AXA S.A.

Good afternoon, everyone, and welcome to AXA’s Full-Year 2018 Results. A warm welcome to those of you on the phone, on the webcast and of course, those of you here in London.

We're joined here in the room by a number in our management team by our CEO, Thomas Buberl, by our Deputy CEO and CFO Gérald Harlin. We also have our CEO for France, Jack de Peretti; our CEO for AXA in Europe is here, Antimo Perretta; our CEO AXA XL, Greg Hendrick; and our Group Chief Risk Officer; Alban de Mailly Nesle.

Welcome to you all. And with all of these people present, I'm hoping we'll be able to answer clearly and thoroughly all the various questions you may have on the results.

And as per usual, the Q&A session will be at the end of the presentation, and we'll be happy to take questions from those of you on the phone or on the webcast. Please just follow the instructions you've been given.

And we will as usual give preference to questions from people here in the room. And it's now my pleasure to hand over to Thomas.

Thank you, Andrew. Good afternoon to everybody and everybody online as well.

Very happy to be with you today to present the full-year 2018 earnings. When we look at the headlines, I would like to mention four topics to you.

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

We have reached a record earnings levels with AXA we have never seen, despite the fact that we have been hit in Q4 by high natural catastrophes, mainly on the XL side. This was the first quarter of XL that we consolidated and it was an abnormal quarter of natural catastrophes.

The integration of XL into AXA to make a new joint force is progressing well. I would come back to it later.

And as a result of this the Board of Directors has decided yesterday to propose to the shareholders a strong dividend growth of 6% very much in line with the trend on the underlying earnings. When we look at the underlying earnings in detail, you see an increase from 6 billion last year to 6.2 billion on a like-for-like basis without the FX movement and this given the fact that we had a reduced ownership in AXA Equitable Holdings.

Gérald well come back to it. We have a rough ownership yet to the closure of 80% in the year of 2018.

And secondly, as I mentioned, despite the fact that we had high natural catastrophes in the fourth quarter, mainly coming from XL. The underlying earnings per share is up plus 3%.

This is obviously on the basis where the foreign exchange movements are considered. When you look at the adjusted earnings per share, they move up by 1% and the dividend is moving from 126 to 134, which is a 6% increase given a payout ratio at 52%.

What is very good for these earnings is that they are very balanced in terms of growth and profitability. We have achieved a 4% growth of revenue to 103 billion for all of AXA.

And this growth has very much been fueled by the growth of the preferred segments. Those preferred segments are the commercial line business, the health business and the protection business.

Why have we taken those segments as preferred segments? They are the ones that grow the most and they are the ones where we are closest to our customers because those are inherent risks where people are interested to be helped to reduce their risk and to jointly make a better journey.

On the health side, we have achieved a 7% growth, which is a very much across a couple of countries and since Jack is here, certainly AXA France has contributed a lot to this health growth, but also other countries. On the protection side, we have achieved a gross of 3% again, coming from very different jurisdictions and well diversified, and it really shows now that this focus on the preferred segments, is really carrying weight and it can manage to grow and to also differentiate ourselves in those areas.

And then the Commercial Line P&C business that has grown by 5%, and this is mainly due to the fact that the AXA entities, and certainly the AXA entities in Europe and France have worked very well on growing the franchise more, but also that XL in the last quarter of 2018 has grown by 10%, which is really a remarkable growth. And so this really shows that the preferred segment strategy is the right one.

What is important today that when we talk about preferred segments, it is not just a wish that we have going forward. Today, more than 50% of our volumes are already in those preferred segments.

And once we have fully exited AXA Equitable in the U.S., 80% of our volume will be in those preferred segments. When we look at the geographies, and that is another very important thing.

The increase of 6% in underlying earnings doesn't come from just one geography. It's very well diversified across the geographies.

Everybody has contributed. And what I'm very proud to say is that certainly Europe, if you take France and Europe, those two geographies make two sets of AXA’s totality growing by 10% in underlying earnings is really a great achievement.

But we also see that Asia, AXA Equitable and also the international markets have significantly contributed to these results. AXA XL as I mentioned in Q4 has been hit by abnormal catastrophe losses and this is really why the contribution of AXA XL to the 2018 numbers remains at minus $200 million.

This is due to the fact that we had $500 million more losses than we had on a normal basis due to Nat Cat’s. So essentially what has happened to make it simple, what you normally experience in one year with XL, we have experienced in one quarter and it was very much an abnormal thing that has happened.

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

We've started firstly to integrate the reinsurance. So Alban de Mailly and Greg Hendrick have worked a lot.

How can we bring AXA and XL together? What are the diversification effects?

Because there is a significant diversification by putting the two together since our main risk used to be European windstorm and now with a large U.S. exposure, there's a much higher densification.

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

Second topic is the commercial approach. And we only had a few months after closing, I remind you, the closing was on September 10.

Nevertheless, in virtually every geography, there was a very strong momentum of on the one hand aligning, who does what; so that we don't run after the same customers or that we'd even poach customers from each other. That the focus is very much on how can we get together to new customers And if you look and again, taking the people that are in the room, Jack de Peretti together with the teams of Greg Hendrick have really achieved to get new customers.

The anger was very much around how can we take customers where we never had a chance because we didn't have the U.S. footprint because we didn't have international exposure to really create new momentum.

They have together created significant business in France. If you take Antimo Perretta, same thing in Europe.

We worked a lot in Germany, in Switzerland to already get new customers and even in the international markets, certainly in Turkey, we've also managed to have a very high commercial momentum, despite the fact that we only had a very short time together, but we have invested a lot in the cultural integration of both companies, making sure that people get to know each other, making sure that people can work together quickly, and I think that starts to payoff. On the synergies, we are well on the journey.

You have seen that we have announced last week to the social partners in Europe, the organizational integration in Europe. This is well on the way.

We want to do this in a responsible way that we have always done it’s an AXA and today I see no reason, why this shouldn't work out in a good space. Lastly, on the asset allocation, we've also started to reallocate the XL assets.

Remember, the XL assets were invested in a very conservative way because of a relatively limited balance sheet, here together with AXA, we've got on the one hand means to invest very differently according to the asset allocation of AXA, but also we have a much better access to alternative assets through AXA IM. When we look a little bit forward to what has happened around the beginning of the year, we can say that the Q4 growth, I mentioned earlier was very good, 10% revenue growth.

Now if you asked yourself, will that be repeated going on? I would say we have to be cautious on this one.

If you take the 10%, there is probably a 5% of recurring in there and the 5% due to some larger contracts. So I would take from this probably, and Greg is nodding that a 5% going forward is a better assumption then 10%.

The renewal rates was also positive. So, on the insurance side, we managed roughly to put price increases through around 4% with a retention ratio of 90%.

On the reinsurance side, it's a little bit lower around 1.5%, but similar retention rates. So the renewal has gone well and Greg and his team are working very hard on making sure that the plan that we have for this year has – will be put in place.

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

All of this leads us to the conclusion that we will reaffirm the targets that we have communicated at the Investor Day in November, which is €1.4 billion of underlying earnings by 2020, assuming that we have a normalized Nat Cat experience of 4% of gross and premiums. We've also been active apart from obviously integrating XL in scaling up a payer to partner.

And I give you two examples out of many examples that we have. One is on the medical teleconsultation.

We've spoken quite a lot about this. We are today certainly in France, the leader in telemedicine.

This is fueled a) by the early investment that we have done. We have two approaches in France.

One is through AXA France, the other one is through care, which is a venture that we have incubated ourselves. But also, the momentum in France, due to the fact that the French state has decided to reimburse teleconsultation as of the 15 of September of last year has really fueled our efforts.

You see here the numbers. We have a massive uptake in those consultations.

Those have very, very high satisfaction ratio. Therefore also the repeat usage and you have more and more physicians coming onto the platform and really wanting to make sure that the availability of medical advice does increase through a better usage of capacities.

On the other hand, we take another example from the other end of the planets. In China, we have concluded cooperation with WeChat and for those of you who are frequently in China, WeChat is the thing, in China where everything is done.

So we have focused ourselves there. On the 140 million travelers that go out of China and to really focus on the needs of travel insurance, which is a massive space for us and this good collaboration, which is extremely digital because everything is basically done and settled in a digital way we will expect a lot from this going forward.

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

On the free cash flow, very similar message, the ambition is to have a cumulative free cash flow of $28 billion to $32 billion by the end of 2020. When you look at where we are in terms of cumulative free cash flow.

We are well on the way with the contribution of the $6.6 billion in 2018. On the adjusted return on equity, we are at 14.4%.

Again, well, in the range of 14% to 16% that we have also increased last November during our Investor Day. And then on the solvency ratio a 193 which is again well situated in the range of 170 to 220, again, range that we have adapted down from 230 to 220 last November.

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

Thanks you, Thomas. Good afternoon.

So let's go through the easy underlying earnings. So underlying earnings are up 6% that $6.2 billion.

I should add that it's that constant FX as usual, but these times, so long as we don't consolidate AXA Equitable Holdings at 100% anymore, but only at 81%, we should say that this 6% includes the negative impact from this drop of 19% in the consolidation of AXA Equitable Holding. On the right hand side, you can notice to across the board.

We have good performance in all our markets and I propose you now to go to these markets, starting first with France. France is a very strong performance plus 10% explained by the higher technical margin and you can see on the top rights that our P&C combined ratio improved by 2 points, 3 points helps as well by 0.8 points.

Second, we had lower expenses across the board I would says that in all the lines of business and we benefited from higher unique link management fees coming for markets being at higher level on average. Under reverse, we have lower investment income, but that's the case in other countries and inline with what we announced before as a whole plus 3% in revenues, plus 12% in health, which has strong plus 5% in protection.

You'll hope now and in Europe we are plus 10% as well, which is again, a very strong performance with higher technical margin in different countries, Switzerland, UK and Ireland, Germany and Spain. You can notice here on the rights that health's combined ratio is down 1.3 points, which is good.

We have a lower corporate tax rate in Switzerland and Belgium in Switzerland it went down from 21% to 20% in the Belgium from 34% to 30% and like in France we have lower investment margin, revenues up 3% an average. Asia now plus 5% with a higher technical margin in Japan life, higher unique link management fees in Hong Kong.

Again, same reason, it's due to the average level of markets which was higher in 2018 and it was in 2017 and higher contribution from China, as a whole or China increased by 43 million. You can see on the right that we have gross revenues increasing by 4% and on the bottom right, you can see that points that we made, we mentioned at the last IR there, but it was while being repeated that 87% of our business of our gross revenues are concentrated in a P&C, Health and Protection i.e.

our priority segments. Let's move to AXA XL.

And as mentioned by Thomas, we suffered from two major Nat Cat in Q4. And that's why on the buckshot on the left, we try to explain the contribution of minus 0.2 for the full-year 2018 of AXA XL.

Let's start first on the left, and with AXA XL with normalized Nat Cat, I remind you that we consolidated one quarter, the last quarter Q4, and with normalized Nat Cat, we should have posted 0.2 billion of underlying earnings. Indeed due to hurricane Michael and California wildfires, we have 500 million in – to be precise, 540 million of Nat Cat in excess of normalized level, which means that we reported Q4 2018 loss of 374 minus €0.4 billion relative to XL.

Then we add €0.1141 million of underlying earnings for the full-year coming from AXA SA, AXA Corporate Solutions and AXA and as a whole we ended up with minus 233 corresponding to the contribution of AXA XL in our 2018 accounts. As explained by Thomas, we have revenues up 10% excluding two large contracts, we would have been at plus 5%.

And as mentioned again, we benefited from plus 4% price increase in 2018 and – in January, we're quite good. We're plus 4% in insurance and plus 1.5% in reinsurance.

Let's move to the United States now. So plus 4% in underlying earnings contribution in 2018 with different elements, let me go through these elements.

First, Unit-Linked and mutual fund fees plus 0.1 billion. Then we have a higher investment margin due to the higher level of assets under management 0.1 billion.

Then we have model and assumption change, which are partially offset by lower tax one-off, it’s plus 0.3 billion, minus 0.2 billion and the tax one-offs where last year in 2017, so it's plus 1 billion. So all these elements correspond to plus 0.3 billion, but this is offset by the what I explained at the beginning, meanings that following the IPO and November sell-downs, we reduced our ownership from 100% to 81% on average because we ended the year at 59%, including the MEB and roughly 52% excluding the MEB.

And as a whole, it's a drag of 0.3 billion, so plus 4% on the net basis. AB plus 6%, which was good, far better in the second half of the year because we achieved a nippy level of 9% in H2.

As far as the AB is concerned, AB revenues plus 5% and AB management fees increased on average by 0.9 basis points due to a better business mix in favor of – with more private clients. Let's move to international now.

Strong performance as well, plus 28%, explained by different countries. Mexico first with higher technical results in P&C and Health.

Turkey, higher investment income. We have been investing at 8% in Turkey.

Russia, strong technical performance and higher volume. AXA Bank Belgium from lower commission and lower expenses, so as a whole plus 28%.

P&C combined ratio is strong. It's quite high at 100.

But keep in mind that in these countries, we are investing at higher rates. We are not in Europe, and you will notice also as home improvement on the hells combined ratio minus 2.1 points.

Renews plus 5% with so strong plus 11 inhales. And again on the right on the bottom right corner, we highlight the fact that 88% in international business he spoke, 88% of our revenues are in P&C, Health and Protection.

Last AXA IM, AXA Investment Managers. So plus 6% in underlying earnings, we slower financial charges with some different mix in term of taxation, which was positive and how your earnings permission JV, which was offset by lower management fees, third-party net inflows plus €3 billion.

And we acquired the Quadrant Real Estate, which is, U.S. alternative asset manager in real estate depth.

It adds $8 billion of AUM to AXA IM. I remind you that where we are presently, even before this acquisition with €73 billion of AUM, so number one Asset Manager in real estate and just after this acquisition will be at €81 billion.

Let's move to the financial performance now. And starting with the group earnings, I commented it already.

So I moved directly to adjusted earnings. As you can see on the third line here, we realized capital gains amounted to €841 million higher than last year, but the market conditions, the equity market condition in Q4 made that we had to suffer and some more impairments in 2018, 440 versus 127 a year before.

Meanings that the net contribution from realized capital gains is 307 instead of 455 one year-ago and we ended up, we suggested earnings at €6.5 billion. Let's go to the net income.

As we announced it's already on the 28 of November, we impaired the goodwill of the U.S. goodwill €3 billion.

So that's the most important part of the €3.1 billion that you can see at the bottom line minus €3.1 billion. We have also some adjustment change in fair value & Forex.

You are used to it. But this year, on top of the freestanding derivatives, which represent to a negative contribution of 137 million.

We have the widening of the corporate spreads. You notice that in the last quarter we had a widening of the corporate spreads, which explains that we have a lot of mutual funds, which are mark-to-market and this was a contribution of minus 326.

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

We see impairment of intangible, but we got it already in the first half. And integration and restructuring costs, you can imagine that we search a huge transformation in our group starting first we seek sale and AXA Equitable Holdings.

We have a higher cost of restructuring and integrations, [indiscernible]. So in the end, net income is at €2.1 billion.

Let's move to this traditional slide on the combined ratio. And our combined ratio starting first with the current year combined ratio, which would move up from 97.6% to 99.1% in blue, you have the cost of Nat Cat.

Last year it was 2.5% this year, 4.2% and this compares with the natural levels which would be around 3% that we mentioned to you, as the last day in November. We have prior year reserve developments at 1.2% versus 2.1% last year, 2.1% is exactly the same number for the first half and we announced you in August here that we should be in the end observe engines that we wouldn't be very different.

So 2.1 it's in line and which means that it ends all your combined ratio goes up for 96.3 to 97. As you can see on the top right, all your combined ratio excluding XL would they have been at 94.9, which would be an improvement of 1.2 points versus full-year 2017.

Last but not least, we increase our guidance on prior year reserve developments from 1 to 2 to 1.5 to 2.5 on the full AXA Group scope. This increase of the guidance relative to prior year reserve release is not some things that we decide it's justified by the facts that like in June, as you can see on the left of P&C reserving ratio is moving up.

P&C reserving ratio I remind you is the technical reserve divided by net earned premium. We are at [2.13] very strong level of 2.13 and the IFRS P&C reserve in excess of the solvency two bells that you will see also is own eligible fund report moves up from $5.7 billion to $7.1 billion.

I propose you now to end over to Alban, who will report on the two next lines relative to the range insurance and Nat Cat.

Thank you, Gérald. Good afternoon.

So the purpose of this slide is to review the losses that we had in 2018 from natural events and natural catastrophes coming both from the legacy AXA scope and the legacy XL scope. And the two main messages from the slide; the first one is 2018 was definitely a heavier in terms of Nat Cat, heavier than average.

But second at the end of the day, the deviation that we incurred was a very consistent with what we should you in November 2018 and that's the graph that you see on the right hand side. So if we go into in detail.

On the left hand side, you have the table with all the natural events last years that we had in 2018. It's a bit of a theoretical exercise because it's both AXA and XL along the whole year whereas we only consolidate XL from Q4.

The numbers that you see in the table, the shaded numbers are the ones that we consolidate and that you will find in our P&L in 2018. So at the top, that's the AXA perimeter and you will see that the amount that you have here for the AXA perimeter is extremely close if not equal to an average amount of natural events losses for year on XL on the AXA side.

On the XL side, you have the detail the quarter and the first three quarters were very much in line, a bit higher than the normal average year for the XL perimeter. But else Thomas and Gérald said it is the fourth quarter, which was highly unusual because we had in one quarter the equivalent of the full-year of cat losses and that's third quarter that we have consolidated in 2018 accounts.

And when you do the some of those natural losses, net of reinsurance, gross of tax, you come to $2.05 billion of losses. That compares that's what we showed you in November to an average year of losses from natural events for the whole AXA plus XL perimeter of 1.5 billion, i.e.

and excess of $500 million, which net of tax is 400 million. And 400 million is a very consistent to, again, the graph we showed you in November for one in 10-year experience, which is exactly what we had in 2018.

So we had that amount of loss and it was in line with what we could expect from such a year. We showed that that graph on the potential deviations because that's exactly how we think about our risk appetite for natural events.

When we think of one in 20 years losses, what is the amount, what is the deviation that we could have with 5% probability? And that's the way that's what drives destructuring the design of our reinsurance program.

We want to achieve that result. So that's what I'm going to show you on the next slide.

That's the way our reinsurance program is designed. So first now for 2019 – the 2019 program.

It covers both AXA and net sales exposure to natural events. It's one common program.

Second, the preliminary comment on certain program is that you want to be covered for any kind of year, a year where you have a very small number of large events or like in 2018 where you have a greater number of small to medium size events. So that's the way we have designed our program.

And it's made of three components. The first one is how we protect our insurance business, AXA and XL.

And you see on that graph that we protect that insurance business through event protection. And we buy – so you see European windstorm, North America hurricane, North America earthquake, and other periods, you see the attachment points and the capacity we buy.

We buy a capacity so that we are protected for those periods up until one in 200-year event. But that's on the insurance side.

We protect our reinsurance business through cat bonds and alternative capital. And the third component is the aggregate.

And that's absolutely key component of our reinsurance structure because that's what helps us achieve the target I showed you on the previous line, which is not to lose more than 500 million net of tax with the 5% probability. So how does it work?

When you look at the shaded areas of the first two components, insurance and reinsurance, we put all those amounts, the shaded i.e. the retentions that we have or potentially also the excess losses that we would have above our protection.

We put all that in the same basket subject to a 50 million deductible per event, insurance and reinsurance. When that basket reaches 1.45 billion and everything above that is reinsured, exceeded to reinsurance subject again to 50 million deductible per new event.

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

Gérald?

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

So we are managing our general account invested assets correspond to 615 billion, mostly invested in govies and corporate bonds. And you can see at the bottom left that the Life & Savings yield on assets stabilized at 3.1% and dropped on P&C side from 3.3% to 3.2%.

Keep in mind as well that we have been investing in different countries where the rates are much higher than in Europe. We have been investing – on the right hand side, we have been investing 70 billion in fixed income, 57% in investment grade credit rating A, 28% in govies, and sovereign average rating AA, and 7% in ABS investment grade, and below investment grade credit is limited to 7%.

As a whole, we have been investing as you can see at the bottom right at 2.5%. Here, we are dealing with investment margin.

So we are quite happy to announce you that our investment margin stabilized, roughly speaking, we moved up on 69 basis points to 70 basis points. I remind you that when we presented our plan in June 2016, we assumed that our investment margin would drop to 55 basis points to 65 basis points.

Same quite good pattern as well on the P&C yield because the P&C yield dropped only by 8 basis points where we are expecting to drop between 10 basis points and 20 basis points. On the left hand side, you can see that our spread above guarantee is still increasing, still improving, beat on the new business on the inforce confirming that.

As I said in the previous meetings, guaranteed rates are no more a problem, no more an issue at all at AXA. Shareholder's equity, shareholder's equity moved down from 69.6 to 62.4.

You can see on the right hand side, what are the main elements explaining it. Keep in mind that that due to the equity drop, there is a change in net unrealized capital gains, OCI minus 3.9 billion.

We have the dividend that was paid €3 billion and the impact of AXA Equitable IPO minus 2.8 plus the net income positive 2.1%. The address today, which is calculated on the average shareholders’ equity is at 14.4% versus 14.5% one year-ago.

Here we have the Solvency II ratio. Solvency II ratio is at 193% well within our one 190% to 200% guidance that we gave you a soon as in March, when we announced each sell transaction and of course, well within the 172 to 220 target range, that gearing 32% in line with our guidance.

And I repeat and I confirmed that the target hunch by 2020 will be below between 25 and 28%. Here traditional slides on Solvency II.

So you have the whole forward with a starting with 25% last year, operating return plus 24 dividend payment minus 12 market impact. And of course the equity markets and minus four points USAP or plus 13, and sub-debt excel acquisition minus 33 points.

We ended up with a Solvency level of 193%. And you can see the sensitivities which are not fundamentally different from, from previously.

It's on a cash flow and we have a strong cash flow generation. It's €6.6 billion instead of €6.3 billion one year ago.

And if I exclude the €2.6 billion, you remember the €2.6 billion correspond to the restructuring of the U.S. debt.

Excluding this, we have 5 billion of remittance, 5 billion divided by 6.6. It's a 76% Lemmy turns ratio within the guidance of 75% to 85%.

Now, I’ll handover to Thomas for the conclusion.

Thank you very much Charlotte. As a conclusion, 2018 with all the changes on transformation has been a very pivotal year.

We started in 2017 to implement a new organization that was more decentral based on the principles of simplicity and empowerment. You can see that this organization is bearing fruit because all the geographies have really increased their operational capabilities have really delivered an excellent operational performance.

And at the same time we have started shifting the portfolio significantly towards technical risks through the significant transformational leap AXA Equitable holding against a XL Group. I’ll remand you again, when we started this journey, right after the financial crisis, AXA was focused 80% on life in savings.

When we have completed the journey on this picture and fully divested from AXA Equitable, we are focused on 80% of technical risk, P&C business, Health and Protection. For 2019, our priorities are very clear, and I repeat them again because it's good to remind ourselves of them after these movements in 2018, our focus is one to continue successfully the integration of AXA XL.

Secondly, to continue the sell down of AXA Equitable Holdings and subsequently certainly to reduce our debt giving to the range indicated to you in November 25% to 28%. At the same time, continuing our successful journey on delivering Ambition 2020, but also making sure that the elements we've presented in November, certainly on Asia, to accelerate in Asia and also to continue to scale up the innovations that we have put in place where we now have decided what we are going to do going forward.

Thank you very much. And we are now moving to the Q&A session.

As Andrew said at the beginning, we give priority to the room, but we will hopefully have sufficient time to also get to all questions on the line. Who would like to start?

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

Thank you very much. Farooq Hanif from Credit Suisse.

Going back to the reinsurance structure, could you tell us what reinstatements you have on each of those cover? So what's the reinstatement policy?

Could you also tell us what the cat bond retention is and how this whole reinsurance departments changed versus what you told us in 2018? Has it been significant?

And the second question area is on cash flow. Does that 6.6 billion basically – does that imply that really you're over 7 billion on a normalized basis on cash?

And therefore, and also you're on the lower end of the remittance ratio. So I'm just wondering whether you expect material improvement in Holdco remittance.

Thanks.

Okay. Good Farooq.

Thank you. So I suggest that Alban de Mailly will answer the three questions around reinsurance or reinstatement, the question of the cat bond potential and what has changed relative to 2018.

And Gérald will answer the question around the cash flow, is 6.6 billion just a basis that is not normalized, are we really at the lower end of the remittance ratio? Alban?

So on the reinstatement, by nature you wouldn't have written statements on the cat bond side on the aggregate either, which you do have reinstatement on the insurance protections that are on the left hand side of the graph. On the cat bond, the outstanding amount is $1.2 billion.

And the change versus 2018, I'd say it's a completely different program in the sense that you had two different companies, XL on one hand, AXA on the other hand and we had united that through the common additional reinsurance layer that we had put in place as you will remember. So comparing the two programs as such doesn't make a lot of sense.

I think what makes sense is the result of the program. And you see on the previous slide that the effect of the program is somewhat similar because we want really one in 20-year to have a loss which is no more than 500 million net of tax, net of insurance.

And that's what matters to us at the end of the day. It's the effect of our reinsurance program.

It depends on the protection.

Your question relative to the cash flow, so starting from 6.6 billion cash flows, if you refer to what I presented at the end of November, I'm sure, and your question is related to this meanings that we said that when we will exit AXA Equitable Holdings, we said that the average remittance of AXA Equitable Holdings was roughly 0.5 billion and that progressively we should benefit from a levels that would be circa 1 billion coming from XL, which means an uplift of 0.5 billion that I said, and I want to be clear. I said that it would be medium term.

So this is a trend and I repeat what I said at that time, meanings that the switch from AXA Equitable Holdings to XL should be positive with maximum of 0.5 billion, but it will take some time. But yes, that's a trend.

And that's also the positive of certain transformation.

We’ll go to Oliver.

Oliver Steel, Deutsche Bank. So first question is coming back on the operating cash, I mean if we assume the €6.6 billion raises going forward, so you're going to break way through the top end of your €28 billion to €32 billion cumulative range, such as want a new comment on that?

Secondly, on cash, the European cash numbers seem to push up quite sharply year-on-year. So I was wondering what was driving that.

And then actually we stick on cash. What is the holding company cash at year-end?

I think you said in November that you expected it to be between €1 billion and €1.5 billion, and actually since I'm here. Can you let us know what the first quarter remittance from Switzerland will be on the back of the Capitol saving that you've put through that?

Thank you, Oliver, for your cash risk questions. Gérald, why don't you take them all for?

Okay. Operating cash, yes, I believe that I already said that we were quite comfortable in the fact that we would be for the whole period for the five years in the high-end of the range.

Yes, that's true. We will be in the high-end of the range.

And that's good. A second, the cash at the holding level, we had at the last €1.8 billion at the end of last year.

And that's also a way you understand that we will have 32% in term of debt, but we had some cash in counterfeit. So – and we don't calculate it was a case in the past, but we don't calculate the gearing ratio net of the cash, okay.

What was your remaining…?

The second question on the European – I guess that's the German effect that you want to comment on. And there was a false question on the Q1 remittance from Switzerland.

Q1 remittance from Switzerland view you knows we should benefit hopefully from a €1 billion coming from Switzerland from Jan 2020. Do you remember, that Jan 2020?

It was €2.5 billion Swiss francs and €2.5 billion, and we said that it will be split between 2019 and 2020. It's still true.

Good. Let's stay there and go to Andy.

Thanks. It's [Anderson Clara from BofA Merrill Lynch], three for me.

Firstly, just the increased Dayton's for reserve releases. But you've not changed your overall combined ratio guidance targets.

Is this really just one pocket into another or is there some extra conservatism and the combined ratio targets? Secondly, just looking at the growth in AXA XL’s reinsurance revenues up 16%, can you tell us about what ladens you've been growing in and how much of that 1.5% reinsurance January renewals from business mix change or is that risk adjusted?

And thirdly just on France, really impressive growth first year. I'm just, do you think that will be possible to continue to grow from that strong base given the [indiscernible] backdrop?

Thanks.

Good. Let's take them one-by-one.

Gérald, There really is reserved for releases and changing the guidance in the combined ratio. Greg will talk about the growth in reinsurance and Jack, you talk about the impressive growth and the nation in 2019?

Okay. Let's start with the combine ratio.

So it's really I would say it's not neutral. It's really because we have excess reserves that we are quite comfortable that we can raise our target reserve release from 1 to 2 to 1.5 to 2.5.

Your question about the combined ratio, we are had target combined ratio, which was in the old perimeter of the group and we said that we would be between 94, 95. So we are below 95 excluding XL.

I believe that it's not so, is the same don't considers that we won't objective is not like we did in the past to still improve, the combiner issue and considers that that a as this will help us improve our combined we have to integrate XL in the future. So that's why we didn't restate it.

But clearly the objective is still to improve our combined ratio.

Greg?

Yes, on the growth for AXA in the fourth quarter reinsurance is a very light quarter in general for us. And the reinsurance assume side.

We are in the fourth quarter of 2018 we experienced growth with a specific contract that we have with a U.S. personal lines and small commercial carrier, which has very, very limited cat risk in it.

So it's a good diversifier for AXA Group both limited cat downside and in lines of business, we're not precedent. That growth rate is not as Thomas alluded to in his remarks, that growth rate is not indicative of a full-year growth rate.

We would be more kind of low single-digits. On the 1.5% rate increase that is rate adjusted across the entire reinsurance segment for the January 1 renewals.

A little bit more in casualty. So say 2%, 3% and a little bit less in short tail property, right around 1%.

I don't have a growth figure I'm going to give you for the one, one for reinsurance, I'll just say that we did look at that rate increase on the reinsurance cat treaty in which side and decided to not deploy quite as much capital capacity as we did coming in on the renewals. And so we've got room to be able to grow if rates as we think they will improve during the course of the year on the U.S.

cat risk.

Thank you, Craig. And we go to [indiscernible].

Thank you. Let's say that excess cost has delivered strong cost this year, but it’s study momentum and we have delivered this cost last year, we deliver this cost this year and Europe will continue.

We are taking advantage of very strong footprint in fast definitely and that give us capacity to move our mobile and to increase of people and to better satisfy. So we are growing activity, we are growing our profitability and we are doing that on all the business line if you look precisely.

So I don’t consider non stop it is very strong and solid growth. And concerning let’s say that higher mostly behind us, you know movement is now fading – took very good decision in December to quite the situation and let’s say the or whatever.

And we are seeing is gaining and since are going well. And they are very, very strong or very, very little.

Let’s say maybe €10 million on that all I need to be behind us. So – I don’t consider as an impact on our business.

Just to correct it's not 1.8 but 1.7, I want to be precise. I'm sorry for that.

Very good. Let’s stay over there, since the - Johnny Vo.

Johnny Vo of Goldman Sachs. Just the first question, I guess just in XL and the guidance of the 1.5 to 2.5 PYD.

I noticed that XL had a reserve release in the fourth quarter. I think that that guidance does not include any reserve release from XL.

So what happened, why was there a reserve release there in the first place? Second question is just in regards to the payout ratio.

So the payout ratio is currently 52%, I guess as you start switching or selling down AXA Equitable and switching to XL should we see that payout when you move through the payout range and how can we see that and get comfortable with that? And the third question is just the manifestation of the diversification benefit that you're going to get?

Is this a diversification benefit out of consolidated solvency level or should we see more fungible capital moving from entity to the Holdco and Lava capital requirements in the entities? Thanks.

Very good. Thanks Johnny.

So I suggest Gérald, you do the first question. I'll take the second one and Alban, you take the third one.

Okay. So your question about the prior reserve release.

We mentioned about XL that you could not expect in the short-term, medium, short to medium-term any prior year release. So when you are referring to Johnny concern AXA Corporate Solutions.

On top of my head we have 60 million, but it concern AXA Corporate Solutions, which is a mature company so it's quite logical. So as far as the future is concerned, I mentioned 1.5 to 2.5, but don't expect anything from AXA.

Very good. The second question on the payout ratio, I was waiting for this one.

You have seen that on the November Investor Day, we have moved our range up to 50% to 60%. And we have always seen the payout ratio as resulting variable of the dividend that should be corresponding to the underlying and operating earnings.

And as you see, we have increased the operating performance by 6% and also decided to increase the dividend by 6%. The payout ratio being resulting variables.

So we are not looking at the payout ratio to be increasing over time in a systematic pattern, but rather to be a resulting variable of the dividend growth that should correspond to the growth in the underlying performance. So to give you an example, if we have a splendid year of 2019, we could as well imagine to go back to 50 again.

So the fluctuation we will use, again, dividend should correspond to underlying earnings and performance development. Alban?

And on the diversification and fungibility, the diversification benefit is mostly at group level, the calculation of the solvency at that level. But now moving more from a life oriented group to more P&C oriented group, capital is naturally more fungible in the P&C business than in life business.

But you wouldn't see that in the way for instance, we calculate solvency at AXA level because we'd still be a Bermuda-based except the fact that we will capitalize AXA, we capitalize AXA France and others and that makes as such our capital more fungible within the group.

Thank you. Let’s move over to Jon.

Jon Hocking from Morgan Stanley. I've got three questions please, on AXA.

First one, just looking at the aggregation of risks, which seems to be in the problem in 2018. Just on the slide where you talk about the sort of €50 million deductible, is it right to think if you had 10 events with the €50 million deductible, you'd hit your sort of one in 10, one in 20 earnings guidance.

So how should we think about that aggregation of risks? And if you sort of back test this, I wonder what circumstances do you hit the sort of the one in 20 earnings guidance?

So first question. And then the second question, just looking at the, again on the sort of A29 where you're showing the sort of the tails to earnings, I just wonder what this looks like, if you go further into the tails.

So if you look at sort of one in 100, one in 200, are there any scenarios, hey, when that Cat actually becomes a capital issue either for AXA or for group potentially. And then the third question, again on AXA, the rating upgrade, does that actually have any business impact for AXA?

Have any lines of business that you can get into that you couldn't previously as a standalone entity? Thank you.

So I suggest Alban you take the first two questions and Greg you do the third one on the rating upgrade?

Yes. On the slide, the 750, you need to keep in mind that on average the normal year is 1.5 billion, in that 1.5 billion would be made of the natural lawsuits.

So you can have two lessors at 750 million and nevertheless still be within the normal year that we should have at 1.5 billion. But we would be protected above that level through the reinsurance protection that we buy and through the aggregate.

Am I answering your question?

Yes.

So if I have small events, that's what I described with the aggregate. And obviously if you have thousands of small events, it's no longer a one in 20-year, but if you have smaller events then that would go to the aggregates subject to the 50 million deductible.

So that's why I said we are protected either for a large string of small events or small number of large events and anything in between. Okay.

Then your second question was on the one in 200. You may remember that in the end of November, at the IR Day, we showed that one in 200 Cat year.

So year not event, but it’s an eight point solvency hit. So it's not a capital issue.

It's nothing like the same on financial crisis.

Greg on the writing one.

Yes. I think if I just – I'll just add one thought.

Just there are other protections that apply just to AXA XL on a proportional basis. So we buy a net property quarter share, we buy some protections on the Cat treaty reinsurance book as well that are in addition to what all bon is outlined there?

So there's that protection as well. On the rate upgrade, those specific business that benefits the most is the reinsurance assumed, particularly outside the U.S.

where essence inside the U.S. and best as the more a normal rating you see a that's followed by the buyers of reinsurance, whereas outside it's almost exclusively SMP.

And there we do get opportunities and have had now already looks at business on the casualty assume side internationally that we didn't see before. It to give you any kind of thought about – it's in the kind of tens not even 10, single-digit to low tens of millions of dollars of premium, so not a big pickup.

It does help you though when you're out marketing, it's a softer marketing pick up that you're able to say. Being part of such a great group were AA- and be able to wear that proudly.

Okay. Thank you very much.

And I had three questions. The first one is on this extra prior year development side, worked out as €300 million and I'm just wondering, where is the €300 million?

Is it extra earnings, the 3% to 7% range because we didn't have it before, and also on that extra €300 million, 1.5%, 2%, but on huge volume opinions. What I noticed is that the excess reserves have gone from €5.7 billion to €7.1 billion to €7.4 billion and France and Europe each earned about €1.5 billion.

So if they come from that, it means the underlying earnings wouldn't have been €3 billion. They would have been €4.5 billion.

I just wondered, how can you have earned an extra €1.5 billion? Where was it's?

Tell us, that we’d love it. And then the other point is on Slide 30, so all the numbers except with the one we're interested in, which is AXA XL.

It's all gray and I'm kind of thing, why did you show it? And the other thing is there was an article in Artemis I think on Thursday, saying that, I think it was quite a new [indiscernible] thatyou were buying more and I was wondering whether that a reinsurance buying would actually increase next renewal or the next round?

Thank you very much.

Thanks, Michael. I suggest, Gérald you take the first three questions, around the €300 million PYD.

Is it extra earnings, yes or no? The second question, where does the excess reserves come from?

And then also on the A30, the real numbers you didn't see. And Greg, you are taking the last one on the increased buying a reinsurance?

So I would like just to start by one of your questions, which is what about is 7.1 versus a 5.7. So let's be clear.

The seventh and I believe it will answer to the rest of your questions. It's a €7.1 billion is not in the account yet.

The €7.1 billion ease part of your Solvency I. I remind you that the Solvency II ratio is calculated based on the best estimate assumption of your liabilities, more or less to more in a NIFA has 17 environment.

It might not be so different, but it's not the case today. So that means that that we have been always go shows and the way we reserve and we have a cautious way of resolving and on a regular basis we are here assessing our level of reserves.

So it's our direct interest to have so height level and the highest number because it helps our Solvency. We did it and I would say is as a P&C reserving ratio is an early indicator of the situation.

So that's why we moved control 9 to 13, and beyond this it will flow. It will flow skuzzy earning.

It will flow skuzzy earnings, going forward and your other question, yes, it will let us. It was previous questions.

That means that it will help us drop the combined ratio. It will help us improve our underlying earnings.

And next the cash flows. Is it clear?

So that's exactly what it is. Last point you noticed as well that we are 2.1 points of prior reserve release.

When you compare with our peers, we are more in the low end of our peers.

Let's got to Slide 30. And before you do other reinsurance, I think Gérald wanted to quickly address the third question on the AXA XL numbers that you were missing A30.

But what – I'm sorry, but I don't understand exactly your question. Yeah.

[Question inaudible]

Let me see if I can, so Alban said it best earlier. There isn't an AXA Group.

There's an old legacy AXA Group cover and a legacy XL covering more. There's an AXA Group cover that protects.

So that insurance protection applies to all of AXA Group, which includes AXA XL. Clearly in reinsurance we only write in AXA XL.

So those protections are specific to the reinsurance part of AXA XL. And then the group aggregate protects again all of AXA Group in XL.

[Question inaudible]

There's not, yes, the bit in the middle is made up of many components. There's a cap on component which is about [$1.2 billion] of euros and force at very retention levels based on industry loss.

So it's not up, it's not a net loss cover. We then have, I just mentioned it earlier, we then have a number of protections that are mostly proportional in nature around the property quarter show that protects all of AXA XLs property writings, some quarter share protections of varying kinds and varying geographic coverages.

Hence why you don't have a lot of numbers there because it is a – we think it's a very smart and intelligent way to buy it. But it doesn't fit neatly, unfortunately on a piece of paper.

The very most important part to takeaway from it is that regardless of what's actually in that box, in the middle, the column on the right sweeps up everything that's leftover. So regardless of what the exact details are in that middle, that right side picks up everything that comes out after all the other protections.

[Question inaudible]

Yes. So if you try to take it from surely a legacy XL lens, yes, we brought more both as a participation of the AXA Group cover now, Group covers, sorry, but also for us, the strategy on the catastrophe assumed book going forward has been an end going forward will be, unless we can generate a sufficient return to retain the same level net, we're going to continue to build out our alternative capital business with new ocean.

We're going to continue to access third party alternative capital and continue to reduce that net participation until such time as we see the returns meet our threshold. So in the aggregate, we bought a little bit more, but it really is important to shift this perspective to the AXA Group perspective.

Yes. Just on the – should I beg your pardon?

I'm sorry. I shouldn't be so.

But the, it has a nice opportunity and I thank you for that. The figure is $1 billion.

That's the figure I saw of the assets or whatever they have. Is this going to help us here?

Yes, there you go, Thomas. Got it.

Yes. And I think Greg you might also want to say that this is let's say in alternative capital XL has been one of the very first companies being active in there.

We have a very clear intention to increase that not only for XL, but for the overall AXA Group and we are currently working on a strategy of how to do it because we've got all the pieces. We've got the peace within XL.

We've got the group risk management framework and we've got also on the AXA investment management side the distribution piece. So this is clearly one of the priority of the XL integration that we haven't talked about a lot.

But there is another upside potential because the approach of originate to distribute is certainly something where we want to focus more. You don't only need to originate and keep everything, you need to smartly decide what you keep, what you reinsure and what you see it to the alternative capital market.

Thanks. Colm Kelly, UBS.

Going back to the operating free cash flow. I suppose there's been some questions on the upside to that.

I'm going to think about it in a slightly different way. If I take the 6.6 billion number, there is a number of positive one offs in that particularly in the UK P&C side.

If I take that out, the cash flow looks flat or slightly down year on year. I think this time last year it was flat year on year.

And even if I normalize going forward for the lack of the U.S. business and adding in the AXA XL full contribution, it won't necessarily get me a bigger number.

So can you provide more detail on the specific drivers of growth in the operating free cash flow because ultimately that will dictate the growth trajectory of this sustainable dividend from the business? That's the first question.

Second question is on capital and on the diversification. So we know there's 2 billion capital synergy expected and we fully understand the diversification from the U.S.

Nat Cat versus EU windstorm aspect, but there's also the last diversification from a lower amount of market risk on the balance sheet against cat risk or insurance risk for longevity and things like that. So can you break down the 2 billion synergy number into that assumed between U.S.

Nat Cat, EU windstorm and also that assumed to be lost through lower market risk on the balance sheet. And then just lastly there was a question at the Investor Day around the return on economic capital for the XL business.

I think there wasn't full line of sight on what that economic capital looked like at that point, perhaps could you update on that number? And now that there's a lot more visibility on that hopefully.

Thank you.

Thank you, Colm. I suggest Gérald you answer the first question on the cash flow and the last question return on economic capital.

And Alban if you would answer the question on capital and diversification and the breakdown of Nat Cat additional diversification versus loss diversification for market risk. Gérald?

On the operational free cash flow, I could say that in P&C business is relatively simple, so it's a direct function of the profitability and it means that so long goes, we have – we are still planning to improve our profit in term of P&C business. It means that naturally we can expect to have cash flows going up, so that's it.

And it's much more complex with the life business, and that's what we presented last time in the IR Day. So really I don't believe that you can conclude that we would be at a kind of gap in term of cash flow.

To follow-up on that. Absolutely P&C growths expect to come through, but the life cash flow is not growing and that's in the context of increasing push toward Unit-Linked to health and protection products, which is capitalized on the more capital intensive book roaming off.

So that's something that I would be expecting some growth and cash flow to come through. Appreciate the summit impacts from the U.S.

this year. So my forward-looking projection is one-off reducing life cash flow or increasing P&C.

I suppose it's just more clarity on should I see the life cash flow increasing from here in addition to the P&C cash flow increasing because that's not what we've seen in the last two years.

It will naturally decrease when we will decrease our share in AXA Equitable Holdings. But who knows that the cash flows from AXA Equitable Holdings has not been so huge these days.

So clearly you can consider it. We are in a transition phase, but clearly you can consider it that it will be a direct function of the future takes the example of XL, XL this year didn't produce any kind of cash flow and we can hope that of course there will be the fluctuation, we have been discussing today, but we'll be as there will be natural cash flows.

And you remember that if I might, I took the example in November of 1 billion coming from XL, which is quite consistent with 1.4 billion targets that we see for 2020. So I'm quite confident on that side.

To give you a simple rule of thumb, so $1 of life earnings transfers roughly into $0.40 to $0.50 of cash. The same $1 of P&C earnings, transforms into 70%, 80% or sometimes even 90% cash.

And so when you replace 20% of the earnings that AXA XL represented, it was 20% of the earnings that AXA XL represent, you've got this cash richness increase on 20% of your earnings, at least. Alban?

On diversification, it’s a complex question you’re asking. So I would say, first diversification on the P&C side is not only about cat, it’s all the business that diversifies because the reserve risk that you would have in XL or in France diversifies with the same one that you would have in Germany and Switzerland.

So it's old P&C diversifies. Seconds, that's the opposite on financial risks.

When you add €1 of equities, €1 of credit, there is little diversification because we all know that when a financial crisis of [indiscernible] comes, all asset classes around the world are hit, so there's India financial risk, little diversification. And then the third piece is diversification between financial risks and PMC risks.

And there again I don't think we would be even with the sale of an equitable and the acquisition of Excel at the optimal point. And we could still write more P&C risk and nevertheless have more diversification.

It's a feeling more than the number that’s implied it, I'm pretty sure of it because precisely P&C diversifies better and more than financial risks.

Can you break it down in terms of €2 billion…?

The €2 billion, the fact that with integration of XL and the internal model, we gained five to 10 pounds of Solvency as we showed the moment of the acquisition comes more from the whole diversification benefit we would get. And that one comes mainly from the P&C side more than the financial side.

Then I think there was the last question from Colm on the return on economic capital of the XL business, any updates from the Investor Day? Yes or no.

No specific, I believe that you will see in our eligible on fund reports that we mentioned that the XL Group acquisition means for the numerators that we will get in term of available financial resources. We will have €10.5 billion.

Then for the time being we don't have more precise figures, but it gives you a good idea. When you compare this figure to the expected earnings at the end of 2020 gives you, I would say a good idea.

But we will come back to you. We will have the opportunity in the future to see more precisely.

It goes back to the previous question precisely. What will be the marginal increase of the short-term economy capital coming from AXA XL?

But anyway, diversification should be good, but that's not exactly precise answer, but it should give you good idea?

Next to Ralph, I can't see.

Thank you. Peter Eliot from Kepler Cheuvreux.

If I could just come back on Johnny's question, first of all, that Sean, that the payout ratio, because Thomas, you gave in your answer, you linked it to the underlying earnings power of the group. I mean, I guess the whole point of increasing the power ratio at the Investor Day was communicate the additional cash generating ability of the group and you've shown very good cash number.

So I was surprised that you didn't include that in your answer. And over time I would hope that the dividend could go up a bit more than underlying earnings, but perhaps if you could just clarify that point and very helpful.

Secondly, I mean there's very strong set of results, but if I had to pick one slightly weak area, I guess the value of new business looked a little bit light, especially if I look at – it was sort of I think plus 4% to the nine-month stage and minus 1% life for life at the full-year. So there was a fairly big drop in Q4 from a number of areas, but Asia high potentials stood out as having nothing at all in Italy.

Very little, and I'm just wondering if you could comment on that and perhaps also where you see the margin going in the future? Obviously the drop was due to the business mix, but, but perhaps some comments around where we see that going to be very helpful.

And then finally, if I could just add one on Nat Cat, I'm probably being very - but what was very helpful for me would be to understand, if you look at the 2018 result, what would that have been if you had taken no action at all? So if the, the program was as it was 12 months ago, was there actually, did we get any benefits in 2018?

Is it just there to protect for even worse years in the future? Thank you.

Thank you, Peter. I will suggest it, I'll answer the first two questions and to Alban we'll go to the third one.

So on the payout ratio, you absolutely right and we are increasing over time as Gérald set and over time I would say more in the medium-term, the cash richness of our earnings. I think I was more saying until the end of the plan 2020, I would not expect a massive, additional cash richness to come from the earnings.

And therefore the driver is very much the underlying performance. You absolutely right?

When we have gone through the transformation when XL is really at this 1.4 billion of earnings that we are targeting for 2020. They are clearly we will consider the cash component in the dividend and we obviously always as much as you do are aligned on the fact that we wanted to have an attractive dividend for our shareholders.

On the second one, which is the question around the value of new business. I agree with the numbers you stated.

When you look at our new business margin it's and also when you look at it relative to competitors, you will have noticed that it is very high. It's probably one of the highest in the industry.

And so in some geographies, and you mentioned to Asia in particular, we have seen that let's take Hong Kong as an example because one of the drivers is the Hong Kong business. You will see that the margin has been extremely high and that we somehow we're pricing ourselves out of the market and therefore we've taken action in launching a new product where we find a better balance between growth and profitability.

And if you look at the Hong Kong numbers and how we have moved there, we've clearly seen an increase in the overall volume, but we had to give a little bit on the margin to be competitive. And you see the same in many other places.

I see Jack here, he's been growing heavily on the employee benefits in France, which is also an area that has structurally lower new business margin. Then for example, the affluent business on the life side.

So it's very much a business mixed question. But overall when you look at the margin and what we have produced in terms of new business value out of that, I'm extremely happy about the fact where we are also relative to our competitors.

The third question, who is filed Alban.

Okay. So first I should say that we shouldn't focus on any given year in particular what methods it's the distribution and the fact that the reinsurance program is robust, whatever the profile of the year, that's a very, very important point.

Now looking at 2018, I would say two things. First, the, the gross loss because when I showed earlier it was a net loss.

The gross loss was 3 billion. Do you had 1 billion of lawsuits that were seated to external be insurance.

And a part of that was I would say the usual program that we would have any way AXA XL thought of that was taken by additional protections that XL had put in place following the 2017 experience. And that's notably a 15% coalition if I'm correctly on the property program.

Conversely, we add, we had also put in place that common reinsurance once we did the transaction, to protect us against extreme years more than one in 20 and that one was not triggered in 2018.

Nick.

Nick Holmes, Societe. Three quick questions.

The first is on specialty insurance. Looking at XL revenue growth, it was just I suppose a touch disappointing at 3%.

The specialty wondered if you could give us a little bit more color on especially the outlook for specialty. Second, quickly on AXA Equitable, nobody has asked yet, for an update on your disposal plans.

You probably can't say very much, but anything... Well, perhaps a, let me rephrase the question.

Is it an entirely opportunistic or do you have a timeframe in which you are theoretically kind of working? And the third question is also, nobody's asked about Asia and Tianping your last acquisition, if you can call it that wondered, if you could just give us an update.

Obviously it's a very exciting potential that Tianping has in China. Thank you.

Yes. So I suggest that Greg you treat the first question on the specialty and the 3% growth, what is the outlook and I’d deal with the other two on equitable and China AXA Tianping.

Sure. On specialty insurance, the problem with all these aggregate numbers is the real story gets lost sometimes.

So in specialty we have two big blocks of business, and I talked about this at our Investor Day. One was the industry classes, marine aviation, energy, those experience loss activity during the year, they're in states of correction.

And there we actually shrunk the book during the quarter about 4% in those classes. We grew what we call the niche.

So the political risk, the crisis management of Fine Art, we actually grew that 21%. Now granted off a smaller base, it's a growing business for us at AXA XL.

So underneath that, that's what's really driving this specialty, not being as robust. I don't think there's any reason to expect that would change.

We have work to do on some of those lines of business as an industry at AXA XL on those industry lines, but we're going to continue to see growth on the niche side.

Nick on AXA Equitable and the disposal trends, our position remains exactly the same. We are now I’d say holding roughly around 50%.

So we've done the first part of the journey, which was necessary also certainly to finance the AXA transaction. Now we are in a phase where we are indeed opportunistic and the opportunity is around three things.

One is the question, what is the market sentiment in the U.S.? You've seen that the equitable sharp price has been ranging, let's say between $24 and $16.

When I looked earlier, it was at $19.53, so close to the $20 that we IPO it at May 10 last year. So we are looking at this market sentiment.

Second one is the question also liquidity of the stock, and thirdly it’s clearly also the question, how much is the improvement plan that the management has put forward as the IPO story? How much is that already reflected in the price?

You've seen in the numbers that team in the U.S. under the leadership of Mark Pearson has achieved a very good balance between growth and profitability.

And they have got very clear plans of how to increase the return on equity in the U.S. and so we will decide as we go along.

Again, there is no pressure to do it. We want to be opportunistic.

But on the other hand, we also want to continue the transformation and making sure that we get to those 80% of technical risks that we said earlier. So it really there to focus ourselves and then continuing to build on the strategy.

So yes, we'll have a look at it. There are certain windows coming up and every window we'll have a look are these conditions met or not.

On the AXA Tianping that we saw – so we have announced in November that we are going to buy the remaining 50% of AXA Tianping to be the full owner of AXA Tianping. This will make us the largest foreign insurer on the P&C side in China.

The strategic outlook is very clear to say, we want to grow in the mortar business, but in a very selected way. The main strategic opportunity is around the health business where we do see that there is a massive opportunity.

Just to give you a very illustrative example, the average Chinese has to queue up for four hours to get a 10 minute consultation at doctor in a public hospital. I don't know who has the patience of doing that for a long time.

There's a large private health sector developing and we want to take this opportunity. In this deal, obviously we are now in the face of sorting everything out and there's still a bit of time until the closing.

However, from the first day we had the opportunity to take over the full management of the company. So Xavier Veyry, who is the CEO of China is now fully responsible, is in charge and he has already making the necessary changes that will lead us to implement successfully as a strategy as you have probably also rented the Chinese regulator was for a long time without a big chief.

The big chief has now been named, who is the ex-chairman of ICBC. So we hope that on the regulatory side, we would also get to know the necessary support to close a transaction.

But there's at this point, no worry that things will not go according to the plan that we have announced on November 28. Andrew?

Good afternoon, Its Andrew Crean, Autonomous. I wanted to take you back the beginning of ambition 2020, you said a there'll be a hockey stick effect.

The growth would start to accelerate in the back years, your 60% through it and you're already at 5%. I want to get some comments around that.

I mean you've got, could you tell us what the impact of lower tax rates in the four year in France, Belgium and Switzerland would be on the EPS? Could you say whether you think with you can maintain the spread guidance at 70 basis points so that we don't need to forecast 55 and 65 and whether that will be a, well that obviously would be a positive.

And thirdly, I think the hockey stick was largely about the fact that the cost savings would come through more strongly. As years passed, you haven't mentioned costs at all.

Is that still true? And you can you give us some numbers around them?

Very good, sorry, I suggest our goal on the third piece of a hockey stick and chirality’s we'll talk about the lower tax rate, certainly in Europe and the spread guidance. I guess the hockey stick effect, was due to my conservative germination nature, because it is true that we have plant, the ambition 2020 in a very careful way.

We certainly accelerated certain things and coming back to the cost savings, you will remember that the new organizational model that we put in place has also come with a significant cost savings, which is well under way. If you look today, where we are on the cost savings journey, the total target was €2.1 billion and we are well on the way.

I think we are at €1.5 billion roughly of cost savings. So we are well on this journey and there's no worry that we should not get their, tax rate and spread tax.

Tax rate, in France that tax rate decline in something, which is green commitment, meanings that it's – we expect it that the tax rate in France would decline, but we are still at 34%. And with the gift is that they've been polished to link to the yellow jackets.

It means that it will take some time for rights in force to decline. To be clear, it took place in countries like Belgium, like Switzerland.

So we can consider just one to answer your question, it's a one of a few points, maybe two points, three points, is that we'd be supplied of in term of few EPS that we'd be spite of a certain period of time. But again, France is a significant part of our business and for the time being, uh, keeping minds that what we publish €1.6 billions that we published in France is still a calculated with a tax rate of 34%.

So it's upside for the future, but I cannot tell you when it would come, and about the 70 basis points.

I believe that, I cannot tell you that it will be absolutely stable at 70 basis points, but I have a good, I'm quite confident that we won't go to the 55, 65 that we announced before and just for one reason because we flexibility and more flexibility, when time goes because we don't have any, any, any kind of commitment. If you take the example of froze, we have been paying a 1.9% and eats, eats quite competitive compared to our peers.

So, it's maybe if I would say we could expect maybe to be between 65 and 70, but I have to check. But that's, that's maybe some things that could that could be reasonable.

Andrew, just on the cost savings after correct myself slightly. It's not €1.5 billion, it’s $1.21 billion, €3 billion, but not too far away from it.

So 60% completion and this obviously does include that we still have two years to go for it. So the conclusion remains the same.

I have no reason today to believe that we are not going to get to those 2.1 billion.

[Question Inaudible]

The 1.3, so the 1.3 is a combination of run rate savings, but also cost avoidance. So if I have today €1 of cost and with inflation of salaries and so on, I would have gone to 1.3 but due to savings and ended up at 1, this is also a 0.3 savings.

So it's a mix of both. But all the geographies are contributing to it.

And as we showed you I think two years ago, certainly also the large change in the organization to slim down the center to slim down the regions has contributed to that as well. Other questions in the room?

Michael again,

I just had one. I suppose it's the international business, which is very nice.

But you remember a year and a half ago, I have a memory of hoping that's some of these smaller countries would be sold and we'd have lots of extra cash. And then maybe you can raise your dividend as well.

But can you, can you talk a little bit about what's, what's the, where we are now on this process. Thank you.

So what we said two years ago is that these international countries are all countries that are outside of the 10 large countries and the six countries we want to focus on going forward. This was already at the time when the U.S.

was still part of our universe. Tomorrow, Europe place the U.S.

with XL, you are still at 10 plus 6. So those 23 countries where I remember correctly, or 26, we set we want to manage in a sort of private equity manner.

So we gave them a very clear target in terms of what is the cost available for them to manage this portfolio, lack in a private equity setting. And they have a very well adjusted to it.

You have seen that they have a very, very nice a increase of the earnings, which means that most of these markets are very much now in line of getting a maximum grows and maximum profitability out. And you've also seen that over time we have started to reduce our footprint.

And you've seen that we started in Azerbaijan. You've seen that we have worked on Ukraine, AXA XL Europe was also part of it.

And so we are always looking at this portfolio, where do we have the critical size? Where do we have a significant market share?

Where do we also have the prospects of being in a good position? And this makes up the decision what we are going to do with it.

But again, if a portfolio like this has such a great performance and it is also nice to have it as a contributor. Any more questions in the room.

We spent today a lot of time asking and hearing about reinsurance and Nat Cat’s and this plus or minus and all this kind of stuff, which is great, but it's not your business. It's not your business.

Your business is to deliver every year. That lumpy cash learning.

If I were you now and I've been following talents and Zurich and all sorts of companies which have had that? What they sit very simply did is they upped the expected loss number and then there were no negative variances because you only have positives then.

So at what stage would you say, well, let's stop spending half now and all this stuff and just up this number and you've got the cash to go and do it. You've got this 300 million from the PYD.

If I were you be such a simple decision, the share price would go up because then the perceived volatility is would be done anyway it’s a wish.

You've certainly seen that we have gone a slight way. I mean the increase in of the PYD guidance is a very clear sign that we want to go.

I mean we have increased the guidance to 1.5% to 2.5%. We are slight very well positioned in the middle was 2.1%, Gérald mentioned it earlier, we are still quite far away from our competitors and this has not been done at the expense of reducing the overall reserving level.

It has been done with increasing the overall reserving leverage. So we have always been very prudent on this one and we want to stay prudent because again, reducing reserves just to optimize profit and cash flow streams at the end is a very short-term game.

So we will continue this, but I think going back to, because I've been asking this question [indiscernible] a lot. I think if there is one hidden very interesting message is exactly that.

If you calculate what is the effect of a higher PYD guidance also going forward. There's certainly has got a profitability impact.

And if you then take the slide side remark of Gérald on I have a 17 which might have the implication that the reserving leverage that also a change and flow through to earnings quicker than we've expected. Then you've got, very good approaches to your answers.

So are there any questions online? Lewis?

Thank you. Just to finish off, we've got three questions from Thomas Fossard at HSBC.

First question, what is the management view of the AXA XL full-year pro forma normalized combined ratio in 2018. We would provide a reasonable base for comparison with a 95% combined ratio target expected by 2020?

Second question taking the pricing increase achieved in 2018 and the rate expectations for 2019 the cumulative price increase would be running at 8% at AXA XL. How does this compare with the pricing assumptions embedded in the 95% AXA XL combined ratio guidance?

Third question, could you please quantify the cost synergies that you have managed to extract following the placement of the integrated reinsurance program? How does this compare to the circuit at US$100 million saving target?

Thank you very much.

So I suggest Gérald you take the first question, which was very much around the normalized combined ratio and comparison. 2018, 2017.

Greg, if you could take the second one on the achieved price increases and what does it mean for the combined ratio target of 95. And Alban if you could take the one on the cost synergies due to the integration of the tool reinsurance programs.

That means the XL, the AXA XL combined ratio should be in the 90s in 2018. I cannot be more precise.

We have our contribution in Q4, but as far a total earnings concerned, it won't be integrated. It won't be part of our earnings.

So I would say high 90s.

Greg.

Sure. The prices increase would be one component of the movement that we need to make to get to the 95% combined ratio that we outlined for 2020.

I would say it's probably about two thirds of the rate increase we need which may come in the form of rate increase but also can comment in many other ways, which is rebalancing the port, the mix of the business. I talked a little bit in the answer that is specialty question lower on some lines like marine aviation where we have not been achieving a strong combined ratios more where we are doing well.

It could be an underwriting what we call underwriting actions. So specifically targeting very narrowed defined actions within each book of business to improve the results.

But that's kind of the trajectory we're on to get to that return sorry, the combined ratio in 2020. So it's a part of it, but it's not all of it.

Alban.

And on the 100 million synergies on reinsurance to we always managed to get 200 million it was slightly below at the end of the day. But on these slightly below.

Lewis, any other questions online? Last call for questions in the room.

Very good. Then I would like to thank you for your attention and thank you certainly for your questions and to wish you a great rest of the afternoon.

Thank you.