AXA S.A.

Andrew Wallace-Barnett - SVP, Head of IR Gerald Harlin - CFO

Peter Eliot - Berenberg John Hocking - Morgan Stanley Nick Holmes - Societe Generale Paul De'ath - RBC Niccolo Dalla Palma - Exane BNP Paribas Michael Huttner - JPMorgan Farooq Hanif - Citigroup Lance Burbidge - Autonomous Blair Stewart - Bank of America Merrill Lynch

Thank you very much and good morning everyone and welcome to the AXA conference call on our activity indicators for the first quarter of 2015. So Gerald Harlin is here, our Group CFO and would like to give you a quick overview of the main figures included in the press release which we issued yesterday evening and which you can find on our website.

I know there are a lot of results, releases and calls today and this morning, so Gerald will take you through the highlights with a little more detail than usual, in order to enable you to catch up on and digest our numbers and then following that, of course Gerald would be very happy to answer your questions. So Gerald, I hand over to you.

Hello, good morning and thank you, Andrew. Indeed, before moving to the Q&A session let me give an overview of the main figures for the three-month period.

We have continued to see growth across all business lines with total revenues up 2% on a comparable basis and 10% on a reported basis, to €31.5 billion. The higher level of reported numbers is coming from the strengthening of all major currencies versus the euro.

It's interesting to note that our businesses in the U.S., in Switzerland, in Hong Kong represent circa 30% of the Group revenues. The reported growth in the quarter represents the benefits of the geographical diversification of the Group.

On life and savings growth momentum continued with a 4% APE growth and a strong increase in net inflows at €3.9 billion versus €1.8 billion in the first quarter last year. The headwind from the continued group life business mix repositioning strategy in Switzerland was more than compensated by the strong performance in other geographies.

As you would remember, we started repositioning our group life business mix towards more profitable semiautonomous schemes in Switzerland in 2014 and we continue to implement this strategy this year. So there is at first a negative impact on APE in this quarter.

I would like to remind you that full protection schemes in Switzerland are mostly renewed at the start of the year. Elsewhere there was a good growth in protection and health coming from Southeast Asia, India and China region, good performance in unit-linked, primarily due to the continued success of our hybrid products in continental Europe and an increasing client appetite for unit-linked products following the improvement in equity markets.

In general account savings sales went down in line with the strategic focus on protection and health and unit-linked products. Also, there was an increase in mutual funds and other line, mainly following an exceptional sale of a large contract in France.

The NBV margin remained healthy at 33%. The key impacts were a less favorable business mix and the negative impact of lower interest rates on U.S.

VA GMxB products, partly offset by a positive impact from an improved country mix and lower unit costs. Life and savings net flows for the quarter were at €3.9 billion.

We saw strong inflows in protection and health and unit-linked business and outflows in general account savings, in line with our strategy. P&C revenues now, P&C revenue growth gained momentum, compared to last year and recorded a plus 2% gross.

The increase was mainly driven by the price increases in mature markets where we continued to maintain our leadership positions as well as strong recovery in Mexico and Turkey. We saw growth in both personal and commercial lines.

Asset management business had strong net inflows at €19 billion with €14 billion net inflows at AXA IM and €5 billion at AB. Along with net inflows, positive Forex impact and market appreciation also contributed to the increase in assets under our management which grows a 7% revenue increase versus the first quarter last year.

I would like to remind you that this was the tenth consecutive successive quarter of positive inflows in our asset management business. Our economic solvency ratio is estimated at 190% at the end of the first quarter.

The 11-point decrease versus the year end was mostly due to a spike in the spot level of implied interest rate volatility which has an impact of minus nine points. The ratio was also impacted by a lower level of interest rates and of course positively by operating return.

As you would know, the implied volatility level had come down recently from its unusually high level at the end of the quarter and this reduction would be expected to have a significant positive impact on our economic solvency ratio compared to the level at the end of the quarter. In other words, a combination of increased rates and reduced interest rates volatility since the end of Q1 would mean we wouldn't be far from 2014 level in the present -- 2014 economic solvency level today.

So, our economic solvency ratio remains resilient and I would say at a comfortable level, even in the context of the exceptional market conditions we saw at the end of March. I would like to take this opportunity to remind you that we plan to share with you our capital management framework at the beginning of December this year.

We have fixed a date for December 3 and the presentation will be held in the afternoon at our London office. So, I propose you to move to Q&A now.

Two quick questions, please, first of all, on the repositioning that's ongoing in Switzerland I'm wondering if you could just comment on how long we should expect that trend to continue for, how much more there is to go in that repositioning? And then, secondly, you showed very strong growth in protection and health in China.

I was wondering if you could just comment on the outlook there and how sustainable that was. Thank you very much.

Okay, so, as far as Switzerland is concerned it will be spread over some time. We cannot say.

We started last year, so it's the second year in a row. Let's say that it will last some time and some more years, maybe a couple of years, something like this, so that means that as you know our strategy now is we still are selling some full protection but we are reducing this full protection.

We still have some net inflows on the existing contracts in full protection, but we are much more focusing on the semiautonomous contracts. So yes, to answer your question, it will still last some time and is something which is progressive.

As I told you many times, it's extremely positive in terms of profitability and in terms of return on capital. On your second question, as far as China is concerned, yes, we benefited from a strong increase in China.

Taking China, it's the total APE is €5 million for the first quarter which is a significant growth of 160%. In terms of profitability it's mostly protection, in fact, it's savings with protection and the profitability that 13%, I think the NBV margin is at 13%.

I've got three questions, please. I just wonder you can comment on how sustainable the flows are in the two asset management businesses, because we've seen a big uptick there, particularly with AB in recent quarters, so I wonder if you could comment on that.

Secondly, in France as well, in the life and savings business, the net flow's number was pretty strong in Q1. I think you mentioned the one off but that sounds like it was in the mutual fund business rather than the life business.

I wonder if you could talk a little bit about the products which are driving that. And then, finally, just if you could give an update on where you are with your Solvency II discussions with the regulator?

Thank you.

Okay. So many questions, Sorry, I go back to the figures question.

It was 68, €68 million. What I mentioned was the improvement, but it was in China €68 million of APE.

Sorry for this.

And it was up €35 million.

And up €35 million, exactly, up €35 million. Sorry for the confusion.

So, as far -- your question is on the net inflows in France and we could say that unit-linked, in as far as France as a whole represents a net inflow of €1.1 billion, of which we have unit-linked representing €0.5 billion, so you can see that our strategy is still good. That means that we are still increasing in unit-linked.

What we sell in France is mostly hybrid products and now the percentage of savings in unit-linked is roughly 42% whereas the rest of the market is at 22% to 23%, so we are still ahead of the market and our strategy is doing quite well. As far as G/A savings we are negative in G/A savings in France by minus 0.2.

So pretty in line with what we told you in the previous meetings and it's going quite well and you can imagine that the perspective of the relatively low interest rates, going forward and this combined with an outlook on the equity market which is better, helps us, in order to improve our mix. The last part of your question I believe was about the discussion with the regulator?

And also on the asset management flows.

Asset management flows?

Asset management flows, so we are improving our net inflows. Our net inflows, I would say, are both a significant part as far as AXA IM is concerned.

In Asia it's €8 billion in Asia and then it's in Europe and also in the U.S., we have close to €1 billion net inflows coming from the U.S. from our short duration high yield product mostly.

Is there anything which is obviously lumpy or one off nature? There's obviously a bit step up.

Presumably we shouldn't be annualizing those numbers for the rest of the year?

Well, it's always extremely difficult at the beginning of the year and after three months to give you an outlook on what could be the rest of the year, but what I can tell you is that looking at the figures from April I don't see any kind of one off in the first three months' figures.

And the €8 billion you mentioned in Asia, again, there's not a particularly lumpy nature to that; that's fairly -- broadly based.

I would say that it's -- of course there are much more fluctuation and we can expect to have more fluctuation going forward, but I would not qualify these amounts as one offs.

And just finally on the Solvency II question?

Yes, the Solvency II question. I could say that we, as you know, we will apply for our internal models at the end of the present month.

So far so good, I would say and so we won't have any -- We are expecting to have the final framework at the end of November and that's why we will present you the whole target capital scheme and with the details of the Solvency II internal models at the beginning of December, but I could say so far so good.

Three quick questions. The first one is could you give us an idea of which countries contributed most of the volatility hit?

That's first question; second question is on direct selling. I noticed your P&C direct slowed a bit to 4% growth.

Could you elaborate a little bit on that and comment on your expectations for the future? And then finally, just in the U.S., wonder if you could update us on the GMxB hedge program?

How did that fare in Q1? Are you expecting anything material in the way of losses in IFRS earnings?

Thank you.

Okay. What I could say, Nick, about the volatility, as you know the volatility -- I don't believe that the key element or the key criteria is in which country.

The point is that, as you know, the volatility is a part of the embedded options. It's just like in [indiscernible] and indeed, the volatility was [indiscernible] on average at 40% at the end of December 2014.

At the end of March it went as high as 100% and now we are back these days, I think just yesterday we were back slightly above 50%, so that gives you a good outlook and that's why I mentioned in my introduction that more or less it's most -- I said that the volatility and the move from 40% to 100% explained and this, combined with the interest rates move, because interest rates went down between the end of December and the end of March, this explains roughly minus nine points for volatility and interest rates it should be minus -- it should be more or less in line with the sensitivities that we shared with you in December. In the meantime, that means between March 31 and now, things have changed, because interest rates went up by 50 BIPS, first and second, because the volatility went down sharply and that's why I'm quite relaxed to tell you that if we would do the same calculation today, we wouldn't be far from the 201% that we published last -- at the end of December.

So your statement--

I just wondered, is it correct that it's countries like Germany and Switzerland where most of the sensitivity lies?

No, it's not in Switzerland. So that's quite obvious and in Germany if you -- that's, in Germany, not so much, why?

Because, first of all in Germany, like in other countries, we don't have any specific ALM mismatch. That means that if you refer to the fact that in Germany there are guaranteed rates, in Germany we have a good coverage.

That means that we have a mismatch between assets and liabilities which is more or less one year, so I don't have any specific fear relative to our German business. It's throughout the business and we are consistent through our, all our businesses, with the general account.

We have a one year halfly a duration mismatch, so that's in Europe. So that's why I would not make a specific focus saying it's coming from such or such countries.

Your question is about direct. I would say that to a competitive position we have -- we, as a direct business, went slightly down in France, because we had 1% growth in the first quarter in direct in France because there was some competition coming from mutuals and from the bank insurance.

That's what I can tell you and that explains the fact that we are the 4%, but our business is doing extremely well in other countries. In Asia, for example, it's doing well, in Japan, in Korea and it's improving also in Spain, although in Spain it's not at the level we could expect, but it's improving.

I was just saying yes and on the last question on the U.S. GMxB.

Okay. On your last question relative to the U.S.

GMxB, I could say that the present environment is quite good. That means that we've been -- you know that the most important driver of our business in the U.S.

is the level of equity markets and it's good because we are not very far from 2100 on the S&P 500. The second is the volatility and the realized volatility and we shouldn't make any confusion between realized and implied.

The realized volatility has been roughly at 13%, so that's good. So I would say that the -- I would say that what happened in 2014, more or less it's not very different.

It's not very different for the start of the year.

A couple of questions, if I can, on products and stuff like that. So the hybrid products that you've been selling in France have obviously been going well.

I believe you're also selling hybrids into Germany and Italy. I just wondered if there's any significant difference between the shape of those products in the different markets.

I think you said in France around 43% in unit-linked and the rest is savings. Do you have a higher savings element in Germany, for example, in order to get the business sold?

And so some color on that would be great. And then the second point was just on the P&C side and just whether or not you could give any comment on the performance of Tianping during the quarter, because obviously that's not included within the numbers.

That would be great. Thanks.

Okay. So I could say that as far as the first part of your question is concerned and about the hybrid products, yes, more or less I would say that the hybrid products are more or less the same.

But it depends on the market. I would say that by far it's in France that we sell the most hybrid products, the most important number and volume of hybrid products.

In Italy, for example, what we've been doing in Italy, that we've been selling more unit-linked products at, for example, in MPS. So it's not hybrid products but it was directly unit-linked products.

In the example in Germany, yes, in Germany we are growing pure unit-linked quite significantly. And so it depends on the countries.

But the logic is always the same. The logic is always to sell more unit-linked products and that's what we do.

And to give you an example in Germany, although we have an APE which is, as a whole, at plus 2%. We have our unit-linked in Germany which is at plus 56%.

So we are starting from a level which is not very high because, in the end, it's an increase of €10 million in APE, but that's quite significant. In other countries, like in Belgium, we didn't hesitate.

And that's the reason why we have a negative APE move in Belgium. It's because we decided to stop the traditional GA products.

So always it's the same strategy. And depending on the country, it could be pure unit-linked or hybrid products.

The second part of your question was about P&C and on direct, in which country? In Tianping?

And I will give you the figure, Tianping was up 20% and 65% in direct.

Moving on to the questions, I'd be curious on the Solvency 2 side to hear your views on two topics. First, the fact that EIOPA has now clearly indicated that sovereign risk should be charged for in internal models.

What is your interpretation of their statement exactly? And secondly, the now very clear positioning of the Dutch regulator regarding their comments on the UFR and the fact that they should not -- this should not be used when setting dividend policies.

What do you think the stance will be of other key regulators in Europe on this topic? Thank you.

Okay. As far as your first question is concerned, I believe and many times I mentioned in this call that using internal models, we are posting some capital in front of sovereign risk.

And so that's it. I don't believe that there will be any questions around this which is not the case for the second topic.

I would say that UFR is part of the -- it's in the framework. It's in the logic of Solvency 2.

You know that UFR concerns very long business, businesses between 20 years and up to 80, 90 years. And maybe there could be an individual position from the Dutch regulator.

As you know, you are not -- we have no business in the Netherlands. But I don't expect UFR to change.

The concept of UFR is very important. And I'm personally extremely surprised to see that at the time where some countries are thinking about using transitional measures and so on and so forth, at the same time it would be a nonsense to push companies to use transitional and to ignore the UFR.

It would be a nonsense. And I believe it's a position which is common to most of the companies in Europe these days.

Just two questions, on the volatility, what index do you use? You cited a figure above 50 yesterday.

I couldn't recognize that. I saw a figure of 46.

I'd be interested what index precisely you use. And then the question of turns off and forgive me because I haven't been following Axa very long and it is a very complex Group, but if the total volatility impact is minus 9% and you say Europe is actually very small because there's only one-year duration gap and the U.S.

of course doesn't enter the equation, where is the impact? I don't understand.

Maybe I'm completely out. These will be my two questions.

Thank you.

Okay. The point on the implied vol, it's because we are dealing with -- you should not miss the fact that there is the effect of the volatility adjustor.

And the figures that I'm quoting are net figures, so after all these adjustments and that's the reason why you don't find exactly your -- and there is also the liquidity premium impact. So today it's the liquidity premium, to be clear.

We are using the liquidity premium and not exactly the volatility adjustor. And that explains why we have such an adjustment.

And your second question was--?

Well you replied to Nick Holmes' question, saying the 9% which was a bit move for the volatility change, didn't come mainly from Europe. It obviously didn't come from the U.S.

because that's a completely different solvency system. So where did it come from?

I'm puzzled. I am confused.

No, no. I said it was coming from -- I'm sorry.

Maybe I've not been clear. But it's mostly coming from Europe.

You are absolutely clear. You are absolutely right, saying that it's not coming from the U.S.

because we are using equivalents. It's not coming from Asia, because, as you know, in Asia it's mostly unit-linked business.

So it's coming from Europe. I'm very sorry if I've not been clear.

Okay. And in Europe you said not Switzerland.

And the other countries all about the same?

No, I didn't say it's not Switzerland. But I said in Switzerland we have mostly a significant part of our business is protection.

So I said that on a relative basis Switzerland was not so high. That's what I wanted to precise.

And if I can jump in, Michael, as well, just to clarify on the volatility, we can send it to you, but you can find it on Bloomberg by looking, for example, at the Swaption 10-10, the ticker. We can email you the ticker or anybody who wants the ticker.

When you do that, that's where you will see roughly equivalent to the 40 that Gerald spoke about earlier, the 100 at the end of the quarter and 50 as of yesterday. And you'll be able to read those numbers pretty much directly.

But it's a mixture of maturities. But we'll send you the tickers that we're looking at and so you'll be able to see those numbers directly.

And in the calculations there is the adjustment that I mentioned to you.

Yes, absolutely. So just to understand this 9% move, it is mainly from Europe.

It is linked to the one-year duration gap. And the one-year duration gap is roughly across all durations -- geographies the same.

Right.

Okay. So it would be split according to the total funds you have in each country basically.

Correct.

I was interested in the revenue growth in the U.S. business.

On a comparable basis, obviously it's just 2%. And I got the impression that your growth outlook there was looking a lot better in terms of actual top line, not just margin.

I was wondering if you could give me some more guidance on when you think your actual overall top-line growth is going to start to be more positive there given that a lot of other companies seem to be having some good opportunities in certain products where there's been a lot of consolidation. So that's question one.

And secondly, going back to the some of the questions on net inflows, obviously you had a big one-off in the life and savings business in mutual funds. But even if you strip that out, you're roughly €3.5 billion of net inflows and that's a materially higher number than you've been experiencing.

So I was wondering whether we could see this kind of level going forward or is there seasonality. Just for the sake of forecasting, what would you recommend I do with my model?

Thank you.

Okay. Maybe I can start with the latter part of your questions, Farooq.

I would say that you cannot consider, first of all, you cannot consider the French products and as a one-off because it's part of our business and it's in line with our strategy, consisting in avoiding taking risk. And that's the reason why when you have a kind of back-to-back agreement, we have a margin fee and we have a fee corresponding to the service we provide without taking general account risk.

What I can tell you relative to the -- to your much broader question relative to the net inflow, I would say that for net inflows you have the gross inflows and you have the surrender and lapses outflows. And more or less outflows didn't move significantly.

So what does it mean? It means that the inflows are directly linked to our top-line business.

So I cannot give you any outlook for the rest of the year. But it's important for you to understand that it's not coming from, for example, from a decline in the surrenders which could be temporary.

Okay? The first question was--?

I'm sorry, Farooq. I missed the first question.

Yes. So in the U.S., I've been waiting for better growth.

I know the margin's been good and that's been very -- you've changed and adapted to the new environment. But the top-line growth just seems to be lagging some other companies that we look at.

And I'm just wondering when you're going to be or if you're going to be a little bit more proactive in the U.S. market.

No. That means that in the U.S.

sale, we experienced an increase in sales in life which is good, because we launched a new product. And this was partly offset by slightly lower sales on our annuity business and it was mostly explained.

And this drop in the annuity business mostly explained by the decrease in sales in Retirement Cornerstone because we will refresh our products quite soon and we can expect to recover. That's what I can tell you.

Yes. Just a couple of quick questions, firstly you've said, Gerald, several times about the ALM matching.

Particularly in Germany I'm interested being EIOPA, in its study, says that on average it's about a 10-year mismatch. So I wonder how your business is quite so different from the average.

And then on the VNB margin, perhaps you could give some idea as to how much the impact of interest rates falling in the first quarter might have on business in Germany and Italy.

First question on the German business, I don't believe that we could say that the market has a 10-year ALM mismatch. I believe that it's exaggerated.

And I can comment only on my own business. What I can tell you is that we have been always consistent in matching assets with liabilities.

The problem, where is it coming from? It's coming from the fact that a lot of business, as you know and you can have a look at the -- all the disclosures that we make -- that we made at the end of 2014 and you can see that on average, on top of my head, we have a guarantee of 3.4% in Germany on the in-force book of business.

And for sure at some time companies start hedging considering that tomorrow will be better and that they will catch up higher rates and we never did it. So that's the main difference.

That's quite simple. That means that we have been consistent, always hedging our existing risks.

I cannot be more clear. So it doesn't mean that we have a great margin in Germany.

But the risk is quite remote. On top of this, I remind you that our German business is relatively small.

I just want to remind you that as a whole, roughly the contribution of Germany was €130 million last year for life, excluding health, to be compared with €5.060 billion of underlying earnings for the Group. So first, it's relatively small.

And second, we have been quite consistent. That's what I can say.

And we don't intend to change this strategy.

And Lance, did you have a second question as well? Sorry.

Well, yes. It was just if you had some idea as to what the falling interest rates that we saw in the first quarter might have done to the German margin.

Sorry to persist on Germany, but your margin is very high there, at 42%. I just wondered what it might be if we restated it.

Yes. First of all, we don't update the rates at the end of interim indicators, so that means that we -- except for some specific business which is the unit-linked -- the VA business, because the VA business is hedged on a dynamic basis.

So that's what I can say. But for the rest, you know you have the sensitivity.

And the best for you is to go back to the sensitivity of our end -- of our EV presentation and there you will have the sensitivity of the NBV country by country. And we can comment it offline with you.

But first, the sensitivity of NBV. We can -- anyway, it will be -- I propose you to take it offline and to go with you and the IR team will go with you through the NBV presentation.

I've had some descriptions and pronunciations of my name in the past, but that's a cracker. Good morning, Gerald.

It's Blair here. Two questions, if I may.

Firstly could you perhaps update us given where interest rate curves have gone on the new money rate that you're able to invest in -- invest at the moment, please? And secondly, I wonder if you could comment on some of the proposals at European level to make it perhaps easier for insurance companies to invest in infrastructure assets and structured credit as well.

Is that something that is likely to lead to a change in your asset allocation over time? Thank you.

Okay, Blair. First of all, you remember that at the end of December it was -- no, it was based on the end of December but it was on February 25, I shared with you a few figures about the investment level plans for 2015, up to -- you remember that we said 2% on average.

And 2% on average, what I can tell you is that we are at 2%. We stick to this 2% for the first three months.

I would say that on the marginal basis, a few days ago, a few weeks ago, at the end of December, I would have told you that the investment would have been more, at 1.8%, for the future, assuming the level. But with the recent rise of 50bps, I believe that the 2% is still relevant.

And the 2% is a mix. And for the euro it's roughly 1.5%.

So end of today's condition, I'm comfortable with the 1.5%.

For Europe and the 2% overall.

The second question is on infrastructure. As you know, we are investing in infrastructure and mostly in infrastructure debt.

And at the end of last year we had a level of a bit less than €2 billion. We committed to invest €10 billion over five years.

That's something that we will do and we are working hard. And we have a team at Axa IM which is dedicated to this business.

Yes, we are quite active. And we are, like some of our peers, we are quite active, saying that if we want the Juncker plan of €315 billion to come alive, it's quite important to invest in infrastructure.

And we were speaking about ALM matching. And infrastructure is a good instrument in order to achieve ALM matching.

So yes, as far as we are concerned, we are using internal models. So that means that of course anything that could help the global industry would be good.

As far as we are concerned, we are using already the internal model. So that means that for us, infrastructure is a good use -- a good investment already.

I guess €10 billion for a company or a balance sheet of your size is still quite modest, Gerald. I just wonder if there's upside to that number.

Yes, there will be. Of course there will be.

But it depends. Look at the Juncker plan, €315 billion.

And it's the end of the European Investment Bank and nothing concrete emerge yet. So of course, if it's enforced, you can imagine that we'll be the first ones to be interested in it and we do everything we can.

You remember that last time I told you that we were diversifying ourselves in less liquid assets, including loans, including mortgages, infrastructure, ABS. So we are applying the plan we shared with you a couple of months ago.

So that's it. And if we can do more, of course we will do more in infrastructure.

You can imagine, because the spreads are quite nice and I summarize these diversification things that we were ready to sell and to -- we were ready to give up on liquidity but that we wouldn't give up on the quality of assets. And this is part of this plan.

And the much we can do in infrastructure, the best.

Just wanted to ask, if we exclude the U.S. business, where obviously you have dynamic hedging, do you normally increase interest rate hedging when vol goes up and interest rates go down?

So are you following a dynamic process also in your European business?

We have a very small -- you mean in terms of VAs?

No, I mean -- no, not the VA. So in the rest of your business, do you -- is there an argument to say the insurance sector generally has increased its interest rate hedging in Q1?

What's your own experience, excluding -- not including VAs?

No, we don't in itself. We don't hedge the volatility because, as you know, it's something relatively expensive.

And we can consider that the present period that really is a bit extraordinary. What we do is that we have, of course, the fact that we have some embedded options in our general account products makes that we have some options and that we are naturally -- for example, many times I explained that we are protecting ourselves against rise of interest rates, buying swaptions.

When you have -- we are long swaptions and in itself, being long swaptions makes that you are long volatility. So that's it.

But it's not in order in itself to hedge. I want to be clear.

It's not in order to hedge the volatility impact on the solvency ratio. But it's just to manage the risk.

And it's good risk management, to protect ourselves against moves like a rise of interest rates. I hope I'm clear.

My question was more did you change your hedging or increase hedging in Q1?

Yes. We didn't change the hedging in Q1.

We keep exactly the same stance and we keep the same pillars of it. And of course these days we are also taking the opportunity of the low interest rates in order to slightly increase our hedges in case rates would go up.

But we don't have any specific program. And for us it's business as usual.

It's another way to explain it. I didn't take in the first quarter any specific hedge in order to have a direct impact, if you want, on the solvency level.

The first question is I spoke with UniCare yesterday. They actually report both the standard and the internal model.

And the point they made is that reporting both allows more comparability between companies. And I just wondered what your view is on that.

And the other is there seems to be almost like a competition between insurers. Competition is always healthy but it produces interest effects.

Zurich, Allianz and Axa, so today and yesterday, published their solvency updates. How do you see that?

Is there -- what is the outcome of all this? Are you married to a figure of 200% or do you think 150% a sign, just stepping back a little bit?

Thank you.

No, we are using internal model. To answer your first question, we are using internal model and will always report on internal models.

And the way we're excluding the U.S. which was the question, we are using internal model.

So we are not using the standard formula, if it was your question and we don't intend to do so. And all the work we have been doing over the last years with the French supervisor is, as I told you, we are in the last phase of getting our models approved.

So we are using internal models and will go on using internal models. And as you may know, there is absolutely no recommendation or any kind of obligation to report on the standard formula because it's, again, it would be contrary to the global framework and to the spirit of Solvency 2 because the standard formula, the internal models are here in order to get a good -- a better matching between assets and liabilities.

Your last question was about the Solvency 2. I'm not sure I clearly -- what was your -- I'm sorry, Michael, but could you repeat your last question?

Yes. So Zurich, you and Allianz in the last two days have reported your solvency numbers.

And clearly there's competition between you guys in reporting this number. So to understand how you look at this metric, what is actually your target?

What do you think is the right number?

Let's be clear and I want to be clear, there is no competition. The figures that we publish is the right figure.

There is no competition. That means that we have a model that we've explained to you many times, I believe in detail and we will be even more -- much more clear and vocal at the beginning of December.

And we have a model which is based on, I would say, a consistent limitation of the mismatch. And that's the reason why.

I believe I gave you -- I believe most of you were expecting that due to the pricing volatility, due to the drop of interest rates, there would be a drop. And we -- and I've been quite clear, telling you that under today's conditions we would be back not very far from the 201% that we had at the end of last year.

So it's not a problem for competition. What I can tell you that I consider that we have a solid balance sheet, that we have a solvency which is good and which is proven, in these extreme market conditions, to be extremely resilient.

Okay. In that case, we thank you all very much for joining and wish you a very good day.

Thanks a lot and have a good day. Bye, bye.

Bye, bye.