Thank you, Anu, and good morning to all of you. Very happy to see you here today. We are very glad, together with my team, that we can present to you the new strategic plan, which I believe will further strengthen our leadership in the insurance industry. Let me maybe start where we stand today. AXA has, after a long time now, become a pure insurance group with leading positions in markets where we operate and where we have a strong commitment to our customers. Our business today is deeply diversified across all lines of business, across all geographies, across all customer segments and distribution channels. Over the last 10 years, we have built a very distinctive insurance franchise, and this plan is about taking it to the next level.
When we talk about the next level, we should have a look back, and if we talk about the last 10 years, we talk about a decade of reshaping AXA in which we have made deliberate choices to transform AXA, simplify our portfolio, and focus on the parts of the business where we believe we can create the most value. We have fundamentally shifted our portfolio towards insurance risk in P&C and health. We strengthened underwriting discipline and pricing, and in the current plan, Unlock the Future, we have significantly improved our margins, and we are now best in class across all our markets. On the life side, we have completely overhauled the in-force portfolio, reducing massively the exposure to high guarantees and refocusing the new business on capital light business with attractive returns.
What for me is the most important, we have returned our franchise to growth across all lines of business. At the same time, we have also worked on our customer proposition. We have sharpened it significantly in a way that we have simplified and digitalized our customer journeys. We have equipped our networks with better tools, and digital was always at the help of our physical channels and never at the expense. As a result of this, we now enjoy a market leading Net Promoter Score in all of our key markets, which for me is a great indicator of loyalty, but also of future growth. We have also worked hard over the last 10 years to make the business future ready from a technology perspective.
I am very pleased to tell you that the majority of our applications is now AI ready, and that we have also heavily invested in equipping our teams and also training our teams when it comes to AI tools. This has helped us to drive efficiency across the organization, and I am very pleased that 80% of our people, of our employees, tell us that they use AI regularly and that this regular use of AI presents a real advantage in their daily work. This makes us very confident that we are now able to turn the technology into a practical advantage rather than an aspiration. So where do we stand today? AXA is a fundamentally different business today. It is an insurer and an insurer only with industry leading underwriting expertise, a very clear customer focus, and a modern technology stack that is AI ready.
This combination gives us a strong foundation for long-term success and also great confidence to pursue the next chapter of growth. When we look over the past decade, we have not only talked about what we want to do or refined our strategy, we have also shown that we can execute it. We have set clear priorities at the beginning of each plan, and we have shown across the last two plans that we have been able to deliver in a culture of accountability and delivery. On top of this, we have also shown that we are doing this in a very disciplined capital allocation framework and a framework of great predictability.
This also makes us very confident that for the remaining months of the current plan, Unlock the Future, we will be able to deliver at the upper end of the underlying EPS growth target and the return on equity target. So you see the track record of execution and the disciplined capital deployment is something that we will absolutely maintain and continue over to the next plan. This has obviously also led to delivering industry leading returns for shareholder. 76% of our market cap has been returned to shareholders across the period of the last two plans. This has been done through dividends and share buybacks, sharing the value we create with our investors. We are very confident that our strategy will continue to compound value for our shareholders and that this journey continues over to the next plan.
When we look at the combination that AXA presents today, it is on the one hand predictable earnings combined with balance sheet resilience. All of this coupled with the fact that the environment that we are most likely be facing will not be the same that we experienced over the last plan. However, we have built a business that is able to continue to deliver predictable and consistent performance. Our confidence in this resilience reflects from our very diversified model. We have multiple earnings engines that are not tied to one single market or not tied to one economy or pricing cycle. We have a disciplined focus on margin, and we have a very active management of volatility. All of this, as I said earlier, is supported by a very strong balance sheet, a high quality asset portfolio, and prudent reserves that we have further reinforced during this current plan.
Today, we have a business that has a proven ability to generate reliable and predictable earnings across very different environments, and that is underpinned by a very robust and resilient balance sheet. We are well positioned with a strong right to win. We are entering now a new plan with distinct competitive advantages. One topic that we have probably not stressed enough in the past is the topic around our distribution. We have a distribution that is extremely well diversified. Whether customers choose to buy through agents, through brokers, through direct or other digital channels, we are present, and we are able to capture their demand and underwrite their risk. We are not dependent on one single route to market.
Secondly, with the focus that we have achieved over the last 10 years, we are now in each market and in each line of business at scale, which also allows us to offer very competitive propositions. A third factor for me that is very important is that our insurance expertise and the depth of our insurance expertise is a real differentiator. We have an underwriting bench that probably not many others have to be able to price and underwrite a very wide range of risks at attractive margins. All of this, and certainly in a time of big volatility and almost a crisis of confidence in many countries, the brand, the trust in the brand and a strong brand are very important.
We are very happy that AXA has always been considered a very strong brand and that in a world in which risks are more present than ever, in which complexity is more present than ever, the insurer that customers trust will be the one that matters most in the decision of the customers. So with this combination from distribution to brand, we've got the strong right to win in our markets, also in the next chapter of our plan. The next plan is called Growing Forward. Growing Forward has two notions. Going forward, which is a continuity of our approach, but growing forward, and therefore our next plan is first and foremost about growth. Taking market share across all our businesses and leveraging our strong positions and our clear right to win that I was just talking about.
Growth will not come at the expense of margins, and I think that is a very important point to remember. We will continue in our efforts to grow, to strengthen our technical capabilities, our tools and processes, so that every additional unit of growth is underwritten with the same rigor that it was beforehand. If you want to remain and stay competitive, we also need to accelerate efficiency, continuously simplifying processes in the way of working, which should ultimately drive us to lower unit cost. Obviously, one very powerful lever in all of this is artificial intelligence. As I said earlier, we are going to deploy it at scale now after having trained and equipped ourselves in terms of data and applications, and we are rolling it out across all pillars. Automation, margins, and growth.
Because we do believe that certainly on the customer front, sharpening the personalization of pricing and offers, equipping our sales teams and our underwriters with better insight and more data, and driving efficiency while enhancing customer experience and employee productivity are absolutely key levers for the next phase. So all levers, growth, technical excellence, and efficiency amplified by AI, will deepen our competitiveness and will give us the confidence that we can deliver stronger organic growth while maintaining robust margins that have underpinned so far and will underpin AXA's long-term value creation. When we look ahead, the main tailwind for our industry are the large trends around us. Many sectors are complaining about a lack of growth. Insurance is in the fortunate position of not being part of this crowd. We are one of the rare sectors with structural growth drivers. Think about widening protection gaps.
Think about new and more complex risks. Think about aging populations with growing needs for retirement and health coverage, while public systems have difficulties to sustain. At AXA, growth is and will not be concentrated on a single product or a single geography. It is broad-braced across all our main segments, P&C, health, life and savings, which is also one of the key strengths of our multi-line model. AXA is especially well-positioned to capitalize on this growth, given its scale, its distribution diversification, and its depth in technical expertise. It is important to note that we start this new plan from a position of strength. All countries, all lines of business, everything is working well. We have no turnaround case, and with excellent margins, we can now focus fully on capturing growth even more, rather than spending time on turning around underperforming businesses.
We operate as one of very, very few sectors in an industry with structural growth. We have the breadth and the capabilities to capture it across all our businesses, countries, and line of business. And we are entering in this phase now in a very strong position, ready to turn these advantages into sustained organic growth. But we are not just dependent on industry growth. That would not be enough. We have a clear plan to accelerate growth and to take market share across all our core segments. Let me go a little bit into detail by line of business. In P&C, our first priority is to increase retention. There is still room to improve, and this is a growth engine that leverages our existing customer base. Every percent of growth we generate from our customer base, we know. We know these customers.
We know we want to keep more of these customers that we already serve across retail, across SME, across mid-market, and also further strengthen at AXA XL, the depth of the relationship we have with our strategic clients. Better retention is a low risk and high-quality source of growth. And obviously, when I was talking about AI earlier, AI will amplify a lot to work better than the traditional means on this question of retention. We will complement this focus on retention with very targeted expansion in some segments, capitalizing on the structural trends I was mentioning earlier. And to give you two very concrete examples. One, direct. We are seeing now that the direct market is at an inflection point. There is more growth, and we are now ready to lean, certainly after the acquisition of Prima, to lean into the momentum and leverage our leading position.
A second example is inclusive insurance. In France, for example, 20% of French people have difficulties to access to insurance solutions. We have decided, not only in France, but across all the footprint in developed markets and developing markets, to build a franchise of inclusive insurance that already contains more than 20 million customers. Because there is a growing demand for affordable solutions from more modest income customers in both, as I said, developed markets, but also in the emergence of a new middle class in the international markets. And so this proven solution that has worked for 20 million customers will also be able to be scaled for more customers. At AXA XL, the situation is slightly different.
We do see, as I said, structural growth opportunities, but given the fact that we see a pronounced cycle at AXA XL, our primary focus is disciplined cycle management in a market that is currently transitioning. Let me quickly also zoom on Life & Health. On Life & Health, we intend to build on the positive momentum by broadening distribution and by further improving our customer proposition when it comes to capital light products. In health and protection, we will continue to drive our health specialization strategy because we are one of the largest health insurers outside of the U.S., with unique integrated offers and services, capturing growth in a segment where demand is rising, where margins are attractive, but where also customer needs go beyond paying claims, which is around help me to organize my medical journey.
When you look across all the segments, we have a very clear and focused growth agenda, stronger retention, and targeted expansions across a few segments of our business. When we think about the next phase, we also need to then think about how are we going to achieve it. As I said earlier, growth will not come at the expense of margins. Today, we have achieved a level of profitability. We are profitability leaders, which is also reflected in our disciplined capital allocation. The discipline that brought us here will also be the discipline that will guide us in the next plan. This is fully embedded in how we steer and manage the day-to-day business and the further growth.
As I said earlier, we are continuing to invest further in technical excellence, notably in pricing, in underwriting, claims, accelerating efficiency, but also accelerating our acumen when it comes to the appreciation of risk. AI will be an absolute core component embedded in these processes and making sure that we can now move from what we have piloted and seen it works to rolling it out, to scaling it, to accelerating in order to deepen our competitiveness so that growth comes with attractive margins and with the same sustainable returns that we have seen it in this plan. Our ambition is clearly to grow market share, but we want to do it while we keep a clear focus on technical excellence and capital discipline.
If we move to the next slide, I want to go a little bit deeper on AI, because it is important that we understand clearly where it plays a role. We believe that at AXA, AI is a great opportunity for us and not something that is forced onto us or that we need to do to do it. It is something that will fundamentally reshape the insurance model. For those who can leverage it, AI, as you see on the slide, is really a positive flywheel because it helps in the beginning to acquire and to retain more effectively customers by offering greater personalization, by offering faster policy issuance, giving more accurate pricing and underwriting, being more efficient in claim settlement while improving service at every touch point.
AI is absolutely core for us, and we will implement AI across the whole value chain and not just in a few places where we think we can automate and save a few costs. AI is a competitive advantage, and AI compounds that advantage with more data. Because what we learn from our customers, not only through data but through interaction, gives us much more smartness, and our models will become better. We want to be the leader in AI. We have now the right foundations, large datasets, a technology stack that is more than 80% ready to go there, and certainly, that is the most important thing, the teams that are hungry to implement it and use it in their daily work.
With the specific operating model that AXA has, combining the group's scale to build common AI and data capabilities, but at the same time empower the local businesses to implement and to decide where it is best to deploy. This combination has been one of the success factors over the last plans and will be going forward with a very clear framework of accountability and responsibility. We have already seen tangible value from AI, and this gives us the confidence that scaling it now across the entire business will further translate into a benefit around growth and margin. We have the foundations, we have the operating model to use AI and to further deepen our competitive advantage, which will enable us to compound more growth while sustaining our margins.
It is always important to look at the beginning of the plan towards the end of the plan and say, look, when would we all be happy in 2029? What would success look like? Success would look threefold. One, if we grow and gain market share, we obviously, and our shareholders, will have a bigger business. But it will also be a better one because it will be even more diversified when you think about sources of earning and when you think about the balance between P&C, health, and life. Secondly, growth means also growing in terms of customers, and we want to achieve the barrier of 100 million customers, not only by growing the numbers, but also by growing the depth of the relationship. With AXA, our customers will get something very distinctive.
Which is a differentiated access to the best of breed asset managers for their savings and retirement needs and preferred access to high quality needs and medical services because the personalization element in a customer journey has become so much more important, and AI will help us to better use our assets. So implementing AI deeply across all the businesses will reshape our ways of working, but will also improve the ways of working and the way we are acting towards our customers. So 2029 will take AXA and will take our franchise to the next level. We will become a larger business with more customers, but also more depth. We will have higher profits and we will be more competitive while implementing AI and scaling AI across the entire business. When we go to the next slide, the formula is relatively straightforward.
We will leverage our strong starting point of this plan, which gives us the right to take market share while keeping attractive margins that we have worked hard to build using AI as an amplifier across the board. This will underpin sustained growth in earnings, dividend, and book value. We are confident that our plan will translate into attractive and durable value creation for our shareholders, and that we will continue the same execution discipline that we have done over the last plan and this plan. If we move to the next slide, I want to say a word around the financial targets because the financial targets are very much aligned with this ambitious growth agenda.
We are targeting for higher growth in underlying EPS and return on equity, and our underlying EPS growth target will, in the next plan, benefit less from share buybacks than in the last plan. While the underlying earnings ambition itself is increasing by 2 points versus the previous plan. We are now very happy with the cash remittance that we have. The level is good, and we intend to maintain it at that level while continuing to support a 75% payout, which is, as it was over the last plan, composed of 60% in dividend and 15% in share buybacks. We are also introducing a new fourth target, because if 75% is paid out, 25% remains invested and reinvested.
This book value per share that represents the retained earnings, including dividends, needs to also have a clear discipline, and we are putting up a new target, which is mid-teen growth in the book value per share. This metric captures the intrinsic value we have built over time through disciplined capital management and deployment. AXA is ready for the next chapter, a leading insurance franchise growing across all its segment, deepening its competitive texture to the benefit both for its customers and its shareholders. If we move to the next slide now, which, I guess is the next section that Guillaume Borie will guide us through.
It is the execution plan of the initiatives that I laid out, the key pillars of the plan, with very concrete examples so that you can see again how we are moving from having piloted something successfully in one country, in scaling it up across all of AXA. Thank you for your attendance.
Good morning, everyone, and thank you very much for being with us today for the presentation of this plan. Building on what Thomas just shared with all of us, I will now explain how we intend to execute this strategy and how, concretely speaking, with all of our colleagues across the world, we will focus on a low-risk growth strategy that is not based on new market entries, but on leveraging the quality of the franchise we have today to bring it to the next level and to make sure that we capture broad-based growth out of the well-diversified model you see on this page. Our point there is to say that AXA is meant to compound through the cycle, and not to bet on them.
What we want to achieve is leveraging this diversification in order to compound growth and earnings above the level of the industry and for the long term. We will do that again, starting from a very strong position. We have all businesses firing on all cylinders, and as you can see here, for the five businesses of the group, we have delivered over the past plan, the current plan, the one we are going to close this year, a strong track record of both growth and margin improvements. The next level for us is now to leverage our best-in-class underwriting and operational excellence and accelerate growth. That is what you see here. We will keep improving technical excellence with clear targets that we present on this page, and we will keep improving efficiency. In both cases, it will be at the service of an accelerated organic growth.
You see on this page the measurable outcomes we target to have over the course of the plan, and I want to insist on one element. Our top-line target is meant to deliver 1- 2 points above the industry market average. Thomas outlined the strong growth we see in our industry, and we believe that with the current model of AXA, we have the ability to outpace that by 1- 2 points, and that is what we are going to do over the course of the next plan. How concretely? By having a clear execution plan and making sure that we apply consistently this playbook across all of our businesses. Arguably, today, we have to address two big questions. First, P&C. In P&C, we do see growth opportunities leveraging our great customer base in retail and SME while staying extremely disciplined at AXA XL. I will come back to that.
Meanwhile, in Life & Health, there will be a stronger momentum, and we are fully ready to seize it. That will be the next engine of the growth for the group. We will accelerate now that we have a well-positioned, de-risked, more profitable franchise, both in long-term Life & Health and in short-term Life & Health. We have a strong growth driver in this business, which is the demographic evolution across all of our markets, and now AXA is well positioned to seize this opportunity. I will now go through those two segments. P&C first, and on P&C, let us start by the elephant in the room, the P&C cycle. How do we look at it? I will start by AXA XL. Yes, there is a softening cycle at AXA XL. It is one-third of our P&C business. I want to insist on an element.
What we usually call soft cycle is when, generally speaking, we are no longer able to price at the level of the claims cost. This is not the situation of AXA XL today, and that's why, arguably, with Scott and the XL teams, what we see today is what we call a softening market. Yes, prices are decelerating. But yes, in many cases, we still find very profitable business opportunities, growth opportunities, and we will be, in this plan, extremely disciplined in the way we manage AXA XL in order to keep growing while being selective in capital allocation and, first and foremost, protecting our margins. That's going to be the XL playbook. I will come back to it in a minute. Meanwhile, 2/3 of our business is retail and SME mid-market, mostly in Europe, in France, in continental Europe. Arguably, the bread and butter of AXA.
It plays to all of our strengths, great distribution networks, customer base that is already very large, and where we have strong relationship, and a great opportunity to expand, deepen the quality of those relationship, as indicated by AXA. That's where we will grow first and foremost, by more than 5% every year on those 2/3 of the business. 5% of growth on those 2/3 of the business, that's exactly what we have delivered in the first half of 2026. That's what we will keep delivering while accelerating through very clear initiatives, because we have multiple levers to further accelerate this growth. And on those 2/3, I want to insist on a very significant element.
Yes, even when you look at the price, the level of price increases currently, it's a bit lower than what we had in the past two years in the middle of the inflation crisis in Europe. But the reality is that it is still above claims cost, and that we have a conducive pricing environment, and again, this pricing environment, we will beat it in terms of top line growth because we will have accelerated volume. How are we going to do that on retail and SME? First and foremost, we will activate much more the lever of the retention. When you look at our current performance, the reality is that in the current plan, as Thomas indicated, we focused a lot all together on strengthening our margins. But now that we have margins at strong levels, we can focus on improving retention, and that's what we're going to do.
On retention, we lag behind today. Only 30% of our entities have a better performance than our competitors in their respective markets. Any basis point of improvement of the retention will yield good growth for AXA, profitable growth out of a book that we know. So the playbook here is clear. The reality is that the growth of the next plan is already within our customer base. We know those customers, and what we have to do is to invest in the quality of the pricing and offering, in the quality of claims and customer services, in the quality of customer value management, and to do that, AI will help us.
That's what, for example, we are doing as we speak in France with a program called Ariane, and the French teams are reviewing systematically the customer journeys at the point of sale in order to make sure that for the distributor, when they have the customer in front of them, they know what to sell, how exactly they could cross-sell, and how they could accelerate retention. It's yielding very concrete results, and that's a playbook that we will now expand to all of our entities in order to gain new customers and to improve the retention of the existing one. That will lead to the growth of our customer portfolio. We will apply the same playbook to our SME and mid-market book in Europe. This book of business is arguably the crown jewel of AXA.
A very good book of customers, SMEs, in most of the cases, across continental Europe, where we have a long-standing relationship and where our tied agent networks have very close intimacy with their customers. We want to bring it to the next level by better equipping our agents with new tools, including artificial intelligence, by enhancing our relationship with brokers, where, in this segment, the name of the game is the quality of the underwriting tools we give to the brokers, and by scaling our prevention and risk advisory services. That's what we are doing, for example, in Italy, where we launched recently a new offer powered by artificial intelligence called Prevencia that is helping the head of the SME to assess the risk of his company and then benefit from lower price points if they implement some tangible prevention measures in their company.
We can scale that also to other markets. Ultimately, it will lead to better loss ratios, better retention, an increase of the retention by 60 basis points over the plan. This retention playbook is going to be applied consistently across our entire retail and SME mid-market book. Beyond that, as Thomas indicated, we have some structural growth opportunities that we see in the markets by some structural shifts of customer expectation and needs, and we believe we are very well-positioned to benefit from those. Where? In direct, in inclusive insurance, in the emerging markets. Starting with direct. You see that direct has experienced over the past few years in the markets where we do have direct operation, a faster growth than the average P&C market growth. There is stronger customer expectation for that kind of solution. We are today the largest player in continental Europe in this business.
It's a very profitable business, as you can see, and we have two amazing assets with the two leading direct brands in their respective countries, Direct Assurance in France and Prima in Italy. The reality is that we can leverage this expertise in order to further accelerate in the other three markets where we see a good opportunity, Ireland, Spain, and Belgium. Having a much more tailored pricing, improving the way we manage claims cost, and even more fundamentally, very competitive products that are helping us capture this book of customers. You see that we expect to grow out of this segment by more than 10% every year. The growth of the direct business will be accretive to our global growth. Another element that we need to have in mind is that over the course of the next plan, we will recapture Prima premiums.
Today, you don't see them. You will start seeing them in our GWP in the second half of this year for a small portion of it, most of it next year in 2027, and a residual portion in 2028. In aggregate, just recapturing the existing book of Prima will yield an additional point of reported growth to our metrics. It will be supportive to the 5% target we give. Second significant growth opportunity is Inclusive Insurance. Thomas mentioned the affordability challenge. I don't come back to it.
The important point for us is to execute on this playbook by accelerating our effort to review our products and offers in order to make them more affordable for this customer segment, and to make sure that we have the right distribution partners everywhere, because in most of the cases, reaching the low to middle-class consumers that have affordability issues go through new type of distribution. That's why, for example, we have implemented dedicated partnerships in Spain, in France, in Mexico, and that will help us accelerate our growth. We expect to generate 8% every year out of this unit. There also, this 8% will be accretive to our global growth. Last but not least, on the P&C side, to support our ambition to grow out of the retail and SME book, we will also accelerate in international markets.
International market is today the dedicated unit for 17 countries in the emerging world. An accelerated growth, as you can see over the past two years. And we believe that we have concrete, tangible actions to implement in order to increase our penetration in those markets. In those markets, the play is a lot about penetration acceleration rather than taking share from the competitors, because you still have a lot of customers who basically do not have insurance at all. That's exactly what we will do with those markets. And to do that, it's a lot about activating more distributors and making sure that they are as productive as possible. There also, we can use AI and technology to do so.
For example, in Turkey, we launched a new tool for our distributor called the Yavar GPT, which is helping them, concretely speaking, driving their own productivity and increasing the number of policy per customer. So from a base that is already significant, this international market unit, close to 10% of our P&C book, we intend to grow more than 15% every year, being accretive to our global P&C growth. That's how we will grow more than 5% out of the 2/3 of our P&C book. Moving now to XL in more details, and Scott is with us from the U.S. for the Q&A session later. I want first to underline the quality of the franchise and the extremely strong quality of the performance of AXA XL. The combined ratio is today below 90% with no PYD at all.
Going forward, obviously in terms of top-line development, we will take a more cautious approach into what we call a softening, not soft, commercial line markets. Again, I want to insist, we still see some very good growth opportunities at AXA XL. Short term, we will be extremely focused on a disciplined cycle management. Our top priority there is to defend high margins. The organization of Scott is ready for market cycle, and everything is organized in order to choose where we can go above capital hurdles and where we have to take a much more cautious approach. You have a good illustration of that on this page, on which I would like to spend a minute because we believe it's extremely important to share with you how we focus on margin through disciplined cycle management, which could be counterintuitive from time to time.
Take in the first half of this year, property and casualty property price - 7%, so strong deceleration. But we grew. We grew volumes, and in aggregate, our premium have increased by 3%. Why so? Because we still have an excellent profitability of this book. In many cases, around 90% combined ratio. Margins are very attractive, even with this level of prices. And we need to keep in mind that together with this - 7%, we also had much more attractive reinsurance pricing, and therefore, it's helping us protecting our margins. So that's property. Yes, price effect is negative, but we still want to grow. At the opposite of that, casualty pricing is positive, + 5% in the first half of the year, but the reality is that we decreased our exposure. In aggregate, our premium have decreased by 5%. Why?
Because the book is still profitable, but less than property, and we are extremely cautious in the management of our exposure to this book, in particular in the U.S. The playbook is to do exactly what I just shared with two examples, but across 26 countries and 400 products. There is not a single cycle. There are 400 products, 26 countries, and we will apply there also technology and AI in order to help us better understand the profitability patterns of each and every book and adjust our underwriting triage accordingly. While we do that on the short term, again, to focus on underwriting discipline, we will also continue to prepare for the long term. And at AXA XL, even more than in other parts of our business, we see structural growth opportunities for the long term. We believe we need to accelerate our diversification.
In the U.S., by going more towards mid-markets, and across the world by leveraging some structural changes we see in terms of customer needs. The expansion of companies, for example, in the defense sector, the energy transition, we are amongst the leading insurance companies on renewable energies, and autonomous vehicle. Those are three examples where we play really to the AXA XL strengths. How do we underwrite complex risk? How do we bring tailored solutions? And how do we provide proper risk consulting expertise? That's why also recently, we decided to take control of S-RM, a risk advisory firm where we were a shareholder and where we are now 100% shareholder in order to bring it to the next level on risk consulting.
So to conclude on XL, it's a great franchise, and we are very much confident in our ability to keep developing it at attractive margins while managing the cycle. Therefore, we believe that there is room to grow earnings out of AXA XL going forward. That was the P&C playbook to grow. I want to insist on an element that Thomas mentioned several times. As you know, AXA's DNA is one of underwriting and operational excellence. Yes, in this plan, we will go for accelerated growth and market share gains. But yes, in this plan, we will keep the same level of discipline on underwriting and operational excellence. We will never compromise on it to deliver the growth. Yes, we believe that we have tangible operational levers to activate in order to keep strengthening our technical excellence. Technical excellence is a constant work.
Almost a hygiene work, as we say within the company. Every morning, you need to ask yourself, how can you improve your pricing, your claims management policies, your underwriting quality? The good news is that it's a lot about data. Now with AI, we can leverage data very differently in order to scale concrete solutions and deliver much better pricing, much better underwriting, and much better claims management. That's what we do, for example, with [Photon], one of our AI tool that is a pricing engine that has helped us improve our loss ratio by 2 points in all the businesses where we have implemented it, mostly retail P&C so far, and that progressively we will scale to all of our businesses. Going beyond P&C and now moving to Life & Health.
There, again, we see a structural acceleration opportunity, and we believe we can capitalize on this structural growth in order to turn our Life & Health book into an even stronger earnings growth engine for AXA in the next plan. Why now? Because now we have repositioned the franchise by de-risking our long-term portfolio and all the work we have done to clean the balance sheet and by restoring attractive margins in our short-term portfolio with very significant improvement of the margins over the past three years. So we believe now we are all ready to go after stronger volumes without compromising capital and technical discipline.
On long-term Life & Health, I don't come back to the structural opportunity mentioned by Thomas. But we do have the assets to win in these markets, starting with our multi-specialist model and the very fact that on the retail customers, the strong retail customer base I was mentioning earlier, and our effort of prevention will have tangible results in the growth of our long-term life book, because we will sell more savings products to this customer base. What do we need to do to leverage this? Activate distribution, and there, it's mostly a play around diversification. Building stronger relationships with IFAs across the world. That's, for example, what we are doing more and more in Hong Kong, having more solid distribution partners. Recently, in Hong Kong, we initiated new partnerships with bank distribution across our high net worth business, and also pursuing some greenfield opportunities.
For example, distributing savings much more on the direct channel. That is what AXA France has started doing with tangible impact, as you can see. We believe we can replicate this playbook to accelerate our growth. Another critical element to grow in the Life & Health business, as we know, is the competitiveness of the solutions we provide to our customers. There, to be extremely explicit, it is about the fees and loadings we have, and we did a lot of work in order to improve the competitiveness, in order to reduce our loadings while keeping similar net margins for us. That is what we did, for example, in Switzerland with a new solution called Smart Flex. Over three years, we increased our market share in the individual savings market in Switzerland by 13% to 19%.
It is a clear demonstration also of the benefit we expect to have from our new model on the investment solution side, with access to a scaled asset manager partner, BNP Paribas Asset Management, while also retaining an open architecture solution with access to third-party asset managers to secure every time the most attractive funds for our customer. All in all, this playbook, this expansion strategy, will support sustained positive net flows across all of our long-term Life & Health books, and therefore, reserves will increase. While doing that, we will remain extremely disciplined on the excellent level of margins we have today in the book, that we expect to maintain at this level. Therefore, growing reserves, keeping stable margins, this will lead us to deliver strong CSM release annually. Moving to the short-term business. Short-term business, mostly health, as you know.
We did very significant work over the past three years in order to improve both the value of the proposition we make to our customers in this market, both on the retail and on the employee benefit side, but also to improve our margins and go much closer to best-in-class players with today a combined ratio around 96%. We therefore believe that while continuing to benefit from sustained claims inflation on the health side, that will drive price upwards, we can also have much better volumes out of this segment, and that out of a proposition that is quite unique in many of our markets, this verticalization integrated healthcare proposal, we have ways to differentiate ourselves and therefore have an accelerated growth around 6%- 7% every year. While doing that there also, we will continue to focus on our monoliner specialization strategy.
For example, extending [Photon], the pricing tool I was mentioning earlier, to the health business, but also by rolling out a new tool on claims lifecycle management in order to better detect fraud, waste, and abuse and reduce leakage. Those tools, we intend to double the size of the business we cover with those technology tools, yielding very concrete results and therefore improving our margin by one point in order to reach 95% combined ratio. So you see that is how, across all the businesses, we intend to drive growth, to accelerate market share gains while protecting our margins and staying at a very good level of attractive margins. To that extent, obviously, we will keep accelerating our efficiency efforts. Basically, over the course of the next plan, the pace of efficiency will almost double when compared to the current plan.
In the current plan, we improved the expense ratio by 50 basis points. In the next plan, we expect to improve it by 90 basis points. How? By being extremely disciplined on cost management with three main levers that you see here. Alban will comment them in more detail in a second, but I like to spend two seconds on what is the most operational level, which is how we will improve productivity across the whole organization, leveraging an accelerated plan for automation. The reality of our workforce is that in many cases, due to natural attrition, due to the demographics, we will have to face a sustained pace of replacement over the next years. To compensate for that, we believe that we need to accelerate productivity even further, and that automation is giving us a great opportunity to do so. We will apply that extremely systematically.
A good example of that is the work we are currently doing in our contact centers. For example, in Italy, where we deployed a new AI tool that is demonstrating a 10% increase in the speed of customer files treatment. It's concrete, tangible results that we can now have in all of our contact centers. That's precisely leading me to say a word on AI and how, concretely speaking, we will leverage AI in order to amplify the level of margin improvements and our level of organic growth throughout the plan. AI today doesn't sit in a lab within AXA. It's live and it's already everywhere. That's the impact you see on this page. Tangible business impacts from AI initiatives and tools that are already used by our teams and our distributors across customer and distribution, across technical excellence, across efficiency. AI is not experimental.
It's a reality with business impact. The question for us is now to turn what is proven local solution with tangible impact that you see here into group-wide margin expansion and to use it to amplify our priorities, growth, technical excellence, efficiency. I don't come back to the examples I mentioned earlier, but what you need to have in mind is that we expect to generate EUR 500 million- EUR 700 million of recurring value out of this AI initiative. How so?
By leveraging our unique operating model, where we combine the strengths of a global group, including to make sure that we manage the cost of implementation and the likely increase in BAU cost due to those new technologies, together with our local agility and making sure that on the ground, all of our teams, they fine-tune what we do around the reality of their respective business, they scale fast, and they drive adoption. Because, again, the name of the game with AI will be about adoption by our teams, by our distributors, and by our customers. That's the execution plan, and that's the roadmap we will apply consistently through the next three years in order to deliver the clear, measurable outcomes you see on this page and on which the entire management team is committed.
We believe that we have a clear plan to execute, a clear playbook, and we will deliver on this, ultimately driving value creation that Alban will now command. As a short break before the part you prefer, we will have a short video to summarize how we use AI at the service of growth and customer acquisition and retention. Thank you all very much.
[Presentation]
[Presentation]
[Presentation] .
Okay. So good morning to all. Let me now take you to the financial details of our plan. The simple message is we are increasing all our targets. We are increasing our underlying EPS growth to 7%-9%. We are increasing our ROE target to 15%-17%, and our cumulative cash remittance over the next plan to circa EUR 25 billion. We are keeping the payout ratio policy that we have of 75% made of 60% dividend and 15% share buyback. But we are also introducing a new objective of book value per share growth inclusive of dividend per share that we position at mid-teen. For us, that new objective, that new KPI, reflects the value that we are creating by reinvesting the 25% that we are not paying to shareholder into higher ROE business.
That set of targets demonstrates our ability to grow earnings, but also give visibility on dividend share buyback and build the future through growing book value. So investors get visible midterm EPS growth, an attractive cash yield, and also compounding growth in book value. All this with a resilient balance sheet and a resilient business. Before I go into the details, I want to spend one second on the last two plans, just to show again that we have met or exceeded all our financial targets over the plans, which shows our strong delivery capacity. We have, I think, an excellent track record, and we have built a very strong platform, very strong foundations to build on for our next plan. Let's start with UEPS growth.
We aim at a 7%-9% underlying EPS growth that is made of 6%-8% on underlying earnings and 1% from share buyback. It is a 2-point increase in reality in terms of underlying earnings growth compared to the current plan, because the benefit of buyback will be lower because of a higher share price, and that is good. But we are clearly increasing our ambition in terms of underlying earnings growth. That ambition will be very balanced between P&C and Life & Health because we want both business lines to grow between 5% and 7% their earnings. I said we were increasing our objectives. I want to highlight the fact that we do that in a context which is probably less easy than three years ago.
Less easy because, as Guillaume mentioned, we have a softening cycle at AXA XL, but less easy also because we have no business to turn around. All our businesses are performing, so there is no quick fix, no quick win. It is an improvement that we want to deliver in all our businesses. Let's start with P&C. As we showed, we have built now an extremely well-performing P&C platform throughout the group. So the purpose of the next plan is not to grow further our margins. The purpose of our next plan is to keep our margins stable and to grow our businesses. They are already at scale. That is why we are delivering that economic performance. But we believe, as Thomas and Guillaume said, that we can grow them further.
The various levers that we will have are revenues that will grow above 5% overall, a stable all year discounted combined ratio at 91%, and investment income that will grow at 6%-7%, simply because we will have a larger balance sheet thanks to growth, but also because we will be replacing lower-yielding assets with higher-yielding assets, thanks to higher rates. The earnings driver in detail would not be uniform, in the sense that for Personal lines, SME, mid-market, we will have good top-line growth, and we will carry on working on our margins. But for AXA XL, the focus will be on profitability. We know how to manage the cycle. We have levers to manage the cycle, and I am not coming back to what Guillaume has described.
There will be opportunities to grow the business at AXA XL, but the focus will be on profitability, which means that we expect AXA XL to show muted growth on top line while managing the deterioration of the current year combined ratio. But there is room to grow AXA XL's earnings, and notably thanks to higher investment income. For the whole group, we are confident that we can keep an all-year combined ratio stable. First, because we will remain disciplined on our technical excellence and on our expense efficiency, but also because we have built reserve buffers over the last years, taking advantage of the low natural catastrophe years that we had over the last two to three years. That reserve prudence gives us a level of safety when it comes to the next plan's all-year combined ratio.
If I now move to Life & Health, you know that we like presenting our Life & Health businesses in two blocks. One is the short term, which is annually repricable, renewable policies in protection and in health, and the other one is the long term, and the translation of earnings for that long-term part, which is the savings business, is through the CSM release. On the short-term part, we believe we can grow our revenues 6%-7% thanks to higher demand, but thanks also to our competitiveness. We can further improve the profitability. We reduced our combined ratio in short-term Life & Health by 300 basis points over the current plan. We believe we can do another 100 basis points in the next plan. On the long-term business, on the savings, we think we can grow our CSM release by 4%-5% points.
I will come back to that in a second. Finally, the third lever to grow our earnings in Life & Health will be investment income, that we will grow at 45% at a lower pace than in P&C, simply because the duration of our assets is longer in that business than in P&C, and therefore, it takes more time to replace the lower-yielding assets. A word on the CSM release. If you take a simple approach, at the end of the day, the CSM release is a margin applied to an amount of reserves. That margin, and you have it on screen, has been relatively stable, around 80-85 basis points over the last years, and we believe it will remain stable over the next years. But the reserves will grow.
They will grow with the positive net cash flows that we are generating, and our ambition is to increase those net cash flows going forward. They will also increase simply because of the credited rates that we give to our policyholders and the revaluation of unit-linked. All in all, reserves should grow 4%-5%. So if you apply a stable margin to growing reserves at 4%-5%, you have a CSM release that also grows at 4%-5%. A word on expenses. Guillaume mentioned one lever. I will talk about two others in a minute. Overall, we will double the pace at which we improve our expense ratio. In this plan, our ambition is to decrease the expense ratio by 50 basis points. We will do 90 basis points in the next plan.
It is a mix of good growth in our revenues, 5% or more, and contained cost base because we do not want our costs to increase by more than 2%, sorry, a year. Just to make it very clear, our investments, and notably our investments in technology, will grow at the same pace as our revenues, so 5% or more. So the efforts will be on BAU expenses, not on investments. Through that cost containment and that strong growth, we will have positive jaws, and therefore, a 90 basis points improvement in our expense ratio. The two levers that Guillaume has not mentioned are, one, the costs of our corporate center, and second, what we do on non-staff cost. Through the reorganization of our operating model with our entities, through a simplification of our tasks here, we believe we can reduce the cost of corporate center by 15%.
On non-staff costs, when we compare ourselves to the best ones outside our industry, I am thinking about car makers or retailers, what they do on procurement is significantly more powerful than what we have been doing. So we believe there is a lot to be done on non-staff costs, notably through procurement, and that will contribute 20 basis points out of the 90 basis points of expense ratio improvement that we are targeting. So that is about earnings. Now let us move to capital and cash. We are maintaining our target for normalized capital generation at 25-30 points. Even though we are increasing our top-line target, that is because we have a very efficient operating model in terms of capital generation. There will probably be seven points of additional capital requirements every year. Nevertheless, we maintain that 25-30 points target.
On the cash side, we have reached over the current plan, a remittance ratio of 82%. We believe that in the next plan, we can maintain that level of 80%, which is sustainable, and that will take us to circa EUR 25 billion of remittance from our entities to the group. So 80% will be remitted to us, 20% will be kept at local level for organic growth. When we look at our capital model in general at group level, that translates into the same 75%/25% that we have had over the current plan. 75% will be distributed to shareholders through dividends and buyback, 60% and 25%. 60% and 15%, sorry. We will keep 25% for our organic growth, which means that we have a clear hierarchy when it comes to capital and cash. First is organic growth, second is dividend and share buyback, and third is M&A.
We have with this model, clearly with the fact that we reinvest for future growth at a 15%-17% ROE, the ability to deliver good cash now and also in the future. That is why we are introducing this new objective of book value per share growth inclusive of dividend, that we position at mid-teen versus 12% in the current plan because there again, we see an acceleration. For us, that KPI will reflect the value we create now and in the future. All this would have little value or less value if we did not have a resilient business, a low volatility business, and a resilient balance sheet. The first reason why our business is resilient is simply the diversification. Diversification in terms of geographies, diversification in terms of lines of business. We have multiple earnings engines.
We are not dependent on any geography, any single line of business, any single regulator, any single economic environment. That is a source of low volatility and of predictable earnings. If we go into low volatility, I want to dwell for a second, again, on P&C. We have one of the best combined ratios of the industry, but, and it is probably less well-known, we have also the least volatile one, and that is extremely important. We have regularity in what we deliver. That comes obviously from the diversification of our business. That comes from all the efforts we have made on our natural catastrophe exposure in the past that allows us to be less exposed to that peril. We also demonstrated how we managed inflation two or three years ago, when we had a peak in inflation, and that might prove useful in the coming months and years.
Finally, as I said, we also built some prudence in our reserves. We have never been a company that releases excessive PYDs, but we have been extremely prudent over the last three years, taking advantage of our low natural catastrophe losses. As I said earlier, that will play as safety net for our next plan. What is true for P&C is also true for Life & Health. We have a predictable, low volatility business there.
Again, if I take the same two businesses, short-term and long-term, on the short-term side, we have annually renewable, annually repriceable policies, and we have demonstrated that we can improve the earnings there even when we have headwinds in some of our markets. But it is also true on the long-term part on savings that is thanks to all the work that we have been doing on the runoff of some portfolios, the sales sessions of some portfolios, the fact that we moved to capital light, the fact that we reduced our duration gap. At the end of the day, you now have a business for which the CSM release is not very sensitive, to say the least, to external financial shocks. So that is again, a source of predictable earnings. On the balance sheet, what is true for the CSM is also true for our balance sheet.
We have reduced significantly the sensitivities of our solvency to financial markets. We also have a high level of solvency, which will be further enhanced next year with the benefit of the Solvency II revision. We have a robust balance sheet, and that is also true for our level of debt, where we believe we have flexibility. We could increase our level of debt by EUR 2 billion- EUR 3 billion per year in the next plan. Overall, the balance sheet is strong, but that also shows in our assets. We have always been prudent in our asset allocation. We will just in the next plan, take stock of the fact that rates yields are higher. By definition in that context, you are better off having debt than having real estate and private equity.
To some extent, we will rotate part of our assets from those two, real estate and private equity, to private debt below investment grade and investment grade. Still on our low volatility, here you have what the sensitivity of our earnings overall would be to a - 100 basis points shock. Clearly the world is not going in that direction these days. If that were to happen, you would see that it would have an impact of - 4% on our earnings before management action, something which is very manageable. You also see the impact on our solvency of some external shocks. At the end of the day, the message is that we are very confident in our planned targets. They are built on realistic assumptions, notably when it comes to the softening market at AXA XL.
Our plan relies first and foremost on our ability to execute, not on external factors. Given the strength of our business, given the strength of our balance sheet, we have room to manage potential deviations. We therefore believe we can deliver a predictable financial trajectory. In summary, we are confident that our plan will deliver good growth in the cash we deliver to the shareholders, and good growth in the value that we generate year after year for the future as we reinvest our at a higher ROE. We have a strong starting point, and we will build on this to deliver our plan. Thank you very much.
Thank you, Alban and Guillaume. We now have roughly an hour to talk about and answer your questions. Who would like to start? Let us start here. William.
Thank you. William Hawkins from KBW. Maybe I will kick off just with one question, but it has got a few parts to it. Your new financial focus on book value growth. Personally, I really like to see that, and I understand the discipline you are putting in place, but it does kind of lead to some questions about how it is going to affect your behavior in the future. Around that, it is going to be an impediment to any acquisitions of high multiple or fee kind of, or distribution businesses in the future. We have not really discussed much about M&A, but in the context of your solvency ratio, that must be a talking point. I wonder, could that actually be a strategic impediment to how you think about growth over time?
Secondly, I know it is slightly nerdy, but your share buybacks are going to be dilutive to book value growth. Shouldn't you be thinking more creatively about how to repatriate capital rather than repeating the last plan? Lastly, if you are going to focus on book value growth, why aren't you including CSM? Thank you.
Thank you, Will, for your three questions. I will take the first one, and Alban, if you could take the second and third around dilutive share buybacks and the book value question. I think the question around M&A. For us, it is very important that we have this measure around book value to make sure that the means that remain within the company are well invested and are well followed up, and also follow a trajectory about the mid-teens that you have seen. If you look in the past, this is absolutely achievable and has been achieved. For us, this plan relies very much on organic growth, and this is the main focus.
If we do spot M&A opportunities like we did in the past, when you think about Prima, when you think about Laya Healthcare, when you think about Crédit Mutuel in Spain, we will certainly look at it, but it needs to fit into the concept of the book value development. If we happen to find acquisition targets that have multiples that are a little bit higher, there needs to be synergies that justify it. Again, I want to stress what I said in my beginning. The discipline that we have put in place over many years now will remain in place. We have not fought for something very hard to give it up as of tomorrow. When it comes to margin discipline, when it comes to capital allocation discipline, we will remain the way we did beforehand. Alban on the second and third question that Will asked.
Thank you, Thomas, and thank you, Will. On the share buyback that leads to a dilution, you are right mathematically. From a value standpoint, we still believe that our share price does not reflect our true value, and therefore, buying at this level of price is still accretive in terms of value for our shareholders. On your question on the CSM, I think the reason why we did not include it is twofold. One, I think book value generally is better understood globally when you go to the U.S., Europe or Asia. Second, when you include CSM, it gets you to something close to the embedded value. We obviously have a large life business, but we are a composite insurer. So I think it would draw the attention too much to the embedded value part versus the book value, which is more reflective of our total businesses.
Thank you. Let us move from William to Will.
Thank you. Will Hardcastle, UBS. The first one is thinking about the improving retention that is going through. It sort of resonated, and I have heard it from some others, and it seems to be a key part of the efficiency tools of AI. I guess as others are also doing it, does it create somewhat of a risk on the reduction in new business acquisition costs? So your ability to grow the volume, and how are we trading that off? I guess if that is getting more competitive, that could create a faster softening. So it is just trying to understand how you are managing that. Or is it just that you think you are so far ahead of the competition and the competitive mode that they cannot catch up? It is understanding that relationship. Then where have you struck the yields?
Obviously yields have moved a long way quarter to date, year to date. Understanding whether there is any risk. Years ago, if we took a step back, we would always say that is linked with the P&C cycle. It takes time, but how much you are factoring that into any potential softening. Thank you.
Good. I suggest I will ask the first question. Alban, if you could talk about the second question, also stressing in the second question or the answer of the second question that when we talk about cycle, we really only see the cycle today in the segment of large. When it comes to retail, when it comes to medium-sized business, we do not see the cycle, and that is also maybe linked to the answer on the first question. Retention is the best possible where you actually have, I would say, control over your customer, which is very much in agency markets. AXA has always been very good and very strong around developing their agent networks. We have probably one of the biggest agency networks in Europe.
The question is, others are also investing in AI, but the number of insurers that invest in AI, if you look at the portfolio of customers that is represented, is relatively small because in order to invest in AI, in order to benefit from it, you do not only need to have the financial means, but you also need to be able to entice your employees and the agents to do it. The big challenge in AI is not have you got the best technology or have you bought the cheapest license for Copilot. The key is are you able to engage your employees and your agents to use it? I think that is where the difference will be made.
Therefore, when you look at the market, most likely we will take market share from others and retain customers against smaller companies that do not have the means and do not have the ability to engage their customers and their agents and their employees in that. Because, and you said it in your sentence yourself, we are probably one of the first ones to push it, not retention as such, because when I was Head of Distribution in 2006, Retention was already an issue. But to push it now with AI and what we have seen in some areas that AI is really making a difference and does increase retention rates. You have seen, Guillaume was talking about it earlier.
On your question on yields and impact on pricing.
You can never say that no competitor will do some cash flow underwriting to take advantage of the yields. That being said, we don't believe it will be so, or it will be a major phenomenon for the simple reason that where you get a strong benefit is for long-term business and casualty, and financial lines. I think we have strong support on pricing in casualty, notably in the U.S., with the loss trend. Today, pricing in casualty overall is up 4%. That's already below the loss trend, which is 6%- 8%. I don't believe that we should see a further significant reduction in pricing in casualty for that reason.
If you think about other lines such as professional lines, which are also long tail, we are clearly seeing a bottoming out of this after a softening part of the cycle for that line, despite the higher yields. I don't think that's a major risk.
Let's move to the next. Farooq.
Hi, thank you. Farooq Hanif from JPMorgan. Going back to your two growth pillars, which are new lines, particularly Direct, and then Retention. If you had just one or not the other, so for example, if you just improve Retention to the basis points levels that you want to, what would that do to your growth rate? When we look at your more than 5%, how much of this is really more about retention and how much is direct? Second question on the 91% combined ratio. You alluded to reserve strength, but if I look at your natural catastrophe budget as well, it feels to me, I may be wrong, but it feels to me like that is a higher confidence level. So your 4.5% is a more extreme event than it used to be, given the amount of de-risking you've done, for example, at AXA XL Reinsurance.
Could you comment on that? Within that 91%, are you saying loss ratio may go up and expense ratio goes down? Is that the mix, or are you leaving it uncertain just because you want that flexibility? Maybe one more question, if I may. When you look at your Solvency II ratio, clearly it's going to be a big number, but we know that Solvency II isn't the same as cash, and you talked about keeping capital locally. I'm kind of wondering why you're doing that. You're running a capital-light model. It seems like you have adequate capital in the group. I'm just kind of wondering why there hasn't been this desire to sort of turn some of that in force into cash and maybe improve payout. Thank you.
Thank you, Farooq, for your three questions. Guillaume, I suggest you do the first one. When it is about Retention versus Direct, the answer is probably we have to do both. I think you'll get into Retention more. Then if, Alban, you could talk about the question of natural catastrophe, and also about the question around solvency. I think, Farooq, you said a very important sentence, "Solvency is not cash or not always cash." I think that is something that we need to keep in mind. Yes, our solvency ratio will most likely be quite high, but because solvency also accounts for future profits, it's not cash. Guillaume.
On your first question, Farooq, obviously when we look at growth, we are looking first at what we could call natural growth, meaning being exposed to the fastest-growing segments of our business. That's exactly the point we make with Direct, but also with Inclusive Insurance and International Markets. Those are territories, customer segments, where the natural growth is faster than the average growth of the market. By increasing our exposure to those segments, we will accelerate, and it will be accretive to the global growth. That's for this part. On this part, the play is a lot about new customer acquisition for Direct, for Inclusive, for our International Markets where we want to increase penetration. Retention is how indeed we work better on our existing customer base, as Thomas indicated.
When we look at the value it will give us, that will be a very significant contributor to the increase of the volume effect, in our largest geographies, in particular in Continental Europe and in our French business unit. That's the way we look at it.
On the combined ratio, the 4.5% cat load is determined with the help of Françoise, I am looking at her, our Group Chief Risk Officer, in the sense that we have a model that tells us on an average year how much cat losses we should have. It comes to 4.5%. We are very happy that over the last years it was below, but as it is an average year, you will have years below and years above. So I prefer sticking to that 4.5%. If there is some prudence there, so much the better. When it comes to expense ratio and loss ratio, yes, you have well understood that our non-commission expense ratio will go down with all the efforts that I described earlier.
But we will reinvest part of this and part of our technical excellence, because there are still a lot to be done on technical excellent, even in P&C, in our competitiveness. In our competitiveness, that means potentially higher commissions ratios, and it could also mean a deterioration, potentially, of our loss ratio here or there. But overall, we will maintain our all-year combined ratio. Then on turning inforce into cash, at the end of the day, we had a couple of transactions, as you know, where we sold some life reserves. It is not easy. There are not so many buyers, and the price they offer is not that great. By doing this, you also compromise your ability to grow earnings on the life side.
We are happy with the 75/25, or 80/20 when you look at local level, because at the end of the day, we can generate 25- 30 points of capital. That is also due to the diversification we have between P&C and life, and that diversification would probably be hindered if we were to sell our life business or part of it.
Andrew?
Good morning. It is Andrew Crean with Autonomous. Three questions if I can. Firstly, could you tell us what the interest rate and inflation assumption is behind your three-year plan? You said, I think, that 100 basis points off interest rates would hit the earnings by 4%. What would 100 basis points on the inflation assumption above your assumption do? Secondly, the whole plan seems to be based on an assumption that large corporate will be softening, but all other P&C markets will be stable and flat. That is beyond your control. If you get a soft large corporate market, and that tips down into the mid-market, possibly into retail, is there a plan B? Would it be possible for you to hit your earnings targets under that scenario?
And then thirdly, in the last plan, I think you said 6%-8% and said that you'd do that in each of the three years. Is that something that is likely during this plan, or do you think it may be less even delivery?
Thank you, Andrew, for your three questions. Alban, I suggest that you do the first one and the third one, and I'll quickly answer the second one. First of all, Andrew, what we see today is that the so-called softening, and I'm talking about softening and not soft market, because what is important is that even in a softening market, profitability in most lines of business is still very good and growth makes sense, as you've seen beforehand. We do not see it in retail, and we do not see it in the commercial mid-market yet. What is the reason? On the retail side, we have precisely, as you mentioned earlier, still two things. One is inflation, so there is reason and opportunity to increase prices. And secondly, you see that we do have many insurers that have not gone the same route that we have.
Meaning, sorting out the issue in one go. When you think about the beginning of last plan or of this plan in the U.K., in Germany, where we went straight ahead and closed our gap immediately, whereas others did it over many years. So on the retail side, I have big difficulties to see the softening market. And when you talk about the mid-market and the SME market, the question is there as well. Mostly softening comes with more capital and more competitors. And the SME market works like the retail market. You need to have a distribution presence and you need to be in front of your customers. If you come into the market and have nothing, it's very difficult. It's very different to, let's say, a reinsurance market where you can come in with alternative capital very quickly.
The U.K. is probably one area where this could be more pronounced because you're much more in a broker market. But on the continent, a very large part is distributed by agents, and it's very difficult to get in there.
On the assumptions we took. In terms of interest rates, we are not betting on higher interest rates, nor for that matter on lower interest rates. It will be broadly stable. That's our assumption over the plan, and I believe the plan was done a couple of months ago. Recently rates have gone up. They could come down as well, but broadly stable. When it comes to inflation, I think, and that's what I said on commenting on one of the slides, the assumption is that the inflation will remain between 2% and 3%. But at the end of the day, what matters is our ability to manage inflation. And that's what we demonstrate in 2022 when we had that spike in inflation.
At the end of the day, it was not visible in our loss ratio because we know how to manage the claims, and we save on the claims, probably I'm thinking of the motor claims, two to three points every year compared to the natural claims inflation. We know how to get, notably through procurement, better claims inflation than the general inflation would lead you to think. I'm not concerned if we have an increase in inflation that it will impact our profitability. On your second question, I do remember three years ago you asked me whether 6%-8% was every year. I said yes. I'm saying also that the 7%-9% is every year.
Let's stay at the same tariff, [Fahad].
Good morning. Regarding your asset reallocation from real estate into private debt, what's the quantum we're talking about there? How much of the 7% increase in capital requirements perhaps relates to this? Also on the CSM growth target of 45%, where you gave the breakdown where the CSM was. Could you give some color in terms of relative growth between your major, where you gave the breakdown of the CSM by country, could you give the relative growth of the countries for that 45% target? I just wanted to ask you on the health. We're talking a lot about retention. You've turned around the portfolio. You're going after more claims leakage. How has retention developed in health, and how is that going to go from here onwards?
Thank you for these questions. I suggest, Alban, you take the first two, and on health, Patrick Cohen, CEO of Europe, and also the CEO of Health, will certainly answer and has got also the field experience from the U.K. on this. Alban, and then Patrick afterwards.
On the first one, we are talking about roughly 3% of our balance sheet that will move from real estate and private equity to private credit, and notably below investment grade private credit. The 7% increase in SCR is the capital required to grow the business. We do not believe that that move from private equity and real estate to private credit will lead to a significant increase in required capital. On the CSM, we are not giving specific guidance by country. But simply, you can see the two drivers, which are credited rates and net cash flows. We plan to have good net cash flows everywhere, and by definition, credited rates are lower in places where interest rates are lower, like Japan and Switzerland. But overall, the ambition is group wide when it comes to growing our CSM release.
Patrick, on health.
Thanks for your question. On health, you said it. We have increased our earnings 20% a year. We have very strongly improved the combined ratio. If I look at Europe, it is down 7 points, probably 4 points overall. We have an extremely healthy portfolio, and we are coming back with growth now. We are at 7% growth. We see our retention being stable. Obviously, all of that has been driven by our specialization effort and strategy, in particular, as you said, on price claims and underwriting. When it comes to retention, we believe we have a model, we have assets that are really distinctive. I will mention three. First, our EB Workplace Solutions, where we help HR leaders through analytics to understand the root cause of absenteeism and their health population, and direct their prevention business to the right places. We are betting very strongly in promoting prevention.
Hassan is close to me here. For instance, in Colombia, 20% of our premium goes to prevention, and it has a fabulous effect on customer retention and also profitability. Last but not least, we are scaling our care delivery in some markets. So we're giving faster access, we're giving a great experience with a 30% claims cost reduction. We have now 84 centers, and we plan to grow that further in the coming years.
Thank you, Patrick. Fahad, did you have still. You were okay because you raised your hand again. Let's move here to the middle. I think it's Kailesh. Yeah.
Hi, Kailesh Mistry, Bank of America. Two questions. Just coming back to the Life & Health CSM point. I think you've been quite careful about phrasing it as CSM release in the various slides. You also gave us a margin on reserves. Obviously, most of our models are built on normalized CSM growth, et cetera. Does that imply that you're assuming a higher release rate throughout the plan? Because I think consensus is probably around 3.5% for normalized CSM growth. So that's the first one. The second one is coming back to this topic around retention, et cetera. Obviously, it's an important driver of the plan in the developed markets.
Can you talk a little bit about how much of the capabilities to affect that are already in place, and in particular, how you've adjusted incentives of distribution or management in order to drive that, or if that's coming down the road? Thank you.
I would suggest, Alban, you take the first question around the CSM release, and Mathieu Godart, if you could take as the CEO of AXA France, take the second one because when we look at retention and cross-selling, I think AXA France today is probably the best practice example in the group. Alban.
The simple answer to your question is that the pace at which we will increase the CSM release will be regular, so it's not going to increase. The 4%-5% increase is something that we want to have every year. It's true that our normalized CSM growth is not at that level, but I want to emphasize the fact that they are not equivalent. Over the long term, obviously, they would converge, but over the long term, as Keynes said. I just want to take an example to illustrate that. When you look at our Japanese business with higher rates, the new business CSM of our Japanese business will come down simply because of the discount. Does it affect in any way the margins that we do in Japan and that we release? No. We need to keep that in mind.
Mathieu, on retention and what is already in place.
Yeah, thank you very much for your question. I think I will mention three things that are already in place. The first one is the tremendous work that we did regarding customer data. Today, we have developed and embedded in our systems a 360 vision of customers that is made available to our distribution networks, which gives them a fantastic lever to work on AI that is now implemented as well in the CRM. What does that mean concretely? It means that I will have the information on your situation, the events in life that might occur to you that will drive the behavior and next actions for distributors. And yes, you mentioned that we are going to work together with our networks to align the incentives and the remuneration with the stake of retention. Thank you very much.
Let's move here to the front. Ben.
Thanks very much. Ben Cohen at RBC. Two questions, please. Firstly, in your prepared remarks about the book value growth, you flagged, I think, a headwind from the value of the Prima minority buyout. Could you just quantify what that headwind could be, maybe lower and upper band in terms of how much that acts. Secondly, in terms of reinsurance, no mention in terms of your own reinsurance business, and your expectations for, I guess, margins and growth there, but also, if you could give us some sense in terms of your assumptions about your own reinsurance costs and how you see that changing over the plan, and are you looking at more alternative capital to your remarks, Thomas, about capacity coming in there to reduce those costs? Thank you.
Very good. I suggest that, Alban, you take the question on Prima, and I guess the better Prima runs, the more difficult the buyout is. On the reinsurance side, we have Scott Gunter online. He can talk about our reinsurance business, so assumed reinsurance. Françoise, do you want to talk about, as Group Chief Risk Officer, around our reinsurance, and the role of alternative capital? So Alban, Scott, Françoise.
First, congratulations for spotting that sentence that we added on Prima, because the accounting is not absolutely obvious. It's true that when we buy Prima, the 47% that we don't own yet in 2029 or 2030, we will not book a goodwill. It will come as a reduction in our net assets. That's why we flagged it in the press release. How much will it be? It will be for the increase in the value of those 47%. That increase is both the reflection of the de-discounting, because today we have discounted that in our book, and potentially the increase in value of Prima over the next years.
We have not disclosed the price formula that we would use to buy the minorities, but you can assume that it would be a multiple, which would not be far from the ones we have used for the acquisition of the 53%.
Scott, if you are with us on reinsurance and the expectations.
Yeah. On the assumed side, we have a very diversified portfolio. The folks in the room probably remember when we de-risked it on the natural catastrophe side over the last few years. So, it's diversified, and look, we're going to grow that selectively where the returns are attractive. But our real focus is on the adequacy of the pricing and getting the appropriate return for our efforts. This is also where we utilize a lot of the alternative capital ILS capabilities is mainly in the reinsurance portfolio, and that helps smooth it out a little bit in terms of the earnings.
Thank you, Scott. Françoise, on the other side of the reinsurance.
Exactly. So, on the reinsurance that we buy. The short answer to your question is yes, definitely, we look at all sorts of capital which is available there, including alternative capital. We look at that, and indeed, the availability of that capacity allows us to broaden the discussions that we have with the reinsurance market, not only on the price but also on the conditions of reinsurance, notably also the clauses that we can negotiate, including also the collateral management, the attachment points, et cetera. We look at it holistically.
Thank you, Françoise. Let's go to James.
Thanks. It's James Shuck from Citi. Just wanted to ask firstly about retail P&C. The over 5% GWP growth you've got. When I look at the slides, you've got Direct Assurance growing at 10%, you've got the inclusive, which is probably a subset of that at 8%, and you've got international at 15%. I'm left wondering about the agency side of things, because over the last plan, I think you somewhat surprisingly decided to grow the agency network. The implication here is agencies, I don't know, are going to be flat, but perhaps you could just talk to that on the retail P&C side. Secondly, Alban, the 2% growth in the, let's call it controllable cost base. I think you mentioned that you'd be expecting the investment part of that to grow broadly in line with revenues.
If you exceed on the revenue count, then I guess it's the BAU part of it. In order to be able to model that, I need to know what the mix is between the BAU, and the investment part of that cost base, which would be helpful. Then finally, just last question. I saw that you're flagging you got EUR 2 billion- EUR 3 billion of debt capacity per annum. I'm just wondering, over the plan period, if you issue no debt at all, then you'll be below what was your previous target range, which I imagine still stands. So why not in this plan allow for debt issuance? Because obviously, that's then funds available for central remittances and cash and buybacks and things. Thank you.
Very good. Guillaume, could you take James' question around retail P&C and certainly the agency, James, does play a big role. It goes back to the question I talked about earlier. We have been at the forefront of restructuring and turning around our agency P&C retail portfolio, which has allowed us this year and last year to grow in net new customers. Guillaume will go into more detail. Alban, the two other questions are for you on the controllable expense base and the investments and the debt issuance capacity, and are we using it or not? Guillaume.
Yes. Thomas, you mentioned most of the important elements indeed. The retail P&C book is a bit more than EUR 20 billion of business. If we want to deliver more than 5% every year, obviously all the business areas will have to contribute. We expect to still have a conducive pricing environment in retail, as Thomas mentioned earlier, supported first and foremost by sustained claims inflation, even if it's at a lower level than what we have experienced in the current plan. That's the first element. When you mention direct, it's more or less EUR 5 billion today, a bit more than that. Inclusive insurance, it's more or less EUR 2 billion. You see, we have to grow all the rest also very significantly, and that's exactly why we will invest in technology equipment for our distributors, first and foremost, our agent workforce.
That's obviously proprietary distribution, so we know how to deploy technology fast that will improve their productivity, and it will help us improve both customer acquisition and customer retention through this channel. They will have to contribute very significantly to the growth ambition, definitely.
They want to contribute. Just a week ago, Mathieu, Patrick, and I had a meeting with our head of the agents in Europe asking us, "Look, when are these licenses coming?" They really want to do it. Again, the wanting is the area which is the most important. If you push AI on people, nothing will happen. If they want it will happen. Alban.
On investments and cost base. First, I want to draw your attention to the fact that when we say expenses, we include in that our claims handling cost, which was not the definition we used for the current time. We are broadening the definition, and that is why it is a EUR 13 billion total, and the vast majority of that EUR 13 billion is BAU cost. Because to be on the claims handling, there is not so much investment. We do not disclose the amount of investments we do. I am sorry for that. But at the end of the day, what matters for us is that we will grow our cost base, those EUR 13 billion by 2%. On the debt capacity, it is true, if we do not use that flexibility, we will reduce our gearing ratio, which is today at 21.7%.
At the end of the day, I do not think it would be a good use of our debt capacity to leverage the group purely to do additional buyback or additional dividend. I think buybacks and dividends should be grounded in our operating earnings, and our debt should not be used for that. But we could use it for M&A exactly as we did in the current time.
I think James, one last comment again on this question around expenses, because it has come in several areas. I think number one, the investments for us are absolutely crucial. And if they go with revenue, great. Even if they were not going 100% with revenue, we would not cut them back because they are absolutely crucial to transform our business. Secondly, and maybe that was not so clear so far, when we look at our expense ambition, it is much broader and higher than what was there previously. If you make the math, you will see that we are roughly twice at the ambition that we used to be in the future. And when you also look into the details of the document, you will see that this is not just one area, it is for everybody.
The headquarter has had a very clear savings target, which has been started to be implemented as of last week. Every market unit head has had a very clear target in terms of cost per policy. How can we bring the cost per policy down? This element around how do we get more competitive and how do we make sure we are financing our goals of tomorrow by being even tougher on expenses is an absolute crucial element of this plan.
I can add something.
Sure.
As it includes changes in cost, it will be reflected therefore in loss ratio. When we talk about the loss ratio improvements, it will also reflect that cost containment of those costs.
Andrew, before your arm is falling off.
Great. Thank you for taking my questions. Andrew Baker, Goldman Sachs. First one, just on the how do we think about AXA MPS JV? I think that's falling out next year. Is that contained in your sort of underlying earnings growth today, or should we assume some type of anti-dilutive buyback? Secondly, apologies, just returning back to the P&C top line, and I'm probably getting a little bit greedy here, but you mentioned the 1-2 points higher than the sector growth. I think if you adjust for the Prima recapture, it's more like in line to +1. You've been pretty clear on your retention efforts, direct, inclusive, international. Why shouldn't we expect it to be higher given the impact of the Prima recapture? Thank you.
Thank you very much. I would suggest on MPS, we let Patrick talk. I think what we know today is that there is a lot of questions around MPS, and that the end of the joint venture is October of next year. What we don't know at all, which solution will come. Therefore, I think your question, what will happen depending on the solution is a good one, but it's most likely a very premature one. Maybe Patrick, you can talk about the state of MPS. On the second question, Andrew, when it comes to the growth on P&C, we spoke about direct, we spoke about the social inclusion.
We have not spoken about the international markets yet because this is also one of the big growth drivers. I would ask Hassan afterwards to quickly give a flavor around the segment we have not covered yet on the P&C growth. Patrick.
Yes. Our agreement with MPS is in force until 2027. We are of course aware of the rischio bancario and the movements in the banking system in Italy. Very hard to see how this is going to play out, but certainly we are going to discuss that agreement in the coming months. What is important for you to know is we are prepared for all options. We have very strongly increased our presence in Italy through the acquisition of Nobis and Prima. Prima continues to grow 30% this year. We are number two in direct. We are now in the insurance retail motor in Italy, number one in terms of new business policies. So a very strong scale and a strong business there.
If we look at the impact overall, the impact of potential discontinuation of the JV would be less than 2% of our earnings in Europe on the Life & Health business. Very importantly, if we would go into a discontinuation scenario we would be entitled to a financial compensation to reflect the fair value of the JV. So that would be a wash for the group perspective.
But today, we do not know what the outcome will be, Hassan.
I just want to-
Yeah, go ahead, Alban.
I just want to insist on one word that Patrick mentioned, which is the fair value. You may have seen that in one of the prospectuses released by BMPS. They clearly showed that the value would be not only the embedded value, but also the value of new business going forward. That is the fair value of the JV that Patrick had in mind.
Hassan.
Thank you, Thomas. Since Thomas decided to create international markets in 2023, we have grown earnings in euro terms by a CAGR of 16%. That tells you the double-digit growth and the additional growth that we're able to do outpacing the market growth in the markets where we operate in. We're very well diversified. We cover regions in Latin America, Africa, Turkey, and Southeast Asia. We are in the major areas in those continents in a very focused manner. Again, after the focused strategy that was led by Thomas 10 years ago, we're now in very focused countries where we believe we have scale, and we can really grow. When you zoom in the P&C, 50% of our EUR 10 billion is P&C, roughly 30% commercial lines, 20% retail. Both are growing at 15% per annum in terms of top line.
You can see very strong growth as Guillaume mentioned in his slide earlier. Happy to zoom in on any specific questions on international markets further. Thank you.
Thank you, Hassan. You'll have the opportunity later on during the lunch to dive into more detail. Hadley.
Hi, thanks very much. Hadley Cohen, Morgan Stanley. First question is actually a corollary to Kailesh's question on retention. Apologies if I've missed this, but I remember a couple of years ago when one of your competitors was talking about retention being a key driver of volume growth in their plan, I was talking to you about this, and you seem to suggest that it's just part and parcel of your day-to-day business to focus on retention. Just wondering if on the metrics that you're looking at improving retention over the next plan, can you give us the numbers for the improvement in retention that you've seen over the past few years, please? Second question is around the health insurance business. Health insurance on the short-term side, it's a very regulated market globally. But you're clearly doing more to improve profitability there.
I'm just wondering to what extent is there a sort of limit on how much profit regulators will allow you to make in those lines of business, and how close you are to that? Thanks.
Thank you, Hadley. Let me try and answer both questions, and let me remind myself of when I was Head of Distribution. You know how retention worked and cross-selling worked in 2006? You got lists of all your customers and your portfolio, and you had a chart. Okay, how many customers were three policy, two policy, one policy, and all of the portfolios were more or less the same. You had roughly 53% of single policy customers. You then got people in agencies to phone these customers that have not been contacted for years, and to try and sell them a policy. This didn't work at all. The retention and cross-selling numbers didn't move at all. How does it happen today? Mathieu was describing it. Today you've got the agent who is driven by a tool, in Mathieu's case, Salesforce.
What we know is if you do not sell a second or third policy within 12 months after the first policy, it's extremely difficult to do cross-selling and retention. So what the tool does, it essentially works like Amazon. What is the next best offer? So when you conclude a contract, immediately based on the data we have on the social profile, on interactions we have had with the customers, you are being, or the agent is being proposed a next best offer, and they need to go. Or they learn, for example, when somebody is coming, we said earlier you can come through whatever access, doesn't matter if it's direct or by telephone. If you do not go after a re-inquiry within 12 hours afterwards, it's gone. AI is helping us a lot because in the past, again, we were working with Excel sheets and Excel lists.
Today this all comes automatically, and as we stressed earlier, we have been working on two elements. One is refining our customer data, so it's much more precise now, and the other thing is the interaction data. So how did it work in the past? In the call centers, if you had a bit of time because you were under your two-minute call that you were allowed, you could ask the customer something and maybe you found out he or she has got a child. He or she has unfortunately had a death in the family. Today, these interactions are all recorded, are all worked on, and you'll immediately see whether something has happened or whether the system is spotting something. And you see cases within AXA where you see retention rates due to this going up 2%, 4%, 6%. So that is exactly what we are focusing on.
And with this new focus on retention will also be a new focus on tracking all of these numbers. I spoke earlier around discipline and execution. This new plan will also require a shift in the operational KPIs to go after retention in a very different manner. The second topic on health insurance. Yes, health insurance is a regulated market, but it is not so regulated. What is regulated today is many things. One, you have mostly countries where you have a public scheme and a private scheme, and what is regulated is who does what. The difference between the different markets is always where is the boundary. Secondly, what is regulated, sometimes not, is the question of how do you treat a patient. So you have an appendix operation. In Germany, for example, it is exactly coded what it is, how you have to treat it, and so on.
In France, not so much. However, when it comes to what do you do on pricing, unless you go beyond what you should be doing. What you do, for example, on vertical integration. So what do you offer in terms of medical care? This is very much open to you. When we think about where can we make the difference today is on a couple of things. Number one is how quickly are you to spotting trends? So going back to Andrew's question, inflation is not an issue. It becomes an issue when you do not react to it and when you do not react to it fast. Secondly, how many networks do we build in terms of our own medical care, and how many customers can we convince and entice to go into our networks? This is absolutely key for us.
Then the third thing is also how do we leverage our medical networks beyond the basic care when you think about more intensive care and so on. On this topic, we are very free, and it is very much a question around discipline in doing it and discipline in implementation. Patrick will tell you the change of our health business in the U.K., yes, came with up-pricing across the three different segments, corporate, SME, and individual, but also came with an increase in steering of the cases. So when you have certain patterns from what was more in the area of 12%- 15% to the area of 80%, and that is where you are relatively free, and that is where you make the difference. Gianluca, I think.
Thank you very much. Gianluca Ferrari, Mediobanca. I have a question around affordability. So you spoke about inclusive insurance, the fact that low earners are struggling a bit with inflation, but probably what is happening is also that if inflation keeps going, also the middle class will be, in a certain way, impacted. During the speech you said, if we see additional inflation, we have room for increasing tariffs, so passing through to clients. Do not you think that we are getting very close to a moment in which people will scale down protections, will cut non-mandatory coverages? So this kind of pass-through, it was probably doable over the past decade, but going forward is becoming less probable. Thank you.
I agree that there is a point. What I would suggest as well is that I start with the answer, and Patrick is continuing around affordability. What you see today is three things. You see that some risks are more and more difficult to cover. Secondly, you see that there is a segment of a population, I mentioned earlier 20% in France, who are basically excluded today. What you also see is that people are not scaling down. In France, for example, we have a situation where in other countries where you could think, oh, people are being a bit more cautious, so they would look at their health insurance, they would look at their household insurance. No. It is a relatively constant good and not very sensitive to an economic environment.
Our aim has always been on the first one to say, look, if a risk becomes difficult to insure as such, we need to integrate prevention in it, because with prevention, you help the customer to manage the risk and bring the claims cost down and bring the tariff increase down. Secondly, to make sure that those people who are excluded will be able to get access to insurance through different products, social inclusion. Patrick, anything to add?
Yeah, so I would say, first, that is important tied to your question. We know how to fight inflation on claims. We talked about this orientation, leveraging our Alpha Scale platform for spare parts, driving cash settlement. All of this is in motion, and we will continue to work also on our cost. This has been mentioned. If I look at Europe, we have reduced NC by one point, and we are going to continue, and AI really opens new frontier here. We are seeing it, 20%- 30% productivity. So that is going to help mitigate that inflation impact. The second thing is we have built a dedicated range of proposition for those customers looking at the essential covers at what really they need. So cater the product for the need of the customer to be as competitive as we can.
We are seeing, if I look at Europe double-digit growth, we have now 3 million customers. Inclusive insurance is 20% of the growth of retail in Europe in the last three years. So this is here to stay. This segment is 25% of the population in any given market, and we are prepared to address their needs.
And maybe if I may, Mathieu, if you could quickly talk about the importance of prevention, because in France, you have started to really integrate this in the areas where insurability is in question.
Yeah. Does that work?
Yes, now it does.
Yes. Okay. Just, yeah, prevention, we're working hard to include that as part of our product offering. Should it be, and I'm going away from inclusive insurance, but in cyber, but also as part of the retail market. We are going to develop as well an app. We are going to include as part of our app services to engage customers because engaging retail customers is probably the biggest challenge that we have to have an impact on prevention and therefore ultimately on the premium price, which is something that we're going to be working on, especially on household in the coming plan. Maybe you want also to talk about the hailer.
You can if you want.
Yeah. Because this is something that is very pragmatic. We have been hit by hail storms in the past month, and this is something very pragmatic that we are pushing, which is to offer people to put their car in undercover parkings. Then we get the tickets, and we take that, and it has an impact not only on the claims cost, but also on the quality of the relationship that we build with customers when it comes to prevention. So I wanted to mention this very pragmatic example. Thank you.
Thank you, Mathieu. Let us stay, I think, Iain.
Hi. Iain Pearce from BNP Paribas. The first one is just on the P&C revenue growth target, hopefully quite a simple one. The 5% revenue growth target
If we are assuming XL is sort of flat or muted, the retail and commercial division needs to be probably growing at more like 7% or 8% to achieve that target. Now you have greater than 5%. Are you comfortable with that being significantly greater than 5%? That sort of 7% or 8% is an achievable level. The second one is just on the combined ratio. Again, just sort of thinking about the constituent parts, really what I am trying to get to is, do you plan for the attritional loss ratio, currently a loss ratio, to be moving up during this portion of the plan? The third one is just around the direct insurance. Clearly quite a big part of the growth agenda. Just trying to think how you think about what that might do in terms of lowering barriers to entry and new competitive threats.
Also how your market share is comparing the direct channel versus the wider market in those particular countries you were targeting.
Good. I suggest I will take the first one on revenue growth. Alban, if you could take the second one on combined ratio and the loss ratio, and Patrick, if you could take the one on direct when it comes to, in particular, Prima, and we see if Mathieu has something to add afterwards on Direct Assurance in France. I think the revenue growth topic seems to be coming up quite a lot of times. It is indeed like this. XL is the only place where we see a softening market, not a soft market, a softening market. However, where during the last phase of the turnaround and price increases, Scott and his team have done a great job in moving the pricing up quite highly. Therefore, when there is a bit of decay on pricing, it still makes sense to write the business as Guillaume explained earlier.
We do not see any of these signals on the retail space, on the SME space. As I said earlier, retail and SME are very much agency driven in our place, and the biggest bulk is agencies. When we talk about the growth levers, we said it is clearly retention. Retention is in our hands. These are our agents, this is our customer data, this is our AI application, and if we want to succeed in retention and we do not succeed, we only have to blame ourselves. It is not the market, it is not dependent on any geopolitical situation. It is only dependent on us and how good are we in the implementation. That is why, and the question comes up quite a lot, retention is the key lever in growth, also in the SME, because a butcher or a hairdresser works like a private customer.
And because we have the access to our agent, it is in our control, and it is in our control to put the right sophistication with these agents to make sure retention increases. And again, we've done it over and over in AXA. It's nothing revolutionary in that sense, Alban.
Our commitment is on the all year combined ratio. And we're saying that thanks to everything we'll be doing on cost, on technical excellence, and the safety provided with reserve prudence, we're confident that we can maintain our all year combined ratio stable. Then from one entity to the other, obviously the picture will be different. At XL, very clearly, the current year loss ratio will most probably deteriorate as our prices will be below loss trends. But as I said earlier, we absolutely believe that XL can grow earnings nonetheless. In the other businesses, personal lines, SME, mid-market, here it will be a mix of strong efforts still on technical excellence, strong efforts on expenses, but part of that will be reinvested in commissions and potentially in loss ratio as we are more competitive.
The situation will vary from one country to another, and at the end of the day, as I said, our commitment is on the group's all year discounted combination.
Patrick and Mathieu on Direct.
Yes, so on direct. Direct now is 20% of the retail business in Europe. It is growing fast. This is a trend that is here to stay. We start from a very strong base. Obviously, there is Prima, where we are leader, but we also have a leadership position. We are leader overall in Europe. We have leadership position in Belgium, in Ireland, in Spain. We believe through the acquisition of Direct, we are bringing unique capabilities that are very hard to replicate. When I look at how Prima manage pricing sophistication, the technology platform they have built, the number of variables they use, the time to get in production and get real time feedback from claims, this is really cutting edge. When I look at their customer experience, to give you two examples, now they are upfront in using voice AI on their call centers.
You can quote a policy on WhatsApp in a conversational mode. All of those things are very, very hard to replicate. The very good news for us, we are going to tap into this and work with our teams to expand this and make all other businesses direct in the whole group of AXA stronger.
Mathieu. Thank you, Patrick.
In France, Direct Assurance is clearly the number one in direct, 55% market share of a market which is approximately 4%. When you look at the P&C market in France, it is only 4%. So the potential is huge, and it is building its success on technical excellence, should it be on pricing or claims management, but also on the very good value for money that customers get from the experience. We mentioned inclusive insurance, but I think this is something that is clearly relevant for customers today. Another lever for driving growth in the next plan is the diversification, because Direct Assurance is entering in the health business, individual health, but will also enter the loan insurance business progressively. So a very strong brand, very good quality for service, and very good growth prospects.
I see your question. I would suggest the following. Time is moving on. For those of you in the room who are staying for lunch, we are still here. We can answer all your questions afterwards. I suggest we take one more question from the web, and I think Michael Huttner has had one, who is not here today, surprisingly.
Michael has several, and I am going to ask one of them today. Michael, I hope you get to follow up when you come and see us on the 21st. His question is whether our targets in short-term Life & Health are ambitious enough. We delivered high single-digit growth and improvement in margin in the last plan or the current plan. He questions whether the 6%- 7% growth and one point of combined ratio is ambitious, and whether we can actually grow faster without compromising on margins.
I will give this question to Guillaume because every market head would say the questions are too ambitious, and Alban would say they are not ambitious enough. Guillaume, you will play the Swiss citizen.
I think it is appropriately ambitious. No, more seriously, the way we see it precisely is that in a market where there is a very significant claims inflation, we need to stay very disciplined in the way we steer the growth. Again, we will accelerate growth also on this business. If you look at the current plan, we had a lot of work to deliver in order to improve the margins. We improved them by more than 300 basis points over three years, and it was a deliberate choice, to do that at the expense of volume growth. Volume growth in this segment has been negative in the current plan. What we will do in the next plan is keep improving the margins by one point. It will be both an effort on expense and on technical excellence.
We believe that this effort will even be a bit higher than this improvement of 100 basis points, but we will reinvest a part of the gains into competitivity in order to grow volumes at a faster level than what we have been able to achieve in the current plan. We think it is both ambitious and disciplined, and this is the right avenue for this business for the next three years.
Excellent. Thank you very much for being here today. Thank you very much for having asked all your questions. We are now moving on to the lunch, which will be behind us. Whoever still has got questions, we are staying here. We can try and answer all your questions. Certainly, next week in London, there is another important conference. If there are questions coming between now and next week, we have ample opportunities, and you will have ample opportunities to ask all your questions and get more clarity on our plan. Thank you very much for being here, and enjoy lunch.