Q1 2021 earnings call transcript

AXA 1Q21 conference call

Transcript

May 5, 2021

09:00 Paris time

DISCLAIMER

This document is the transcript of the 1Q21 conference call held on May 5, 2021. The podcast of this presentation is available on https://www.axa.com/en/investor/earnings-presentation. In the event of any inconsistency between the transcript and the podcast, the podcast will prevail. In addition, the following transcript is unedited, and statements and figures therein are accordingly in all cases subject to those set forth in AXA’s most recently published quarterly or annual results.

IMPORTANT LEGAL INFORMATION AND CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING

STATEMENTS AND THE USE OF NON-GAAP FINANCIAL MEASURES

Certain statements contained herein may be forward-looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans, expectations or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause AXA’s actual results to differ materially from those expressed or implied in such forward looking statements. Please refer to Part 5 - “Risk

Factors and Risk Management” of AXA’s Universal Registration Document for the year ended December 31, 2020

(the “2020 Universal Registration Document”) for a description of certain important factors, risks and uncertainties that may affect AXA’s business and/or results of operations, particularly in respect of the Covid-19 crisis. AXA undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise, except as required by applicable laws and regulations.

In addition, this document refers to certain non-GAAP financial measures, or alternative performance measures

(“APMs”), used by Management in analyzing AXA’s operating trends, financial performance and financial position and providing investors with additional information that Management believes to be useful and relevant regarding AXA’s results. These non-GAAP financial measures generally have no standardized meaning and therefore may not be comparable to similarly labelled measures used by other companies. As a result, none of these non-GAAP financial measures should be considered in isolation from, or as a substitute for, the Group’s consolidated financial statements and related notes prepared in accordance with IFRS. A reconciliation from the underlying earnings APM to the most directly reconcilable line item, subtotal or total in the financial statements of the corresponding period is provided on pages 47 and 48 of the 2020 Universal Registration Document. The above mentioned and other non-GAAP financial measures used in this press release are defined in the Glossary set forth in Appendix V of the 2020 Universal Registration Document (pages 479 to 483).

Page 1 | 17

1Q21 ACTIVITY INDICATORS – CONFERENCE CALL TRANSCRIPT

Andrew Wallace-Barnett, Head of Investor Relations, AXA

Good morning everyone, and welcome to AXA’s conference call on our activity indicators for the first three months of 2021. I am very pleased to welcome Etienne Bouas-Laurent, AXA’s Group CFO. Etienne will take us briefly through last night’s release, and at the end of his introductory remarks, he will be happy to take your questions. Etienne, I hand over to you.

Etienne Bouas-Laurent, Group Chief Financial Officer, AXA

Thank you, Andrew. Hello and good morning to all of you. Thank you for joining the call today.

As you saw from our release yesterday evening, AXA performed well in the first three months of 2021. Our total revenues increased by 2% in a quarter still marked by Covid-19 related restrictions, supported by growth in our preferred segments.

Our Solvency II ratio was very strong at 208%.

And we also pursued our actions on climate and societal topics since the beginning of the year, notably by issuing our first Green bond, pledging to invest Euro 2 billion in French SMEs impacted by the Covid-19 crisis and acting as a chair of the new Net-Zero Insurance Alliance.

Let me now quickly go through the key numbers from the release, starting with P&C. P&C revenues were up 2% overall, with a continued strong growth of 4% in Commercial lines and stable revenues in Personal lines. In

Commercial lines, we continue to benefit from favorable pricing conditions across all our major markets, at AXA

XL, and in France and Europe. And the outlook remains positive.

More specifically at AXA XL, price increases on renewals were +15% in Insurance and +11% in Reinsurance, translating into a price effect of +11% on gross written premium. This favorable price effect was partly offset by continued and disciplined exposure reductions across the portfolio, which resulted into a -7% impact on revenues. Overall, a 4% revenue growth at AXA XL with a strong focus on profitability.

As you know, the quarter was quite active in terms of Nat Cats, especially in the US. For AXA XL, we estimate a slightly higher-than-usual Nat Cat charge for the first quarter, including from severe freeze events in Texas. We also, however, estimate a more favorable than expected non-Cat loss experience.

As a consequence, we believe that AXA XL is on track towards its Euro 1.2 billion underlying earnings target for

2021.

In Personal lines, revenues were stable. We saw some price softening on the Motor side, notably in China due to a change in regulation. We expect a price softening trend to also impact Europe linked to Covid-19. On the other hand, we saw favorable pricing and volume effects in non-Motor, for France and Europe.

Page 2 | 17

Moving to other lines of business. In Health, we saw continued growth, with revenues up 5% in the first quarter.

This was driven by both Group, up 6%, and Individual, up 4%, with growth in most of our geographies, in particular, in International and Europe.

On the Life side, we recorded Euro 2 billion in net inflows and continue to see a favorable business mix, with inflows in Protection and Unit-Linked, and outflows in G/A Savings.

In terms of revenues in Life & Savings for the quarter, two things I would like to highlight. Firstly, the strong performance in Individual Savings in France, up 8%, with higher sales of Unit-Linked retirement products and

Eurocroissance capital light products. Secondly, a good momentum in Japan from both a successful campaign of a capital light product and continued growth in Protection.

Finally, in Asset Management, AXA IM delivered a revenue growth of 17%, a strong performance, with Euro +13 billion of net inflows in the quarter, and an improved business mix towards Alternatives. I want to highlight also that 90% of AXA IM eligible assets under management are now classified under Sustainable Finance Disclosure

Regulation Articles 8 and 9, the most demanding EU regulatory disclosure for sustainable funds.

Moving on to Solvency II. Our Solvency II ratio was at 208% at the end of March, an increase of 8 points since the end of last year. To give you a bit more details and insights in the key moving pieces, the increase stemmed from: a positive operating return, net of accrued dividends, of +2 points, favorable market effects, mostly from higher interest rates, of +7 points and an additional point coming from the ADC put in place at AXA XL. This was partly offset of course by the reduction in the UFR with an impact of -2 points.

We expect structural positives on Solvency II in the near term, with the recent issuance of our Green Tier-2 bond, as well as the disposal of AXA Bank Belgium expected to be completed in Q2.

So in conclusion, five things to retain:

First, AXA performed well in a quarter still characterized by Covid-19 restrictions. Our preferred segments are performing well and we remain disciplined, growing where we have the best returns. Second, we continue to see a good pricing dynamic at AXA XL, and we maintain our underwriting discipline. We are on track towards our Euro

1.2 billion underlying earnings target for 2021. Third, France and Europe are also performing well, notably with strong sales in Individual Savings in France and good momentum in Health in Europe. Fourth, in terms of our growth avenues, we are pleased to see some good momentum in Asia coming from Japan. As you have seen, AXA

IM also had a very good quarter. And fitth, our balance sheet remains very strong, with a Solvency II ratio at 208%.

An overall strong start to the year, we are now focused on execution and delivering on our planned targets.

I am now happy to take your questions.

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Q&A SESSION

Operator First question from Andrew Sinclair from Bank of America. Sir, please go ahead.

Andrew Sinclair | Bank of America Thanks. And morning, everyone. Three for me as usual, if that's okay. Firstly, just on XL, really just wondered if you could give us some more color on the drivers of outperformance in the Non-

Cat areas of XL in Q1 and any expectation for recurrence of those positives in coming quarters.

Secondly if you could give us an update on the Euro 1.5 billion COVID loss, how the figure has evolved in Q1 in terms of further losses and frequency benefits?

And thirdly was -- I was actually just looking at the French Life APE figures, pretty huge jump in French Health

APE up about 30% and at the same time French Protection APE was down about a quarter year-on-year and just wondered, if you could give us some color on those big moves. Thanks.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So thank you, Andrew. First of all, what we said is, as you highlighted, regarding XL, our Nat Cat experience was a little bit above our expectations, but the non-Nat

Cat experience was a little bit better, thus having a sort of compensation effects. So the non-Nat Cat exposure is mainly driven by a good experience in large losses to a larger extent and to a lower extent some positive evolution expected in attritional given the very high prices implemented in the first quarter.

Your second question refers to the impact of the COVID. Euro 1.5 billion was the amount of the cost estimated at the full year of 2020. We still think that it's the best view we have on our COVID losses so far. Of course, there are still some uncertainties left as we said at the full year 2020 on the situation in France, and we'll see how things evolve, but so far, I would say 1.5 is our best estimate.

Third, you had some questions on the APE in France. And the increase in the Health APE in France was primarily driven by the increased sales in international business from our partnerships in the US. You know that we have a very strong franchise in Employee Benefits in France and we are capitalizing on the structure to expand on some international opportunities from time to time. And in the US, we have a strong franchise with partnerships there with other insurance providers fronting the business for us.

Andrew Sinclair | Bank of America And on the other side, on French Protection APE was down quite a lot year- on-year.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA On Protection, results were related to very large contract. So on the EB side, which are, you know, from time to time going up or down. So no trend here to highlight. Just it's a business where you have ups and downs, but it's really driven by Group contracts, EB contracts.

Andrew Sinclair | Bank of America Understood. Much appreciated. Thank you very much.

Operator Thank you. Next question from Jon Hocking from Morgan Stanley. Please go ahead.

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Jon Hocking | Morgan Stanley Good morning everyone. Just got two questions please. Firstly, are you now finished with the reduction in exposure at XL, and should we start seeing the volume sort of track more in line with rate going forward? That's the first question.

And then second, in terms of the individual Life performance in France. Can you talk a little bit about how the agents have adapted to COVID and what we should see as restrictions still continue to lift through the summer, are the agents going to get back to the old way of working? It seems that they have been pretty productive in the current situation. Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So first of all, we have not changed our policy at

AXA XL since you know what we said in the Investor Day. The year 2021 will be dedicated to margin improvement.

And so we are sticking to our plan. And there will be no change up to the end of the year. It is really about discipline and I would take the sort of exposure reduction as a good news and not as a bad news, right. We have renewal rates with our customers which are very high, but we reduce the exposure per client and we don't hesitate not to renew the business or even not to write new business when we think that the pricing is not the right one. And we are not isolated of course in the market to do this, but at AXA XL, we have a plan, we stick to it.

You know our target. We want to achieve it. And so it's all about consistency.

Your second question was related to the performance in France. I think, and it's true that we are comparing here a Q121 with a Q120 where in January and February, there was no COVID impact. So this quarter is particularly difficult in terms of growth. However, you highlight that in individual Savings, we did well and we did well in

France, especially because we are, I would say one of the leaders – we have 25% of the market for the new

Retirement Savings plan called Plan Épagne Retraite, which is a very strong business with strong tax incentives and where we have the possibility to have a Unit Linked rate above 50%. And this explains this resilience of the individual Life Savings performance in France.

Jon Hocking | Morgan Stanley Thanks, Etienne.

Operator Thank you. Next question from Peter Eliot from Kepler Cheuvreux, please go ahead.

Peter Eliot | Kepler Cheuvreux Thank you very much. Just a few points of clarification, please. The first one, the claims experience at AXA XL. You say a higher than usual Nat Cat charge, I assume you mean higher than 6% as the new Cat budget, is that the right interpretation?

And the second one just on the earnings guidance, very helpful that you've reaffirmed that. I just wondered, if you could sort of remind us when you think of that, how you think of the risks to meeting that guidance. I mean,

I guess when you're thinking of it, you're assuming that Nat Cat sort of don’t exceed 6% and there is no adverse development on the back book. And if you could sort of say on the confidence and the risks on that, it would be very helpful.

And then finally, AXA Bank Belgium, I know you're expecting it to close this quarter. Just wondering, the degree of confidence there, because I guess obviously originally it was supposed to close 12 months ago – or expected

Page 5 | 17 to close 12 months ago and it's been a little bit delayed, but just confirmation that you're fairly confident on it closing this quarter would be great, thank you very much.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hi, Peter. So first of all, you're absolutely right, when we say compared to our expectations, it's in terms of Nat Cat for AXA XL. It's compared to the 6%. Absolutely right. And the reason for this is that, there was the Texas freeze where you know the definitive cost are not yet completely known, but where we think it's manageable, but still, it has an impact and to a much lower extent some floods in Australia. So this was the highlights. I would even say of the first four months of the year.

The second question relates to the earnings guidance. I would say, what are the risks? The Nat Cats are per construction a risk and this is the main one. I don't see the back book as a major risk at this stage. And we don't have news compared to what we said exhaustively at the full year 2020. You know that with the ADC, the legacy book on liability lines are really under control, and you remember as well, what we said on the COVID reserves, which are very conservative. So I would not be overly anxious about the legacy book at this stage.

Your third question related to AXA Bank Belgium. I understand your question because there is such an inertia in the administrative process to get banking transactions done in Europe that it's difficult to understand from the outside, but this is the reality. What I can tell you is that we don't have any more questions from the banking regulators either in Belgium or the European one. And it's purely an administrative waiting period. And the likelihood, and this is my feeling, that we will get the authorization is not far away from 99%, I would say. Or not far away from 100%, at 99%. Now the likelihood that we closed before end of June is very, very high, but not

100%.

Peter Eliot | Kepler Cheuvreux Great. That's very helpful. Thank you very much for this.

Operator Thank you. Next question from Michael Huttner from Berenberg. Please go ahead.

Michael Huttner | Berenberg Good morning, and thank you. I've a few questions. On Solvency II, you provided some granularity. So I just wanted to check whether I have the numbers right? Essentially I'm trying to find out or the question is what is the contribution of the operating return? I have it by difference as being 4%, which would imply 16 for the year, which is a great number, but just wondered if you could confirm and maybe give some color here? And the second, you said just now COVID was mainly reserves. And I just wondered if you could update us on how much of the 1.5 billion figure is still reserved, and how much is paid relative to year end?

And then maybe two more, if I may. You kind of implied that Motor was a difficult business at the moment with volumes and pricing down. Just wondering if you could give some color? And also AXA IM, if you could give a split of the assets with the high value assets from the alternative? Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So on Solvency II, we communicate on operating result net of dividend of + 2%. I will not confirm the 4% precisely, because we don't want to give, as you know, we don't make a full closing at the quarter and therefore, we don't intend to give you a very precise number on this. You know that we communicated on 20% operating return on a yearly basis, everything being normal, and

Page 6 | 17 you can take the assumption you want for the dividend, but we always take the dividend paid for the previous year. So here, Euro 1.43 which we accrue. So you can make the math, and I hope that you can leave with this very small uncertaincy around the operating return, which is either four or five depending upon the way you calculate it.

The second is that the Euro 1.5 billion was the number we gave in June. We reaffirmed at half year and full year last year. At this stage, we don't have any reason to communicate on a different number. So we stick to it.

Third question, the Motor environment. You saw we are flat for the reasons we just explained .The volume from country to country are different, but we have still a positive net inflow at Group level in terms of number of contracts. The pricing is slightly down and the counterparty is that the frequency is still relatively favorable even if at a higher level than the Q2 level, I would say, of last year. So it's little bit early to say what will happen on the frequency side for the half year. What we see indeed that the prices are not increasing. There is a pretty high level of competition, but we are doing pretty well. We think that our performance is pretty resilient, and I would like to highlight as well that on the non-Motor side, we have quite a positive evolution. So that in total, the Personal lines are doing pretty well in this first quarter.

Your fourth question is related to AXA IM and to the business in Alternatives. It represents around 20% of the average assets under management. It was up 13% in Q1, and we reiterate our target revenue growth of 10% a year until 2023.

Michael Huttner | Berenberg Thank you very much.

Operator Thank you. Next question from Dominic O'Mahony from Exane BNP Paribas. Please go ahead.

Dominic O'Mahony | Exane BNP Paribas Hello. Thanks for taking my questions. Three is that’s allright. Just a couple on AXA XL. I understand that you recently consolidated your AXA XL Reinsurance businesses together in

Bermuda. Can you just highlight the rationale for this and any potential financial benefits that might come from it? And then just a clarification on the topline. I understand that you have given the reported the adjusted growth because of the rebasing of the Q120. I understand that’s likely driven by the reduction in economic activity because of COVID, which then plays through into premiums and that was sort of rebased in 2020. Do you expect that to bounce back once we're back to normal and planes start flying and so on. Or actually, would you see this is sort of the new normal?

And then just a question on Chinese Motor. You highlighted the impact of regulatory change reducing average premiums in Chinese Motor. Could you just maybe give us a bit of context as to whether this is positive or negative for your volumes, for your profitability. You might think the deregulation of that market might be changing some of the competitive dynamic? Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hello Dominic. So you had a question on the XL

Reinsurance reorganization and it's perfectly right, we have decided to establish a new company in Bermuda, which will carry all Reinsurance operations of AXA XL. The rationale for these changes is to reduce complexity

Page 7 | 17 within the Group, to reinforce within the lines the management responsibility and accountability on these specific segments of business and this is the way we deal with all our entities in the Group. So we think it will enhance accountability, transparency and efficiency to the benefits of our clients and our business.

And I remind you that AXA XL Reinsurance Ltd is rated by S&P and A.M. Best. It's seen as core by both agencies and it benefits from the same rating as the other entities of the Group with AA- stable outlook.

You absolutely right in your analysis of the comparable growth for XL and the reason why we made this restatement, if you will, is that this +4% growth is more representative of the underlying growth we will disclose in the upcoming quarters, everything being equal. So this is what you can take as a sort of trend for this year.

Your third question on China. Actually, there was a change in regulation at the beginning of Q4 or end of Q3 last year where two things happened. The Chinese regulators first said they want to reduce the standard pricing, and second, they wanted to increase the insurance coverage of the policies to better protect the customers with both measures. It has created a lot of movements in the market because actually prices have come down and in order to maintain a combined ratio below 100%, everybody expected the commission ratio to go down, which is not yet the case, I would say. So the Chinese market as a whole is in the short term impacted negatively by this change in regulation. We expect it to come back to normal in the upcoming quarters, but it's a bit early to say. So this explains the reduced momentum on our Chinese business, because at the same time, what we did was to select the best risk and not to run for volumes in the current context because it would have been detrimental to our combined ratio. So you will see this is impacting the whole P&C industry in China at the moment.

Dominic O'Mahony | Exane BNP Paribas Thank you.

Operator Thank you. Next question from Farooq Hanif from Credit Suisse. Please go ahead.

Farooq Hanif | Credit Suisse Hi everybody, good morning. In terms of the Green bond that you've raised, can you talk again about your rationale for raising capital given your Solvency II position and given your cash position? I mean it seems like you don't really need it, and I'm just kind of thinking about the philosophy behind that.

So second question is on your Microsoft agreement on Health. Can you explain how that might change maybe the profitability or service dynamics or fee dynamics of existing businesses? And what it does for growth?

And the last question is on update on disposals. I mean I believe in the press, there's been some talk about your

Malaysian business and I'm just wondering whether you feel that there is still significant non-core disposal potential? Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Thank you, Farooq, for your questions. The first one related to the green bond. First, there is nothing new. You remember that we provided you with the analysis of our plan, well, our capital management plan, during the Investor Day in December. As you have seen, we can afford at comparable Gearing to raise Euro 3 billion of debt between 2020 and 2023. This was the first part of the plan. We are not forced to raise debt each year. So we will see. But given the extremely good financing conditions

Page 8 | 17 at the moment, it was very tempting to take this opportunity. I remind you that we have a spread of just a little bit less than 150 bps, which are extremely favorable market conditions. So this was, I would say, the reason why even if it was in the plan, the market timing was excellent. And then each year, we'll see if we raise debt or if we don't do it.

Second, on the Microsoft transaction. It's not a transaction, it's a project, sorry. We have been working on such initiatives for quite a while, including in Asia with a project called Emma. Here, we are accelerating with Microsoft.

The objective is not short-term to boost the sales. I think it's really to improve the customer experience around

Health at AXA. By this, we want to have a better retention of our customers. We want to attract from time to time new customers, but it's more retention and also should have a positive experience on the loss ratio because we will improve the prevention, we will improve the sort of triage to our preferred providers. So it's a full ecosystem around Health, where we think that the customer needs are very high and the expectations of the customers are not fulfilled today anywhere. So it's really about the qualitative approach on Health and I'm very positive about the long-term benefits of this project. But it's not like an M&A deal, it's not like a spectacular new product, which is going to change the numbers in the upcoming quarters. It's really a fundamental long term move for our Group.

Farooq Hanif | Credit Suisse Just to be clear, you'll be implementing these capabilities in countries like the UK and France as well, presumably, or is it more Asia focus?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA No. So I referred to Asia, sorry, because I had this experience in Asia with the project called Emma. The new venture with Microsoft is starting in Europe, and we had two pilots in Italy and Germany, which are highly promising. It will be rolled over the other European countries. And then in a second step to France, but France has itself its own characteristics and is moving into the right direction, and we'll see if they take this platform in a step two. But I would say, it's at the end of the day, the idea to have a global approach on Health services for AXA customers.

Your third question related to disposals. As you know, we are keen to pursue the simplification of the Group and to focus on the countries where we have a competitive advantage in the long run. So we might from time to time continue our program of disposals. The priority is to target the countries within the International segment. I cannot comment more than this. I think this is something we explained during the IR Day in December, there is nothing new on this. And as you know, we will also have a very strong financial discipline in order to reduce or eliminate the potential dilution coming from such disposals when they come.

Farooq Hanif | Credit Suisse Thank you very much. Thank you.

Operator Thank you. Next question from Oliver Steel from Deutsche Bank. Please go ahead.

Oliver Steel | Deutsche Bank Good morning. So three questions from me. The first is on Protection volumes, which were up 1%. I'm not looking here at the new business so much. I'm looking at the sort of premiums. But this is actually now the second year in succession where the growth in Protection is actually a bit less than you targeted. It was 3% year-on-year in the first quarter of last year, it's 1% this year. How much of that is economic?

And how are you expecting that to sort of pan out as lockdowns end?

Page 9 | 17

Second question is on AXA IM. I mean, so basically the margin that you generated on average went up from 17 bps to 19 bps. Is that all just simply a function of improved mix or I think you mentioned there performance fees.

I'm just wondering, how much of that margin uplifted came from the performance fee or anything exceptional?

And then the third question is about sort of the French government attitude. It comes in two parts. One is, given that you're still saving money on frequency and there's still lockdowns in France, are you expecting to pay any further contribution towards sort of COVID solidarity funds? And then separately, if you do make further disposals this year, what is the French regulatory attitude towards you of eliminating any earnings per share dilution through buybacks?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Thank you, Oliver. So the first question relates to the growth in Protection business, +1%. You might take that as a disappointment compared to the performance in Commercial lines and Health, the other two preferred segments. I see that differently because as I said in the introduction, we are comparing our performance with the Q1 last year, which was not impacted by the COVID in

January and February. So nothing worrying. And I think that once the lockdown will reduce or the effects of the lockdown will reduce, we will see a natural move up on the Protection side in terms of new business. So I'm not overly worried. We might have also some more potential coming from Asia, and notably from Hong Kong once the frontiers will open up again. So, no, I would say the + 1% is not representative of the run rate. It should be higher and at the latest, I hope Q3, Q4.

AXA IM, we have a revenue growth of 17%. I would say that you have within that around one third which is linked to non-recurring, I would say, performance fees. So sort of one-off. One third, to make it very simple, coming from an improvement in business mix, which is due to the Alternative business but also within the core business with a positive business mix towards multi assets and high yield lines of business. And the third component is, of course, the increased average assets under management.

Regarding the French government, you're right to say that they are very tempted to come with new creative ideas in terms of taxes, every time we make profit. We haven't heard anything on the Motor side. The only idea, which has been put on the table, but it's really an idea or concept. I'm not sure if it will go through, it is on the Health side, where I remind you that last year, they said, we should have to pay a 2.6% tax on Health sales on 2020 and

1.3% on 2021. Both taxes were booked in our accounts in 2020. Now they said with the prices continuing maybe the 1.3% was not high enough for 2021. We are not sure that this will go, that this idea will be further developed, but this is a potential risk, which is difficult to assess at this stage. We didn't hear at all about new solidarity taxes, to be frank, and now we are speaking more about opening up the economy and the cafes, hotels, restaurants slowly but surely in the upcoming days. So I don't think that the risk is really high.

Regarding the consequences of the disposals and potential share buybacks for us, there is not really anything new. What we just saw is a shift in the supervisor attitude, you know from a blanket ban to a case by case approach, which we think is very positive. And this is why we were able to confirm or to announce and confirm the dividend of Euro 1.43, which is a back to normal situation, I would say. There are no specific statements from

Page 10 | 17 the ACPR on the share buyback. However, given the very solid solvency and the positive prospects of the vaccine, we see no reason to be worried for that especially, from Q4 of this year.

Oliver Steel | Deutsche Bank Thank you.

Operator Thank you. Next question from William Hawkins from KBW. Please go ahead.

William Hawkins | KBW You made passing reference to the benign experience of your reserves covered by the

ADC protection for XL. Have you actually done a formal close for Enstar at the end of the first quarter to support that statement? And if not, when is the first formal close to assess the ADC? Is it the end of June? Or the end of

December?

And then secondly, please. What's most prominent in your mind at the moment in terms of thinking about inflation risk? Some people are worried about US costs as the courts open up, some people are worried about the return of drivers to the road. There's always something to worry about. So, maybe there is nothing to worry about on this point. But in terms of what you've seen in the first quarter, what's the most prominent in your mind when you think about inflation?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hello, William. So the ADC contract has been closed recently. So, I hope that it's good news from your point of view.

William Hawkins | KBW I'm sorry, Etienne. Sorry, Etienne. I know the contract has been closed. I just meant, when is the first formal reporting schedule to your counterparty?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So, we have actually, as you know, no formal closing at the first quarter. We review our reserve twice a year. So, it will be more a topic for the half-year.

William Hawkins | KBW Right.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Regarding the inflation risk. You're right, there is always a question, a reason to worry in our business. On this one, I wouldn't say that it was on top of our agenda in terms of risk. Of course, you can always say, you know the cost of claims could suffer from inflation. But at this stage, it's a bit early and I wouldn't flag any specific risk on top of the agenda really for now. You can say, it could be a positive because maybe it will help getting back to a normal interest rate curve. I think we see it more on this way, it's still a little bit early stage to draw conclusions. So, it could be an opportunity. There could be some more inflation on the claims, which could be a slight negative, but nothing I would say at this stage, nothing really significant.

William Hawkins | KBW Briliant. Thank you.

Operator Thank you. Next question from Andrew Crean from Autonomous. Please go ahead.

Andrew Crean | Autonomous Research Good morning all. Couple of questions, if I can. Firstly, could you talk about the Nat Cat experience outside of XL in your main European businesses in the first quarter? And secondly, if you take on board the debt and the Banque Belge if it completes, your solvency will be 216%, which is I think 7

Page 11 | 17 billion, north of the 190%. How do you propose analysts assess your capability to return capital now that you have taken away the boundaries of higher and lower comfort zones. How are we supposed to think about that?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hello. Andrew. Outside of XL, the Nat Cat experience was slightly below what we expected. There were no really real Nat Cat events in 1Q. But I would say, we are only at the end of Q1. So let's wait a little bit before drawing conclusions. But if your conclusion is a good start of the year, I would say yes from this point of view.

On the solvency side, you are absolutely correct that Q2 solvency will go up in a mechanical way because two events are already known, which is the impact of the debt, 4 points, and the expected 4 points from AXA Bank

Belgium disposal. So you're absolutely right that we will be above our long-term target of 190%. It's a bit early to say in the year, how we are going to manage, I would say these excess level of solvency. And I would propose to have a discussion more at the half year about this. In the meanwhile, you have also the possibility, even if it's marginal, to reduce a little bit the level of hedging on some equity positions in order to get a better return on our assets, but still a bit early to answer this question. Mechanically, you're right. I would say that, I see that as a positive to be comfortably sitting with a sort of caution about our long-term target and it's a very nice contrast with the situation we experienced last year.

Andrew Crean | Autonomous Research Yes. Thank you.

Operator Thank you. Next question from Thomas Fossard from HSBC. Please go ahead.

Thomas Fossard | HSBC Oh yes, good morning, Etienne. Two questions. The first one will be on the commitment of AXA to allocate Euro 2 billion to the French recovery participation loan scheme. Could you tell us a bit more how you are going to deploy, what the expected return, and the risk attached to this new scheme and how you're going to -- or who is going to support ultimately the risk around this scheme.

Second question will be related to the cash at the Holdco company. So starting from the Euro 4.2 billion reported at the end of the year. Could you say if there has been any significant positive or negative movement, and maybe if you could update us on your thinking regarding AXA Life Europe restructuring. Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Thank you Thomas for your questions. The French scheme, I would say, we think that it's a win-win deal because we are very happy to support the French economy in terms of solidarity. On the other side, the 30% of the risk is taken by the French, I would say, government. It reminds us a little bit of the system of sponsored loans granted by the banks during the crisis. So it's sort of an opportunity and a nice way to support the economy at the same stage, so we think that the risk return is favorable to us.

Second at the Holdco level. So what's happening at the moment is absolutely bang in line with what we expected when we disclosed the strategic plan in December during the IR Day, knowing that the cash at the moment is, you can imagine, above the level that we had at the end of last year, because a big part of the dividends are being paid in the first part of the year, and including in the first quarter. And we really think that the prospects in terms

Page 12 | 17 of liquidity for the end of the year, that we should be at least at the upper end of our long-term target, if not above.

Third, AXA Life Europe. We successfully signed a reinsurance agreement between AXA Germany and AXA Life

Europe to reduce the capital constraints at the level of AXA Life Europe. When I say successfully signed, you can say, but it's an internal contract, you do whatever you want. I say successfully because we got the authorization from -- not only from the German regulator, but also from the Irish regulator, which is for us something very important. And now, we will dedicate the upcoming months to try to get the authorization to distribute an exceptional dividend from Ireland to the holding company because we have an excess level of capital there.

Thomas Fossard | HSBC Can you quantify what it could be?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA A few hundred million euros.

Operator Okay. Next question from James Shuck from Citi. Please go ahead.

James Shuck | Citi Hello, good morning. So three questions for me please. Actually firstly, on Ambition AXA 2023 on the underlying earnings per share. You have the cost reduction target in that number, but there's also efficiency gains. So I'm just intrigued to know whether the start that you've had up to this point means that the revenue growth that you've got embedded in those targets will get you confidence in delivering on the efficiency elements of the underlying earnings per share?

Second question on the solvency. The ADC benefit, I think you mentioned in your comments there's about one point benefit from the ADC. Could you just clarify that? That seems a bit low to me. What is it in relation to the risk capital at AXA XL, please.

And then finally, I noticed from the SFCR that the French Life business hasn't paid a dividend again in 2020. Do you expect it to pay a dividend in 2021? Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Thank you, James. So on Ambition 2023, you are absolutely right that the contribution to the UEPS or to the cost is significant, both in terms of cost reduction, and second, in terms of efficiency, which supposes that the revenues go up. And there is no reason for us to change anything in what we said in December. We are confident, both in our capacity to reduce cost and second, to continue to grow our revenues in order to have a better expense ratio. So no change here at all, we just confirm our plan.

In terms of solvency, the ADC is plus one point at Group level, of course, which means a bit more at the XL level.

It's always difficult to isolate one item without looking at the diversification benefits and this is certainly why you might have expected a bit more, but it's absolutely mechanical here. And the solvency situation at AXA XL remains above our risk appetite, or in line with the upper range of our risk appetite. So there is absolutely no reason to worry on that. And our capacity to distribute the earnings whatever level they are in 2022 based on the 2021 earnings is confirmed at this stage.

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You highlight the situation of AXA France Vie. As you know the cash upstream is managed at Group level. So we have various situation between the entities from year to year, but the plan for 2021 is absolutely in line, I just said that before, with our expectations, when we disclosed the plan. The Euro 14 billion cash upstream is absolutely confirmed at this stage. And the solvency situation of AXA France Vie remains much above the risk appetite limit at this stage at 165%.

James Shuck | Citi Okay, thanks very much, Etienne.

Operator Thank you. We don't have anymore question for the moment. (Operator Instructions) We have a new question from Pierre Chedeville from CM-CIC. Please go ahead.

Pierre Chedeville | CM-CIC Yes. Good morning, Etienne. Two quick questions. Frst question regarding performance fees in asset management. I wanted to know if you could give me some information regarding eligible funds for perf fees? And if you have any concerns regarding the ESMA reform, regarding the way of calculating performance fees on a five-year basis, instead of one year? That's my first question.

And my second question is related to participative loans. I read this morning in les Echos an article which was not very clear for me. It said that the insurers have chosen their asset managers with which banks have to work with. But they don't mention AXA, while AXA will be, as you said, a significant participant to this dispositive. So I wanted to know what will be as the bank or asset manager, you will make a binôme with? Thank you very much.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hello Pierre. I fear I will not be able to answer these two questions in a very transparent way. The first one is a very precise and technical question on the accounting metrics related to performance fees, and I propose you to liaise with the IR team, which will itself connects with

AXA IM to ensure that we give you the proper answer.

And on the participating loans, it's true that we are a major market participant and that these loans are distributed by the banks and we will take our share of this distribution. So I'm not sure to understand exactly what it means to select one partner because it's, for me, there is a platform. So once again on this one, please don’t hesitate to get back to the IR team, if there is something, I mean, but for me, it's really sort of a no-brainer.

There is a platform initiative, and we take our share of it and the banks are the intermediaries.

Pierre Chedeville | CIC Yes. I thought exactly like you, but maybe you will see this morning in an article in Les

Echos, you will see a strange article on that issue which is not understandable. That's why I was asking the question because in my view, I was thinking like you. I don't understand this question of binôme between insurers and asset managers which is mentioned in this article.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Okay. Pierre, I'm sorry, I will not give you more insights and please accept my apologies for this.

Pierre Chedeville | CIC Okay. Thank you very much.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA You are welcome.

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Operator Thank you. Next question from Ashik Musaddi from J.P. Morgan. Please go ahead.

Ashik Musaddi | J.P. Morgan Yes. Thank you, and good morning, Etienne. Just a couple of questions for me. So first of all, pricing in Commercial lines in France. It was pretty strong at about 4%. I mean could you just give some color as to is it just inflation driven? Or is there is a bit of extra pricing as well? That's the first one.

And second one is, I mean, I'm not sure I'm going to get the answer, but I'll still ask you. You mentioned that you got a lot of cash flows from subsidiaries in the first quarter. Now you mentioned that it has already been strong, but is it possible for you to give any indication on a number? Or say, what portion of your annual cash flows are already in, as you have got from the subsidiaries to the holding company for the Group? Any thoughts on that would be great? Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Hello, I'm not sure I got -- and sorry for that. I'm not sure I got your two questions.

Ashik Musaddi | J.P. Morgan. In Commercial lines in France. The pricing in Commercial lines in France was pretty strong at about 4%. Is it all driven by just inflation? Or is it there is a bit of extra element on pricing as well?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA No. Sorry for that. It's not on inflation. As you know, it's mainly driven on the large accounts. Certainly, part of it is a sort of impact from the COVID crisis as well. So there is a hardening trend and it's true, these price effects across the whole portfolio, Motor, Property,

Construction, Liability. So I think it's more than inflation. Your second question, sorry.

Ashik Musaddi | J.P. Morgan The second question -- yeah, the second question was with respect to the cash upstreaming from subsidiaries. Now I remember, you mentioned that a lot of the cash upstreaming that you think for the year comes in the first quarter. So can you give us any percentage of how much of cash upstreaming has already come through? And how does that compare to last year?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So I will -- so the big part is in 1H for sure, and I will not give you the amount of cash we have today, but it's in a nutshell, if I take the cash we have today, and I subtract the dividend to be paid, we would be at least at the upper range of our long-term target. If you see what

I mean.

Ashik Musaddi | J.P. Morgan Yeah. Okay. That's very clear. Thank you.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Thank you very much.

Operator Thank you. Next question once again from Andrew Sinclair from Bank of America. Please go ahead.

Andrew Sinclair | Bank of America Thanks. And just one final follow-up for me. Actually, it's about the mandatory convertible bond into the EQH shares, I think it converts in 10 days time on 15th of May. Just want to

-- by my term, EQH share price means you probably have some EQH shares left after the conversion, and I'd say I really wondered what the impact on solvency from that conversion and what you are going to do with the EQH shares left? Thanks.

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Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So I will just tell you that based on the current share price, because the definitive calculation is not made yet, based on the current share price, we would be left with around 7 million shares of Equitable Holdings.

Operator Thank you. Next question once again from Michael Huttner from Berenberg. Please go ahead.

Michael Huttner | Berenberg Thank you, and it's tricky, so I'm going to ask as delicately as I can. When you arrived at CFO you probably thought oh my gosh, it's a complicated group and all these moving parts so I must be very careful. And now clearly after a year in the role, that you don’t only know the numbers better, but clearly there's a lot of confidence in the way you present these numbers and the feeling things are good. When we will have the potential change now, are we going to go through the same cycle again of slight caution and then kind of reintroduce confidence? Or can we kind of assume that the transfer will be absolutely seamless? I don't know how you can answer it, but I can't not to ask it. Because it's kind of following up what I did ask on COVID. You said no change. My question was really to know how much of the COVID you've set aside? How much is still unpaid?

And then the final one is just I am a bit lazy, I'm really sorry, what is the long-term target for cash?

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So Michael, a long-term target for cash is Euro 1 billion to Euro 3 billion. So, when I speak about the upper end of the range is Euro 3 billion, right. So if I say above the upper end of the range, it is above Euro 3 billion.

And your first question. Part of the question you asked related to the reserve and COVID and so on, will be better answered at the half year because then we will have a closing, a proper closing of the accounts. It's difficult for me to comment in the Q1 on the level of reserves with a high level of accuracy and granularity as you can understand.

And I remind you that we have gone through last year, a very specific year where we had the COVID crisis. And second, there was a level of earnings at XL which was not at the level we expected. Those two components which really impacted us last year. I don't think that we are in the same context this year. If it can give you some comfort on my level of confidence, and on the tone which will be used by my successor with whom I've been working in very, very close relationship and in a relationship of trust, over the last two years, I would say.

Michael Huttner t | Berenberg Wonderful. That's very helpful. Thank you.

Operator Thank you. We don't have any more question for the moment. (Operator Instructions) It looks like we don't have any more question. Back to you for the conclusion.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA So thank you very much to all of you for the quality of your questions, and the high attendance. This was for me my last official conf call or appearance as a Group

CFO, and I enjoyed particularly these exchanges with you, and I will miss it.

And I am very happy for my successor Alban, who is sitting here today. I think he will enjoy very much and be sure that there will be a continuity in the messages we are delivering to you, in the tone, but also in terms of contents.

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And I'm very confident about us, about our plan, about our capacity to deliver, and I will miss you all. But maybe there will be some roadshows, don't hesitate to go, don't forget that Benelux is an important part of AXA. Thank you very much.

Andrew Wallace-Barnett | Head of Investor Relations, AXA Thank you, everyone.

Etienne Bouas-Laurent | Group Chief Financial Officer, AXA Bye-bye.

Andrew Wallace-Barnett | Head of Investor Relations, AXA Have a very good day. Take care.

Operator Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.

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