sum of this, I would say the business case for the end customer is probably not positive.
Okay.
Nevertheless, I'm a big believer in Solvency II because it has finally instilled discipline in our action. And I also do hope that IFRS 17 will instill more discipline, in particular on the life side. Yes, we have other disadvantages. I mean, I was always a big fan of lower volatility in our business. Now with IFRS 17 and the discounting and the unwind of the discount, we have unfortunately again instilled an element of volatility. But look, let's see how it goes over time. If the interest rate situation does calm down and we find a new normal that is more sustainable over time, we might hopefully also have less volatility from that perspective.
Thank you. Thanks, Thomas. That was really, very insightful. First of all, congratulations for your coming out with the plan and all the best for execution of the plan. We are pretty confident it will work under your leadership.
Me too.
Thank you.
Thank you.
Thanks a lot for your.