Next up, we have Thomas Buberl, the CEO of AXA. When we met here a year ago, most of the conversations were centered around the achievability of the targets that AXA presented at the start of last year and how the group would navigate the French political issues. Some things, unfortunately, haven't changed, but when it comes to AXA, all the signals are flashing green. Despite a volatile backdrop, the shares have reached an all-time high this summer, and I'm really happy to have Thomas with us here today to discuss what's next for the group. Before we jump into Q&A, I believe you'd like to say a few words, Thomas?
Thank you very much, David. Good morning to all of you. Just a few brief comments before we get into the discussion. In the middle of 2025, we are exactly halfway through our current plan, Unlock the Future. When you see where we stand at half year, we have managed to produce both a very high organic growth, 7%, in an environment, as David pointed out, that is not always the easiest, that has also translated into a strong result, 8% underlying earnings per share. All of this happening on a very strong balance sheet with 220% solvency. What is important is that when you are in volatile times, it's important to obviously have a strong balance sheet, but it's even more important to have a very diversified business to be able to absorb whatever shock there is.
Obviously, when you look at it from a shareholder perspective, not only from a share price perspective, but when you look at the return on equity, we are also well positioned. This should give you good confidence that halfway through the plan, we should be able to also achieve the targets that we have put forward for this plan that runs until the end of next year. When you look at what has been driving this momentum, as I said, it's on one hand a strong top-line growth. When you look under the bonnet, you will see that it is all lines of business and all countries that have contributed to this strong top-line growth.
When you look into what we set out in terms of margin improvements, there was a first phase where we improved very much margins in Property & Casualty Insurance, in particular two focus areas, the UK and Germany. This has been achieved. In the second part, we have now focused on health, but we will also focus on higher net flows in the life and savings business. You've seen that at half year 2025, for the first time in a long time, the net flows changed into positive territory again in our move from moving from very high general account business and highly guaranteed general account business to protection business and retirement business. This is accompanied by significant investments, both in the growth initiatives, but also expanding our distribution, in particular physical distribution, but also direct distribution.
You saw the acquisition announcement around Prima at the half year, and obviously also Data and Artificial Intelligence in order to make sure that we benefit from the customer insight as much as we can. I want to highlight the data investment because it is important to have a very clean and well-ordered database. Otherwise, your artificial intelligence efforts remain useless. When you look at the business, and I mentioned it earlier, for us, it's absolutely important to be diversified. We have a very balanced business when it comes to geographies, when it comes to line of business, but also when it comes to B2B and B2C. This mix for us has proven to be very good.
We believe that going forward in a more volatile world where you don't know where the next spike will come from, it's good to stay on this, making sure that we also move on all engines. As I said earlier, in the first phase of the plan, the focus was very much around how can we get the property & casualty insurance business to a very good performance. We are at this point now, both in terms of growth, but also in terms of margins and in terms of the investment capacity that we have put in there.
Secondly, as I said earlier, we focused on getting our health insurance business better, both in terms of more growth and margin improvement, but also into investments in the services and the vertical integrations, so small clinics, general practitioners, and doctors, and making sure that we are now in the next phase of the plan and also probably in the subsequent plan, making sure that the life and savings segment in this transition from traditional capital-heavy general account products to more insurance-related life business, protection, so biometric risk and longevity risk, is producing even more momentum on the growth side. All of this on a very strong basis in terms of balance sheets, but also customer base. We put a lot of effort on our agency distribution that is traditionally very close to our customers and obviously has produced a very high result in terms of customer retention.
All of this combined with a very disciplined capital management framework, dividend, share buyback, and whatever is left to invest in the business. You have seen that the sale of AXA Investment Managers, which has been closed by the middle of this year as well, will lead to a $3.8 billion share buyback. In conclusion, we are traveling well on the plan that we have launched one and a half years ago. All the levers we said we would pull have been pulled. We feel comfortable with our setup in the business, being highly diversified in a moving environment. Going forward, we want to continue our journey and make sure that we both deliver what we said we would deliver in the plan, but also that we continue strong value creation for our shareholders. Thank you.
I'd like to start on commercial non-life, which is the area where most of the concerns are today, given the acceleration of the softening of some lines of business. I get the sense that the market perceives AXA's commercial business as very U.S. blue chip. Can we start by talking about the diversification of your commercial business and cycle management in general?
Our Property & Casualty Insurance business is roughly $60 billion premium. One third is retail business, so that's what we're not talking about. Two thirds is commercial. Of these two thirds, half of it is European commercial business. When we talk about commercial business, it is the butcher, the local shop, the hardware, and so on. Business that is very retail-like, very close to the agents, and that is extremely stable. If you were to again look under the bonnet of the growth in commercial lines, you would see that both growth and margin improvements are extremely good on this business. Then you have the last third, which is AXA XL. AXA XL is in part large commercial business. When you look at AXA XL, it's a franchise of $20 billion of revenue, but extremely diversified. You have a multitude of lines of business.
When we talk about the question of cycle management, we come now out of a cycle that was only going in one direction, which was prices up. You could change terms and conditions. Obviously, we have benefited from that massively because you've seen that the result of AXA XL has also improved massively. We are now coming into a market in which in some lines of business, when I say some lines of business, we're talking about U.S. professional, we're talking about cyber insurance, we might going forward talk about property, where you see some signs where the price increase is not the same anymore as it used to be. A price increase means nothing. What you need to look at is what is the delta between your claims inflation and the price increase.
If you don't get the sufficient price anymore that you need to cover your claims inflation, then there is an issue. When you look at it today overall, you see that the large majority of AXA XL's business are not affected by any weakening signs of price. In the areas where we are confronted with lower price, we are extremely disciplined. The rule is pretty simple. If your delta between claims costs and price increase is still positive, you continue growing, even though the margin is a little bit lower. If you see that the delta is not positive anymore, and I can give you a concrete example, U.S. professional, where we have actually pulled back significantly in volume. Have you seen anything of that pullback in the larger franchise of AXA XL? No, you haven't.
I think we've been working towards this model of a different cycle for a long time. AXA XL, as I said, is a diversified franchise and is a franchise that puts the responsibility on the underwriters. The underwriters are incentivized to write the right business. If they write a bad business, they will feel it in their pocket very quickly.
Would you say there is a finish off?
Yes, there is a cycle, but I am not worried that we will not be able to manage the cycle. That is why we have said that the result of AXA XL, which is the area where some of this could appear, in dollar terms, we will deliver.
Would you say that on the European part of the business, there is such a thing as a cycle?
No, I mean, there might be, but I don't see it. Again, you don't, I mean, this business in Europe is very difficult to get into. If you want to insure the hardware and the butcher around the corner, you need distribution. You can't just get a bit of capital and place it. The barriers of entry in those markets are very difficult. It's the same, by the way, in AXA XL. If you want to insure a complex marine risk, there are not 25 companies that can do it. The previous cycle of reducing capacity and price increase has washed a lot of companies out of the market. This complex marine risk, maybe 10 years ago, you had 20 parties lining up. Today, you might have six or four. It's a very different market.
You've mentioned some of the lines where the pricing isn't higher than claims inflation right now. On the contrary, where is the gap positive? Where are you growing at the moment?
Certainly, on marine is positive, on capital is positive. I mean, there's plenty of lines of business. Again, AXA XL is like a, or it's a $20 billion business, but the average size of a line is maybe between $500 million and $1.2 billion. It's very small pieces and all in specialties. It's also difficult for other people to get in.
That's the commercial part of AXA XL and the group. There's a smaller reinsurance business at AXA XL. I found it interesting that in the first half of the year, top line grew a lot at AXA XL Re, but the risk, I think, was carried by third parties. Can you talk about the dynamic there? Are you seeing a lot of appetite to take that sort of risk?
Look, we have a small reinsurance business that we have restructured over the years because the business used to make a loss, and we've restructured it in several ways. Number one, we have reduced its dependence on property risks. We have significantly scaled down the property risk, which also means now that if there was to be pressure on pricing in property, we would be less affected than others. Secondly, we simplified the business. It's a global franchise, but we made it simpler. Thirdly, we said we want a certain risk profile. If the risk profile should increase, then we should rather attract third-party capital, which we did, because a lot of investment funds and private equity funds and so on are looking for risks that are diversifying to market risks. That's the reason.
In a way, that puts a little bit more competition or pressure on reinsurance pricing, which is what's better for you because you're on the right. You do reinsurance and you're a big purchaser of reinsurance covers.
We purchase much more than we accept, so the net net is always positive.
Right. I'd like to move to personal lines. Before I do that, are there any questions in the room? You can raise your hand if you have a question. All right, I'll continue on personal lines then. You're targeting a 2.5% improvement in your underlying loss ratio. That's already been achieved in the first half of this year. If I look at the average pricing across retail lines, it's still a few percentage points above claims inflation. Is that one area where the cycle is doing quite a bit better than you expected a year and a half ago?
No, look, I mean, we started, as I said earlier, this plan with, I would say, two problem zones in the retail business, which was the UK and Germany. All the other businesses were actually doing quite well. When you looked, all the other business, ex-Germany and ex-UK, were actually gaining in net new contracts, which is always a sign that you get profitability and growth right. We have gone on a journey in quickly turning around the German business and the UK business. We are at a place today, and you've seen in the half-year results, where all of the countries, including Germany, are delivering net new contracts again. We are at a point where the portfolio is sorted out. I mean, you are never done. You always have to continue and see where you can get better. The big lift is done.
There's been a lot of consolidation in European personal lines, and maybe lower interest rates will put even more discipline to keep prices higher. The cost of natural catastrophes is still high. Do you think we could have a harder market for longer in personal lines? It seems like a lot of players are already earning ROEs a lot higher than they were in the past. Do you think that the industry could be earning too high of an ROE for some time?
Look, what is interesting is that the traditional cycles don't really appear anymore. They were appearing in the past mostly when third-party capital came quickly in and went out again. What you see today is that the market is disciplined and will probably remain disciplined because there is one area that we should never forget. The complexity for each business has increased. We had a significant accounting change to IFRS 17. In order to implement this, you need to invest a lot. We have the upcoming revision of Solvency II, which might mean very different or might have very different consequences per company. You also have, I mentioned it earlier, significant investments into data and AI to make. For all of this, you need means to invest.
Many of the insurance companies that have in the past caused a more volatile and cyclical market were mostly in the camp of mutual companies. Those mutual companies have, by definition, no or very limited access to get third-party capital. I think that is one of the reasons why we have seen a much higher discipline in the market because there are big hurdles that need to be financed and invested in to keep going as a company.
You announced the acquisition of Prima in Italy at the half-year result, and I have two questions on this. One is on Prima and one is on what it means for the rest of the group. First, on the company itself, how do you explain the success story of Prima? Because Italian direct motor has been very difficult for everyone, but Prima has been growing a lot at excellent combined ratios, which is always a bit puzzling in insurance. How do you achieve that? Can you give us a bit of color on this, please?
are two simple answers to it. Number one is they have chosen a model that is extremely low cost. They have looked at every component of cost, including the question, should they be an insurer or not? They have decided not to be an insurer. They are an MGA. That is the one part. The second part is they have basically priced their business in a different way to a traditional insurer. When you look at a traditional insurer, traditional insurers have what I would call smooth tariffs. The 25-year-old wild male driver today does not pay his or her proper premium because we smooth it down to also be able to get these customers. The better drivers, more, I would say, between 40 and 50, pay partially for that. You have a smooth tariff. Prima has done the opposite.
In Prima's tariff, the wild 25-year-old driver will pay his or her exact price, whereas the driver between 40 and 50, who is driving in a much more gentle way, will also pay his or her proper price, which is lower. What I think is the real beauty of Prima is, yes, it is a direct insurer that can differentiate through that model, but they have also made inroads into serving the agents. A traditional agent of an insurance company can handle, I would say, 80% of their customers with those smooth tariffs. The last 15% to 20%, they have an issue to serve because they are not competitive. What they have done now is, instead of going to a competitor or to a broker, they have used Prima to keep that business on the 15% to 20% that they were not able to do with the smooth tariffs.
For me, those are the three elements: low-cost model, real risk pricing, and giving agents a ventilation solution for this part of the business where they are not competitive.
Interesting. One of my takeaways from the presentations you did yesterday on Spain, Germany, and Ireland was that Prima seems to be an enabler to accelerate your direct franchise.
Because you only ask about Italy, I say it on Italy. Yes, I mean, when you look at Prima for us, why? I mean, beyond the question of the interest of the business model, there is something else. We see that, number one, the direct business is really picking up now. Customers do want to engage more in direct, which hasn't been the case for a long time. Secondly, we actually have got quite a big franchise within AXA already on direct business, but we have not treated it really as a growth opportunity. We want to do this now. Thirdly, the Prima model is strong in Italy, but for them, it's difficult to start in a new country. Because why? If you want to succeed as Prima in a new country, insurance is a scale game.
You need access to a repair network, which they don't have, but which we have. You need access to an agency network, which they don't have, which we have. If they start in a new country, let's take Spain, for example, as the actual case, we can give them access to our repair network, so they immediately have scale. We can give them access to our agency base, so they immediately have a potential that they would otherwise not have.
How are you putting together your current direct business with Prima? Will that be the idea over time?
We're not putting them together because, as I said, Prima is a very distinct model, and the traditional direct model of insurers is just basically the direct arm of a traditional insurer. If we were to merge Prima into AXA, the same would happen. We will keep it apart, but we will obviously make sure that the subscale direct insurance companies that we've got are being moved onto Prima. When I say moved onto Prima, let's take Italy. We have a subscale business direct in Italy. We will re-underwrite the contracts into Prima without merging all the old cost structure into a very low-cost model.
Okay. I'm going to move to life and savings again. If there are any questions, please raise your hand. On life and savings, we had elevated lapses in the past. That's over. Flows are pretty good now and really picking up in savings markets. A normalized yield curve in Europe should help. My takeaway from one of your competitors' presentation just before was that European insurers are much more bullish on life insurance than they were a few years back. Is this your point of view as well?
I mean, if you look at the general trends that we have in our society, we have an aging society, and we have a society that needs to protect itself and needs to most likely protect beyond what we have today because the social systems that were traditionally provided by the states are not working anymore in the way they were working, both in terms of their way of delivering, but also in the way of them being financed. This is a general trend that is an opportunity for us. As I said earlier, I think the insurance companies have rediscovered this market in moving from a pure savings market, which is very much in competition today with banks and asset managers, to the insurance-like element of this market, which is around protection. How to protect you against disability, against death, and other biometric dangers. Secondly, longevity risk.
How do you help a customer to not only accumulate, but also to decumulate later and to live a good life, you know, in the last phase of your life? I think in these areas, there is a significant increase in demand and the space for us to be. Most of these products that we offer there are quite sophisticated products. When you look at the in-force market shares versus the new business market shares, you see that there are much less companies acting and being able to act in a new business than you see in in-force. It's a good opportunity, and we want to obviously capture this market.
Savings are still a growth area for you, but it's mostly employee benefits, health, retirement.
Yeah. Look, when you look at AXA, we have started sorting out the P&C business. I would say this is now at an optimal balance of growth and profitability. We are getting there on the health business, and the next chapter is getting the life business back on a growth track again. You've seen that the net flows at half year for the first time were positive. You mentioned it, David. When you project yourself a little further beyond the existing plan, this is where also the journey and the travel will go on. It's not, you know, the story of AXA is not over at the end of next year because we have pulled all levers. We have optimized certain businesses, but there is a runway beyond 2027 to go on, in particular, on the life and savings side.
Understood. Now, on the health in particular, if I look at markets where health are already big products, like the UK, like the Nordics, like the Netherlands, we've seen in the last few years a trend of increased clients' frequency, usually on sickness leave. Is this something, and you've talked about it, I think, at H1 for France as well, is this something that could become a bigger risk for your health portfolio? Are you taking that into account for these other markets where this is growing?
I think to make it simple, in a business that has yearly contracts, we can handle any kind of claims inflation because every year you can adapt your pricing. The only thing you have to do is you have to keep a very close eye on your claims inflation and react fast enough. There is obviously a societal question behind it. This cannot continue forever because the affordability question is also there. We need to make sure that we are always adequately priced. We also need to make sure, and this will be also part of the next five to ten years, to become even more important as an actor in prevention to make sure that affordability, going looking more long-term, is ensured.
When you talk about growth in health, I struggle to differentiate the AXA model versus the market. You talk about growing top line 6%. What makes AXA different in the health segment? Is 6% the market growth or what are you doing differently?
I mean, look, the market as such is relatively small because there are very small players of our size. You have a couple of specialized ones, but there's not so many. I think when you look, most of them are either in one or the other segment and are health specialists. Our ability is we can grow across all the markets in individual, in employee benefits, and also in IPMI, which is the expat market. Most of the specialists are very focused on their monoline business. Our model is very much to say, look, we have the full spectrum and can grow across the full spectrum.
Moving on from the business side of things to capital management, you still have $500 million more or less left from the AXA Investment Managers disposal. How should we think about your priorities for the use of that cash?
You should be happy that in a volatile time, we have good cash.
Course.
No, I mean, look, we have a clear hierarchy in terms of capital management. First hierarchy, dividends. We set 60%. Second hierarchy level, share buyback, 15%. Then we keep a little bit. The little bit is pretty simple. So €100 or £100 profit that emerges in an entity turns into €80 or £80 of cash at the holding. Of these 80, we give 75 to the shareholders. There is a little bit left. Obviously, through the AXA IM deal, because we sold at a higher multiple, there is a bit more left now. This money will be invested in areas where we believe we need more market share. I think Prima is a good example where you've seen one of these markets. We have clearly identified markets where we believe we need to be a bit stronger. In those markets, we will use the money.
It's not that we think 24 hours of the day around where to acquire. Our main focus is organic development, organic growth, organic profit improvement. If there's an opportunity, we look at it, but we don't bank on it.
Can I ask you to share what those markets are?
The U.S. commercial, mostly in the areas where we are not so present, so in excess and surplus and mid-markets, but in a very selected approach. In Europe, it is Germany, Italy, and Spain. Ireland is done. Then Japan. Again, this is as we speak. These things might always change in a volatile time. As we speak now, this is the list.
Linked to that, you used to put a bit more focus on the cash balance at the holding. You're probably around €6 billion today, and we're talking about this €500 million, maybe extra. How should we think about a reasonable holding cash level for you? If I think about dividend costs and recurring expenses, we're maybe around €4 or €5 billion. Is that the... Do you want to hold just enough, basically, to cover these recurring expenses, or do you aim to build a buffer at the holding?
No, I mean, we always set the buffer at the holding needs to be between $1 billion and $3 billion. That's also what we follow. You'll see in February next year what the extra limit is. We don't publish at half year, but that's how I would think about it. In volatile times, if you are rather at the upper end and not at the lower end, it's not so bad.
Very well. Now, a slightly different topic. I wanted to ask you about your investment portfolio. AXA is one of the few companies with still a big upside between your backbook yield and the rates at which you reinvest. If I look at the changes in asset allocation in H1, real estate came up a little bit. Are there any significant, probably not, but changes in your asset allocation you're aiming to do at the moment?
Not significant. I think these are always changes that evolve over time. When you look at our portfolio relative to others, I think there's two areas that probably would be striking. One is we have more government debt than others do. There could be a question, should you shift more into corporate debt? The other thing is we have less private debt than others have. Should you be moving more into that? Again, this would, if we were to do so, be gradual movements, never radical movements.
If we take a step back and look at your... How have you been performing compared to your targets? One of the fears I have is the market might be extrapolating some of the growth numbers we're seeing in the sector currently into the long term, which might not be sustainable. It sounds from the comments you made, I think at H1 results, that you might be sharing that a little bit and holding back a little bit for the next plan. Is that how you're thinking of it? You have a target of 6 to 8% earnings growth, a little bit below where your peers are. Is your idea to deliver that 6 to 8% regardless of the macro environment?
No, look, I mean, we try before we launch a plan to think carefully of what a realistic delivery could be. I would never be there to communicate a target that was not achievable. We give a range, but our ambition is to be rather in the upper area of the range than in the lower area of the range. I guess if you look at this current plan, this is the perfect illustration of it. You know, we're not here today to discuss what the next plan looks like, and we still have one and a half years, but we'll do the same thing again. As I said earlier, we have clear levers for the next phase.
This story will continue, but we are now taking the next year to think about how do we construct it and what is a realistic target that can be achieved in an environment that hasn't become easier.
My last question, I have to ask about the French political situation. If we put the taxation aside or the corporate tax rate aside, is there anything else that worries you in the political debates currently?
No, I mean, as a citizen of France, I'm obviously worried about the country and its future and how do we find back to stability. From a business perspective, we have done the maximum to ensure against this instability. I mean, when you think about, you mentioned taxation. I mean, when you look at our business, we have a strong French business, but this business and the profit of this business is confronted with 100% of the debt cost of the AXA group. There's not that much that is left to be taxed. First topic. Second topic, when you look at how we are exposed to France as a country in terms of our investment versus business, you will quickly notice that we have roughly 25% of our profit coming from France. This is very much linked to business that is not very reactive to political uncertainty.
I have seen none of our customers who have canceled their health policy or their household policy after the resignation or the confidence vote of François Bayrou. When the economy is going down, they will not react either. You have to note that the savings rate in France is currently at 18%, and it has never been as high. Thirdly, one should never forget a very strong government sometimes has the tendency to display a very high influence on sectors or companies. A government that is weaker rather leaves the companies doing what they need to do.
Makes me want to buy more insurance, actually, not less. We're running out of time, so thank you very much, Thomas. Thank you, everyone.
Thank you.