AXA S.A.

Andrew Wallace - Andrew Wallace-Barnett Thomas Buberl - CEO Gérald Harlin - Deputy CEO and CFO Jack de Peretti - CEO for AXA in Europe Antimo Perretta - Group Chief Risk Officer Alban de Mailly Nesle - CFO, U.K. and Ireland; Bertrand Poupart-Lafarge

Peter Eliot - Kepler Cheuvreux Nick Holmes - Societe Generale James Shuck - Citi Andrew Crean - Autonomous Johnny Vo - Goldman Sachs Ralph Hebgen - KBW Farooq Hanif - CS

Okay, well good afternoon everyone and welcome to Axis 2018 Half Year Results. A very warm literally welcome to those in the room, welcome to those on the telephone, welcome to those on the webcast and again very warm welcome to those here in London.

We will have a Q&A session at the end of the presentation and we’ll be happy to take questions from those on the phone or on the webcast. Please follow the instructions you've been given.

We will as usual give preference to questions coming from those of you who are here in the room. On the stage we’re joined by our CEO Thomas Buberl, our Deputy CEO and CFO Gérald Harlin also in the room we have our Jack de Peretti; our CEO for AXA in Europe, Antimo Perretta; our Group Chief Risk Officer; Alban de Mailly Nesle and our CFO for the U.K.

and Ireland; Bertrand Poupart-Lafarge so welcome to you all. And it's now my pleasure to hand over to Thomas.

Thank you very much Andrew and good afternoon to all of you. I am very happy to see you for half year earnings presentation.

If I summarize and then going to detail in five points. The six months earnings are classified as a very strong delivery in a way that there is very strong operational earnings both on the top line and on the bottom line that we have continued to shift our business mix through the inforce transformation that the U.S.

IPO and the AXA integration are well underway. And all of this is based on a strong balance sheet with additional cash flexibility having a clear vision for the future which is based on a focus on partnerships and innovation.

If I take these five messages and go more into detail, the very strong earnings growth is characterized by an underlying earnings growth of plus 9% by an adjusted earnings growth also of 9% at constant FX. And by an underlying earnings per share growth of 6% and adjusted earnings per share growth of 6% as well despite significant headwinds from foreign exchange.

When we look at who and how have the different geographies contributed and – since we have changed the organization we’ve also changed reporting two geographies. We see that the simplified organization is bearing fruit in a way that all different geographies have contributed to that success.

And in particular France and Europe have shown a very, very strong performance and it also shows that mature markets does not mean no growth, mature markets means that you have a strong position and that you can also achieve a strong growth both in topline and underlying earnings. If we want to highlight a little bit, what characterizes the good performance of the countries.

We clearly see that in France, we see a very strong growth dynamic. France has in general a good business climate, but given our very strong position given our very innovative character and given our strong leadership under Jack de Peretti and his team.

We have achieved a very strong growth based on a very, very important position. Similar in Europe which is composed of a few different markets with strong positions, if I had to highlight one example it is clearly the transformation of the Swiss second pillar business also under the leadership of Antimo Perretta.

The new model has been established of a simpler organization of more empowerment of the local CEOs and we see the fruits of this. And in particular in Europe the partnership with ING will have the strongest impact.

If I look at Asia, we were in the focus of streamlining the regional office. We have recruited a very strong leader was Gordon Watson.

Gordon is now really in the midst of it he is changing the business dynamic. He is recruiting his team and I will have very high hopes after the launch – successful launch of new products certainly in Hong Kong and in Japan that the performance would also increase going forward.

On the U.S., we see here a mix picture where there is a negative number on the earnings growth. This is due to the fact that we have obviously through the IPO reduced our ownership stake if you were to compensate for that and we would be at a flat.

If you were to compensate the one-time effects from last year, we were at a much higher underlying earnings growth. Gérald will come to the details of that.

Clearly on the U.S., the big highlight is the successful IPO and as also if you look the performance of the U.S. business both when it comes to the earnings and the business development, but also when it comes to the share performance.

We launched the IPO at $20 and the year share price has certainly been between $20 and $22. If you look at the international and transversal segment, again many countries in the international segment, we have started to streamline the footprint.

We have started to really implement the private equity method of managing these countries certainly there. And when you look at the transversal businesses most importantly AXA investment management we have also launched a new initiatives there which is a new organization getting to savings that are there to invest in the growth of that business.

On the international side, we've been working on the major markets particular Mexico and Turkey where we see very good progress. If you look at all preferred segments, the preferred segments are health, protection and the commercial line business.

Why have we taken those segments as preferred segments because A) there is less volatility than other segments. There is a higher growth and there is in particular also a higher profitability.

We have shifted our organic growth ambitions – towards those segments and when you look at the fruits that we have today 7% growth in the health revenues. We are very strong as AXA in six health markets that have significantly contributed to those 7% very strong growth in the APE in protection 10% and 2% growth on the P&C commission line revenues.

All of this has happened at the same time when the profitability has increased. You see that the combined ratios in all of these segments have improved over the period.

The major move that we announced this year are the two major moves which is very much at the core of how do we transform our profile from being a company that is mainly life and savings dominated, that is mainly exposed to financial risk, towards the company that is more P&C dominated and mainly exposed to technical margins. We announced on the one hand the acquisition of XL and on the other hand the IPO and the subsequent sell down of the U.S.

business of AXA Equitable. Where are we today on the XL side we can clearly say that the integration is progressing well what was important for us in the integration was a couple things.

One is to make sure that we take key decisions very early, you seen that we have – at the time of the announcement already announced the leader. We have already announced the [N-1] and we are in the process also of announcing the next levers quite soon.

We've also been very clear on what is the new brand of the new company and see that the synergy targets are well on track. A second big and important piece for us was how can we bring the volatility of that business in a larger context of AXA to a level that is acceptable for us.

And also there we have reduced significantly the potential cat impact by 40% if you compare it to the same time last year. So in total the integration is well underway.

We are in the process of really getting everything done and we are hoping to close that transaction in the second half of this year. We are on good track.

On the other hand, as it is a swap between XL and AXA Equitable. You’ve seen that on the 10th of May, we achieved a great milestone and key milestone to IPO the U.S.

business. In New York, we achieved with the placement of the first tranche and the mandatory exchangeable the necessary 4 billion of proceeds in order to secure the financing of the XL Group.

And obviously we are going to sell down our U.S. – participation in the U.S.

business over time which will give us a potential upside because we do believe that business is not fully valued today. And it gives us with the subsequent sell downs a source of additional cash flexibility.

When we look at the balance sheet and the financial flexibility, we see that with 233% of Solvency II coverage we are at the very high end of our range that we have indicated and it is up 28 percentage points from the full year 2017. As we always said, this is a temporary high because with the acquisition of XL we will go back more to a level between 190 and 200.

What is also important is that at the time of the announcement of XL, we had two negative credit watches from Fitch and from S&P both have lifted those negative credit watches after the successful IPO of AXA Equitable. When we look at the further significant cash flexibility it comes clearly as I said earlier from the future sell downs of AXA Equitable Holding.

It does come from a strong cash generation of our existing business, but it also comes from a couple transformational moves that we have announced. The one is the one I mentioned earlier when I spoke about Switzerland which is the transformation of the Swiss Group Life business which will lead to a significant capital upstream.

And the second one is the one that we announced yesterday evening which is the disposal or the potential disposal of AXA Life Europe both of those the Swiss business transformation and the AXA Life Europe will get us to a capital release of roughly €3 billion. What is important, when we spoke at 5th of March was our priorities.

We clearly said getting the IPO of the ground, integrating successfully XL are the two business priorities which are well underway. The first priority now is to use the additional cash flexibility to reduce our leverage and we also clearly said that we want to reduce our leverage to a minimum of 28% gearing.

When we look at the business profile I mentioned earlier, those strategic moves of acquiring XL and of IPOing the U.S. business will lead us to a very different profile.

We will change from a life and savings dominated company to a P&C health and protection dominated company, which will also have a reflection on how we are going to sink about our capital management. And our history shows that we have a very good track record in our dividend payment that we have paid 15 billion of dividends over the last six years.

And certainly with the change of our risk profile, we also intend to review our capital management policy in light of this profile change. When we look at the innovation side, we are working on two major topics.

One, is the question how can we build a base in services around the insurance coverage? I would like to highlight one element which is the successful acquisition of Maestro Health in the U.S.

It’s a company that focuses and helps large companies in the U.S. to reduce their health expenses and to better manage them and this is a very successful business looking forward.

The other great area is digital partnerships, we do believe that through our investments on the IT side, but also the way we have modularized all products. We have been able to strike three important partnerships with Uber, with BlackRock, with ING always in the logic how can we offer a fully digital journey.

How can we link ourselves simply in the customer journey of our partner and how can we also make sure that we offer very new solutions. So if you go and look at Uber the big question is how can we help to create a protection for those drivers that work as individuals but still belong into the Uber ecosystem.

Today, there is no solution. On the BlackRock side, the question was how can we make sure that the BlackRock drivers behave appropriately and that there is I would say a social contract between the passenger and the driver.

And when you see the first results they are very, very encouraging and very different from what you would normally expect from a fleet type of business. When we look at the first half year, a lot has happened, a lot of transformational move has happened.

These moves all contribute to the strategy and the plan Ambition 2020 focus and transform we launched in 2016. It also fully pays into the strategic directions we announced last November which was the question how can we focus on fewer countries, how can we reduce the complexity of the model.

How can we shift our portfolio towards the preferred segments both by organic growth, but also by and organic moves and by that shift the balance more towards the technical margin. How can we simplify the organization?

This has been done today we are working in a very different world of a simplified organization with much more empowered CEOs and you have two of them sitting here today that have taken the responsibility, that have taken the empowerment and have turned this into very successful and good operational business results. And we have started to scale the innovation ecosystem, you seen the examples of Maestro Health.

I didn't mention telemedicine which is growing very nicely. The partnerships on digital sides are very important pillar for us.

There is still quite a few other partnerships out there where we want to go after and make sure that we can build on this position that we have achieved so far. When you look Ambition 2020 and the targets we have communicated.

We can clearly say that we are fully in line with Ambition 2020. 6% underlying earnings per share growth is at the higher end of the range of three to seven.

On the free cash flow, we are not yet at the end of 2018, but today I have no reason not to believe that we will also achieve our targets. When you look at the adjusted return on equity, we are actually above the range of 12% to 14%, but for the half year is normally slightly anyway above this range.

And when you look at Solvency II we are also slightly above the range of 172 to 230 as I mentioned earlier this is a temporary phenomenon we will come back into a range between 190 to 200 once the XL deal is closed. With that I would like to thank you for your attention and hand over to Gérald.

Thank you, Thomas good afternoon. So as explained by Thomas our underlying earnings are up 9%.

You can see on the right-hand side that across the board all the entities, all the regions have a positive contribution to earnings with one exception which is the United States. And following the IPO as you know the Group share dropped we are at 92.7% and at 100% would they been at zero.

And taking into account again as explained by Thomas excluding the 2017 one-offs we would have been at plus 30%. You might have a question on the 26% positive on central holdings this is due to the fact that we don't have any more to pay in France the 3% tax on dividends.

Moving to the countries and starting with France. We have a first topline growth is strong plus 8% on revenues and you can see that with a strong growth in our preferred segments, the health protection, commercial lines.

This translates into underlying earnings up 9% mostly explained by two factors. The first one is a technical margin - despite natural events which were quite high referring for the first six months in France at 1.5 points.

Nevertheless as you can see on the top right P&C combined ratio is on 0.6%. At the same time, we have unit linked fees which are up because we have higher average asset base.

Let's move to Europe, as far as Europe is concerned we have 3% revenues with 3% P&C commercial lines, 4% health, 11% protection APE. I would like to notice the fact that thanks to the recovery of the MPS our revenues are up 21 but here I mentioned APE is up 22%.

This translates into underlying earnings up 10% and I could say that across the board all countries benefit from lower P&C combined ratio improved health combined ratio as you can see minus 0.6, minus 1.2 respectively. Let's move to Asia, in Asia we have plus 3% in revenues with plus 3 in Japan, plus 8 in Hong Kong.

Thanks to new product as explained by Thomas, we can notice that NBV in China is going up by 12% which is good. As a whole underlying earnings are up 4% explained by higher technical margin in Japan, higher unit linked management fees in Hong Kong and higher profit in China.

Moving to the United States, in the United States we have underlying earnings decreasing by 8% as explained excluding the reduced ownership and excluding the one-offs we would have been at plus 30% mostly explained by higher unit-linked management fees and by higher earnings from AB. As far as AB is concerned I just would like to focus on the facts that we have management fees going up plus 1.3 basis points which is good because we move from to private and to retail.

We had outflows in institutional but positive inflows in private and retail which is good. In the end, we have - for AB cost to income ratio which is going down by 4.9 points and revenues plus 11%.

So a good performance of AB and you noticed that since the beginning of the year the stock price of AB significantly improved. We should be around 20%, 27%, 28% up.

Let’s move to international and revenues are up 3% it’s mostly in health and in P&C commercial lines. You can mention the topline growth of Mexico and Turkey plus 12, plus 11 underlying earnings plus 2 and with increased profit coming from Russia, Turkey, Gulf, Mexico but we have less favorable last year we had a significant to prior year reserve development in Singapore that's not the case this year.

Let’s move to AXA IM and AXA IM net inflows are strong 13 billion. We have 4 billion of third-party and underlying earnings are plus 10 explained by higher management fees, higher performance fees as well and higher earnings from Asian JV.

Remember that we announced AXA IM announced new strategy priorities which will end up with the some significant savings up to 2020 of 100 million that will be reinvested our business in alternatives in digital. I’ll remind you that we want to develop this business at its core and we want to develop it for two reasons first because it's a way to provide interesting assets for management for the insurance companies and it's a way to develop third-party business.

Let's to underlying earnings, so that's I won’t comment it’s the same slide. But moving to adjusted earnings, adjusted earnings are up 9% and you can see that net realized capital gains were slightly increase compared to last year at €330 million versus 307.

Let's move to net income as far as net income is concerned it’s minus 11% I would say mostly explained by three elements. The first one is the exceptional and discontinued operations its linked to GL 2020 it knows that we had VBI an intangibles that we had to impair and its 340 million in Switzerland.

And the second reason is this minus 346 that you can see in the top that it split between some economy hedge you know that unfortunately we have a lot of derivatives which are not eligible to hedge accounting which explained minus 236 it's a mismatch between assets and liabilities. And we have the change in fair values are some assets which are mark-to-market.

And again with a notably with a slightly widening we have a loss of 110 and 10 points. Moving to the line of business, quite interesting to see that the plus 9% of underlying earnings translates and of course for their Life business we have to adjust for reduce U.S.

ownership I don’t restate at all the past and the one-off of 2017. Nevertheless, we would be at plus 2, plus 4 in property and casualty, health plus 17.

I remind you that it's a preferred segment and we are nicely growing on the topline and our costs and our combined ratio is improving which means that in the end its plus 17 and in asset management it’s the same. That – what we can call operational leverage which end up with plus 30% in underlying earnings.

Let's move to the traditional slide on the combined ratio, currently our combined ratio is slightly up from 96.6, 97.1, but as you can see and I mentioned France but there are some other companies like Germany as well where we have Nat Cat and natural events which means that instead of 0.1% only last year in the first half we are at 0.6. You can notice that the prior year reserve developments are increasing from minus 0.8 to minus 2.1 which means that in the end we have an improvement in our combined ratio of 0.7 from [957] to 95%.

I would like to mention the fact that and we have a slide in the appendix that are reserve ratio is at very high level so it's plus four points versus last year which confirms that the we are quite conservative and I can tell you that we can expect to be close to 2% for the whole year in term of prior year reserve release. Let's move to – I would say let's focus on natural events pro forma cost combining XL plus AXA.

So the average expected Nat cat is roughly €1 billion after-tax two-thirds for AXA one-third for XL. And we could experience some positive or negative deviation, but here is the objective today is to focus on the negative deviations.

Pat attention these lines are deviations above the normal expected level the 1 billion after-tax that I mentioned to you. So first line which is light blue which is a dotted line correspond to the pure combination of AXA and XL at the end of 2017 and the dark blue line is AXA plus XL neutralized by June 2018.

And you can see that it's a significant decrease because we have a decrease in potential deviation of 40% meanings that in one in 10 years we can expect to be at 0.6 in one in 50 years at 0.8. This is due to the combination of two initiatives, the first one is the underwriting actions and incremental reinsurance that protections that was built by XL.

Second it’s a tailor made aggregate protection that's been purchased by AXA and XL. So in the end, we have again a decrease of 40% of these extreme events, and second as you can know the dark curve is much flatter that means that we starting at 0.6 billion in one in 10 years and ending at 0.8 in one in 50 years.

So which was not the case before because we had a positive curve in the past. So it’s an important point you remember that on the 5th of March when we presented you this acquisition we said that we would take some initiatives in order to reduce this volatility this has been done.

Let's move to the balance sheet now and the investment portfolio. Total assets under management excluding in a clean of still close to 600 million nothing new on that side.

Yield on assets you can see that the yield is extremely resilient because in life we are moving from 3.1 to 3.2. In P&C we are stable at 3.3% the reinvestment yield we reinvested in the first half 32 billion and the reinvestment yield move is at 2.4% compared with 2.1 in the last year.

These translates into quite resilient investment margin life and savings investment margin went down by two basis points only from 71 to 69 basis points above the 2018 to 2020 target range that we shared with you two years ago when we presented in June 2016 our plan. We plan to be between 55 and 65 and indeed we are above this level this is possible again as you can see on the left because we have very low average guaranteed rate and that these rates being quite low.

We can afford and we can pay quite attractive interest rate to our policyholders but we don't have any constraints coming from the guaranteed rates. On the P&C yield we are quite stable we are slightly down at minus 11 basis points in line with yield dilution guidance.

Moving now to the debt, so last year we had 25% debt gearing at the end of the first half at the end of June 2018 we are 29% explained by the 3.2 billion debt rates at AXA Equitable Holdings and plus 2 billion debt raised at AXA SA you remember that we issued for the financing of XL 2 billion of sub-debt. We can expect at the end of 2018 to be at 32% mostly explained by the XL acquisition and the fact that XL has some debts and we gave target range for 2020 between 25 and 28 irrespective of our level of future AXA Equitable Holding sell-down.

Shareholder’s equity, so shareholder equity went down from 69.6 to 66. I would just like to highlight all the other items are quite comment but impact from U.S.

IPO minus 2.1 and for AXA and other plus 0.8 because since, the beginning of the year the euro slightly weakened. You’ll notice that adjusted ROE is at a very strong level of 15.6% [followed] 12% to 14% guidance.

Solvency II now so we have a Solvency II ratio which is at 233, you have all the all word explained and the operating return of plus 10, dividend minus 5. Then you have the IPO which is the disposal of almost 35% its plus 10 points and we have the sub debt plus other elements.

In the end 233 and the guidance for full year 2018 as explained by Thomas is between 190 and 200. Now I hand over to Thomas for the conclusion.

Thank you very much Gérald. So to conclude a very strong delivery in the first six months, very strong operational performance across all geographies across all lines of business and in particular continuing the shift of the business mix towards health and protection and the commercial and P&C.

Progress on the change of the risk profile through the successful IPO of our U.S. business and through the XL integration that is well underway.

All of this based on a very strong balance sheet has additional cash flexibility if you think about the further sell down of AXA Equitable and the two transactions Switzerland and AXA Life Europe. With a very clear vision for the future when it comes to innovation and partnership with clear proof points on the innovation side but also on the partnership side.

Thank you very much and we have come now to your questions. Let's start here and we have enough time to go to all the questions.

Peter Eliot from Kepler Cheuvreux. I guess -- to start off with you, you talked a bit about the synergies with XL being well on track.

We thought about the de-risking but with the deal not yet been closed, could you just elaborate a little bit on what you have done to-date on the synergy side or maybe what groundwork -- whether you can add a few comments about what you meant by the synergies that are already underway? And secondly, just on the debt gearing, I guess things are looking a little bit better in terms of the debt that you were expecting to have and other factors since you announced the XL acquisition.

So I'm just wondering why the 32% hasn't sort of improved a little bit? And looking forward, looking at your ability to deleverage, I guess, over the next couple of years I think you got about €0.7 billion of debt that you could call over the next couple of years, before you then go sort of bigger amounts.

Does that mean that we should think the target as being a bit backend loaded or is there more you can do to accelerate that? And sorry, if I can add a third question very quickly.

I guess XL did have some adverse reserve developments when it announced its results. I don't know if you're able to comment on that and your thoughts on that, whether there is anything that concern you there?

I suggest that I will elaborate on the first one, on the synergies. Gérald, will elaborate on the debt gearing.

And Alban, who is the Chief Risk Officer, will elaborate on the reserves. So when you look at the synergies, there were different types of synergies.

There was obviously or there is obviously cost synergies. And we have announced a target of €200 million, those cost synergies are essentially the question of, if the deal closes successfully, which we assume now.

And that the -- we don't need or the head of its infrastructure anymore, that XL has to be a quoted company and so on. There is synergies around the headquarter, when it comes to the underwriting headquarter of AXA Corporate Solutions, that we don't need any more.

And obviously you have some countries where you have significant overlap, the countries with the highest overlap being France and Germany. So those synergy targets have clearly been affirmed.

The second kind of synergy, were revenue synergies. So when you think about what does the combination of XL and AXA bring.

It brings a very large specialty expertise that we as AXA have not had, and AXA has been and is very strong in the SME segment. And by having access to the specialty expertise, we will be able to sell more specialty businesses into the SME portfolio.

And certainly when I look at the two European representatives, Antimo, and Jack, they are in active discussions with the XL people, how can we do this as quickly as possible. You have further revenue synergies which go towards the question of accompanying international customers certainly towards the U.S.

and internationally. And by combining AXA as a whole, we'll have a U.S.

presence, which we didn't have beforehand to that extent. And we'll be able also to have businesses accompanying them together.

And this is clearly another initiative which we are pushing very hard. And then I mentioned earlier, as a third pillar, that -- moving into health and protection and moving into commercial lines is also looking at the combined piece of it.

Because when you think about a company, a company has got two types of risks. It has got the company risks, so Nat Cat business interruption cyber.

But it also has got the risk of the health of the employees, and since we are very strong in the health business and particular also in the group health business. We want to obviously combine our forces with the distribution footprint and the health expertise that we have certainly when it comes to France and other countries, to really serve our customers on a much larger basis.

So those are clearly revenue synergies. The third synergy piece is very much about the reinsurance synergies.

So, by combining our reinsurance purchases and by also buying on a much more diversified portfolio that AXA and XL will bring together, we will be able to buy reinsurance at very different conditions. And then you had a fourth synergy, which was very much around the capital synergies.

So when you bring the two balance sheets together, you have a very different and much more -- much higher diversification. Since today, AXA is very exposed and very focused on European windstorm only because we have nothing in the U.S., so hardly anything.

Tomorrow, with the U.S. exposure, with the Bermuda exposure, we have a very different diversification which also leads to the capital synergies of €2 billion in less capital required in 2020, once we can apply the internal model also on to the AXA business.

And since the Bermudian Solvency rules are very close to the Solvency II rules, we do believe that there is a very high likelihood that it's going to happen. So the synergies, and sorry for being a little bit long, but I think it's important to outline it again.

They're very well identified in the process of being affirmed and also in the process of starting the realization plans, so that once the closing comes, we can move ahead very quickly. Debt gearing, Gérald?

Yes, Peter. You remember that between the announcement of the XL acquisition in March and now, we had two news and two inforce portfolio initiative, which are, [GL 2020] and the announcement from yesterday, which is AXA Life Europe.

Keep in mind, the fact that -- if I take first GL 2020, it's -- the capital relief will take place in 2019. So that means that it will take place in 2019 and it will be upstream later in 2019 and 2020 through the holding company, its €2.1 billion.

So second is, AXA Life Europe. And AXA Life Europe, it will depend on the closing date.

And the closing date most probably will take place beginning of next year. So these two elements are quite sizable because we are dealing with €3.3 billion.

So it goes absolutely in line with the fact that we said, we will deleverage. So we walked the talk, but it will be a bit later for cash reasons.

And that's the reason why we are still at 32% at the end of the present year.

Initially you were targeting €3 billion of debt to be raised and that is then below €2 billion?

Yes, but anyway, we have €3 billion difference, in the end it will be so it's -- there are plus and minuses, but I would say that we have €2 billion and we have also some additional local debts, which means that in the end, the difference will not be substantial, that we will stay at around at 32%. We will update you, but that we will stay at 32%.

We will update you as well, most probably at the IR day.

Alban, on reserves? Maybe you come here so people see you in the webcast.

On the prior year development of XL, so you're right, during the first half they were less positive than last year. There were even slightly negative on the insurance side.

So we had a close look on the origin of those developments. In fact it comes from a very limited number of property claims, large claims that were incurred at the end of 2017, so late in the year, shortly before the closing, and they were -- as they were large, difficult to evaluate.

And so they were reviewed by XL in Q2. XL reviews its results twice a year not only in Q2.

And at that time they were able to better evaluate those losses and to increase the charge for that. So given that it's a very limited amount of claims and given that it's on property, and therefore short headlines.

We have now a full certainty and a very good understanding of those losses. And so it's not indicative at all of a given trend.

Let's go to Nick.

Nick Holmes of Societe Generale. Couple of questions, the first is, you say you want to review your capital management policy in light of becoming more P&C, wondered if you could elaborate a little bit more about that?

And the second question is on Asia, which seems to be the only bit of the group that is going through a fairly dull patch, perhaps, at the moment. I don't know if you agree with that.

I wondered if you could tell us more about what your plans are and how to really get growth going in Asia? Thank you.

Good thanks for your two questions, on the first one the intention to review the capital management policy. I could tell you a lot but not today because as I said to you in the presentation we are in the process of working through all of this.

Our core priority is really getting the IPO off the ground integrating XL and having the closing of XL. And we tend to review the capital management policy with the aim of once we know exactly what it means to update you and give you a clear view on what we want to do.

So you have to unfortunately wait a little bit for this.

Can I just ask very quickly is a full disposal of AEH conditional upon launching your new capital policy or it just XL?

Look the new capital management policy will be in the light of the moves that we have announced and in light of the full completion of the moves and you have to most likely differentiate in that view a period where we are still in transition and a period where we are beyond the transition. And we are probably most likely look at it that way.

On Asia, and Asia is certainly I have mentioned earlier we have changed our leader in Asia. We have been able to recruit the number two of AIA Gordon Watson who has been very successful at AIA.

When you look today at our Asian footprint, you see that we have a very strong position in many countries, but the position is very much focused on bank deals and bank joint venture partnerships. And if you go country by country we have started to relaunch the dynamic but as the Asian markets are quite competitive.

So if you go into Japan and Hong Kong where we are by ourselves so without joint venture partners. And as Gérald mentioned earlier, we have launched both in Japan and Hong Kong new products those products are already showing in a significant improvement in the growth.

We want to continue this journey and in particular the next step will be to also revamp our health propositions both in Japan and in Hong Kong. And in particular in Hong Kong, we will come out quite soon with a very innovative product called FirstCare whether it’s a very high integration between this product and also some Hong Kong hospitals.

So this is Hong Kong and Japan. Seconds large piece is Southeast Asia where what I said earlier is applying.

We have in these markets a lot of joint venture partner in form of banks. So if you go into Thailand we have a relationship and joint venture partnership with Krung Thai.

If you go into Indonesia with Mandiri, if you go into Philippines with Metrobank, Philippines works very well. So this is a very well oiled machine, a very well functioning joint venture.

We want to continue to let it prosper. When we look into Thailand and into Indonesia both of our joint venture partners have in the past suffered from nonperforming loans.

They have both gone through a deep restructuring of their own portfolio and we see that growth is coming back. However, after a long time of a bancassurance partnership the penetration of the bank will come to a saturation.

And therefore we started in all of these countries to build significant agency sales forces. So in Thailand we have a very large agency sales force within the joint venture.

The same is true for Mandiri and Gordon Watson's mission is to really make this agency sales force growth also apply the learnings that we had in Europe on the more hybrid approaches between direct and the agents. and really use that as a growth engine.

Third piece is China where we have in total three joint ventures, one is on the asset management side with Shanghai Pudong Development Bank which works well. So we also want to let that prosper.

The second one is AXA Tian Ping which is one of the largest foreign insurer in the direct and hybrids P&C retail business. The motor market in China has significantly been challenged that we are in the process of shifting our business model more towards non-motor our P&C more towards short-term health in this journey will take some time.

And you seen that the joint venture with ICBC on the life side Gérald was commenting on it went also through a significant transformation of changing the product mix in the bancassurance channel away from single premium to more regular premium. This is also seen in the numbers that the new business margin has significantly come up.

And in the same logic as I explained about Thailand and Indonesia we will also strengthen the sales force or the agency force that we have together with ICBC in order to shift to more growth. When you look at ICBC today, I do believe that the saturation of that model is at the very beginning because we are touching today 2% of the customer base of ICBC and with a renewed management of this joint venture both through the Chairman and the new female CEO.

We have very high hopes that this is now changing in terms of the growth dynamic. And then you’ve got a last piece which is the P&C strategy again with joining AXA and XL our presence in Asia when it comes to P&C will change significantly and we will also develop Asia as one of the growth regions for P&C in the joint company.

Just very quick follow up on that is commercial P&C in Asia and in places like China is that envisaged as part of the program?

That was my last comment on combining XL and AXA it is clearly but you have to be very selective because again – no wonder we have to be very selective when it comes to the underwriting. Again Gordon Watson is currently working with his team exactly on how to build the strategy and when the moment is there we would gladly update you on what exactly is the strategy, but it will be along these lines.

Thanks very much.

James?

Thank you its James Shuck from Citi. I had two questions and gearing and one on kind of cash liquidity.

On the gearing side of things I mean you present your gearing target on an IFRS basis including goodwill. When I look at your Solvency II gearing and the capacity you have left in the Tier 2 and Tier 3 as a percent of the SCRIPT on a pro forma basis including XL you pretty much out in that 50% limits.

Seem to have any flexibility on that, so when I think about the composition of your debt between senior and subordinated debt how do you envision changing that mix because I think as part of Ambition 2020 you were changing the mix which had a drag of about 10 points on your Solvency ratio by 2020. So what’s expected Solvency drag as you optimize that mix and give yourself better flexibility under Solvency II metric.

Second question is around the U.S. goodwill situation because again your IFRS metric for the gearing includes goodwill.

I would expected some sort of U.S. goodwill write-down with these numbers, but that hasn't comes so presumably the order says you get away with it sort of voicing that level down.

Would you only show below 50% so could just clarify what the kind of status is there and whether your target level incorporates a full U.S. goodwill write-down please.

And final question I mean obviously the Life sale of the VA block is very positive and helps your cash position. You raised about 1 billion less debt than you'd initially talked about.

You haven't been very transparent about what is the level approved central or cash liquidity where that actually is versus any of your target ranges. So I really like to understand the extent which you’ve drawn down on that central resource and the extent which you need to replenish it please?

Gérald three question for you.

First about the capacity to ensure more debt and more Tier 1, Tier 2 debt yes we have this flexibility for things that if we would like we could between 2 billion and 3 billion but it's not at all our intention. It’s all our intention because clearly our intention is to deleverage and it goes for me to other questions that you are raising about the U.S.

goodwill. I could say that – you know that the IPO took place in May.

You will all agree that the liquidity of the stock is not doesn't reflect the real value. I mentioned to you the fact that AB was trading close to 30 billion so no need and I'm sure that you made the mass and it will means that the life party is below five times the earnings.

So all of this and I won't go into more detail, but all of this goes in the same direction that means that that's why we didn't impair the goodwill for the future. So I cannot comment in any detail on what might or might not happen and when we will see.

Nevertheless I encourage you to go to your calculation and you have all the calculation of the debt gearings that is on page 43 of the financial supplement. And you will see on that page that the denominator amount to 75 billion.

So you can make all your math, you can assume whatever you want about the impairment of the goodwill but you will see that in the end the impact is not so huge, that's what I can tell you. I would say there is some liquidity and because this was your last question.

So as we will use and that's what I told you in the 5th of March we used a large part of our excess cash capacity. I said and it was 3.5 billion.

So it's clear when I tell you that it’s our intention to deleverage that means that we expect to cut believe or constitute this excess cash buffer. And I can tell you as well that whatever you take between the 25% and 28% – this cash buffer will be reconstituted at the end in 2020.

Thank you very much if you're reducing level of cat risk and volatility of risk that has a cost. So I think in XL in the reinsurance business has been kind of one to two point possible more increase in loss ratio due to that.

Can you comment on the group and what you see as a cost of putting the additional protection on whether is coming on the numbers already. Second question is going back to capital management you probably not answered this question, but obviously the 25% to 28% is not including or is not dependent entirely on AEH being sold down.

So the scenario where you presumably you have extra cash is not included in that number. So are you kind of is M&A off of the consideration in the capital management policy.

And finally, just a quick one on the tax one-offs in the U.S. I mean presumably the provision I think it’s 400 to 500 million can that be released end of the year I mean what’s the timing on that?

Thank you.

So three questions I suggest on the reinsurance cost Alban will comment, I will comment on the M&A question and Gérald will comment on the tax one-off question.

So on the reduction of the risk profile on cat what was done by XL as you pointed out it’s a mix of underwriting decisions and additional reinsurance, but where I do not fully agree with you is on the underwriting decisions. Because they moved to less volatile business that as such has a slightly higher combined ratio because it's less volatile.

And therefore that’s the balance but with more premiums and therefore in absolute numbers there is little difference if any compared to what they had last year. So the cost to some extent will not appear in XL numbers because it's compensated by a different kind of business with higher premiums.

And as far as we are concerned the cost of the combined protection that we brought a few months ago is de minimis in our accounts it's really marginal.

Good on the second question I repeat what I said to Nick earlier, we intend to review our capital management policy but we have not intended to talk about it today. Once we have reviewed it we will talk about it.

And your M&A question I think is naturally answered by the priorities that we have and the first priority for us is to deliver. So M&A for me would happen at the margin the focus is deleverage.

Andrew sorry it was the third question I’m sorry you’re right third question on the tax one-off.

Okay so you have to wait for the IR there meaning that on the tax one-offs. So we had in the U.S.

last year we had 200 million of positive tax one-off and it was zero this year. You right we have roughly 450 million of provision of tax provision that the way it works in the U.S.

So we have some audits it’s difficult to plan any would be the timing. So I remember that I got this question when one year ago and I said that on average you could maybe expect to have 100 million, but it’s not regular.

So nevertheless I'm quite happy to say that we have been posting 9% underlying growth without relying on this tax one-off which was a question one year ago.

Andrew I think it was your question one year ago, do you have another question today?

Andrew Crean, Autonomous. Not about the tax, a couple of things it is a bit of a struggle on the gearing side.

Could you say I'm you going up to 32% when XL could tell us roughly pro forma if you were flog out the whole of AXA Equitable what would it come down to on that or put another way how much in monetary terms how much debt do you want to get off your balance sheet by 2020 in your deleveraging. And then second question related to the synergies with XL could you talk a little bit about revenue dis-synergies I mean clearly when businesses get together there are partners all of XL that want to be insured by competitors like XL.

What was your thinking around dis-synergies?

Okay very good I think Gérald you should answer the first question on the gearing and I will go to the negative synergies on the revenue side?

Yes so roughly speaking it’s more or less Andrew we can go into a bit more detail but it’s more or less proportional. So that means that we moved from 25 at the end of last year to 29 today and corresponding to an increase of 5 billion debt that 3.2 billion which has been raised by AXA Equitable Holding okay and 2 billion debt raised by AXA SA these are the 2 billion that we issued in March.

When moving from 29 to 32 then you have the debt of XL and half speaking it should be slightly above €3 billion million and for the decline its proportional as well.

The equity also declines once you get rid of ex effect it’s not just the amount of debt it’s the amount of share count?

It’s mostly debt plus normal move of equity so and you can make your own calculations. So, but it's mostly coming from the new numerator okay.

On the negative revenue synergies so you have potentially two negative revenue synergies and we obviously knew that this could be a topic and therefore on 5th of March we have already announced that we do expect negative revenue synergies. First of all what have we done to avoid negative revenue synergies, because the first question that a customer is asking okay if AXA and XL is combined are you keeping your risk appetite on a combined basis or you reducing.

And there we’ve clearly said no for the renewal of 1st of January we are keeping the combined risk appetite so there is no reason an issue for customer to look for a new ensure at the front end. At the backend if we believe that there was too much risk exposure we have worked it out as Alban and Gérald have discussed it beforehand.

Second thing is when you look at the customer's perspective there are clearly some customers but I could use one hand so far to name them. Then I have said look we don't want so much to be given to one insurer on the primary insurance line and today there is exactly two customers that have mentioned that.

And then on the reinsurance side you are absolutely right - after the closing we would partially reinsurer some of our competitors. We would also technically reinsure AXA and so obviously the AXA contract that XL has is gone.

And again is there when I look at the number of insurers that have expressed their willingness not to renew their reinsurance coverage one hand is sufficient and I could even heck a few fingers off. Johnny?

It’s Johnny Vo from Goldman Sachs just a couple of questions just in relation to the disposal of the life business and your clearly there are many, many bidders in the market for closed blocks today across Europe in particular across Germany. We’re seeing one of your competitors selling a block there as well or potentially selling a block.

Is their potential for you to realize more value or cash from selling blocks of business across Europe that is potential closed to business and therefore release more money that’s the first question. And just the second question in relation to the reserve really development, the reserving ratio I know it’s a shorthand measure but its seems to have ticked up.

Is there any read through for 2019 or further with regards to BYD? Thank you.

Let’s share the questions so I will share the first question with my tour European colleagues Antimo and Jack and Gérald will answer the second question. So and maybe I’ll start with a general comment.

What is important is that when we talk about AXA Life Europe and the disposer. We must not mix it up with a general a dis-interest in the life business.

What we have said is that life businesses are not strategic for us anymore life businesses where we have no end customer contact those are the businesses and also life business sorry that are very, very exposed to financial markets. Those are the businesses that we are reviewing that doesn't mean that we do not believe in the life business in Europe.

And beforehand I've spoken about the great numbers in France it is a clear indication that we want to develop the life business. So when we look at this it's very much what is nonstrategic, what is not performing enough and where is there a better use of the money and I would ask Jack and Antimo.

Jack that you can talk about the life business in France and what you're planning and Antimo then afterwards maybe comment on the second pillar in Switzerland. And also what you plan in the other countries.

Jack.

Thank you. Yes so life business is France is doing well it's a light consuming capital and its growing fast at 12% - let’s say it has a very good ROE.

And we know we are ahead of the market in term of [indiscernible] with 42% compared with another highlight of 30%. So we have no intention to get rid of this business we want to develop it in a profitable manner and we have – thanks to our range of products.

Thanks to the closing links with AEH because thanks to the good training of our people and operating network on which we have answered we intend to develop this business in a very profitable manner in the coming years.

Thank you Jack and may let’s hear Antimo for the rest of Europe outside of France.

Exactly so what Thomas we believe on the Life business and we invest also to develop new product for our customers. What we have done we have shift some business like Thomas said in Switzerland with the Group Life business from a full scale insurance to a separate account business.

And we see the reaction in the market was very low so the customer are stay with us but they understood that with a negative interest rates with low interest rates and high declining of Solvency especially in Switzerland we see Solvency test. That it was the right moment to do it and you remember we communicated that to the market that we will start with the foundation with a really good cover, the cover will be around 111%.

So a good position for the customers and a very good position for AXA because we will reduce our exposure in capital in general account and we will realize around €2 billion for the next three years in the capital up-streaming. In the rest of Europe, I would say in Italy we have a strong partnership with MPS.

We are selling capital light product and unit link and we see that the market is very interested in these type of products and we will continue to push that. And also in other countries like Spain and in Germany it’s a little bit special market.

We have some good products but the situation is a little bit different and we have also referred to with the portfolio of [indiscernible] where we really sell this. We will see that if what Thomas said if the position is not very high we will look to find solutions in the market.

But if we have a strong position we will change the business what we have done in Switzerland. Overall that is what we’re doing outside of France and Europe.

Thank you.

Thank you Antimo and Gérald the second question I’ll turn you.

Yes Johnny I could say that and you could go to page B 33 in the Appendix because you will have year-to-year all the reserving ratio which is net tactical reserve divided net premium. And you will see as I said in the presentation that we’re at 207 well as we were at 203 at the end of June 17 195 at the end of 2017.

So we are in a comfortable position that the reason why I said that I can expect that the trend of the first half will plunge for the full year. For the future yes, it makes me quite optimistic but let us give us sometime just to refine our figures – we anticipate to up-date you on the IR Day on what we could expect in term of release for the next year, but we’re optimistic that's what I could say.

Ralph, oh sorry there was no question okay Ralph yeah.

Thanks Ralph Hebgen from KBW just one question again on capital management I am afraid. And just first perhaps specifically at what point do you think will you be able to share your views on this with us a qualitative comment will suffice.

I mean do you have to – is this a formal review which has meant date or do you need to see and integration of XL happening and see how that gets down before your thinking is sufficiently developed to share your views on capital management with us. Second, in the context of that, to the extent you can say something today, can you remind us of your relative preference between dividend payments and share buybacks?

And the final question I dare to ask is, although, I can expect the answer to be no, is; do you have a level of equitable holdings, share price levels at which you would be comfortable selling it or a minimum level which you see -- which you need to see attained before a sale in your view will become economically viable?

So, I think all three questions are very difficult to answer today. Not because I wouldn't know what the answer is, but we are here today to discuss the half year results.

I understand that it's important for you to understand when does the answer come. And we put all our efforts into the fact that the answer will come on the Investor Day, which is November 28.

And exactly at that time, we will tell you -- give you an answer to your question. As I said earlier, we need to differentiate two phases.

One is the phase where we are still in transition. So once the XL deal has closed, we have certainty on that deal and we are then in the transition of selling down the AXA Equitable stake.

And then there is a period after a full exit, and what will that look like. And our intention is, as I said, to review it now and to come with a conclusion to you.

Because we also, when you look at the risk profile of the Group, and the risk profile, as I said earlier, will change from Life and Savings domination to P&C Health And Protection domination. And as you know very well, the cash nature of the earnings of a Life business is very different one to a P&C business.

In a way that Life earnings produce much lower levels of cash in the short-term than P&C and the Health business will be doing. But the best time is that -- the two of us are keeping your questions in mind for the 28th of November.

Further questions folk, second round.

Farooq Hanif from CS. Slightly boring questions.

The 10 points that you got in Solvency II from selling AEH was larger than I expected. Is it that something special going on there or is that proportional?

Alban, do you want to answer that question?

I'm not sure there is anything going on. But maybe -- what was not absolutely obvious was the fact that the mandatory exchangeable bond that we issued had a favorable treatment because it protects us on the downsides of AXA Equitable.

That's probably the answer to your question.

How many points?

That's around two points, I think, yeah.

Further questions in the room? Doesn't seem to be the case.

Any questions on the webcast, no? Okay.

I'm going back to the room, any further questions? Yeah, there is one, and the second one afterwards.

[Nicola] from Exane BNP Paribas. And the question on the organization of the group which you moved to a country focus last year.

Now, in that context, can you talk maybe a bit about the governance of AXA/XL, because XL will not be a country but it has a significant European presence as well. So how do you think is that transition?

How does AXA/XL have to work with Antimo to get things aligned given that you move to a country focus and this seems to be a bit of complication in that sense?

Yes, and no. But we'll let Antimo answer the question because he has been working with Greg Hendrick, on exactly that question.

And they have found, I think, a very attractive result.

So, we are still working on that. But I see it's not complication.

Because we know -- but we wanted to achieve together, it's to be a partner for our customers to have the right answer in product for our customers. And to do that, we have a clear view about the segmentation of the different markets.

There are some markets like Germany, Switzerland, Belgium and France, are very matured and big market for us but also for XL. And there are other market like Spain, like Italy, where we have a different situation.

So what we have found, in some countries like Italy that worked for the past also for many years with XL. So it's not new, they will continue to work with XL.

And in other countries we have to make sure what type of business we do together and what type of business will be done in AXA and in XL new come. So, there are some specialty that - we see that XL is much more advanced in cyber risk, that we will use this product.

We will be a sales channel for XL and the other side we see in other product like Vogues compensation that is already strong, and we could be a partner for the customers of XL. So it's still working, but we see that we have a lot of potential that we can together work better in the market to make sure that we have the right solution and answer for our customers.

Peter Eliot from Kepler Cheuvreux, again. Maybe just to ask a few questions on the numbers since this is an H1 release.

And first of all, I mean you discussed in the presentation about a 0.6 percentage point Nat Cat impact. But then you talked about a 1.1 percentage point delta from last year in the activity report.

Just wondering if you could give us a little bit more insight into how you think the Nat Cat experience compared to a normal year, so we can just understand that impact. Secondly, one area where you beat my numbers was France Life and Savings, where acquisition expenses fell by $64 million versus last year.

Wondering if you could just say what will happen there. And thirdly, I was surprised that the interest rate sensitivity or the Solvency ratio went up actually from 6 to 9 percentage points for a 50 basis point decrease.

Just wondering again if you could just explain why that was?

Let's do Nat Cat, by, Gérald. Reduction of the acquisition expenses in Life, by, Jack; and the question around the sensitivity on the Solvency II, by, Alban.

So, as far as Nat Cat are concerned -- so we have a Nat Cat -- for half year 2017 we had Nat Cat of 22 and natural events of 100 million. And for 2018 we have Nat Cat at 96 and natural events at 322.

So that gives you an idea of this element, because we are highlighting in the slides the Nat Cat but we have to take into account the natural events as well.

So that's compared to last year, do you have any view of what is on the long-term average or what you might expect normally?

I would say that should be -- as far as the Nat Cat are concerned, last year we were at 0.7 on natural catastrophes. I could say that it's just below 1.

But I'm seeing something around this or below between 0.5 and 1.

Okay, Jack, on the acquisition expenses in Life in France.

Concerning the acquisition expenses in France, we have had some impact concerning the deferred acquisition customs. That is why you see this change on the figures.

Alban, on the sensitivity on the Solvency.

Yes, it simply comes from the fact that we -- our share holding in AXA Equitable has dropped because of the IPO and therefore that has an influence on the sensitivity coming from the interest rates.

Does it answer your questions Peter?

Yes because the U.S. is adversely the 100% - otherwise in the U.S.

Yeah, exactly, yeah.

Yes. Any further questions in the room?

Any questions on the webcast so far? Last chance for question in the room.

Good, you're all satisfied, then I would like to thank you very much for being here, for asking your questions. And wish you a good holiday for those who haven't had it yet.

Thank you.