Axa Sa · EURONEXT:CS
Axa Sa — Investor Presentation (November 2022)
41 slides from Axa Sa's investor presentation, Nov 3, 2022
Slide 1: IFRS17 & IFRS9 Investor Presentation
IFRS17 & IFRS9 Investor Presentation November 3, 2022
Slide 2: Important Cautionary Statements Concerning Preliminary IFRS17/9 Expectations and Assessments
IMPORTANT CAUTIONARY STATEMENTS CONCERNING PRELIMINARY IFRS17/9 EXPECTATIONS AND ASSESSMENTS AXA’s audited financial statements for 2022 under IFRS4 will b e published in March 2023 with its 2022 Universal Registration Document. On January 1, 2023, IFRS4 will be replaced by IFRS17, which is a new ac
Slide 3: Presentation on IFRS17 & IFRS9 | Agenda
Presentation on IFRS17 & IFRS9 | Agenda Key Messages & Overview of IFRS17 & IFRS9 A Alban de Mailly Nesle, Group Chief Financial Officer Page 4 Key Accounting Choices & Resulting Balance Sheet B Grégoire de Montchalin, Group Chief Accounting& Reporting Officer Page 10 Profitability under IFRS17 & IF
Slide 4: IFRS17 & IFRS9 at AXA | Upcoming Reporting
IFRS 17 & IFRS 9 at AXA | Upcoming Reporting - IFRS17/9 figures in this presentation are figures currently expected to be included in AXA’s opening balance sheet under IFRS17/9 as of January 1, 2022. They are preliminary figures that are unaudited and subject to change - All other IFRS17/9-related a
Slide 5: A. Key Messages & Overview of IFRS17 & IFRS9
A. Key Messages & Overview of IFRS17 & IFRS9 Alban de Mailly Nesle Group Chief Financial Officer
Slide 6: IFRS17 & IFRS9 at AXA | Key Messages
IFRS 17 & IFRS 9 at AXA | Key Messages Group Underlying Earnings power to remain unaffected post-transition Shareholders’ Equity1 expected to remain stable at transition Limited reporting impacts reflecting our profile focused on technical lines No change to capital management and strategy ‘Driving
Slide 7: Continuity in earnings | Underlying Earnings power expected to be unaffected
Continuity in earnings | Underlying Earnings power expected to be unaffected in aggregate Expected IFRS17/9 Underlying Earnings1 ▶ P&C earnings to be more sensitive to interest rates ▪ All reserves to be calculated ▶ L&S earnings to be more predictable driven by the release at ‘best estimate’ and di
Slide 8: Continuity in reporting | Focus on technical lines and fee-based businesses
Continuity in reporting | Focus on technical lines and fee-based businesses to result in limited impacts Our predominant P&C business will see limited reporting changes Limited changes ▶ Technical profitability to continue to be reported by Current and Prior Year Combined ratio to remain ▶ Combined
Slide 9: Overview of IFRS17 & IFRS9 | AXA's strong fundamentals remain unchanged
Overview of IFRS 17 & IFRS 9 | AXA’s strong fundamentals remain unchanged ▶ Group’s earnings power expected to be unaffected P&L post-transition With no impact on… ▶ Net Income expected not to be more volatile ✓ Our capital & cash generation ✓ Our balance sheet strength ▶ Shareholders equity (excl.
Slide 10: B. Key accounting choices & Resulting Balance Sheet
B. Key accounting choices & Resulting Balance Sheet Grégoire de Montchalin Group Chief Accounting & Reporting Officer
Slide 11: Key Principles & resulting Balance Sheet
Key Principles & resulting Balance Sheet Guiding Principles Continuity on capital and earnings, with limited additional volatility from financial markets Convergence to Solvency II principles where practically feasible Accounting choices largely reflect the underlying economic nature of the business
Slide 12: AXA's business mix largely accounted for under the simplified model
AXA’s business mix largely accounted for under the simplified model Changes in CSM Financial Technical Measurement Model Assumptions Assumptions Optional model for Asset Management PAA or ca. 5% short-term business Simplified OCI P&L → incl. 99% P&C and short-term model Protection and Health VFA mod
Slide 13: Key accounting choices ensuring continuity and limited volatility in earnings
Key accounting choices ensuring continuity and limited volatility in earnings Alternative Options AXA’s choice Rationale Top-down approach Bottom-up approach ▶ Framework similar to Solvency II Discount rates Portfolio yield less allowance for Risk-free rates + illiquidity premium unexpected losses C
Slide 14: Shareholders' Equity largely stable on transition
Shareholders’ Equity largely stable on transition Shareholders’ Equity (excl. OCI) from IFRS4 to IFRS17 Main accounting changes Impact from reserves 1 revaluation incl. discounting ca. €58bn €58bn 2 ca. €4bn Risk Adjustment creation Intangible Revaluation Risk CSM elimination & discount adjustment c
Slide 15: Simple methodology used for reserves discounting
1 Simple methodology used for reserves discounting ‘Bottom-up’ Discounting Approach Discounting Methodology going forward ▶ Going forward, reserves to be discounted at a market consistent PAA BBA rate or Simplified or General VFA model model model ▶ Impact from change in interest rates to be absorbe
Slide 16: Risk Adjustment provides an additional reserve with limited P&L impact
2 Risk Adjustment provides an additional reserve expected to generate limited P&L impact Approach at AXA Confidence level set at 65th percentile An extra reserve on top of Best Estimate within a range from 62.5th to 67.5th percentile Liabilities for uncertainties arising from non- financial risks Li
Slide 17: Contractual Service Margin (CSM) of ca. €34bn on transition
3 Contractual Service Margin (CSM) of ca. €34bn on transition Building Blocks of New Business Contractual Service Margin ▶ Application scope Calculated by group of contracts for long-term Life & Savings and Health products ▶ CSM mechanism CSM absorbs changes in technical assumptions for all business
Slide 18: Contractual Service Margin expected to grow sustainably over time
3 Contractual Service Margin expected to grow sustainably over time Opening CSM Stock New Business Actual Experience & Impact of changes in CSM Release into P&L Other (incl. FX) Closing CSM Stock Changes in Technical Fair Value of Assets Assumptions Creation of a stock of Contractual Service Margin
Slide 19: IFRS17/9 better aligns accounting balance sheet with economic reality
IFRS17/9 better aligns accounting balance sheet with economic reality Assets on transition Liabilities & Shareholders’ Equity on transition ▶ Elimination of intangible assets (DAC/VBI) with goodwill unaffected ▶ Reserves similar to Solvency II Best Estimate Liabilities ▶ Invested assets’ classificat
Slide 20: Return on Equity & Debt Gearing under IFRS17/9
Return on Equity & Debt Gearing under IFRS17/9 Return on Equity (ROE) Debt Gearing No change in definition will be lower reflecting CSM addition Underlying Earnings Financial Debt1 Average Shareholders Equity Shareholders Equity (incl. OCI) (excl. OCI) + CSM + Financial Debt1 NEW ▶ Underlying Earnin
Slide 21: Key Accounting Choices | Main Takeaways
Key Accounting Choices | Main Takeaways The transition approach largely reflects the economic nature of the business and convergence to Solvency II where practically feasible The options taken allow for continuity in capital, with Shareholders Equity1 expected to be largely stable on transition The
Slide 22: C. Profitability under IFRS17 & IFRS9
C. Profitability under IFRS17 & IFRS9 Alban de Mailly Nesle Group Chief Financial Officer
Slide 23: Underlying earnings power expected to remain unaffected in aggregate
Underlying earnings power expected to remain unaffected in aggregate Property & Casualty Life & Savings Health Asset Management IFRS4 IFRS17 IFRS4 IFRS17 IFRS4 IFRS17 IFRS4 IFRS17 ▪ Lower combined ratio reflecting ▪ Increased earnings predictability ▪ Earnings to reflect the underlying ▪ No change i
Slide 24: P&C earnings mostly impacted by discounting at market-consistent rates
P&C earnings to be mostly impacted by discounting at market-consistent rates P&C earnings walk from IFRS4 to IFRS171 ▶ IFRS17 P&C earnings reporting will be driven by combined ratio as under IFRS4 Undiscounted ▶ Earnings are market-consistent, therefore more sensitive to interest rates Technical as:
Slide 25: P&C earnings mix will change, reflecting discounting impact of reserves
P&C earnings mix will change, reflecting discounting impact of reserves P&C underlying earnings Lower combined ratio expected under IFRS17, partly offset by lower investment result Technical Combined Ratio (remains on a Gross Earned result Premiums basis) IFRS4 CY discount effect Risk adjustment IFR
Slide 26: More predictable L&S Earnings driven by the release of CSM
More predictable L&S Earnings to be mostly driven by the release of CSM L&S Underlying Earnings (before tax) 1 Underlying Earnings will primarily be driven by the release of the Contractual Service Margin (CSM), expected in the range of 9-11% p.a. 2 Investment result will include non-participating b
Slide 27: New Business Value and NBV Margin main activity indicators for L&S
New Business Value and NBV Margin will be the main activity indicators for L&S IFRS17 New Business Value (‘NBV’) NBV Margin The NBV will be adjusted to include New business CSM1 (ca. 90% of the The NBV margin is based on the present value of expected new total NBV), calculated on a risk-neutral basi
Slide 28: Health Underlying Earnings to reflect the underlying nature of the business
Health Underlying Earnings to reflect the underlying nature of the business Expected Health Underlying Earnings Split by Business & Geographies IFRS4 IFRS17 France Europe Asia Rest of the World Short-term business Long-term business Contractual Service Margin stock of ca. €9bn on transition, expecte
Slide 29: Underlying earnings to Net Income: not more volatile
Underlying earnings to Net Income: not more volatile Underlying Earnings Net Realized Capital Gains4 Mark-to-market incl. Derivatives to Net Income IFRS4/IAS39 IFRS17/IFRS9 IFRS4/IAS39 IFRS17/IFRS9 Changes in financial flows Participating Savings 1− Net Income no longer impacted by Participating P&L
Slide 30: Profitability | Underlying earnings power unaffected in aggregate post-transition
Profitability | Underlying earnings power unaffected in aggregate post-transition & expected to grow sustainably More economic view of profitability with greater predictability Underlying Earnings remain the basis of the Dividend Policy Net Income expected not to be more volatile All notes are on pa
Slide 31: D. Conclusion
D. Conclusion Alban de Mailly Nesle Group Chief Financial Officer
Slide 32: IFRS17 & IFRS9 at AXA | Conclusion & Key Messages
IFRS17 & IFRS9 at AXA | Conclusion & Key Messages Group Underlying Earnings power to remain unaffected post-transition Shareholders’ Equity1 expected to remain stable at transition Limited reporting impacts reflecting our profile focused on technical lines No change to capital management and strateg
Slide 33: Appendices
Appendices IFRS17 & IFRS9 Presentation November 3, 2022
Slide 34: Changes in discount rates fully impact CY claims while OCI option smooths unwind
Changes in discount rates fully impact CY claims while the ‘OCI option’ smooths the impact on unwind 2022 P&L impact 1 2 Accident Cohort Year (AY) CY discounting 1 2022 effect Based on the prevailing interest rates Undiscounted Current Year Unwinding Effect Investment Total Underlying 2021 & Unwindi
Slide 35: Q&A
Q&A IFRS17 & IFRS9 Presentation November 3, 2022
Slide 36: AXA Investor Relations | Keep in touch
AXA Investor Relations | Keep in touch Meet our management Contact us Investor Relations +33 1 40 75 48 42 February 23, 2023 Full Year 2022 Earnings Release London anu.venkataraman@axa.com Head of Investor Relations remi.dousteyssier@axa.com May 09, 2023 Three Month 2023 Activity Indicators Call Vic
Slide 37: Thank you
Thank you IFRS17 & IFRS9 Presentation November 3, 2022
Slide 38: Glossary
Glossary ▪ Other Comprehensive Income (‘OCI’) refers to items of income and expense that are not recognized in profit or loss in accordance with IFRS Standards ▪ Contractual Service Margin (‘CSM’) refers to a component of the carrying amount of the asse t or liab ility for a group of insurance contr
Slide 39: Notes (1/2)
Notes (1/2) Page 6 1. Shareholders’ equity excludes other comprehensive income (OCI) 2. ‘Driving Progress 2023’ key financial targe ts refer to the f our main financial targe ts of AXA’s ‘Driving Progre ss 2023 ’ plan: (i) underlying earnings per share growth at the high end of the 3-7 % CAGR targe
Slide 40: Notes (2/2)
Notes (2/2) Page 20 1. Financial debt includes financing debt, dated subordinated debt, reversal of mark-to-marke t of intere st rate derivatives, undated subordinated notes and undated deeply subordinated notes 2. Guidance illustrates the mechanical inclusion of the Contractual Service Margin into
Slide 41: Scope and definitions
Scope and definitions France: includes insurance activities, banking activities and holdings in France. Europe: includes Switzerland (insurance activitie s), Ge rmany (insurance activ ities and holdings), Belgium (insurance activities and holdings), United Kingdom and Ireland (insurance activitie s