Q1 2021 AXA SA Corporate Sales Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Sinclair - BofA Merrill Lynch - Analyst : Thanks and morning, everyone. Three for me, as usual, if that's okay. Firstly, just on XL, just really wondered if you could give us some more color on the drivers of out-performance in the non-cat areas of XL in Q1. And any expectation for recurrence of those positives in coming quarters? Secondly was just on if you could give us an update on the EUR1.5 billion COVID loss figure, how that evolved in Q1 in terms of further losses and frequency benefits. And thirdly was actually just looking at the French life APE figures. Pretty huge jump in French health APE, up about 50%. At the same time, French protection APE was down about a quarter year on year. Just wondered if you could give us some color on those big moves. Thanks.

Question: Andrew Sinclair - BofA Merrill Lynch - Analyst : Another, sorry, on French protection. APE was down quite a lot year on year.

Question: Andrew Sinclair - BofA Merrill Lynch - Analyst : Understood. Much appreciated. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call

Question: Jon Hocking - Morgan Stanley - Analyst : Morning, everyone. I have just got two questions, please. Firstly, are you now finished with the reduction in exposure at XL? Should we start seeing the volume sort of track more in line with rate going forward? That's the first question. And the second, in terms of the individual life performance in France, can you talk a little bit about how the agents have adapted to COVID and what we should see as restrictions for continued lift through the summer? Are the agents going to go back to your workings? It seems they have been pretty productive in the current situation. Thank you.

Question: Peter Eliot - Kepler Cheuvreux - Analyst : Thank you very much. Just a few points of clarification, please, if I may. The first one, the claims experience at AXA XL you say a higher-than-usual nat cat charge. I assume you mean higher than 6% for the new cat budget. Is that the right interpretation? The second one, just on the earnings guidance. Very helpful that you have reaffirmed that. I just wondered if you could sort of remind us when you think of that, how you think of the risks for meeting that guidance. I mean, I guess, when you are thinking of it, you are assuming that nat cats don't exceed 6% and there is no adverse development on the back book. But anything you could sort of say on the confidence and the risks on that would be very helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call And then finally, AXA Bank Belgian Belgium. I know you are expecting it to close this quarter. Just wondering sort of the degree of confidence there. Because I guess obviously, originally, it was supposed to close 12 months or expected to close 12 months ago and it has been a little bit delayed. But just confirmation that you are fairly confident on it closing this quarter would be great. Thanks very much.

Question: Peter Eliot - Kepler Cheuvreux - Analyst : Great, that's very helpful. Thank you very much indeed.

Question: Michael Huttner - Berenberg - Analyst : Good morning and thank you. I have three questions. On the Solvency II, you provided some granularity. I just wanted to check whether I had the numbers right. Essentially, I'm trying to find out or the question is what is the contribution of the operating return? I had it by difference as being 4%, which would imply [16%] for the year, which is a great number. I just wondered if you could confirm and maybe give some color here. And second, you said just now COVID was mainly reserved. And I just wondered if you could update us how much of the EUR1.5 billion figure is still reserved and how much is paid relative to year end? And then two more, if I may, but you kind of implied that motor was a difficult business at the moment with volumes and pricing down. I just wondered if you could give some color. And also AXA AM, if you could give a split of the assets with the high-value stuff, the alternative. Thank you.

Question: Dominic O'Mahony - Exane BNP Paribas - Analyst : Hello. Thanks for taking my questions. Three, if that is all right. Just a couple on AXA XL to start. I understand that you recently consolidated your AXA XL Reinsurance businesses together in Bermuda. Can you just highlight the rationale for this and any potential financial benefits that might come from it? And then just a clarification on the top line. I understand there's a difference between the reported and the adjusted growth because of the rebasing of the Q1 2020. I understand that's likely driven by the reduction in economic activity because of COVID, which then plays through into premiums and that was sort of re-based in 2020. Would you expect that essentially to bounce back once we are back to normal and planes start flying and so on? Or actually would you suggest that this is sort of the new normal? And then just a question on Chinese motor. You highlighted the impact of regulatory change reducing average premiums in Chinese motor. Can you just maybe give us a bit of context as to whether this is positive or negative for your volumes, for your profitability? You might think the deregulation of that market might be changing something in the competitive dynamic. Thank you.

Question: Farooq Hanif - Credit Suisse - Analyst : Hi, everybody. Good morning. In terms of the green bond that you have raised, can you talk again about your rationale for raising tiered capital, given your Solvency II position and given your cash position? I mean, it seems like you don't really need it. And I am just kind of thinking about the philosophy behind that. So second question is on your Microsoft agreement on health. Can you explain how that might change maybe the profitability or service dynamics or fee dynamics of existing businesses and what it does for growth? And last question is on update on disposal. I mean, I believe in the press there has been some talk about your Malaysian business. And I am just wondering whether you feel that there is still significant non-core disposal potential. Thank you.

Question: Farooq Hanif - Credit Suisse - Analyst : Just to be clear, you will be implementing these capabilities in countries like the UK and France as well, presumably. Or is it more Asia-focused?

Question: Oliver Steel - Deutsche Bank - Analyst : Good morning. So three questions from me. The first is on protection volumes, which were up 1%. I'm not looking here at the new business so much; I'm looking at the sort of the premiums. But this is actually now the second year in succession where the growth in protection has actually been a bit less than your target. It was 3% year on year in the first quarter of last year and it is 1% this year. How much of that is economic and how are you expecting that to sort of pan out as lockdowns end? Second question is on AXA IM. The 17 -- I mean, so basically, the margin that you have generated on average funds went up from 17 bps to 19 bps. Is that all just simply a function of improved mix? Or I think you mentioned there a performance piece. I am just wondering how much of that margin uplift came from the performance fee or anything exceptional. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call And then the third question is about sort of French government attitudes. It comes in two parts. One is given that you are still saving money on frequency and there's still lockdowns in France, are you expecting to have to pay any further contribution towards sort of COVID solidarity funds? And then separately, if you do make further disposals this year, what is the French regulatory attitude towards you eliminating any earnings per share dilution through buybacks?

Question: William Hawkins - Keefe, Bruyette & Woods, Inc. - Analyst : -- remarks. You made passing reference to the benign experience of your reserves covered by the ADC protection for XL. Have you actually done a formal close for Enstar at the end of the first quarter to support that statement? And if not, when is the first formal close to assess the ADC? Is it the end of June or the end of December? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call And then secondly, please, what's most prominent in your mind at the moment in terms of thinking about inflation risk? Some people are worried about US tort costs as the courts open up. Some people are worried about the return of drivers to the road. There is always something to worry about, so maybe there is nothing to worry about on this point. But in terms of what you have seen in the first quarter, what is most prominent in your mind when you think about inflation?

Question: William Hawkins - Keefe, Bruyette & Woods, Inc. - Analyst : I'm sorry, Etienne. I know the contract has been closed. I just meant when is the first formal reporting scheduled to your counterparty?

Question: Andrew Crean - Autonomous Research - Analyst : Morning, all. A couple of questions, if I can. Firstly, could you talk about the nat cat experience outside of XL in your main European businesses in the first quarter? And secondly, if you take on board the debt and the Bank Belge if it completes, your solvency will be 216%, which is I think EUR7 billion north of the 190%. How do you propose analysts assess your capability to return capital now that you have taken away the boundaries of higher and lower comfort zones? How are we supposed to think about that?

Question: Thomas Fossard - HSBC - Analyst : Yes, good morning, Etienne. Two questions. The first one would be on the commitment of AXA to allocate EUR2 billion to the French recovery participation loan scheme. Could you tell us a bit more how you are going to deploy what the expected return and the risk attached to this new scheme? And how you are going to or who is going to support ultimately the risk around this scheme? Second question will be related to the cash at the holdco company. So starting from the EUR4.2 billion reported at the end of the year, could you say if there has been any significant positive or negative movement? And maybe if you could update us on your thinking regarding AXA Eurolife restructuring. Thank you.

Question: Thomas Fossard - HSBC - Analyst : Can you quantify what it could be?

Question: James Shuck - Citigroup - Analyst : Hello, good morning. So three questions from me, please. Firstly, the Ambition AXA 2023 on the underlying earnings per share, you have a cost reduction target in that number, but there is also efficiency gains. So I'm just intrigued to know whether the start that you've had up to this point means that the revenue growth that you have got embedded in those targets still gives you confidence in delivering on the efficiency elements of the underlying earnings per share? Second question on solvency. The ADC benefit, I think you mentioned in your comments is about a 1-point benefit from the ADC. Could you just clarify that? That seems a bit low to me. What is it in relation to the risk capital at AXA XL, please? And then finally, I noticed from the SFCR that the French life business hasn't paid a dividend again in 2020. Do you expect it to pay a dividend in 2021? Thank you.

Question: Pierre Chedeville - CM-CIC Asset Management - Analyst : Yes, good morning, Etienne. Two quick questions. First question regarding your per fees in asset management. I wanted to know if you give the information regarding eligible funds for per fees. And if you have any concerns regarding [your f] reform regarding the way of calculating per fees on a five-year basis instead of one year. That's my first question. And my second question is related to the participating loans. I read this morning in The Echo an article, which was not very clear for me, where it said that insurers have chosen their asset managers and bankers to work with. But they don't mention AXA, while AXA will be, as you said, a significant participant to this positive. So I wanted to know what will be the bank or asset manager you will make a [binum] with. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call

Question: Pierre Chedeville - CM-CIC Asset Management - Analyst : Yes, I thought exactly like you, but maybe you'll see this morning an article in The Echo. You will see a strange article on that issue, which is not understandable. That is why I was asking the question. Because in my view, I was thinking like you. I don't understand this question of binum between insurers and asset managers which is mentioned in this article.

Question: Ashik Musaddi - JPMorgan - Analyst : Yes, thank you and good morning again. Just a couple of questions from me. So first of all, like pricing in commercial lines in France is still relatively strong at about 4%. I mean, could you just give some color as to is it just inflation-driven or is it a bit of extra pricing as well? That's the first one. And second one is, I mean, I am not sure if I am going to get the answer for this but I will still ask it. You mentioned that you get a lot of cash flow from subs in first quarter. Now you mentioned that it has already been strong. But is it possible for you to give any indication on number or say what portion of your annual cash flows are already in, as in you have got that from the subsidiaries to holding company for the Group? Any thoughts on that would be great. Thank you.

Question: Ashik Musaddi - JPMorgan - Analyst : No, commercial lines in France. The pricing in commercial lines in France was pretty strong at about 4%. Is it driven -- all driven by just inflation or there is a bit of extra element on pricing as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2021 / 7:00AM, AXAF.PA - Q1 2021 AXA SA Corporate Sales Call

Question: Ashik Musaddi - JPMorgan - Analyst : The second question was with respect to the cash upstreaming from subsidiaries. Now I remember you mentioned that a lot of the cash upstreaming that you take for the year comes in first quarter. So can you give us any percentage of how much of cash upstreaming has already come through and how does that compare to last year?

Question: Ashik Musaddi - JPMorgan - Analyst : Yes, okay. That's very clear. Thank you.

Question: Andrew Sinclair - BofA Merrill Lynch - Analyst : Thanks. Just one final follow-up for me, actually. It's about the mandatory convertible bond into the EQH shares I think converts in about 10 days' time on May 15. Just wondered, by my turn, EQH share price means you will probably have some EQH shares left. After the conversion you will have some spare ones left. Just really wondered, what is the impact on solvency from that conversion and what would you plan to do with the residual EQH shares? Thanks.

Question: Michael Huttner - Berenberg - Analyst : Thank you. One is tricky and I'm going to ask it as delicately as we can. So you know when you have -- when you arrived as CFO, you probably thought, oh my gosh, it is a complicated group and all these moving parts. I'd better be really careful. And now clearly after a year in the role, not only are the numbers better, but clearly there's a lot of confidence in the way you present these numbers and the feeling that things are good. When we have the potential or the likely or the confirmed change now, are we going to go through the same cycle again of slight quarter and then kind of reintroduce confidence? Or can we kind of assume that the transfer will be absolutely seamless? I don't know how you can answer it, but I can't not to ask it. The other is kind of a follow-up. I did ask on COVID. You said no, no change. My question was really kind of how much of the COVID you have set aside, how much is still unpaid? That would give me. And then the final one is just I'm a bit lazy; I'm really sorry. What is the long-term target for cash?

Question: Michael Huttner - Berenberg - Analyst : Wonderful. That's very helpful. Thank you.