FY 2018 earnings call transcript

AXA FY18 results

Transcript

February 21, 2019

DISCLAIMER

This document is the transcript of the FY18 conference held on February 21, 2019. 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 4 -

“Risk factors and Risk Management” of AXA’s Registration Document for the year ended December 31, 2017, for a description of certain important factors, risks and uncertainties that may affect AXA’s business and/or results of operations. 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 transcript 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

APMs Adjusted Earnings, Underlying Earnings and Underlying Combined Ratio to the most directly reconcilable line item, subtotal or total in the financial statements of the corresponding period is provided on pages 28 to 29 of AXA’s 2018 Activity Report, which is available on AXA’s website (www.axa.com). APMs Adjusted Return on

Equity and Underlying Earnings per share are reconciled to the financial statements in the table set forth on page

37 of AXA’s 2018 Activity Report, and Debt Gearing is reconciled to the financial statements in the table set forth on page 36 of AXA’s 2018 Activity Report. The abovementioned and other non-GAAP financial measures used in this press release, are defined in the glossary set forth in AXA’s 2018 Activity Report (pp. 78-85).

The results of our US segment are presented herein on the basis of IFRS and are not, and should not be relied upon as representing, the US GAAP results of AXA Equitable Holdings, Inc. (including AllianceBernstein), which, as a US public company, reports in US GAAP in accordance with the rules of the US Securities and Exchange

Commission (“SEC”). For further information on AEH’s financial results and other public reports please consult the SEC website at www.sec.gov.

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FY18 RESULTS PRESENTATION

Andrew Wallace-Barnett, Head of Investor Relations, AXA

So good afternoon, everyone. Welcome to AXA's Full Year 2018 Results. A warm welcome to those of you on the phone, on the webcast, and of course those of you here in London. We're joined here in the room by our management team, by our CEO Thomas Buberl; by our Deputy CEO and CFO, Gérald Harlin; we also have our CEO for France, Jacques de Peretti; our CEO for AXA in Europe this year, Antimo Perretta; our CEO for AXA XL, Greg

Hendrick; and our Group Chief Risk Officer, Alban de Mailly Nesle. Welcome to you all.

And with all the people present, I'm hoping we'll be able to answer clearly and thoroughly all the various questions you may have on the results. And as per usual, the Q&A session will be at the end of the presentation and we'll be happy to take questions from those of you on the phone or on the webcast. Please just follow the instructions you've been given. And we will as usual give preference to questions from people here in the room.

And it's now my pleasure to hand over to Thomas.

Thomas Buberl, Group CEO, AXA

Thank you, Andrew. Good afternoon to everybody and everybody online as well. Very happy to be with you today to present the Full Year 2018 earnings. When we look at the headlines, I would like to mention four topics to you.

The first one is it was a year of excellent operational performance. You have seen that the entities have really performed well.

We have reached record earnings levels with AXA we have never seen despite the fact that we have been hit in Q4 by high natural catastrophes, mainly on the XL side. This was the first quarter of XL that we consolidated and it was an abnormal quarter of natural catastrophes. The integration of XL into AXA to make a new joint force is progressing well, I'll come back to it later. And as a result of this, the Board of Directors has decided yesterday to propose to the shareholders a strong dividend growth of 6%, very much in line with the trend on the underlying earnings.

When we look at the underlying earnings in detail, you see an increase from €6 billion last year to €6.2 billion on a like-for-like basis without the FX movement. And this, given the fact that we had a reduced ownership in AXA

Equitable Holdings, Gérald will come back to it. We have a rough ownership on average1 of 80% in the year of

2018, and secondly, as I mentioned, despite the fact that we had high natural catastrophes in the fourth quarter mainly coming from XL. The underlying earnings per share is up plus 3%, there this is obviously on a basis where

1 During the presentation, the ownership of 80% was mentioned to be “at the closure” instead of “on average”.

This has been corrected here in the transcript.

Page 2 | 28 the foreign exchange movements are considered. When you look at the adjusted earnings per share, they move up by 1% and the dividend is moving from 1.26 to 1.34, which is a 6% increase given a payout ratio at 52%.

What is very good for these earnings is that they are very balanced in terms of growth and profitability. We have achieved a 4% growth of revenues to €103 billion for all of AXA, and this growth has very much been fueled by the growth of the preferred segments. Those preferred segments are the Commercial lines business, the Health business and the Protection business. Why have we taken those segments as preferred segments? They are the ones that grow the most and they are the ones where we are the closest to our customers because those are inherent risks where people are interested to be helped to reduce the risk and to jointly make a better journey.

On the Health side, we have achieved a 7% growth, which is very much across a couple of countries. And since

Jacques is here, certainly AXA France has contributed a lot to this Health growth, but also other countries. On the

Protection side, we have achieved a growth of 3%, again coming from very different jurisdictions and well diversified and it really shows now that this focus on the preferred segments is really carrying weight and we can manage to grow and to also differentiate ourselves in those areas. And then the Commercial line, P&C business, it has grown by 5% and this is mainly due to the fact that the AXA entities and certainly the AXA entities in Europe and France have worked very well on growing their franchise more, but also that XL in the last quarter of 2018 has grown by 10%, which is really a remarkable growth. And so this really shows that the preferred segment strategy is the right one. What is important today that when we talk about preferred segments, it is not just a wish that we have going forward. Today, more than 50% of our volumes are already in those preferred segments.

And once we have fully exited AXA Equitable in the U.S., 80% of our volumes will be in those preferred segments.

When we look at the geographies and that is another very important thing, the increase of 6% in underlying earnings doesn't come from just one geography. It's very well diversified across the geographies; everybody has contributed. And what I'm very proud to say is that certainly Europe, if you take France and Europe, those two geographies make two thirds of AXA's totality. Growing by 10% in underlying earnings is really a great achievement. But we also see that Asia, AXA Equitable, and also the International markets have significantly contributed to these results.

AXA XL, as I mentioned in Q4, has been hit by abnormal catastrophe losses. And this is really why the contribution of AXA XL to the 2018 numbers remains at -200 million. This is due to the fact that we had 500 million more losses than we had on a normal basis due to Nat Cat. So essentially what has happened, to make it simple, what you normally experience in one year with XL, we have experienced in one quarter and it was very much an abnormal thing that has happened.

How is the integration of XL progressing? And I can tell you that the progress on the integration is moving fast, but that we also, on the business momentum, see very good news. We started firstly to integrate the reinsurance.

So, Alban de Mailly Nesle and Greg Hendrick have worked a lot. How can we bring AXA and XL together, what are the diversification effects because there is a significant diversification by putting the two together since our main

Page 3 | 28 risk used to be European windstorms and now with a large U.S. exposure, there's a much higher diversification.

But we also aligned the joint program to the AXA approach of the risk appetite, which is done, which is implemented and as we have shown you last year, on a combined basis, which has led us to reduced maximum exposure.

Second topic is the Commercial approach. We only had a few months after closing. I remind you that closing was on 10th of September. Nevertheless, in virtually every geography, there was a very strong momentum of, on the one hand, aligning who does what, so that we don't run after the same customers or that we'd even poach customers from each other, that the focus is very much on how can we get together to new customers. And if you look and I'm again taking the people that are in the room, Jacques de Peretti, together with the teams of Greg

Hendrick, have really achieved to get new customers. The angle was very much around how can we take customers where we never had a chance because we didn't have the U.S. footprint, because we didn't have

International exposure to really create new momentum. They have together created significant business in

France. If you take Antimo Perretta, same thing in Europe. We worked a lot, in Germany, in Switzerland to already get new customers. And even in the International markets, certainly in Turkey, we've also managed to have a very high Commercial momentum despite the fact that we only had a very short time together, but we have invested a lot in the cultural integration of both companies, making sure that people get to know each other, making sure that people can work together quickly and I think that starts to pay off.

On the synergies, we are well on the journey. You have seen that we have announced last week to the social partners in Europe the organizational integration in Europe. This is well underway. We want to do this in a responsible way, that we have always done it at AXA. And today, I see no reason why this shouldn't work out in a good space.

Lastly on the asset allocation. We've also started to reallocate the XL assets, remember, the XL assets were invested in a very conservative way because of a relatively limited balance sheet. Here, together with AXA, we've got, on the one hand, means to invest very differently according to the asset allocation of AXA, but also we have a much better access to alternative assets through AXA IM.

When we look a little bit forward to what has happened around the beginning of the year, we can say that the Q4 growth, I mentioned it earlier, was very good, 10% revenue growth. Now if you ask yourself will that be repeated going on, I would say we have to be cautious on this one. If you take the 10%, there is probably a 5% of recurring in there and a 5% due to some larger contracts. So I would say from this probably, and Greg is nodding, that 5% going forward is a better assumption than 10%. The renewal rate was also positive. So on the insurance side, we managed roughly to put price increases to around 4% with a retention ratio of 90%. On the reinsurance side, it's a little bit lower, around 1.5%, but similar retention rate. So the renewal has gone well and Greg and his team are working very hard on making sure that the plan that we have for this year will be put in place.

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Subsequent to that, we have experienced the rating upgrade of AXA XL to AA- and we have – Greg and his team – have received the various prestigious client recognition event award. J.D. Power again last year in the third row and they are obviously working very hard that this will become a normal event every year.

All of this leads us to the conclusion that we will reaffirm the target that we have communicated at the Investor

Day in November, which is 1.2 billion, Euro 1.4 billion sorry, of underlying earnings by 2020, assuming that we have a normalized net cap experience of 4% of gross earned premiums.

We've also been active, apart from obviously integrating XL, in scaling up pay-out to partner. And I give you two examples out of many examples that we have. One is on the medical teleconsultation. We've spoken quite a lot about this. We are today certainly in France the leader in telemedicine. This is fueled, A, by the early investment that we have done. We have two approaches in France. One is through AXA Assistance; the other one is through

Qare, which is a venture that we have incubated ourselves. But also the momentum in France, due to the fact that the French state has decided to reimburse teleconsultations as of the 15th of September of last year, has really fueled our efforts, you see here the numbers. We have a massive uptake in those consultations. Those have a very, very high satisfaction ratio, therefore also the repeat usage and you have more and more physicians coming on to the platform and really wanting to make sure that the availability of medical advice does increase through a better usage of capacity. On the other hand, we take another example from the other end of the planet, in China, we have concluded a cooperation with WeChat. For those of you who are frequently in China, WeChat is the thing in China, where everything is done. So we have focused ourselves there on the 140 million travelers that go out of China and to really focus on the needs of Travel Insurance, which is a massive space for us and this good collaboration, which is extremely digital, because everything is basically done and settled in a digital way.

We will expect a lot from this going forward.

All in all, we are well on track with the Ambition 2020. On the underlying earnings per share, if you take the average across the years of beginning, from 2016 to now, we are at plus 5%, well in the range of the 3% to 7% that we have indicated on the 21st of June in 2016.

On the free cash flow, very similar message. The ambition is to have a cumulative free cash flow of 28 billion to

32 billion by the end of 2020. When you look at where we are in terms of cumulative free cash flow, we are well underway with a contribution of 6.6 billion in 2018.

On the adjusted return on equity, we are at 14.4%, again well in the range of 14% to 16% that we have also increased last November during our Investor Day.

And then on the Solvency ratio, a 193%, which is again well situated in the range of 170% to 220%, again a range that we have adapted down from 230% to 220% last November.

I will now hand over to Gérald Harlin, who will go into the detail of the business performance. Thank you.

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Gérald Harlin, Deputy CEO and Group CFO, AXA

Thank you, Thomas. Good afternoon.

So let's go through the – yes, let's go through the underlying earnings. So, underlying earnings are up 6% at 6.2 billion. I should add that it's at constant FX as usual, but this time, so long as we don't consolidate AXA Equitable

Holdings at 100% anymore, but only at 81%, we should say that this 6% includes the negative impact from this drop of roughly 19% in the consolidation of AXA Equitable Holdings. On the right-hand side, you can notice that across the board, we have good performance in all our markets and I propose you now to go through these markets, starting first with France.

France is a very strong performance, +10%, explained by the higher technical margin and you can see on the top right that our P&C combined ratio improved by 2.3 points, Health as well by 0.8 point. Second, we had lower expenses across the board, I would say that in all the lines of business, and we benefited from higher Unit-Linked management fees coming from markets being at higher level on average. On the reverse, we have lower investment income, but that's the case in other countries and in line with what we announced before, as a whole,

+3% in revenues, +12% in Health, which is strong, +5% in Protection.

Europe now, and in Europe, we are plus 10% as well, which is, again, a very strong performance with higher technical margin in different countries, Switzerland, UK and Ireland, Germany and Spain. You can see on the right that Health combined ratio is down 1.3 points, which is good. We have lower corporate tax rate in Switzerland and Belgium. In Switzerland, it went down from 21% to 20%; in Belgium, from 34% to 30%. And like in France, we have lower investment margin. Revenues up 3% on average.

Asia now +5%, with a higher technical margin in Japan Life, higher Unit-Linked management fees in Hong Kong, again, same reason. It's due to the average level of markets, which was higher in 2018 than it was in 2017. And higher contribution from China, as a whole, China increased by 43 million. You can see on the right that we have gross revenues increasing by 4% and on the bottom right, you can see that the point that we made, we mentioned at the last IR day, but it's worthwhile being repeated, that 87% of our business of our gross revenues are concentrated in P&C, Health and Protection, i.e. our priority segments.

Let's move to AXA XL and as mentioned by Thomas, we suffered from two major Nat Cats in Q4. And that's why on the bar chart here on the left, we try to explain the contribution of -0.2 billion for the Full Year 2018 of AXA XL.

Let's start first on the left and with AXA XL with normalized Cat Nat, I remind you that we consolidate one quarter, the last quarter, Q4, and with normalized Cat Nat, we should've been – we should have posted 0.2 billion of underlying earnings. Indeed, due to Hurricane Michael and California wildfires, we have 500 million – to be precise 540 million – of Nat Cat in excess of normalized level, which means that we reported a Q4 2018 loss of 374 million, -0.4 billion euros relative to XL. Then we add 0.1 billion – 141 million – of underlying earnings for the full year coming from ACSA, AXA Corporate Solutions and AXA Art, and as a whole, we end up with -233 million

Page 6 | 28 corresponding to the contribution of AXA XL in our 2018 accounts. As explained by Thomas, we have revenues of up 10%. Excluding two large contracts, we would have been at +5%. And as mentioned again, we benefited +4% price increase in 2018 and the renewals in January were quite good with +4% in insurance and +1.5% in reinsurance.

Let's move to the United States now. So +4% in underlying earnings contribution in 2018, with different elements.

Let me go through these elements. First, the higher Unit-Linked and mutual fund fees, +0.1 billion. Then we have a higher investment margin due to the higher level of assets under management, +0.1 billion. Then we have model and assumption change, which are partly offset by lower tax one-off, it is +0.3 billion minus 0.2 billion (and the tax one-offs were last year in 2017), so it's plus +0.1 billion. So, all these three elements correspond to plus

+0.3 billion. But this offset by the – what I explained at the beginning, meaning that following the IPO and the

November sell-down, we reduced our ownership from 100% to 81% on average, because we ended the year at

59% including the MEB, and roughly 52% excluding the MEB. And as a whole, it's a drag of 0.3 billion, so +4% on a net basis. APE, +6%, which was good. Far better in the second half of the year because we achieved an APE level of +9% in H2. As far as AB is concerned, AB revenues, +5% and management fees, AB management fees increased on average by 0.9 basis point due to a better business mix in favor of – with more private clients.

Let's move to International now. Strong performance as well, +28% explained by different countries. Mexico first with higher technical results, in P&C and Health. Turkey, higher investment income, we've been investing at 8% in Turkey. Russia, a strong technical performance and higher volume, AXA Bank Belgium, from lower commission and lower expenses; so as a whole, +28%. P&C combined ratio is strong. It's quite high at 100%; but keep in mind that in these countries, we are investing at higher rates. We are not in Europe. And you will note it also, a strong improvement on the Health combined ratio, -2.1 points. Revenues, +5%, with a strong +11% in Health and again on the right hand, on the bottom right corner, we highlight the fact that 88% in International business is – 88% of our revenues are in P&C, Health and Protection.

Last AXA IM, AXA Investment Managers, +6% in underlying earnings, with lower financial charges with some different mix in term of taxation, which was positive, and higher earnings from Asian JV, which was offset by lower management fees. Third-party net inflows +3 billion and we acquired Quadrant Real Estate, which is a U.S. alternative asset manager in real estate debt. It adds 8 billion of AUM to AXA IM. I remind you that we are presently even before this acquisition, with 73 billion of AUM, the number one asset manager in real estate, and just after this acquisition we will be at 81 billion.

Let's move to the financial performance now and starting with group earnings. I commented it already, so I move directly to adjusted earnings. As you can see on the third line here, the realized capital gains amounted to 841 million, higher than last year. But the market condition, the equity market condition in Q4 meant that we had to suffer some more impairments in 2018, 440 million versus 127 million a year before, meaning that the net

Page 7 | 28 contribution from realized capital gains is 307 million instead of 455 million one year ago and we end up with adjusted earnings at 6.5 billion.

Let's go through the net income. As we announced it already on the 28 of November, we impaired the goodwill of – the U.S. goodwill 3 billion. So that's the most important part of the 3.1 billion that you can see at the bottom line, -3.1 billion. We have also some adjustment changing fair value and forex, you are used to it. But this year, on top of the freestanding derivatives, which represent a negative contribution of 137 million, we have the widening of the corporate spreads. You noticed that in the last quarter, we had a widening of the corporate spreads, which explains that we have a lot of mutual funds, which are mark-to-market and this was a contribution of -326 million.

On top of this, we have exceptional and discontinued operation, -451 million. Most of it is coming from

Switzerland, with the impairment of intangible, but we got it already in the first half. And integration and restructuring cost, you can imagine that with such a huge transformation in our group, starting first with XL and

AXA Equitable Holdings, we have a higher cost for restructuring and integration, 332 million. So, in the end, net income is at 2.1 billion.

Let's move to this traditional slide on the combined ratio and our combined ratio, starting first with the current year combined ratio, which moved up from 97.6% to 99.1%. In blue, you have the cost of Nat Cats. Last year, it was 2.5%, this year 4.2% and this compares with the natural levels which would be around 3% that we mentioned to you at the last IR Day in November. We have prior year reserve development at 2.1% versus 1.2% last year.

2.1% is exactly the same number for the first half and we announced you in August here that we should be in the high end of the range and that we wouldn't be very different so 2.1%; it's in line. And which means that in the end, the all-year combined ratio goes up from 96.3% to 97.0%. As you can see on the top right, all-year combined ratio, excluding XL, would have been at 94.9%, which would be an improvement of 1.2 points versus Full Year

2017. Last but not least, we increased our guidance on prior year reserve development from 1% to 2% to 1.5% to

2.5% on the full AXA Group scope.

This increase of the guidance relative to prior year reserve release is not something that we decide. It's justified by the fact that like in June, as you can see on the left, our P&C reserving ratio is moving up, P&C reserving ratio,

I remind you is the technical reserve divided by net earned premium, we are at 213%, very strong level of 213% – and the IFRS P&C reserve in excess of the Solvency II BEL that you will see also in the eligible own funds report moved up from 5.7 billion to 7.1 billion.

I propose you now to hand over to Alban, who will report on the two next slides relative to the reinsurance and the Nat Cat costs.

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Alban de Mailly Nesle, Group CRO and Head of Group Insurance Office, AXA

Thank you Gérald. Good afternoon. So the purpose of this slide is to review the losses that we had in 2018 from natural events and natural catastrophes coming both from the legacy AXA scope and the legacy XL scope. And there are two main messages from this slide. The first one is 2018 was definitely a heavy year in terms of Nat Cat, heavier than average. But second, at the end of the day, the deviation that we incurred was very consistent with what we showed you in November 2018 and that's the graph that you see on the right-hand side.

So if we go into detail, on the left hand side, you have the table with all the natural events losses that we had in

2018. It's a bit of a theoretical exercise, because it's both AXA and XL along the whole year, whereas we only consolidate XL from Q4 on. The numbers that you see in the table, the shaded numbers are the ones that we consolidate and that you will find in our P&L in 2018. At the top, that's the AXA perimeter and you will see that the amount that you have here for the AXA perimeter is extremely close, if not equal, to an average amount of natural events losses for a year on AXA, on the AXA side. On the XL side, we have the detail by quarter and the first three quarters were very much in line, a bit higher than a normally average year for the AXA's perimeter. But as

Thomas and Gérald said, it is the fourth quarter, which was highly unusual because we had, in one quarter, the equivalent of the full year of Cat losses. And that's the quarter that we have consolidated in our 2018 accounts.

And when you do the sum of all those natural losses, net of reinsurance gross of tax, you come to 2.05 billion of losses. That compares, that's what we showed you in November, to an average year of losses from natural events for the whole AXA+XL perimeter of 1.5 billion; i.e. in excess of 500 million, which net of tax is 400 million. And 400 million is very consistent to, again, the graph we showed you in November, for a 1-in-10 year experience, which is exactly what we had in 2018. So we had that amount of loss and it was in line with what we could expect from such a year.

We show that graph on the potential deviations because that's exactly how we think about our risk appetite for natural events, when we think of 1-in-20 years losses, and what is the amount, what is the deviation that we could have with a 5% probability. And that's the way – that's what drives the structuring, the design of our reinsurance program. We want to achieve that result.

So that's what I'm going to show you on the next slide, that's the way of our reinsurance program is designed. So first now, in for 2019, the 2019 program, it covers both AXA and XL's exposure to natural event, it’s one common program. Second, the preliminary comment on such a program is that you want to be covered for any kind of year, a year where you have a very small number of large events or like in 2018, where you have a greater number of small to medium-size events. So, that's the way we have designed our program and it's made of three components. The first one is how we protect our insurance business AXA and XL. And you see on that graph that we protect that insurance business through per-event protection. And we buy, so you see European windstorm,

North America hurricane, North America earthquake and other perils, you see detachment points and the capacity we buy. We buy a capacity so that we are protected for those periods up until a 1-in-200-year event. So

Page 9 | 28 that's on the insurance side. We protect our reinsurance business through Cat bonds and alternative capital. And the third component is the aggregate. And that's absolutely key component of our reinsurance structure.

Because that's what helps us achieve the target I showed you on the previous slide, which is not to lose more than 500 million net of tax with a 5% probability. So, how does it work? When you look at the shaded areas of the first two components, insurance and reinsurance, we put all those amounts, the shaded; i.e. the retentions that we have or potentially also the excess losses that we would have above our protection. We put all that in the same basket, subject to a 50 million deductible per event, insurance and reinsurance. When that basket reaches

1.45 billion, and everything above that is reinsured, is ceded to reinsurance, subject again to 50 million deductible per new events.

So, with that, you see that we are protected against extremely large events, through the towers that you have on insurance, or a large number of small to medium events through the aggregate. And that's how we achieve the deviation and the risk appetite that I showed you on the previous slide. Gérald.

Gérald Harlin, Deputy CEO and Group CFO, AXA

Thank you, Alban. So moving back to the balance sheet, and to this traditional slides on our investment portfolio.

So, we are managing our General Account invested assets correspond to €615 billion, mostly invested in govies and corporate bonds. And you can see at the bottom left that that's the Life & Savings yield on assets stabilized at 3.1%, and dropped on the P&C side from 3.3% to 3.2%. Keep in mind as well that we have been investing in different countries where the rates are much higher than in Europe. We have been investing, on the right-hand side, we've been investing 70 billion in fixed income. 57% in investment grade credit rating single A, 28% govies and sovereign, average weighting AA and 7% in ABS investment grade, and below investment grade credit is limited to 7%. As a whole, we have been investing, as you can see, at the bottom right at 2.5%.

Here, we are dealing with investment margins. So we are quite happy to announce you that our investment margin stabilized, roughly speaking. We moved up from 69 basis points to 70 basis points. I remind you that when we presented our plans in June 2016, we assumed that our investment margin would drop to 55 to 65 basis points. Same, quite good pattern as well on the P&C yield because the P&C yield dropped only by 8 basis points, where we are expecting a drop between 10 and 20 basis points.

On the left hand side, you can see that our spread above guarantee still increasing, still improving, be it on the new business or on the inforce, confirming that as I said in the previous meetings, guaranteed rates are no more a problem, no more an issue at all at AXA.

Shareholders' equity, the shareholders' equity moved down from 69.6 billion to 62.4 billion. You can see on the right hand side what are the main elements explaining it. Keep in mind that due to the equity drop, there is a

Page 10 | 28 change in net unrealized capital gains, OCI, -3.9 billion. We have the dividend that was paid 3 billion, and the impact of AXA Equitable IPO, -2.8 billion, plus the net income positive 2.1 billion. The adjusted ROE, which is calculated on the average shareholders' equity is at 14.4% versus 14.5% one year ago.

Here, we have the Solvency II ratio. Solvency II ratio is at 193%, well within our 190% to 200% guidance that we gave you as soon as in March when we announced the XL transaction, and of course well within the 170% to 220% target range. Debt gearing, 32% in line with our guidance. And I repeat and I confirm that the target range by 2020 will be below – between 25% and 28%. Here, traditional slides on Solvency II, so you have the roll-forward starting with 205% last year, operating return +24 points, dividend payment -12 points, market impact and of course the equity market and -4 points. US IPO +13 points and sub debt, XL acquisition -33 points, we ended up with a

Solvency level of 193%. And you can see the sensitivities which are not fundamentally different from previously.

And last point, it's on cash flows and we have a strong cash flow generation, it's €6.6 billion instead of €6.3 billion one year ago. And if I exclude the 2.6 billion, you remember the 2.6 billion correspond to the restructuring of the

U.S. debt. Excluding this, we have 5 billion of remittance, 5 billion divided by 6.6 billion, it's a 76% remittance ratio within the guidance of 75% to 85%.

Now, I hand over to Thomas for the conclusion.

Thomas Buberl, Group CEO, AXA

Thank you very much, Gérald. As a conclusion, 2018 with all the changes on transformation has been a very pivotal year for AXA. We started in 2017 to implement a new organization that was more de-central, based on the principles of simplicity and empowerment. You can see that this organization is bearing fruits because all the geographies have really increased their operational capabilities, have really delivered an excellent operational performance. And at the same time, we have started shifting the portfolio significantly towards technical risks through the significant transformational leap, AXA Equitable Holdings against XL Group. I remind you again when we started this journey right after the financial crisis, AXA was focused 80% on Life & Savings. When we have completed the journey on this picture and fully divested from AXA Equitable, we are focused on 80% of technical risk, P&C business, Health and Protection.

For 2019, our priorities are very clear and I repeat them again because it's good to remind ourselves of them.

After these movements in 2018, our focus is one to continue successfully the integration of AXA XL. Secondly, to continue the sell-down of AXA Equitable Holdings and subsequently certainly to reduce our debt gearing to the range indicated to you in November, 25% to 28%. At the same time, continuing our successful journey on delivering Ambition 2020, but also making sure that the elements we presented in November certainly on Asia,

Page 11 | 28 to accelerate in Asia, and also to continue to scale up the innovations that we have put in place where we now have decided what we are going to do going forward.

Thank you very much. And we are now moving to the Q&A session. As Andrew said at the beginning, we give priority to the room, but we will hopefully have sufficient time to also get to all questions on the line. Who would like to start?

Farooq, you are the first one with your arm up.

Q&A SESSION

Farooq Hanif | Credit Suisse Thank you very much. Farooq Hanif from Credit Suisse. Going back to the reinsurance structure, could you tell us what reinstatements you have on each of those covers, so what's the reinstatement policy? Could you also tell us what the Cat bond retention is and how this whole reinsurance program has changed versus what you told us in 2018 and has that been significant? And second question area is on cash flow. Does that 6.6 billion – basically does that imply that really you're over €7 billion on a normalized basis on cash? And therefore – and also you're at the lower end of the remittance ratio. So I'm just wondering whether you expect a material improvement in HoldCo remittance? Thanks.

Thomas Buberl | Group CEO, AXA Very good, Farooq. Thank you, so I suggest that Alban de Mailly Nesle will answer the three questions around reinsurance, reinstatement, the question of the Cat bond potential and what has changed relative to 2018. And Gérald will answer the question around the cash flow: is 6.6 billion just a basis that is not normalized and are we really at the lower end of the rate of remittance ratio. Alban?

Alban de Mailly Nesle | Group CRO and Head of GIO, AXA So, on the reinstatement, by nature, you wouldn't have reinstatement on the Cat bond side on the aggregate either, but you do have reinstatement on the insurance protections that are on the left-hand side of the graph. On the Cat bonds, the outstanding amount is

$1.2 billion. And the change versus 2018, I'd say it's a completely different program in the sense that you had two different companies, XL on one hand, AXA on the other hand and we had united that through the common additional reinsurance layer that we had put in place, as you will remember. So, comparing the two programs as such doesn't make a lot of sense. I think what makes sense is the result of the program and you see on the previous slide that the effect of the program is somewhat similar because we want, with a 1-in-20 year, to have a loss which is no more than €500 million net of tax, net of reinsurance. And that's what matters to us at the end of the day. It's the effect of our reinsurance program.

Farooq Hanif | Credit Suisse Just very quickly on the cost of the reinstatement, is it just pro-rata for the rest of the year?

Alban de Mailly Nesle | Group CRO and Head of GIO, AXA It depends on the protection.

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Gérald Harlin | Deputy CEO and Group CFO, AXA On your question relative to the cash flow. So, starting from

6.6 billion cash flows. If you refer to what they presented at the end of November, I'm sure and your question is related to this. Meaning that we said that when we will exit AXA Equitable Holdings, we said that the average remittance of AXA Equitable Holding was roughly 0.5 billion and that progressively we should benefit from a level that would be circa 1 billion coming from XL, which means an uplift of 0.5 billion. But I said and I want to be clear,

I said that it would be medium term. So this is a trend and I repeat what I said at that time, meaning that the switch from AXA Equitable Holding to XL should be positive with a maximum at roughly 0.5 billion, but it will take some time. But yes, that's the trend. And that's also the positive of such a transformation.

Thomas Buberl | Group CEO, AXA Oliver?

Oliver Steel | Deutsche Bank Oliver Steel at Deutsche Bank. So first question is coming back on the operating cash. I mean, if we assume the 6.6 billion rises going forward, you're going to break way through the top end of your 28 billion to 32 billion cumulative range. So, I just wanted you to comment on that. Secondly on cash, the

European cash numbers seem to push up quite sharply year-on-year. So I was wondering what's driving that. And then actually, we stick on cash. What is the holding company cash at year end? I think you said in November that you expected it to be between 1 billion and 1.5 billion. And actually, since I'm here, can you let us know what the first quarter remittance from Switzerland would be on the back of the capital saving that you put through there?

Thomas Buberl | Group CEO, AXA Thank you, Oliver for your cash-rich questions. Gérald, why don't you take them all four?

Gérald Harlin | Deputy CEO and Group CFO, AXA Okay. Operating cash, yes, I believe that – I already said that we were quite comfortable on the fact that we would be, for the whole period, for the five years in the high end of the range, yes, that's true. We will be the high end of the range and that's good. Second, the cash at the holding level, we had at the last – we were at 1.8 billion2 at the end of last year. And that's also a way, you understand that we were at 32% in term of debt, but we had some cash in front of it. And we don't calculate, it was the case in the past, but we don't calculate the gearing ratio net of the cash. Okay. What was your remaining...

Thomas Buberl | Group CEO, AXA On the second question on the European cash, I guess that's the German effect that you want to comment on and there was a fourth question on the Q1 remittance in Switzerland?

Gérald Harlin | Deputy CEO and Group CFO, AXA The Q1 remittance from Switzerland, you know that we had – we should benefit roughly from 1 billion coming from Switzerland from GL2020. If you remember that GL2020, it was CHF 2.5 billion and we said that it will be spread between 2019 and 2020, it's still true.

2 Cash at the holding level figure was corrected orally by Gérald Harlin afterwards, to Euro 1.7 billion (cf. page

15)

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Thomas Buberl | Group CEO, AXA Let's stay there and go to Andy.

Andrew Sinclair | Bank of America Merrill Lynch Thanks. It's Andy Sinclair from BofA Merrill Lynch. Three for me. Firstly, just the increased guidance for reserve releases, but you've not changed your overall combined ratio guidance targets. Is this really just one pocket into another, or is there some extra conservatism in the combined ratio targets now? Secondly, just looking at the growth in AXA XL's reinsurance revenues, up 16%. Can you tell us just about what lines you've been growing and how much of that 1.5% reinsurance January renewals is from business mix change or is that risk-adjusted? And thirdly just on France, really impressive growth this year. Just do you think that will be possible to continue to grow from that strong base given the Gilets jaunes backdrop?

Thanks.

Thomas Buberl | Group CEO, AXA Good. Let's take them one by one. Gérald, the reserve releases and changing the guidance in the combined ratio. Greg, you would talk about the growth in reinsurance. And Jacques, you'll talk about the impressive growth and the Gilets jaunes in 2019.

Gérald Harlin | Deputy CEO and Group CFO, AXA Okay. Let's start with the combined ratio. So it's clearly, I would say, it's not neutral. It's really because we have excess reserves that we are quite comfortable that we can raise our target reserve releases from 1% to 2% to 1.5% to 2.5%. Your question about the combined ratio, we had a target combined ratio, which was in the old perimeter of the group and we said that we would be between 94%,

95%. So we were below 95% excluding XL. I believe that it's not so – the trend is the same. Don't consider that we won't – that our objective is not like we did in the past to still improved the combined ratio. And consider that this will help us improve our combined ratio and for the targets, we have to integrate XL in the future. So that's why we didn't restate it. But clearly, the objective is still to improve our combined ratio.

Thomas Buberl | Group CEO, AXA Greg, on the reinsurance?

Greg Hendrick | CEO, AXA XL Yes. On the growth for AXA XL during the fourth quarter, reinsurance is a very light quarter in general for us. On the reinsurance assumed side. We are – in the fourth quarter of 2018, we experienced growth with a specific contract that we have with a U.S. personal lines and small commercial carrier, which has very, very limited Cat risk in it. So it's a good diversifier for AXA Group, both limited Cat downside and lines of business we’re not present in. That growth rate is not, as Thomas alluded to in his remarks, that growth rate is not indicative of full-year growth rate, we would be more kind of low-single digits. On the 1.5% rate increase, that is rate-adjusted across the entire reinsurance segment for the January 1 renewals, a little bit more in casualty.

So say 2%, 3% and a little bit less in short-tail property, right around 1%. I don't have a growth figure I want to give you for the 1/1 for reinsurance. I'll just say that we did look at that rate increase on the reinsurance Cat treaty inward side and decided to not deploy quite as much capital capacity as we did coming in on the renewals. And so we've got room to be able to grow if rates, as we think they will, improve during the course of the year on the

U.S. Cat risk.

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Thomas Buberl | Group CEO, AXA Thank you, Greg. And we go to Jacques on the growth and “les Gilets jaunes”.

Jacques de Peretti | Chairman and CEO, AXA France Thank you. Let's say that AXA France has delivered a strong growth this year, but it's in a steady momentum and we had delivered that sort of growth last year. We delivered this growth this year and I hope we'll continue. We are taking advantage of a very strong footprint in France definitely and that gives us the capacity to move our model and to increase the expertise of our people and to better satisfy our clients. So we are growing our activity, we are growing our profitability and we are doing that in all the business line, if you look precisely. So I don't consider it will3 stop. It is a very strong and solid growth.

And concerning the Gilets jaunes, let's say that the riots are mostly behind us. You know that the movement is now fading. The government took very good decision in December to quiet the situation. And concerning, let's say, the morale or whatever, everything is green in France and things are going well and the damage are very, very strong – are very, very little. Let's say maybe 10 million, that's all and it's behind us. So Gilets jaunes I don't consider has an impact on our business.

Andrew Sinclair | Bank of America Merrill Lynch Okay. Thank you for that.

Gérald Harlin | Deputy CEO and Group CFO, AXA Just to correct, it's not 1.8, but it's 1.7. I want to be precise. I'm sorry for that.

Thomas Buberl | Group CEO, AXA Very good. Let's stay over there since the mic… I can’t see with the light, I'm sorry.

Johnny Vo | Goldman Sachs Johnny Vo from…

Thomas Buberl | Group CEO, AXA Johnny, sorry – yes.

Johnny Vo | Goldman Sachs …from Goldman Sachs. Just the first question, I guess just in XL and the guidance of the 1.5% to 2.5% PYD. I notice that XL had a reserve release in the fourth quarter. I think that that guidance does not include any reserve release from XL. So what happened? Why was the reserve release there in the first place? Second question is just in regards to the payout ratio. So the payout ratio is currently 52%. I guess as you start switching or selling down AXA Equitable and switching to XL, should we see that payout – would you move through the payout range and how can we see that and get comfortable with that? And the third question is just the manifestation of the diversification benefit that you're going to get. Is this a diversification benefit at a consolidated Solvency level or should we see more fungible capital moving from entity to the HoldCo and lower capital requirement within the entities? Thanks.

3 During the presentation, it was mentioned “I don’t consider it won’t stop” instead of “I don’t consider it will stop”. This has been corrected here in the transcript.

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Thomas Buberl | Group CEO, AXA Very good. Thanks, Johnny. So I suggest Gérald, you do the first question. I'll take the second one and Alban, you take the third one.

Gérald Harlin | Deputy CEO and Group CFO, AXA Okay. So your question about the prior reserve release, we mentioned about XL that you could not expect in the short term, medium – short to medium-term, any prior year release. The one you are referring to, Johnny, concern AXA Corporate Solutions. On top of my head, we had 60 million, but it concerned AXA Corporate Solutions which is a mature company; so it's quite logical. So as far as the future is concerned, I mentioned the 1.5% to 2.5%. But don't expect anything from XL.

Thomas Buberl | Group CEO, AXA Very good. The second question on the payout ratio, I was waiting for this one.

You have seen that on the November Investor Day, we have moved our range up to 50% to 60%. And we have always seen the payout ratio as a resulting variable of the dividend that should be corresponding to the underlying operating earnings. And as you see, we have increased the operating performance by 6% and also decided to increase the dividend by 6%, the payout ratio being a resulting variable, so we are not looking at the payout ratio to be increasing over time in a systematic pattern, but rather to be a resulting variable of the dividend growth that should correspond to the growth in the underlying performance. So to give you an example, if we have a splendid year of 2019, we could as well imagine to go back to 50% again, so that the fluctuation we will use, again dividend should correspond to underlying earnings and performance development. Alban?

Alban de Mailly Nesle | Group CRO and Head of GIO, AXA And on the diversification and fungibility, the diversification benefit is mostly at group level, the calculation of the Solvency at that level. But now moving more from a Life-oriented group to more P&C-oriented group, capital is naturally more fungible in the P&C business than in the Life business. But you wouldn't see that in the way, for instance, we calculate Solvency at XL level, because it will still be Bermuda based, except the fact that we will capitalize XL like we capitalize AXA France and others and that makes as such our capital more tangible within the group.

Thomas Buberl | Group CEO, AXA Thank you. Let's move over to Jon.

Jon Hocking | Morgan Stanley Jon Hocking from Morgan Stanley. I've got three questions, please on XL. First of all, just looking at the aggregation of risks, which seems to being the problem in 2018, just on the slide where you talk about the €50 million deductible. Is it right to think if you had10 events with a €50 million deductible, you'd hit your 1-in-10, 1-in-20 earnings guidance. So how should we think about that aggregation of risks and if you sort of back-test this, you know, in what circumstances do you hit the sort of 1-in-20 earnings guidance, so first question. And then the second question, just looking at the – again on the slide A29, where you're showing the tails to earnings. I just wonder what this looks like if you go further into the tails. If you look at the sort of 1-in-

100, 1-in-200, are there any scenarios here when Nat Cat actually becomes a capital issue either for XL or also AXA

Group potentially? And then the third question, again on XL, the rating upgrade, does that actually have any business impact for accessing lines of business you can get into you couldn't previously as a standalone entity?

Thank you.

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Thomas Buberl | Group CEO, AXA So I suggest Alban you take the first two questions and Greg, you do the third one on the rating upgrade.

Alban de Mailly Nesle | Group CRO and Head of GIO, AXA So maybe yeah – on this slide, the 750 million, you need to keep in mind that on average, the normal year is 1.5 billion. That 1.5 billion would be made of the natural losses. So you can have two losses at 750 million and nevertheless still be within the normal year that we should have of 1.5 billion. But we would be protected above that level through the reinsurance protection that we buy and through the aggregates. Am I answering your question? So, if I have smaller events, that's what I described with the aggregate. And obviously if you have thousands of small events, it's no longer a 1-in-20 year. But if you have smaller events, then that would go to the aggregates subject to the €50 million deductible today. That's why I said we are protected either for a large string of small events or a small number of large events and anything in between. Okay? Then your second question was on the 1-in-200. You may remember that in the end of

November at the IR Day, we showed that 1-in-200 Cat year, not event, which is an eight-point Solvency hit. So, it's not a capital issue. It's nothing like the same on the financial crisis.

Thomas Buberl | Group CEO, AXA Greg, on the rating one.

Greg Hendrick | CEO, AXA XL Yeah. I think if I just add one thought just – there are other protections that apply just to AXA XL on a proportional basis; so we buy a net property quota share. We buy some protections on the Cat treaty reinsurance book as well that are in addition to what Alban has outlined there. So, there's that protection as well. On the rating upgrade, the specific business that benefits the most is the reinsurance assumed, particularly outside the U.S. Inside the U.S., A.M. Best is the more normal rating agency that's followed by the buyers of reinsurance whereas outside, it's almost exclusively S&P. And there, we do get opportunities and have had now already, looks at business on the casualty assumed side internationally that we didn't see before. To give you any kind of thought about it, it's in the kind of 10s, not even 10s, single-digit to low 10s of millions of dollars of premium; so not a big pickup. It does help you though when you're out marketing – it's a softer marketing pickup that you're able to say being part of such a great group, we're AA- and be able to wear that proudly.

Michael Huttner | J.P. Morgan Thank you very much. I had three questions. First one is on those extra prior year development, so I worked out at 300 million. And I'm just wondering where is the 300 million? Is it extra earnings?

You know the 3% to 7% range, because we didn't have it before? And also on that extra 300 million, the 1.5% to

2.5%4 that's on a huge volume of premiums. What I notice is that the excess reserves have gone from 5.7 billion to 7.1 billion so 1.4 billion. And France and Europe each earn about 1.5 billion, so if they come from that it means the underlying earnings wouldn't have been 3 billion, they would have been 4.5 billion. I just wondered how can you have earned an extra 1.5 billion, where was it? Tell us, that would be lovely. And then the other point is on

4 During the presentation it was mentioned 2% instead of 2.5%. This was corrected here in the transcript.

Page 17 | 28 slide A30, you show all the numbers except the one we're interested in, which is AXA XL, it's there and it’s all grey and I'm kind of saying why did you show it? And the other thing is there was an article in Artemis I think on

Thursday saying that I think it was quoting you, Mr. Hendrick that you were buying more and I was wondering whether that reinsurance buying would actually increase throughout the next renewal or the next round. Thank you so much.

Thomas Buberl | Group CEO, AXA So just – thanks Michael. I suggest Gérald, you take the first three questions around the 300 million PYD, is it extra earnings, yes or no? The second question, where does the excess reserves come from? And then also on the A30, the real numbers you didn't see. And Greg, you are taking the last one on the increased buying of reinsurance.

Gérald Harlin | Deputy CEO and Group CFO, AXA I would like just to start by one of your questions, which is what about the 7.1 billion versus the 5.7 billion. So let's be clear. This 7 billion – and I believe it will answer to the rest of your questions. The 7.1 billion is not in the accounts yet, the 7.1 billion is part of your Solvency. I remind you that the Solvency II ratio is calculated based on the best estimate assumption of your liabilities. More or less, to grow in an IFRS17 environment, it might not be so different. But it's not the case today. So that means that you know that we have been always cautious on the way we reserve, and we have a cautious way of preserving. And on a regular basis, we are reassessing our level of reserves. So, it's our direct interest to have the right level and the right number because it helps our Solvency. We did it and I would say that the P&C reserving ratio is an early indicator of this situation. That's why we moved from 209 to 213 and sorry – and beyond this, it will flow through the earnings, I'm sorry. It will flow through the earnings going forward. And your other question says yes, it will help us – it was the previous question. That means that it will help us drop the combined ratio. It will help us improve our underlying earnings and next the cash flows. Is it clear? That's exactly what it is. But – last point, I'm sorry, last point, you noticed as well that we are at 2.1 points of prior year reserve release. When you compare with our peers, we are more in the low end of our peers.

Thomas Buberl | Group CEO, AXA Let's go to slide A30 and before you do the reinsurance, I think Gérald wanted to quickly address the third question on the AXA XL numbers that you were missing, A30.

Gérald Harlin | Deputy CEO and Group CFO, AXA But what are the – I'm sorry, but I don't understand exactly your question.

Thomas Buberl | Group CEO, AXA Yeah, take the microphone.

Michael Huttner | J.P. Morgan No, no I don’t mind. It’s just on slide A30…

Greg Hendrick | CEO, AXA XL Slide A30, yeah.

Thomas Buberl | Group CEO, AXA Where is slide A30?

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Michael Huttner | J.P. Morgan There is no numbers there.

Alban de Mailly Nesle | Group CRO and Head of GIO, AXA No because there is no AXA XL here.

Thomas Buberl | Group CEO, AXA Yeah exactly.

Greg Hendrick | CEO, AXA XL So, let me see if I can... Alban answered it best earlier. There isn't an AXA Group, there is isn't an old legacy AXA Group covering or old legacy XL covering. There is an AXA Group cover that protects, so that insurance protection applies to all of AXA Group, which includes AXA XL. Clearly in reinsurance, we only write in AXA XL, so those protections are specific to the reinsurance part of AXA XL. And then the group aggregate protects again all of AXA Group and current AXA XL.

Michael Huttner | J.P. Morgan I know but if you show a slide and there is one with no numbers, then I kind of think why?

Greg Hendrick | CEO, AXA XL Oh, there's – okay, now yes, the bit in the middle is made up of many components.

There's a cap-on component, which is about 1.2 billion in force at varying retention levels based on industry loss.

So, it's not net loss cover. We then have, I just mentioned it earlier, we then have a number of protections that are mostly proportional in nature around a property quota share that protects all of AXA XL's property rights, some quota share protections of varying kinds and varying geographic coverages. Hence why you don't have a lot of numbers there, because it is a – we think it's a very smart and intelligent way to buy it, but it doesn't fit neatly unfortunately on a piece of paper. The very most important part to take away from it is that with regards to what's actually in that box in the middle, the column on the right sweeps up everything that's left over. So regardless of what the exact details are in that middle, that right size picks up everything that comes out after all the other protections.

Michael Huttner | J.P. Morgan Did you buy more? The article…

Thomas Buberl | Group CEO, AXA Yeah. That’s…

Greg Hendrick | CEO, AXA XL Yes. So, if you try to take it from purely a legacy XL lens, yes, we bought more both as a participation of the AXA Group cover now, group covers, sorry, but also for us, the strategy on the catastrophe assumed book going forward or has been, and going forward will be, unless we can generate a sufficient return to retain the same level net, we're going to continue to build out our alternative capital business with New Ocean, we're going to continue to access third-party alternative capital and continue to reduce that net participation until such time as we see the returns meet our threshold. So in the aggregate, we bought a little bit more, but it really is important to shift this perspective to the AXA Group perspective.

Thomas Buberl | Group CEO, AXA Mic?

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Michael Huttner | J.P. Morgan Yes, sorry, just on the New Ocean, I beg your pardon, I'm sorry, I shouldn't be so, but it’s such a nice opportunity and I thank you for that. The figure, New Ocean is $1 billion; that's a figure I saw of the assets or whatever they had. Is this going to help us here?

Greg Hendrick | CEO, AXA XL Yes. The – there you go Thomas got it.

Thomas Buberl | Group CEO, AXA Yes. And I think actually we might also want to say that, this is, let's say, in alternative capital, XL has been one of the very first companies being active in there. We have a very clear intention to increase that, not only for XL, but for the overall AXA Group. And we are currently working on a strategy of how to do it; because we've got all the pieces. We've got the piece within XL. We've got the Group risk management framework and we've got also on the AXA Investment management side the distribution piece. So this is clearly one of the priority of the XL integration that we haven't talked about a lot, but there is another upside potential, because the approach of originate-to-distribute is certainly something where we want to focus more. We don't only need to originate and keep everything; you need to smartly decide what you keep, what you reinsure and what you cede to the alternative capital markets. Let's stay on this side here, and then move over to Nick.

Colm Kelly | UBS Thanks Colm Kelly, UBS. Going back to the operating free cash flows, I suppose there has been some questions on the upside potential here. I am going to think about it in a slightly different way: if I take the

6.6 billion number, there is a number of positive one-offs in that, particularly in the UK P&C side. If I take that out, the cash flows look flat or slightly down year on year, I think this time last year it was flat year on year, and even if I normalize for the lack of the US business and adding in the AXA XL full contribution, it won’t necessarily get me a bigger number. Can you provide more details on the specific drivers of growth in the operating free cash flows because ultimately that will dictate the trajectory, the growth trajectory of the sustainable dividend from the business? That's the first question. Second question is on capital and on the diversification. So I know there's

Euro 2 billion in capital synergy expected and we fully understand the diversification from the U.S. Nat Cat versus

EU windstorm aspect, but there's also the loss diversification from a lower amount of market risk on the balance sheet against Cat risk or insurance risk for longevity and things like that. So can you break down the 2 billion synergy number into that assumed between U.S. Nat Cat and EU windstorm, and also, that assumed to be loss through lower market risk on the balance sheet? And then, just lastly, there was a question at the Investor Day around the return on economic capital for the XL business. I think there wasn't full line of sight on what that economic capital looked like at that point. Perhaps could you update on that number now that there is more visibility on that hopefully? Thank you.

Thomas Buberl | Group CEO, AXA Thank you, Colm. I suggest Gérald, you answer the first question on the cash flow and the last question on the return on economic capital and Alban, if you would answer the question on capital diversification and the breakdown of Nat Cats additional diversification versus loss diversification on market risk? Gérald.

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Gérald Harlin | Deputy CEO and Group CFO, AXA On the operational free cash flow, I could say that in P&C business, it's relatively simple. So, it's a direct function of the profitability and that – it means that so long as we're still planning to improve our profit in term of P&C business, it means that naturally, we can expect to have cash flows going up and so that's it. And it's much more complex with the Life business. But here – and that's what's represented last time in the IR Day. So really, I don't believe that you can conclude that we would be at the kind of cap in term of cash flows.

Colm Kelly | UBS Just to follow-up on that. So, absolutely, P&C growth expected to come through, but the Life cash flow is not growing and that's not in the context of that increasing push toward Unit-Linked, Health and

Protection products which is capital-light and the more-capital intensive backlog running off, so I would be expecting some growth in cash flow to come through – appreciate there is some impact the U.S. this year. So my forward-looking projection is one of reducing Life cash flow and increasing P&C. I suppose it's just more a clarity