Earnings Transcript for AXAHY - Q4 Fiscal Year 2020

Andrew Wallace-Barnett: Good morning, everyone, and welcome to AXA's 2020 Full Year Analyst Presentation. It's good to have you with us. The presentation this morning will be made by our Group CEO, Thomas Buberl; and our Group CFO, Etienne Bouas-Laurent. Also joining us for Q&A this morning, at the end of our presentation, will be the CEOs of AXA in Europe, in France, and AXA XL, and our Group Chief Risk and Investments Officer. Now sadly, we can't be with you physically in London this morning, but we're very happy to welcome you virtually here to sunny Paris. And to enable a fluid and direct interaction between our analysts and the management this morning, we've invited our analysts to join us here by teams. And so welcome to you all, as well. And if you've connected by the webcast, you can also ask questions, if you wish, in written form, just follow the instructions you've been given. And now I'm very happy to hand over to Thomas, for his introduction.

Thomas Buberl: Thank you, Andrew and good morning to all of you. As Andrew said, we are very sad not to be with you in person and hope that hopefully for the next full year, we will be in the old physical format again. Let me start with the key highlights of the full year of 2020 and those are four key highlights. The first one is very much around our revenues. €97 billion of revenues is almost stable, relative to last year, in a very difficult context; we've seen that the business momentum is good and that particular in the preferred segments, it has really been very good, plus 5% in the last quarter of 2020 and we obviously, are very confident that this is continuing throughout 2021. Second, very key message is the stability and solidity of our balance sheet. 200% of Solvency II coverage represents this very strong balance sheet and it shows that our shift towards technical risks and in particular, the benefit from the integration of AXA XL internal model -- into the internal model with 13% of benefit shows that we are very strong as a group in one of the most difficult crisis in the last 50 years. Third message is about dividend. The Board of Directors has decided yesterday, a proposed dividend per share of €1.43. It was important for us to get back to an attractive dividend and certainly, to get back to a proposal of the initial dividend of 2019 full year. Fourth important message is €4.3 billion reported underlying earnings. This has to be seen in a context of a very severe crisis, but it also has to be seen going forward. Many of the negative effects that we have seen in 2020 will not repeat. Therefore, we are very confident in our outlook. Also, given the very good business momentum that we can achieve the 3% to 7% underlying earnings per share growth based on the normalized rebased underlying earnings of €6.3 billion. If we now go a little bit in more detail. And before I do that, on the numbers, I would certainly like to talk again about AXA's contribution to society during this very difficult period of COVID-19. As you know, we had many challenges, starting with our employees around the simple question, how can they continue to work in a safe environment? How can they continue to serve their customers? Up to the point, how can we help our customers that have found themselves in very, very difficult situations and are still in some of the sectors in difficult situations, up to the point where we really wanted to make sure that as an actor in society, we do contribute to relaunching the economy and stabilizing the economy. And this was very much the driven spirit of our 2020 engagement. On the one hand, protecting our clients and employees, we've spent and paid over €1.5 billion in claims and solidarity measures to our customers and to society. And we focused very much on how can we guarantee a high employee well-being in a situation that is very different and that requires to work at distance. Supporting the economic recovery was very much around supporting the SME, making sure that we provide capital to the SME in order to relaunch growth, in order to relaunch investment. €700 million have been invested in France into SMEs to help them to prosper. And certainly when we think about the investment in people and research, we continued our engagement into research. And certainly, we recruited despite that difficult crisis, 5,000 people in France, and 30% of those 5,000 people have been young people in order to make sure that we are a very strong actor, a very active actor, in a difficult situation of our society, in this difficult moment of COVID. Where has that led to? And when you look at how the franchise of AXA has developed, I'm very proud to say that despite those difficulties, our distributors, our employees, and our customers have really seen an enhancement in their satisfaction. On the distributor side, we were able to increase the use of digital means from 67% to 91%. This was really the key to make sure that we could continue a good customer service in a time where we couldn't rely anymore on the traditional mechanisms. The digital investments that we have made have significantly helped us to continue the very good service. I mentioned earlier that employee protection was one of the absolutely key elements and first priorities that we have. We managed very quickly to transfer all of our colleagues into a safe environment of distant working. And this was really the fruits of a very long-term, very intense strategy and engagement of investing into digital. This has led to the fact that our employee satisfaction has increased by 14 points during the crisis to 35, which is way above the benchmark of global high-performing companies. All of this has resulted in an increase of our customer satisfaction, which made me personally very proud. In a period of a crisis, you have very difficult situations, you are faced with very tragic moments, but we did our best to help everybody to help our customers. And I'm very proud to see that today, in 94% of our markets were at/or above the market average in terms of customer satisfaction. This is a fantastic result and I would really like to thank all of my colleagues and certainly all of the agents and the distributors for this excellent result. If we go a step further, and have a look what has really happened in the underlying dynamics, it is very clear that we see some very promising trends that are significant opportunities for the future. One is clearly the growth in our preferred segments. I mentioned earlier that we've seen a dynamic of plus 3% over the first three quarters of 2020. But in particular, in the last quarter we've seen an acceleration to plus 5%. This makes me very confident that we have a good momentum also for 2021. On the PNC profitability, we could also advance. If you exclude the effect of COVID-19, if you exclude the abnormally high natural catastrophes, we managed to bring down the combined ratio to 94.2%. And lastly, we also continued during that very difficult period of the crisis to continue to shift our business mix away from general account which has experienced a negative net flow towards more unit linked, fee based business which has seen a very attractive, good positive inflow. XL was clearly the business that was mostly hit by COVID. Most of the other geographies had a another business which was mainly the personal line business that could compensate the negative effects and as you see the moment, we are -- have a very high stability of Europe, of France, where this compensation mechanism has worked very well. Since COVID, is very much a crisis of the commercial line business and since XL did not have the opportunity to compensate with another business, we obviously see the biggest effect there. However, we've taken very concrete measures at XL, under the leadership of Scott who is with us today, to make sure that we are very focused on our target of €1.2 billion in 2021. What have we done, we have firstly, been very, very disciplined in the re-underwriting of our contracts, making sure that we get the right profitability, making sure that we exclude the risk of COVID as much as we can and benefiting from a very strong momentum in pricing. You've seen that up to the Q3 of last year, prices have increased by 20%. And in Q4, it even went beyond to 22%. We've seen with the renewals in Europe that this trend of price increases is continuing. And we are very, very dedicated to continue this very strong discipline on the underwriting side to make sure that we are using this great momentum of increasing prices. At the same time, we have continued to take measures to manage our volatility down. Volatility on the natural catastrophes, which means that we have increased our prudence by the higher cap load of 6%, but also managing down our volatility on the reserves of the long term business, through the adverse development cover with ensta [ph] that we published this morning. All of this makes me very confident that we have a taken the right measures, we have a strong base, we are confident on the reserves at XL, and we will be achieving the €1.2 billion of desired target for 2021. When we look at the other businesses, as I said earlier, we see very high resilience. France and Europe, the strongholds of AXA, have managed to keep their results even between 2019 and 2020, despite the fact that we have experienced significant losses from the COVID. The balancing effects and the diversification effect has worked very well. We've also seen in other geographies, for example, Asia and the international markets that are pivot towards health has really advanced well. Health is now considered as the number one risk for everybody. It's on everybody's mind and benefiting from this trend being in a position of having such a strong global franchise on health will really help us to capitalize on this trend in 2021 and going forward. And certainly on the investment management side, we have seen a very high desire for longer term alternative and illiquid assets. Having one of the most important franchises on alternatives in Europe, helped us really to accelerate our growth on the alternatives, and to make sure that we have really boosted our performance there, which is also a good indicator of how this will continue going forward. When we look at how does 2021 look like? I'm personally extremely confident. Why? Because we have taken the right measures and the right decision at XL to really accelerate the turnaround, very strong measures on the discipline on underwriting, very strong measures on the reduction of the volatility on net cat and the long-tail reserves. All of this in environment that remains extremely favorable when it comes to price increases. Secondly, we have a very strong foothold with France and Europe, very strong results despite that difficult crisis, sustained delivery over the crisis. And we have a clear problem of pace under the leadership of Jack and Antimo to continue this and certainly benefiting from the growth options in Asia in the international markets and in AXA IM we are well positioned, we are on the right trends, be at the alternatives, be at the health business in order to make sure that we can achieve the 3% to 7% underlying earnings per share based on a normalized earning capacity of €3.6 billion. This ends my section. And I would like to now hand over to Etienne. Thank you.

Etienne Bouas-Laurent: Thank you, Thomas, and good morning, everybody. Happy to be with you to present our full year 2020 results and share some insights on the outlook for 2021 and beyond. Let me start with group revenues. Overall revenues were €97 billion, down only 1%, demonstrating the resilience of our business model in a challenging year. We recorded strong growth in the first quarter, followed by a tough second quarter impacted by strict lockdowns. We then saw a rebound in the third quarter, and an acceleration in the fourth quarter, which bodes well for 2021. Each of our preferred segments, P&C Commercial lines, Health, and Protection performed well, proving the pettiness of our strategy. Revenues in preferred segments, which represent around two-thirds of our total revenues were up 3% overall in 2020, and return to pre COVID growth rates in the fourth quarter at plus 5%. Going forward, we are well placed to continue to grow in our preferred segments, notably with continued strong pricing momentum in P&C Commercial lines, and increased awareness for health and protection post COVID. Let's now move to underlying earnings, which of course were impacted by COVID and Nat Cats in 2020. AXA's underlying earnings were €4.3 billion in 2020, down from €6.5 billion in 2019 from three key items. First, the non-recurring contribution from equitable holdings. Second, COVID impacts and third, Net Cat's which were open €2 billion higher than in 2019. If we look at it by line of business, here are the key elements which are important to retain. P&C earnings, excluding COVID and AXA's Cat's were 2% higher, driven by current year technical margin improvements. In light and savings, the technical margin was partly impacted by non-recurring items, as already seen in the first half, while investment margin remained resilient. In Health, we have good top line momentum across geographies and in Asia in particular. However, earnings growth was offset by adverse regulatory changes in France. Asset Management performed well boosted by the alternative division, holdings and others improved mainly from higher non-recurring investment income. As Thomas just explained, we have set the starting base for underlying earnings of our 2020 free plan at €6.3 billion, adding back COVID impacts and the excess cats from 2020. This is in line with 2019 earnings on a like-for-like basis, which is a strong level considering the changes in economic environment. Let's look at more details for each of our lines of business starting with P&C. P&C revenues are up 1% overall. First, in commercial lines we record a 2% growth for the year with the strong rebound in the second half, plus 2% in the third quarter, plus 7% in the fourth quarter. Pricing momentum remains strong as Thomas explained, notable at AXA XL with insurance prices at 22% year-on-year in line in the fourth quarter. We also had strong January renewals in reinsurance with prices up 9% year-on-year. We expect to see continued pricing increases in 2021 and this will lead to further margin expansion. Personal lines revenues declined by 1%, mainly from lower new business during lock downs in France and Europe, mostly in Motor. The number of contracts remain overall stable and pricing was flat. Moving to P&C earnings, the key point to highlight is that we're earnings were actually higher, I just think for COVID and Cats, earnings were impacted by €1.5 billion of COVID losses, and by higher Nat Cat charges, notably from a very active hurricane season in the North Atlantic. Looking through that, we recorded higher current year technical profit, which more than offset lower investment revenues. We also had slightly less favorable prior reserves developments. As a result, excluding COVID and assuming normalize Nat Cat, P&C earnings were up 2%.The combined ratio shows a similar picture. The current year combined ratio ex-COVID, and Cat improved by 0.5 points from both lower loss and expense ratios. Going forward, for P&C, we remain confident that higher technical profits will move will more than compensate lower investment revenues. As a reminder, our target combined ratio is 93% by 2023. Let's now take a detailed look at COVID impacts, which are confirmed at €1.5 billion and in line with our initial June 2020 estimate. This continues to represent our best view of ultimate losses linked to COVID. In the second half of 2020, we saw additional impact in commercial lines, notably AXA XL offset by reduced frequency in retail lines. In business interruption, we have assumed incremental claims from the introduction of new partial lock downs, and also from court decisions in the UK and Australia. And as you know, some uncertainties remain in France. In other lines, credit, financial lines, liability and travel we have anticipated some more impact, even if we have seen very limited claims so far. IBNR is at 90% for this line, event cancellations remain pretty stable. On the other hand, and offsetting this additional impact, we so further benefits from reduced frequency in retail lines, notably in motor. In order to reduce our exposure going forward, we have revised the policy wordings for all our non-damage business interruption contracts across the group, and strengthen the exclusion of pandemic triggers. The rollout of these revised wordings is ongoing as contracts are renewed. Moving on now to, AXA XL we confirm the €1.2 billion target for 2021. First, some color on 2020 earnings. Underlying earnings were minus €1.4 billion impacted by COVID, Cats and US riots. COVID impacts have been booked at €1.7 billion, mainly from business interruption, event cancellation and other lines as I just explained. Natural catastrophes were €0.5 billion above the assumed 4% catalog for 2020, linked to the high frequency of mid-sized storms in the Atlantic. We also had open to €1 billion claims from riot in the US as mentioned in the first half. Adjusting for this free item normalized earnings were €1 billion in line with the guidance provided by Scott in December. In comparison with 2019, we did benefit from higher pricing more than offsetting higher claims cost in long term loans. For 2021, we are confident on our €1.2 billion underlying earnings target. We expect €0.5 billion earnings uplift from higher pricing and underwriting measures net of claims trends. The year is starting well on that front. Also, remember, we are now assuming a more cautious cat load of around 6% of combined ratio, compared to 4% previously, and we expect €0.1 billion headwind from lower investment income. Overall in 2021, we expect around 70% of products will deliver a combined ratio of 96% or below, and the overall combined ratio for AXA XL to be 96%. Let's now move to Life & Savings, starting with revenues. You will see that our business mix continues to improve. Revenues were down 6% in 2020, driven by lower general account savings in the context of COVID, especially in France, and in Italy. Protection revenues were resilient at plus 2%. Unit-linked revenues were down 1% but at 3%, including unit-linked products booked as mutual funds in Italy and Belgium. In France, we continue to see strong appetite for unit-linked products, which represent 48% of revenues in individual savings, and this is 10 points higher than the market average. Net flows also demonstrate clearly this change in business mix, less spread business, more technical risk, and more free business in line with our strategy. Going forward, we expect a rebound in Life & Savings revenues as COVID impacts continue to recede with further growth from protection and unit-linked. Let's now move to earnings for Life & Savings. As you can see a very similar picture compared to the first half. Earnings were down 7%, mainly driven by lower technical margin linked to a combination of factors already reported in the first half. Investment margin was stable at 67 bps as lower investment revenues were broadly offset by lower crediting rates. Expenses were lower, reflecting good cost containment measures across geographies. The technical margin should improve next year from current levels while investment margin could see some dilution given the low level of interest rates. Remember, our guidance is 55 to 65 bps for investment margin during the plan period. Moving now to our growing health business. Revenues were up 6% across geographies in group and individual businesses. In Asia, revenues were up 9%, mainly in China with higher volumes from new partnerships at AXA Tianping. We also saw higher volumes in Japan and tariff increases in Hong Kong. Underlying earnings were down 1% rather than new growth being offset by a higher combined ratio. In France, the benefits from reduced frequency during lockdown were broadly offset by the exceptional tax introduced by the government. We also saw increased claims frequency from a recent health care reform. Going forward, we expect health earnings to go back to a normal growth trajectory brought in line with revenue growth. Moving now to asset management, which continues to be boosted by alternatives. Assets under management were up 7% reaching a record high €858 billion. Alternative assets under management were up strongly by 14%.Net inflows were strong at €14 billion across core alternatives and our Asian joint ventures. Revenues were higher driven by alternatives, which represent around 40% of total revenues. Underlying earnings were up 6% largely reflecting higher assets under management, a strong performance in a challenging year. You can expect us to keep growing our high margin alternatives franchise, which contributes around half of our profits. Alternative products continue to be very attractive in a low rate environment. Let's move to net income, which amounted to €3.2 billion. Let's go through the key drivers. Net realized capital gains were €337 million significantly higher than in first half reflecting more favorable market conditions in the second half. For gains and losses on derivatives, we had positive from equity hedges and losses from interest rates and forex hedges. For change in fair value of IFS P&L assets, we saw decrease in funds value from private equity, hedge funds, as well as fixed income funds. Exceptional operations reflect the impact from announced disposals. The impairment of some non-consolidated assets, contributions to solidarity funds, and a change linked to the discontinuation of our management liability and financial institutions business written by AXA XL in the UK and the Lloyd's. Integration and restructuring costs are mainly linked to the integration of XL and restructuring initiatives in France and Europe. Moving now to shareholders equity, which increased by €1.7 billion to €71.6 billion. Net income was part of partially offset by the dividend paid in July. Higher unrealized gains from lower interest rates were broadly offset by forex impact linked to the strengthening of euro against major currencies and higher pension benefits. Solvency II now, as you can see a strong solvency ratio at 200%. The ratio was up 20 points in the fourth quarter, benefiting from 13 points uplift from the integration of AXA XL into the group's internal model. This captures the diversification benefits from combining XL with AXA, which resulted into lower capital requirements, the solvency capital grants reducing by about €2.5 billion to €27.5 billion. Note that, this ratio does not reflect yet the expected four points benefits from the disposal of AXA Bank Belgium. We remain confident the transaction should close in the upcoming months. Lastly, you will have noted that market conditions have improved since the end of 2020 and this bodes well for 2021. Turning to assets now, we remained very disciplined and have maintained a stable mix of high quality assets. Our asset mix has remained stable with 80% in high quality fixed income. The average ratings AA for Globes [ph] and A for corporate bond. Other fixed income assets are also of high quality. ABS are primarily AAA CLOs and mortgage loans are highly secured. The remaining 20% of assets are well diversified and include real estate and listed equities. Our exposure to vulnerable sectors is very limited, representing less than 2% of total assets following derisking actions implemented in the first half of the year. As expected, we saw a slight reduction in our book yield, the reinvestment rate was 1.3% in full year 2020 leveraging our expertise in low risk alternative assets. Looking now at cash at holding, we continue to benefit from ample cash flexibility, with more than €4 billion at full year 2020; this is both our desired range of between €1 billion and €3 billion. The main drivers of cash movements during the year were as follows. Firstly, a strong cash remittance from our entities at €4.8 billion. In the second half, the capital injection in AXA XL was offset by remittances from Switzerland and Japan. Second, we had €1 billion proceeds from the disposal of C and €1.2 billion from crystallized gains on equity derivatives and commercial paper. Those elements were partially offset by €1.7 billion of dividend payment, holding cost of €1 billion as well as the rebuild of cash flexibility at entity level amounting to €1.4 billion. Finally, financial debt and gearing, as promised we reduce gearing significantly over the past two years. At a level now well within the 25% to 28% target range. The gearing ratio was 26.8% at full year 2020 reduced by two points from full year 2019, primarily from debt repayments of €1.3 billion in April and €0.4 billion in December. In conclusion, and before handing over to Thomas. Top line momentum is good, notably with strong pricing and successful January renewals in P&C commercial lines. P&C earnings COVID cuts were higher with current year technical margin improvements. We have taken measures on AXA XL reserves and we are on track towards the €1.2 billion under earnings targets for 2021, growing profitable business in an attractive market cycle. In life and savings, the business mix improved further and earnings are resilient. In health, we had good top line momentum across geographies, earnings to grow in line with top line going forward. Asset Management performs well boosted by alternatives. The Solvency II ratio is strong at 200%. And the holding cash position is above our guidance. The outlook across our key financial matrix is positive. And we are confident on our plan targets, as communicated last December. Thomas, I hand over to you.

Thomas Buberl: Thank you, Etienne. And coming to the conclusion again, you seen that the year 2020 was a strong year in a very difficult context. And that is what is most important, we have very, very good and good business momentum and good perspectives for 2021, which makes us all very confident for 2021. Why? Because we've been very stable during that crisis, being able to have a revenue that is almost stable relative to 2019, with a good dynamic in the preferred segments. All of this based on a very strong balance sheet, 200% solvency is very solid, enabling the Board of Directors to propose a dividend of €1.43 per share, and being able to come back to a normality of dividends, and certainly being very clear and very confident on a good outlook, that we can achieve our 3% to 7% underlying earnings per share in 2021, based on a normalized earning capacity of €3.6 billion, which also means that the COVID losses that we have seen will not repeat in 2021. Thank you very much for your attention. And we are now moving to your questions.

Operator: We have many questions. And the first one is from Andrew Crean from Autonomous. Andrew, please turn on your microphone and go ahead.

Andrew Crean: Good morning, everyone. Very good to see you all. I've got three questions if I might. Firstly, could you said that AXA XL's profit improvement €0.5 billion is coming from pricing rising above the level of claims growth? Could you give us some detail around that as to what level of pricing versus what level of claims inflation you have there? Secondly, could you give us a little bit more detail around the €1.43 dividend and particularly give us some insights into your discussions with the ACPR, and just how intervention is there or not intervention as hopefully? And then thirdly, your solvency margin once you sell bonds, it will be 204. If you retain more earnings than dividends, you could be well above 210 by the end of the year. You got some disposals in, and I think there's rumors of other disposals coming. How should we look at that relative to your 190 target? And is there any possibility of you being able to execute buybacks this year or even make up the shortfall in the 2019 dividend? Thanks.

Scott Gunter: Yes. All right.

Thomas Buberl: No, it works.

Scott Gunter: Is it better. Now you can hear me, sorry. Hi, Andrew. How are you doing? Good to see you. Yes, in terms of the €0.5 billion. When we the rate is going to earn in, obviously, from 2020 that earns into 2021 plus the rate we're getting in the first quarter, will also predominantly earn in for 2021. So if you take this 2020 number, say around for insurance around 17% rate, and then use a loss development factor or claims cost inflation number around 4% to 5%, you see the difference there. We have about a 12 point margin on the portfolio that generates about €0.5 billion. That's kind of the rough, sort of, back of envelope math that we use to calculate that. Hope that answers your question.

Thomas Buberl: Thank you, Scott. Andrew, let's go to the second question, which was around the dividend and the ACPR. As you can imagine, we've got a very fluid relationship with the ACPR. We've also had a very active dialogue around the dividend, but not only because we also had a very active dialogue around the question of our financial situations and stress test. And as you can -- you could see today, the financial situation, the solidity of our balance sheet is very good at 200% solvency. The ACPR has clearly communicated last week that dividends should be looked at with the angle of prudence. Our board has certainly taken all of these considerations into account when they decided yesterday, but not only the ACPR considerations are much wider -- and that's why it was very important for me earlier to also show you what we have done on a wider society basis, and certainly for our customers at large. Because a dividend decision should be and is taken at AXA in a balanced approach across all stakeholders, and given our financial situation, given the fact that the board has considered that the decision of 143 is in alignment with the principles of prudence, we are very happy to announce that attractive dividend today to the market. Your third question on the solvency margin. It is absolutely true that -- if we could conclude the transaction with AXA Bank Belgium successfully, we would be at 204. And we certainly hope that the generation of solvency from operating return beyond a dividend payment will also add to the stability of our balance sheet and the solvency. As you will remember, on Investor Day, we have been very clear that we want to target our solvency around 190%, but that we are not relating it to any share buyback or other criteria anymore. Share buyback was very much seen under the two angles. One, if we do make further disposals so disposals that were announced after the Investor Day on the first of -- the first of December of last year, that those -- those proceeds would be used at the after closing of the transaction to neutralize the earning dilution. And we said further that when it comes to investments and looking, where can we really deploy the capital, that we would really do that with high financial discipline, and always looking at where is the multiple of AXA at that point in time. And so this should give you a very clear idea how we are looking forward at this. It is important to know that COVID is not over yet. So we are very proud of having a strong balance sheet. But we want to make sure that we continue to build the strengths and keep the strengths up. Let's move to the next question.

Operator: Our next question is from Peter Eliot from Kepler Cheuvreux. Peter, please activate your microphone and go ahead.

Peter Eliot: Thank you very much. Yes. Three questions from me, please. The first one was just looking at the reserves in excess of best estimates. And, I mean, if I look at France, they fell by €0.6 billion across the year after being up, I think, at the half year stage. I'm just wondering if you could explain what's happening there, especially with France. The second question was just on the protection of the long tail lines that you've done at AXA XL. I'm just wondering if you could give us a little bit more insight into that decision and maybe the timing. I mean, I guess obviously you've had that book for some time, but decision is being made now. So some more insights there would be great. And the third one, event cancellation. Now, I think I'm right, that you now assume that events canceled up until the end of 2021 is up through 2020 before, but the cost is only increased by €0.1 billion. And I have to admit I'm pleasantly surprised that it was so small and just wondering if you could explain again, what you're assuming that doesn't include the Olympics, for example, and any the other events like that, be very helpful. Thank you.

Thomas Buberl: Thank you, Peter, for your three questions, I suggest that the first question will be answered by Alban de Mailly. The second question on the -- and sorry, the first question was very much on the reserve movements in France. The second question was on the protection of the long tail lines, I would like Scott to talk about it. And certainly, when it comes to the event cancellation, I would also like Scott to talk about it. May be a general comment on our reserving situation, as you've seen, and the slide is now being shown, the reserving ratio has increased in the full year 2020. And despite the fact that we have the phenomenon you mentioned, in France, the excess reserve; above the undiscounted Solvency II bill remain at a very comfortable level. The same is true, as I said in my statement around XL. We have high confidence on the reserves, the reserve review at -- full year 2020 has really shown that we are very comfortable. We have excess reserve of €200 million. And certainly, when it comes to the COVID reserves, as Etienne has pointed out, we've also been very cautious since 65% of these are IBNR incurred but not yet reported. And so, all of this is really with two angles; one is to keep a very strong reserving position for the group. And secondly, to make sure that at the AXA level, we really have managed well our volatility when it comes to the reserves. And then a last piece, which is around the prior year development. You have certainly seen that the guidance that we have given is 1.5 to 2.5. Last year, we were at 2.1, which is below what we could have gone. So, I think we should keep this in mind when we talk about the reserves. Alban, if you could please talk about France in particular.

Alban de Mailly Nesle: So, thank you for the question and hello. Yes. I think, Thomas, you've said most of it. What I would just add is that, the reduction in this amount comes from the prior year development -- the positive prior development, which, at group level is still well within the range that we have indicated. And, overall, the ratio of reserves to premium in France is very stable at 250%. So we have not deteriorated at all the prudence in AXA France reserves.

Thomas Buberl: Thank you, Alban. Let's move to Scott on the ADC and the second -- the third question was on the event cancellation, Scott?

Scott Gunter: Hi, Peter. To answer your first question on the ADCs, first of all, as we mentioned earlier, we're comfortable in our current reserving position. However, as we mentioned, during the Investor Day, one of our key priority is really managing our earnings volatility. Thomas mentioned it during his opening comments around we're taking action online sizing, net line sizing. We're taking action on cat. We've been more prudent and our cat load. And so what we decided to do is another way to help manage earnings volatility is on the reserve risks side. So -- and obviously working with the whole team, we decide that one way you can help that, earnings volatility is to purchase the ADC. So in my mind, it helps achieve one of those key priorities for us, which is improving our or reducing our earnings volatility. With respect to, the event cancellation, when COVID first happened back last year, we took a hard look at our entire event cancellation portfolio. And then, you sort of make estimates about what when things are canceled, when they're going to be canceled, and the majority of the -- vast majority of the exposure was obviously from sort of a March-to-March basis. However it's off, there were events that purchase coverage going into 2021 and even a little bit into 2022. But it's relatively small compared to the rest of the book. So at the beginning -- at the end of last year, we took a look, okay, what's left, what's happening in those kinds of events. We do expect a lot of events to occur perhaps with fewer attendees or no attendees, etcetera. And then, we put a little bit more provision into event cancellation for the remaining part of the events that we ensure. Now, you mentioned the Olympics specifically, we've done our analysis and we're comfortable if -- we don't expect it but if the Olympics are canceled, we expect to be able to handle that within the event cancellation reserve that we have set up.

Thomas Buberl: Thank you, Scott. Let's move to the next question.

Operator: Yes. We have another question from James Shuck from Citi. James, please turn on your microphone, and go ahead.

James Shuck: Thank you, and good morning. Thanks for taking my questions and congratulations on the new innovation for this Q&A. So I had three questions. If I may, I just wanted to return to the best estimate margins. So that's reduced from 8.7% to 7.5%. So you're eating into that assessment margin a little bit and part of that has come from France, but the overall PYD for the years 2.1 points. So if you adjust for that reduction in conservatism, it seems like there's some adverse movement happening elsewhere. If you could just elaborate on that and whether you think 7.5% is an appropriate level going forward. And secondly, on the ADC and the reinsurance, in general. So the ADC looks like it's costing €20 million in lost investment income. Then we have the reduction in the retention rates on across the reinsurance that you're buying. Just interested to know how that gets charged to XL. Does it all come through XL? Or is it -- is there a central item that flows through? And kind of equally with that, could you just elaborate on the long-term reserves are not forming part of the ADC. It looks like you have about €17 billion of total long-term reserves about €11 billion transferring, I know it's 2019 and price, maybe that is the answer. I kind of interested about the large loss potential and how that feeds into the aggregate. So are the reserves that are transferred to Nstar? Do they still feed into the aggregate cover? And then a final, just, quick question on the own funds generation, I saw this positive development €1.2 billion operating expense variance for Life & Savings. And that is partly driven by -- sorry, and then there's negative on the P&C, I think, minus 0.7. Could you just elaborate a little bit around that? I saw that you had contract boundaries being a positive factor from Japan? Is there any progress with conversations with the regulator around contract boundaries in France? Thank you.

Thomas Buberl: Thank you very much, James, for your four questions. I suggest that they will be -- the first one on the best estimate being taken by Alban, is 7.5 enough? Second question was on the ADC and how does it work with the rest of the reinsurance and the charging mechanism to XL and the central unit, Alban should also answer that question. The third one is around the long term reserves. What is the large loss potential? And how does that fit in with reinsurance structure? I guess, Alban, that is also your question. And on the own funds, I give that to Etienne. And the question, do we have any boundaries of contract discussion with the ACPR, Alban?

Alban de Mailly Nesle: So, thank you very much for those questions. So the -- on the first one, the bestest EBIT margin. So you have seen that there is a reduction in AXA France. The other part of the reduction is with AXA XL, with the use of the PGAAP reserve, and that's why we have a reduction there on the excess overall at group level. Is the resulting amount at 7.5? In line with what we want, I think there is no target on that one. What I can tell you is, it's above the minimum of our risk appetite, and therefore we have margin there. The second part on the ADC, so it's going to be all charged to AXA XL, any cost and in particular, the loss of investment income. On the third one, the long term reserves that would not be part of the ADC. So, we -- what we said is that, it's the legacy XL. What we mean by this is that the AXA corporate solution long tail reserves on casualty, liability or professional are not thought of it. Simply because, from an actuarial standpoint, it's still two different triangles, to put it that way and it was easier to tackle the XL part. And we see also less volatility in the AXA corporate solution reserves that's focused on Europe. But then I'm not sure I have understood your question on the large losses and how that feeds to -- if you can say that again, so that I can take that question.

James Shuck: Thank you. The question was really around, to the extent that you might see adverse development on the reserves that are transferring to Nstar. Do those reserves still feed into your group aggregate cover? So any large losses, do they come back into the group aggregate?

Alban de Mailly Nesle: Okay, sorry. So the group aggregate cover covers property, and property losses, notably cat. So it's not the same covers. So the ADC covers long tail lines, casualty and professional, that are not covered by the aggregate. So that's two different protection mechanisms. I hope I've clarified.

Etienne Bouas-Laurent: Is it clear James?

James Shuck: Yes, yes. Thank you.

Andrew Wallace-Barnett: Very good. So let's go to the first question [indiscernible].

Etienne Bouas-Laurent: Yes. Hello, James, I guess that your question relates to UF report, where you see that we have €3.5 billion of operating free cash flows. We had indeed, some exceptional movements due to Japan impacting or the non-recurrence of an exception in Japan last year, which impacts negatively the evolution this year, because it was a reinsurance contract. So I think the reference to the boundary of contracts, there was no evolution this year. And I guess that the UF reflects this one-off in Japan for the life business. Second, you know, enforceable market conditions, which will reduce the free operating cash flow in life and then, of course, the lower contribution from the P&C earnings.

Andrew Wallace-Barnett: Excellent. Thank you, Etienne. Let's move to the next question.

Operator: We -- the next question is from William Hawkins from KBW. Please, William, activate your microphone and go ahead.

William Hawkins: Hi, thank you. Hopefully, you can hear me. Also just a little bit more detail to help understand the ADC. Thomas, how are you thinking about the all in economic costs of what you've just done? Obviously, ultimately, this is an additional cost to the original acquisition of AXA XL and you've given us the €20 million run rate. But I'm wondering, how you're thinking about the economic costs of that transaction? And then, secondly to understand your view about the level of protection that you've got, how long if at all, will it take to each through that €1 billion of cover, it's not at all unusual, the ADCs are completely exhausted over some period of time. So will this one be exhausted? Or from your point of view, is this really kind of tail protection? So the risk that it gets entered into, let alone exhausted is limited? So that's kind of point number one. You've already got a question number two, please, you've already touched for Mr. Andrew, but I wanted to come back, the baseline that you've set for earnings and the dividends that you've paid, you've described both of them. I think Etienne talking about effectively being the same as 2019. So relative to your long-term business plan, you've effectively lost a year of growth. You know, put another way, this year's dividend should really have been 1.5, if we hadn't had the catastrophe of the past year. So, should we be looking really out, your reset as one year's worth of lost earnings growth and lost dividends growth? Or do you think that over the long-term, we'll be able -- well, not the long-term over the life of the business plan, we'll be able to make it back to what should have been the original trajectory? And then lastly, please, I just wondered if you could be a bit more explicit on the outlook for running yield. Having finished looked at my model yet, but it does look like the XL investment income was about flat 2020 on 2019. And it's the rest of the world that took the brunt of the decline in investment income, which was about €250 million. How should we be thinking about the euro changes in non-life investment income for XL and the rest of the world? Thank you.

Thomas Buberl: Excellent. Thank you William for your three questions. So, I suggest Alban that you speak again about the adverse development cover. Again, what is important is to position the adverse development cover, as Scott mentioned it, as a tool to reduce volatility of the earnings. And since I've also said earlier that we feel very confident -- very confident about the XL reserves, you seen that we have €200 million of excess reserves. NStar has certainly looked at the reserves in detail. And we feel that this is the right time to really move forward and reduce the volatility on the earnings and the reserve movements of this long tail block. But I would like Alban to go perhaps a little more into detail again on the economic costs and the logic at this point and then we come back to your other two questions. I would do the dividend one and Etienne would do the one on the outlook of the running year. Alban?

Alban de Mailly Nesle: So, on the ADC, I think the way we see it from a price standpoint is obviously, there's a willing buyer and a willing seller. So, it's -- as such, it's a fair price. But I think we see it as a right balance between a cost, which is completely absorbable, by XL in its earnings, doesn't change the target that we have for this year, for instance, and protection against volatility. If I take the second part of your question on the ADC, what we have booked in our reserves at full year 2020 is our view of the ultimate cost of those lines. At this point, we don't think that the -- it will be used up in a given number of years in the future. But there is volatility in those lines of business. We know that. And we thought it would it was a good idea to put that behind us.

Thomas Buberl: Thank you, Alban. On the second question, William on the dividend. Obviously, last year and last year's dividend debate in the crisis was a very unfortunate one, since France was very different in its treatment to dividend payment relative to other countries. And for us, it was very important to get back to normality in the dividend payment, and therefore, the €1.43 that you have seen if you relate it back to the adjusted earnings normally, we've always given a guidance of 50% to 60% of adjusted earnings being the dividend, we've obviously gone very much beyond it as a very clear decision and sign to get back to normality in dividend payment. And from here going forward, we have said clearly that we want to increase as the underlying earnings per share between three and 7% over the next three years. And for me, an attractive dividend trajectory should follow the development of the underlying earnings. Let's move to the next question, which is the outlook on the running year. Etienne?

Etienne Bouas-Laurent: Hi, Will. So two things. First, when you look at the normalized earnings of XL in 2021 €1 billion. Part of the difference to the €1.2 million, which was our initial target is related to lower investment income. And you will see that for 2021, in the world forward, we will have another minus €0.1 billion, which is reflecting the lower investment income yeild.

Andrew Wallace-Barnett: Thank you, Etienne. Let's move to the next question.

Operator: The next question is from Michael Huttner from Berenberg. So, Michael, please activate your microphone and go ahead.

Michael Huttner: Fantastic. Thank you so much. This is a remarkably efficient and most efficient for you. I have three questions. I did them really quickly in case I get cut off or something by my picture. And France, what's the profit starting point of what I really want to know what's the profit for 2021. And it sounds funny, but the France results were fantastic, right? Almost flattened in a difficult environment, but in there, I countered and then maybe wrong €0.3 billion of COVID kind of benefits in a frequency less business interruption, other stuff, maybe I'm wrong. So that'd be my first question. The second is on AXA XL. Scott, you gave us a figure for 2021, the rate rises of 12%. But of course you don't have €4 billion or €4 billion [ph] and change of commercial lines. You got over twice that, so there's over twice that benefit to come. And I just wanted, it doesn't mean that we should put in for 2022, €1.7 billion, so €500 million on top. And then the last one is on cash. So we have €4.8 billion remaining for 2020. I really liked this. I'm really lazy here. Maybe you can say what we should expect for 2021? Is it up or down and kind of order of magnitude? It's really lazy. I'm sorry.

Thomas Buberl: Thank you, Michael. Let's help you in your laziness if I use your words. Number one, on France, maybe Jacques de Peretti, you could elaborate a little bit. What were the tendencies in 2020? And how do you characterize the results? Scott, if you could take the second question on AXA XL and how do the rate rises really transfer and transform themselves into the required budget of €1.2 billion. And then Etienne, if you could take the last question of what is the expectation for cash remittance for 2020? Is it 4.8, up or down? Jacques, let's start with you.

Jacques de Peretti: Thank you, Thomas. Thank you very much for this question that underlines the resilience of AXA France in this very, very difficult time and the capacity both to be close to our customer, and also to be resilient in terms of results. We have been touched by the COVID-19. Of course, and let's say that we have been touched by roughly €300 million net of reinsurance on COVID-19. But this as has been partly offset by cost reduction, first €100 million, roughly, higher development, which has been already underlined, which was very strong in France, and also a lower income taxes, so all of that permits to accept France underlying earnings to drop only by €47 million minus 3%, compared with 2019.

Thomas Buberl: Thank you, Jacques. Let's move to Scott on the second one.

Scott Gunter: Michael, I think I understand your question, you try and want a little more detail on how we ended up at this €0.5 billion benefit in 2021. And roughly, how we look at it is, we have the rate that's earning in from '20, plus a little bit of '21 that we're getting in the first quarter. And then we look at that in conjunction with for example, the lost cost trends somewhere between 4% to 5%. It varies a lot by product, obviously. Lost cost trends as we look at, we have to build in things like the cost of reinsurance, some of the costs of our reinsurance on the insurance side as well as their retrocession. We buy on our reinsurance portfolio, we build those costs and those costs have gone up. So when you put everything into the mix, what falls out is about that €0.5 billion of additional income, underlying earnings income for 2021, right. So there's a bunch of number of factors in that. But that's what that's kind of how we look at. Hope that helps?

Thomas Buberl: Thank you, Scott. Let's move to a channel on the cash remittance.

Etienne Bouas-Laurent: Hi, Michael. As you know, 2020 has been an exceptional year. And with the lower operating free cash flow, as you can see in the ERF report, and therefore, one might expect a lower level of remittance for 2021. So -- and this is, I guess, in line with the discussion we had already during the IRB.

Thomas Buberl: Thank you, Etienne. Let's move to the next question.

Operator: Next question is from Pierre Chedeville from CM-CIC. Please, Pierre, could you please activate your microphone and go ahead. Thank you.

Pierre Chedeville: Yes. Good morning, everybody. First question is the relating to the asset management as we see strong recovery since two quarters of the division. And I have a question regarding performance fees this year against management fees. Did we see a good ratio of performance fees in this context? And also I wanted to be clear, when Etienne said, what alternative represented 50% of revenues, I wanted to be sure that I have clearly understood? And other detailed question, I wanted to know if one day you could consider a spin-off of XIM considering the valuation PEs that are measurable in asset management industry when insurance is something that you could consider, of course, while taking the majority stake, of course? My second question is about the target of €66.3 billion in 2021. I wanted to know if it's a starting point, or if it's a target? I mean, would it be possible for you to get to €6.5 million, for instance, considering the fact that we observed an increase interest in interest rates in U.S., but also in Europe that could improve as Gunter said. So where are you investment margin? And my last question is regarding remote work, it seems to me that AXA, wants to be a pioneer in this area, in terms of organization, can we imagine that we could see real estate capital gains coming forward due to reorganization of work inside worldwide AXA ? Thank you very much.

Thomas Buberl: Thank you very much, Pierre for your questions. I suggest that Alban is taking the first one on the asset management when it comes to the resilience of performance fees. And Etienne is taking the question around, is the target a starting point or an end point? And I would like to quickly comment on your two other points. First was the question of, does a spinoff of AXA, IM make sense in terms of valuation? As you know, AXA investment management for us today is a very core entity to the AXA Group because it is important in a time of low interest rates, in particular, to be able to source the right amount of alternatives and be able to generate a good return for our customers; therefore, AXA IM is core. And we are also very proud about the fact that we have such leadership position on the alternatives. It is clear that if there is an opportunity arising that could make it interesting to grow our franchise in particular on the alternatives, we will certainly always have a look at it in the interest of our shareholders. However, as you mentioned yourself, what is very important for us is to keep control in a setting like this. And you have to think very carefully whether this makes sense because again, today, we have the necessary size. We have the necessary capacities. We can live very well, by ourselves. And maybe on your last question around the remote work, it is true that AXA has been very good in transferring all of the employees in a remote service setting, also being able to continue the customer service. We've seen now, let's say, two extremes being 100% present and being 100% remote. I think all of us have experienced that. And we understand that the two extremes is not the scenario that we probably desire going forward. And therefore, we will one as you said, of the pioneers of pushing very much what we call the smart working principle, which is to find a good blend between physical presence because we do need to interact. We also do need to make sure that the culture of AXA continues and continues to develop, and is also transferred to the new recruits. But on the other hand, we also want to respect the way people are more flexible in the way they work. And so this is now enhanced already being -- I have to say, integrated in many of the real estate strategies of our local entities. For example, you see that in Belgium or in Germany or another in many other entities, we already had a philosophy where people were present for three days and had a remote situation for two days. And this enables us obviously to create a very different workspace, a more collaborative workspace, and we can really benefit from the technical and technological investments that we have done. It does obviously lead to an concentration and reduction of our real estate. And so we are continuously working through this now and making sure that we get to a ratio of around 0.6 workspaces per person. Alban, let's talk about the resilience of performance fees and thereafter ATN around the €6.3 billion target or destination. Alban?

Alban de Mailly Nesle: So, thank you for the question. There was also a question on the breakdown of revenues between alternatives and core. So yes, it's roughly 50-50 between the two. There is obviously less AUM in alternative, but the average management fees is significantly higher than for core, hence, all the benefits of the growth that we forecast for that part of the business of AXA IM, the alternative part. On management fees versus performance fees, performance fees were slightly down last year at AXA IM

Thomas Buberl: Excellent. Thank you, Alban. We move to Etienne.

Etienne Bouas-Laurent: Yes, absolutely. So the €6.3 billion is, of course, the starting point and not the end point. And why so? Because we if you take the €4.3 billion earnings achieved this year, we have to add up the non-recurring COVID losses of €1.5 billion and the €0.5 billion excess net cat of this year. All this adds up to €6.3 billion. And of course, we want to achieve growth from this point. And we want of course to move our earnings.

Thomas Buberl: Excellent. Thank you, Etienne. Thank you, Pierre for your question. Let's move to the next question.

Operator: Next question is from Jon Hocking from Morgan Stanley. Jon, please activate your microphone and go ahead.

Jon Hocking: Hi, there. Good morning, everyone. Can you hear me?

Thomas Buberl: Yes, we can Jon?

Jon Hocking: Yes, I've got three questions, please. Firstly, on XL. Scott was talking about so wanting to reduce the earnings volatility going forward at XL. You've got a very skinny reserve buffer there kind of €0.2 billion and realize you've got the ADC to back that up. But is there a desire here to rebuild that reserve buffer over time? So you have gotten a little bit more earnings protection? And is that baked into the €1.2 billion this year? And then the business plan thereafter, that's the first question. And second question just on the P-GAAP usage a year-end sort of €0.5 billion that was used. Can you give a little bit of color, please, in terms of what reserve adjustment?

Thomas Buberl: Yes. Sorry, Jon, I'm completely I am just completely distracted

Jon Hocking: And then --- and then, the final question. There's a slide where you've got the cash injections into business entities, the €1.4 billion. I think €1 billion of that was the XL adjustments in the fourth quarter. Is that correct? And if so, what's the balance €0.4 billion which other entities that you inject cash flow capital into -- in the fourth quarter? Thank you.

Thomas Buberl: Sorry, Jon, could you repeat your second question? Because I think micros was not -- microphone was not it? Was it the P-GAAP usage?

Jon Hocking: Yes. Whether that you used quite a lot of business.

Thomas Buberl: Exactly, okay.

Jon Hocking: That was all XL or whether that was your part of business as well.

Thomas Buberl: Excellent. Thanks, Jon. So I suggest, Scott, you take the first question, which was around bringing earnings volatility down? We have a skinny reserve buffer. We have the ADC now. Is it in the plan to build up the reserve buffer? Etienne second question for you on the P-GAAP usage. And then also third question for Etienne, the cash injection of 1.4. Where is 0.4 being used? Scott?

Scott Gunter: Thank you. Thank you, Jon for the question. Yes. as we look at our, you know, look at sort of 2020, 2021 going forward, we want to make sure we constantly look at the performance of the portfolio, and constantly make sure that we have adequate reserves. I think what happened in 2019 -- 2018 and 2019 and 2018 and 2017, with the social inflation was definitely not to us, not just only to us, but the entire marketplace. a shock to the system. You see a lot of that in the marketplace about what happened in those years, the action taken. So I think we've got with the ADC and with the reserves that we have, I think we've got that adequately covered off. And then we just have to make sure as we go forward, as we look at the portfolios, constantly keep that in mind. As we set our IBNR numbers for the 2020, 2021, 2022 and make sure that we have sufficient reserves on those portfolios. I'm confident we're going to be able to do that.

Jon Hocking: Thanks. Just to comeback on this...

Scott Gunter: Go ahead.

Jon Hocking: GAAP between the rates and the loss cost inflation, would you expect, is it reasonable to think you get posted roll off from XL in future periods?

Scott Gunter: If you would look at it from a math standpoint, you can see that, but we're also very cautious on the social inflation. It was a big mover in those years. And we're not, it's not "over yet'', right? So the loss cost numbers, you make your best estimate, but I think it's a bit of a full errand, if you just say, okay, it's over, it's done, we go back to more traditional loss costs. So we're watching that very carefully. And, it could or could get -- things could happen, right. So we're very cautious on the social inflation numbers, particularly in United States. So it's going to take a few years to figure that out. But I'd rather lean in a little bit more on the cautious side, then sort of look at what happens in 2017, 2018 and 2019.

Thomas Buberl: Jon to add to it, I think what's very important is, the ADC gives us very good momentum not to reduce the volatility. Our aim is to build up the buffer over time, but the very focus is at this year to get to the €1.2 billion. If we are in excess of €1.2 billion, we'll certainly think about increasing the reserve buffer. But as we go along, and as those price increases that Scott has described, earnest through, we will certainly have the opportunity to strengthen the reserve buffer, not forgetting that at the AXA group level, we have a very solid and sufficient reserve buffer. Etienne, on the two questions P-GAAP and capital injection.

Etienne Bouas-Laurent: Hi, Jon. So let's put it that way, the unallocated excess reserves, which amounted to €0.5 billion at half year are now €0.2 billion, right? So we allocated €0.3 billion during the second half of the year. Regarding your third question, on the €1.4 billion. The €1.4 billion is not a capital injection, because the capital injection is accounted for in the line cash upstream. And I said in my introduction, that it has been this GAAP injection at XL have been offset by upstream from Japan and Switzerland in the second half of the year. So the €1.4 billion is purely the reimbursement of internal loans, and especially at AXA France.

Thomas Buberl: Thank you, Etienne, and thanks, Jon for your questions. Let's move on to the next question.

Operator: Next question is from Farooq Hanif from Credit Suisse. Farooq, please activate your microphone and go ahead. Please Farooq, could you activate the microphone? We cannot hear you. Okay. We're going to move to Nick Holmes. Could you please activate your microphone, Nick?

Nick Holmes: Yes. Hi, there. Can you hear me?

Thomas Buberl: Yes, Nick, we can hear you.

Nick Holmes: I'll keep it brief. Just one question, which is with Asia, can you update us on your plans? We've been fairly conspicuously silent on Asia so far. I think you had a target for 100 million customers in Asia by 2030. This may be an old target. But I just wondered, if you could discuss the ambition that you have in Asia, and what your plans are to get there? Thank you very much.

Thomas Buberl: Thank you, Nick, for your question. It is true that we have been silent. However, I have been mentioning Asia in my parts. It is clear that Asia is a very important part of AXA, because we have a very good presence across the majority of the countries. We have under the leadership of Gordon Watson, the right team in place. And when you look at the performances across the different countries, you have seen that in Japan, we have a very strong momentum on growth in the health space. We have in China as well, a very strong momentum on the health side, being the largest foreign insurer in China. Hong Kong has just this morning been recognized as the best insurer of the year, also with a very strong momentum on the health side. So, we have very strong growth plans in place. We have the right talent in place and I have no doubt that we will get to the 100 million customers, because we are only in 2021 today, and we still have got nine years and 10 months time to get there. Let's maybe try and see if Farooq is now ready to have an activated microphone.

Farooq Hanif: Hello. Great, thank you. So three questions, please. Firstly, on the reserve buffer. I mean by 2023, you won't no longer have a reserve buffer because of IFRS 17, so I'm wondering whether you actually -- it would make sense for you to be in the upper end of your one and a half to two and a half or even above that to use it up because academically, not going to exist, basically going forward. So if you could comment on that, please. Secondly, on your nat cat program, I see that you have -- you've reduced your limits, so on your agreement and on individual kind of catastrophic losses. I'm wondering, in that context, whether the six percentage point budget for XL seems to be more on the conservative side. And then, the last question is, could you tell us now, what the capital ratio is for AXA XL in the Bermudian regime? Thank you.

Thomas Buberl: Thank you, Farooq for your three questions. I suggest that Etienne takes the first and the third one, and that Alban takes the second one. Just to be clear, it is true that IFRS 17 will not channel the PYDs to the P&L. But those reserves don't disappear. They'll just be added to the funds or the shareholder equity. Let's start with Etienne on the reserve buffer.

Etienne Bouas-Laurent: So -- hi Farooq, and thank you for your questions. I think it's a bit early to speak about IFRS 17. I think, we are going to -- before the introduction of IFRS 17, we're going to communicate a lot with all of you in detail. It's a bit early. It's true that this is an opportunity to review the reserves, to review the shareholders equity. But so far, our main driver is to ensure that the earnings pattern as a group will not be impacted in a significant way. So this is where we are looking at. And it's too early to make further comments on the individual treatments of different countries or different situations.

Thomas Buberl: Maybe you take the third question as well, the capital ratio at XL Bermudian?

Etienne Bouas-Laurent: Yes, absolutely. And you remember Farooq that when we decided to proceed with the capital injection of €1 billion in November at AXA XL, what we told you is that, it was designed to allow XL to capture any opportunities, business opportunities going forward in 2021 and to be able to distribute dividends going forward into the plan. And what does it mean, it means that the capital solvency of AXA XL is win, well within our risk appetite framework, and we have not changed our mind on this topic.

Thomas Buberl: And Farooq don't forget the ADC will add to the solvency of the local solvency of AXA XL. Alban for the -- on the net cat limits aggregation and the 6%.

Alban de Mailly Nesle: So, hello, Farooq. On the net cat, as you pointed out, we have increased to 6% the cat load for AXA XL. But what that means in practice is not only a budget number, but also the fact that as XL once it needs to be profitable with that cat load, it means price increases and more stringent risks election in order to make sure that we write business which is profitable with without cat load. So that also has an impact on the exposure that we have in on the property side on what we insure. And then on the volatility at group level, around the total amount of cat, so what we have done to the same extent we have wanted to align the cat load to the recent cat losses that we've had over the last say five years. We want to also to focus on what cost us money in terms of volatility, which is a number on accumulation of small to medium cat. And that's why we put the emphasis on that part of the curve, the one in five, the one in 10. And we have slightly increased our risk appetite slightly for the one in 20 years. And that translates into the adjustments that we -- that you see on page B30. And I take that opportunity to highlight what I think is a typo on that slide between the retention and the capacity for the aggregate, the retention is 1.25. And the capacity is 650. Because I think the slide could be interpreted in the other way around.

Andrew Wallace-Barnett: Thank you, Alban. Thank you, Farooq. Let's move to the next question.

Operator: Next question is from Andrew Sinclair from Bank of America. Andrew, please activate your microphone and go ahead.

Andrew Sinclair: Thank you. Hi, everyone. Three for me, as usual, if that's okay. Firstly, it was just on the adverse development cover very helpful announcement on that today. Just really wondered, are there any sub limits within that -- that €1 billion of cover that we should be aware of? And secondly, was just on the reimbursement of cash subs. How much is left to be reimbursed between the -- between the different business units that left lend money for XL? And thirdly, was -- actually just going back to the XL reserve buffer? Sorry. You were saying, if you earned over €1.2 billion that you potentially look to further strengthen reserve buffer in Excel? How long would you keep going with that? What would be the level of buffer where you think you would no longer look to build? Thanks.

Thomas Buberl: Very good. Thank you, Andrew for your three questions. Alban, I think, you should answer the first questions on the supplements. Second question on the reimbursements, Etienne, you are doing this, and I'll get back to you on the third one around the reserve buffer.

Alban de Mailly Nesle: So on the first one on the -- the answer on the sub-limit, it's simple. There are no sub-limits. We take the aggregate of the reserves, and that's -- that amount against which we are reinsured.

Thomas Buberl: Very good. Thank you, Ablan. Etienne?

Etienne Bouas-Laurent: Yes. We said one year ago, actually that we intended to reimburse around €2 billion and we have reimbursed €1.4 billion. So there is €0.6 billion missing. And actually the €0.6 billion missing corresponds to the proceeds of AXA Bank Belgium, which we'll get in a few months.

Thomas Buberl: Andrew on your second question. As it concerns for this year, our aim is to get to €1.2 billion on the basis of reserve that we consider adequate and that we are very confident about. You've seen the excess reserves, you've seen also that in the COVID reserves, we've been very conservative, and you've seen the ADC to reduce the volatility. So, we are very confident and very focused to achieve the €1.2 billion if there is this year possibility to go beyond, we would certainly consider this to be part of an of an idea of reserve strengthening. However, it should not give the impression that the limit of the excel earnings is €1.2 billion. So, I do expect that €1.2 is the starting point for 2021. And that we progress from there onwards. And once we have, you know, a clear progression and we over achieve that you have to always see this in this way then we would consider to strengthen the reserve buffer because we look at the excel reserves as a part of the entire group. And what you see is that we are very, very reserved at excel. But across the whole group, we have even a larger buffer and as Farooq pointed out earlier IFRS 17 will redefine the game once it comes. And therefore, we look at excel as part of the AXA Group and as the overall -- and as it comes as the overall reserve base of the group is concerned. And again, on this topic, both Excel and Group, we feel today, very comfortably and very confident on the reserve base. Let's go to the next question.

Operator: Next question is Dominic O'Mahony. Dominic? Sorry, Dominic O'Mahony from Exane. Please go ahead, Dominic.

Dominic O'Mahony: Hello. Thank you for taking our questions. Three from me as well, if that's okay. First of all, a specific question just on the cash flow dynamics. Can you remind us how much special dividend you've released from the Swiss life transformation a few years ago? And whether there's anything left to come from that, and did whether it's already in the cash guidance that you us at Capital Markets Day? And then secondly, thinking more broadly about efforts to release capital from the life back books, of which this transformation is, is I guess, a very good example. I think previously, you suggested there might be a reinsurance transaction on AXA Life Europe. Could you give us any updates on where we are with that? And more broadly, could you give us any, sort of, sense of how you think about releasing capital from those books beyond simple M&A? So, for instance, is there an opportunity to replicate Swiss life transformation in other areas, maybe in different ways? And then the third question more on the operations of the business. Thomas, you mentioned AXA Tianping? You've been only there 100% for a while now, has it enabled you to do things that you weren't able to do before. You mentioned, of course, smashing into health. Can you perhaps give us a little bit more granularity on developments in that business? Thank you.

Thomas Buberl: Excellent. Thank you, Dominic. I suggest that Etienne, you are talking about the first three questions. So one was on the GL 2020. How much was it? What is still left? Secondly, AXA Life Europe, what is the -- where are we on the reinsurance transaction? And then, thirdly, what -- and how could we release more capital from life back books beyond M&A? And I would then come back, Dominic, on your last question AXA Tianping. Etienne?

Etienne Bouas-Laurent: Yes. Hello, Dominic. So the cash flow GL 2020, it's around €2.5 billion program as a whole off of several years. In 2020, we had a positive cash upstream of around €0.9 billion and there is €0.5 billion left for next year; so I mean 2021. Considering the life back books, it's true that we say that half year that we were working on a reinsurance transaction with AXA Life Europe, it will be an internal reinsurance transaction aimed at increasing the solvency of AXA Life Europe, and with the ultimate objective to as for the authorization to the regulator to distribute a special dividend. So this is ongoing. And once again, I hope it will be come to an end on this transaction before the 1H closing. Are there any other transactions in the in the pipe comparable to the GL 2020, so the Swiss Life Group Transformation, as spectacular as this? Not, I would say, but you know that we are looking at various situations, we have, of course, already enforce measures to reduce the amount of General Account in various countries. It's the case in France, we spoke about it, but it's also the case in Japan, for instance, where we are very active on enforce measures. Second, we are looking at from time-to-time reinsurance transactions and other condition that they financially makes sense, right? And more to come in the upcoming months.

Thomas Buberl: Thank you, again. And Dominic, on your last question on AXA Tianping. Health revenue in Asia has grown by 9% last year, which was primarily driven by AXA Tianping. And as you pointed out, we haven't been 100% owner for a long time. But we immediately made sure that we also exercised our rights and powers as 100% owner, making sure that we've got the right talent in place, and making sure that we shift the business mix to health and actually the majority of this 9% growth that I've just mentioned, is actually driven by AXA Tianping, mainly from partnerships with digital platforms. We work a lot with reSure [ph], work a lot with Shridi [ph] which are two very leading platforms to which we sell a so called cancer drug and medical reimbursement product because in China, cancer drugs are extremely expensive. And we are combining this insurance offering with a procurement offering to direct access to the producers of those cancer drugs. In addition, AXA Tianping has also concluded a collaboration with Beijing life, which is also focused on how can we continue through corporations to put push in health product. And then lastly, since we are looking at China in a larger context, Hong Kong and AXA Tianping are working very closely together. And this should also enable us on the one hand to benefit from knowledge transfer from Hong Kong into China, but also to make sure that the so called GVA [ph], the greater Bay Area, which is the southern China part, which is highly promising, and where we've been one of the first ones to be present, to also make sure that we bundle our forces to really be able to make a start and make a good growth in this area as well. Let's move to the next question.

Operator: Next one is Kamran Hossain from RBC. Kamran, please go ahead.

Kamran Hossain: Hi. Good morning, everyone. The first questions about P&C overall, would it be fair to say that 2021 did have a net benefit from COVID? As you said, COVID, mainly a commercial lines risk that's kind of gone away or is behind you. But personal lines frequencies should continue, especially in Q1? And the second question is, can you talk about how you are protecting against kind of secondary perils or in the money perils? So my understanding is that availability of cover here fell away pretty sharply at the January renewals, but any kind of color or comfort on that would be really helpful? Thank you.

Thomas Buberl: Excellent. Thank you very much. Kamran, maybe if you could be a bit more specific on your second question, which are those in the money perils you are thinking about when you ask the questions?

Kamran Hossain: So I mean, I think wildfire, snow storms, etcetera.

Thomas Buberl: I see. Thank you. Okay, excellent. So let's, I will take the first question, and then Antimo we'll take the second one. And, as we said, the year 2020 has been highly driven by COVID and certainly by in many instances coverages that we will not insure anymore. We spoke about the events or coverages in which at renewal, we have excluded the COVID coverage. So in the majority of our cases, and we have launched an internal project to really go through all the clauses of the so called NDBI, non-damage business interruption to change all these contracts. This has to a large extent already happened. But there is still some work to be done in 2021. And obviously, those contracts would still have coverage. But it's the smaller majority of -- minority of the total contracts. And then, you obviously have the effects of confinements in which we still see a lower frequency of accidents, lower frequencies of cars moving, but the nature of these confinements are not the same anymore, as we've seen in the first confinement. The first confinement was really characterized by complete distance. Today, we see a confinement that I would characterize a more pragmatic in which there is a lot of movement on the roads. And so, if you imagine yourself being in Paris today, you are in the same traffic jams as you used to be a year ago or two years ago. So we don't actually see a reduction more than I would say, 5% to 10% of the activity when it comes to driving and moving cars. And so, I believe that going forward, there will not be a net benefit from COVID. But I predict that, we will see the same ironing out effects that we have seen in the year 2020, when it comes to France and Europe, Alban, on the second question around the in the money perils and the protection against them.

Alban de Mailly Nesle: So for me, there are two, you mentioned Texas, but I'm sorry to say that, it's way too early to be able to give you any decent numbers, because we've had a few claims, but there is no conclusion that you can draw from those few claims. You need to see what comes out of it. And you've seen that estimate for the overall loss is extremely different, from one source to the other. So I'm sorry, I can't give you any number on that. On COVID, I think the more interesting part is the coverage through reinsurance. And you're right to point out, that reinsurance, which sounds logic, do not provide any longer, any reinsurance protection against COVID losses in 2021. Is that was your question really?

Kamran Hossain: The question was more angled towards kind of secondary peril, reinsurance protection and the availability of that still? Especially for XL, it's un-modeled perils, things similar to the Texas snowstorm that maybe wouldn't be in people's models wouldn't be a focus, and whether you've been able to buy protection for those kinds of events, which have been, a scourge for the industry in the last three or four years.

Alban de Mailly Nesle: Okay, sorry. So, clearly, it's -- it is not because it's not completely modeled. And I agree with you with the -- the industry is modeling of wildfires in California is not at par with typical cat modeling. But it's not a reason, not to by protection against it. So we have reinsurance cover would protect us, against that kind of property losses that we would have coming from wildfires. And we have in our own cat load, an amount, which is obviously less precise than for other cats for that kind of perils.

Andrew Wallace-Barnett: Excellent. Thank you, Alberto. And thanks. Comment for your questions. Let's move to the next question.

Operator: Before we move on to the webcast questions, the final question from teams is from Thomas Fossard from HSBC. Thomas, go ahead. Thomas, could you please unmute your microphone? We can't hear you. Unfortunately, we cannot hear you. Okay, I think we can hear you now.

Thomas Fossard: Yes. Sorry about that and good afternoon, everyone. I have two questions. So, the first one would be on the 13 points benefit new Solvency II ratio coming from Excel that was both the five to 10. Guided? So maybe you can mention if there were any specific benefits from ADC cover, I guess so, but maybe you could quantify this. The second question would be also related to Solvency II. And just to have your thinking around inflation. And if you were thinking about factoring into your internal model, inflation shock scenarios, given the potential long lasting effect of COVID-19, regarding monitoring you're seeing, is that something you're thinking about to do? Thank you.

Thomas Buberl: Very good. Thank you, Thomas for your two questions. I suggest Alban that you treat them. The one was -- is the benefits of the ADC in the model? Second one is on the Solvency II, how do we factor inflation in the internal model?

Alban de Mailly Nesle: Good morning, Thomas. On your first question, the ADC is not in the 13 points. But I would -- you shouldn't expect much at group level when it is in the model. The 13 points are indeed above the five to 10 that we had given as an estimate. And it's true that it reflects the benefit of diversification that we have between AXA XL's risks and the others. The ADC is not is not part of that. On inflation, so we do already have an inflation module in our internal model. There are pluses and minuses to inflation. In minuses, obviously, high inflation will compound the cost of claims. And, therefore, but it's already included in our premium risk and our reserve risk. But it also have positive impacts because high inflation also means higher interest rates and as you've seen with our sensitivities, that's a positive to our solvency. So inflation is not negative only.

Thomas Buberl: Thank you, Alban. Thank you Thomas for your question. Let's move to the next question.

Operator: So we're now on to the questions from AXA.com. The first question is from Ashik Musaddi from JPMorgan.

Ashik Musaddi: Combined ratio in France excluding COVID was 88%. And in Europe, excluding COVID was 92.6%. Would you say that this is structural in nature, and similar combined ratio could be expected going forward? Can you give us some color on negative impact of low interest rates on P&C earnings for the next few years assuming rates don't increase going forward?

Thomas Buberl: Thank you, Ashik for your question. I suggest we split the question in two, the first question, I would like Jacques de Peretti to give us an answer based on his experience in the French market, the combined ratio x and with COVID. And then Etienne, if you could take the second part of the question, which is the negative impact on low interest rates in P&C. Jacques?

Jacques de Peretti: Thank you very much, Thomas. Concerning the French market, it's true that our combined ratio without COVID is good and better than last year, part is due also to the better prior year reserve release compared with last year. So that -- this part, I cannot think it is necessary possible each year. On the other part, definitely, we have a very good book, which is each improved, thanks to first our new products. Secondly, it's reduction of expenses, the decrease of our expenses and the decrease that is coming will come in, in the coming years. And also the capacity, we still have to increase the height and on commercial line, for example, this year we have proved that we were able to increase more than last year. So we are very, very confident in the capacity to reproduce this sort of combined ratio next -- in the coming years.

Thomas Buberl: Thank you, Jac. Let's move to Etienne.

Etienne Bouas-Laurent: If we're speaking about trends, let's take a step back. Years ago, the objective in terms of combined ratio was 100%. Because all the money was made on the investment result. And as you can see, it's not anymore the case today. Today, everyone is trying to reach levels, which are in the low-90s, because the financial income is not what it used to be. If we were to have a further deterioration in financial income, there would be an adjustment on the technical result. So there is an offset in terms of trends, which make the P&C business attractive for the long-term.

Thomas Buberl: Thank you, Etienne. Let's move to the next question.

Operator: The next and final question is from Frederick Tsang from Aviva.

Frederick Tsang: What is your view on the consolidation operations that are taking place in France?

Thomas Buberl: Thank you, Frederick, for that question. To be impolite, I would actually, actually have to ask you that question. But I won't. So I think you see as the general trend, and AXA has started this movement as early as 2016, in which we, at the time, segmented our portfolio in what are the large markets, what are the markets that we want to develop in? And then what are markets that we want to manage in a different way and where we also have a look where we stay present or not. You see in our case that we have focused ourselves lot on less markets on the core geographies. And you will see the same happening now with other insurers. And I think that is a trend that has been accelerated in the crisis, but is a trend that will probably come even more because insurance remains a scale business. And so you need to focus yourself on your large positions. And it is a business in which the regulatory complexity, which is often again, very local has increased. So we believe that this movement is a movement that will go forward. And the second observation that we see that it's not always the larger players that consolidate in the case of the French market in the recent announcement. You also see that large mutual companies are using the opportunity to grow their franchise. We do not believe that this will have a significant impact on our positions, since we are already very focused, and we have very leading positions that allow us to really be confident going forward and also be confident to fulfill the targets of our plan that we have announced last December. I want to thank you because this was the last question. I want to thank you for your active participation, for all your questions, and for having been with us. I'm really sorry we haven't been able to see each other in person. But I really hope going forward that physical meetings will come back because it would be nice to see you again instead of talking into a screen. I wish you all the best. Thank you very much again, and hope to see you soon. Have a great day.