Ladies and gentlemen, welcome to the AXA Q1 2021 Conference ]Call. To begin the call, I will now hand the call over to Andrew Wallace-Barnett, AXA Head of Investor Relations. Please go ahead.
Good morning. Good morning, everyone, welcome to AXA's Conference Call on our activity indicators for the first three months of 2021. I'm very pleased to welcome Etienne Bouas-Laurent, AXA's Group CFO. Etienne will take us briefly through last night's release, at the end of his introductory remarks, he will be happy to take your questions. Etienne, I hand over to you.
Thank you, Andrew. Hello, good morning to all of you. Thank you for joining the call today. As you saw from our release yesterday evening, AXA performed well in the first three months of 2021. Our total revenues increased by 2% in a quarter still marked by COVID-19 related restrictions, supported by growth in our preferred segments. Our Solvency II ratio was very strong at 208%, and we also pursued our actions on climate and societal topics since the beginning of the year, notably by issuing our first green bond, pledging to invest EUR 2 billion in French SMEs impacted by the COVID-19 crisis, and acting as a chair of the new Net-Zero Insurance Alliance. Let me now quickly go through the key numbers from the release, starting with P&C.
P&C revenues were up 2% overall, with a continued strong growth of 4% in commercial lines and stable revenues in personal lines. In commercial lines, we continue to benefit from favorable pricing conditions across all our major markets at AXA XL and in France and Europe. The outlook remains positive. More specifically, at AXA XL, price increases on renewals were up 15% in insurance and up 11% in reinsurance, translating into a price effect of plus 11% on gross written premium. This favorable price effect was partly offset by continued and disciplined exposure reductions across the portfolio, which resulted into a - 7% impact on revenues. Overall, a 4% revenue growth at AXA XL with a strong focus on profitability. As you know, the quarter was quite active in terms of Nat Cats, especially in the U.S..
For AXA XL, we estimate a slightly higher than usual Nat Cat charge for the first quarter, including from severe freeze events in Texas. We also, however, estimate a more favorable than expected Non-Cat loss experience. As a consequence, we believe that AXA XL is on track towards its EUR 1.2 billion underlying earnings target for 2021. In personal lines, revenues were stable. We saw some price softening on the motor side, notably in China, due to change in regulation. We expect a price softening trend to also impact Europe linked to COVID-19. On the other hand, we saw favorable pricing and volume effects in non-motor for France and Europe. Moving to other lines of business. In health, we saw continued growth with revenues up 5% in the first quarter.
This was driven by both group at 6% and individual at 4%, with growth in most of our geographies, in particular in international and Europe. On the life side, we recorded EUR 2 billion in net inflows and continue to see a favorable business mix with inflows in protection and unit linked and outflows in GA savings. In terms of revenues in less and savings for the quarter, two things I would like to highlight. Firstly, the strong performance in individual savings in France up 8% with higher sales of unit-linked retirement products and EuroCroissance capital light products. Secondly, a good momentum in Japan from both a successful campaign of a capital light product and continued growth in protection.
Finally, in asset management, AXA IM delivered a revenue growth of 17%, a strong performance with plus EUR 13 billion of net inflows in the quarter and an improved business mix towards alternatives. I want to highlight also that 90% of AXA IM eligible assets under management are now classified under Sustainable Finance Disclosure Regulation, Articles 8 and 9 , the most demanding EU regulatory disclosures for sustainable funds. Moving on to Solvency II. Our Solvency II ratio was at 208% at the end of March, an increase of eight points since the end of last year. To give you a bit more details and insights in the key moving pieces, the increase stemmed from a positive operating return, net of accrued dividends of plus two points, favorable market effects, mostly from higher interest rates of plus seven points, and an additional point coming from the ADC put in place at AXA XL.
This was partly offset, of course, by the reduction in the UFR, with an impact of minus two points. We expect structural positives on Solvency II in the near term, with a recent issuance of our Green Tier 2 Bond, as well as the disposal of AXA Bank Belgium expected to be completed in Q2. In conclusion, five things to retain. First, AXA performed well in a quarter still characterized by COVID-19 restrictions. Our preferred segments are performing well, and we remain disciplined, growing where we have the best returns. Second, we continue to see a good pricing dynamic at AXA XL, and we maintain our underwriting discipline. We are on track towards our EUR 1.2 billion underlying earnings targets for 2021. Third, France and Europe are also performing well, notably with strong sales in individual savings in France, and good momentum in health in Europe.
Fourth, in terms of our growth avenues, we are pleased to see some good momentum in Asia coming from Japan. As you have seen, AXA IM also had a very good quarter. Fifth, our balance sheet remains very strong with a Solvency II ratio at 208%. An overall strong start of the year. We are now focused on execution and delivering on our planned targets. I'm now happy to take your questions.
Ladies and gentlemen, if you have a question, you have to press o one on your telephone keypad. The first question from Andrew Sinclair, from Bank of America. Please go ahead.
Thanks, morning, everyone. Three from 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 outperformance 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 EUR 1.5 billion COVID loss figure. How's that evolved in Q1 in terms of further losses and frequency benefits? 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.
Thank you, Andrew. First of all, what we say is that, as you highlighted, regarding XL, our nat cat experience was a little bit above our expectations, but the non-Nat- Cat experience was a little bit better, thus having a sort of compensation effect. The non-Nat-C at exposure is mainly driven by a good experience in large losses to a larger extent, and to a lower extent, some positive evolution expected in attritional, given the very high prices implemented in the first quarter. Your second question refers to the impact of the COVID. EUR 1.5 billion was the amount of the cost estimated at the full year 2020. We still think that it's the best view we have on our COVID losses so far. Of course, there are still some uncertainties left, as we say, that the full year 2020 on the situation in France.
We'll see how things evolve. So far, I would say EUR 1.5 billion is our best estimate. Third, you have some questions on the APE in France. The increase in the health APE in France was primarily driven by the increased sales in international business from our partnerships in the U.S. You know that we have a very strong franchise in employee benefits in France, and we are capitalizing on this structure to expand on some international opportunities from time to time. The U.S., we have a strong franchise with partnerships there with other insurance providers fronting the business for us.
On the other side, on French protection, APE was down quite a lot year-on-year.
On the protection, these are related to very large contracts. On the EB side, which are from time to time, going up or down. No trend here to highlight. Just it's a business where you have ups and downs, but it's really driven by group contracts, EB contracts.
Understood. Much appreciated. Thank you very much.
Thank you. Next question from Jon Hocking from Morgan Stanley. Please go ahead.
Morning, everyone. Just got two questions, please. Are you now finished with the reduction in exposure at XL? Should we start seeing the volumes sort of track more in line with rate going forward? That's the first question. Secondly, 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 the restrictions continue to lift through the summer? Are the agents going to go back to your way of working? It seems like they're being pretty productive in the current situation. Thank you.
First of all, we have not changed our policy at AXA XL since what we said in the investor day. The year 2021 will be dedicated to margin improvement. We are sticking to our plan, and there will be no change up to the end of the year. We are really about discipline, and I would take the sort of exposure reduction as a good news and not as a bad news. We have renewal rates with our customers, which are very high, but we reduce the exposure per client, and we don't hesitate not to renew the business or even not to write new business when we think that the pricing is not the right one. We are not isolated, of course, on the market to do this. At AXA XL, we have a plan. We stick to it.
You know our target, we want to achieve it. It's all about consistency. Your second question was related to the performance in France, I think. It's true that we are comparing here a Q1 2021 with a Q1 2020, where in January and February, there was no COVID impact. This quarter is particularly difficult in terms of growth. However, you highlight that in individual savings, we did well. We did well in France, especially because we are, I would say, one of the leaders. We have 25% of the market for the new retirement savings plan called Plan d'Épargne Retraite, which is a very strong business with strong tax incentives, and where we have the possibility to have a unit-linked rate above 50%. This explains this resilience of the individual life savings performance in France.
Thanks, Etienne.
Thank you. Next question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. Just a few points of clarification, please. The first one, the claims experience at AXA XL, you say are higher than usual Nat-C at charge. I assume you mean higher than 6%, so the new Cat budget. Is that the right interpretation? The second one, on the earnings guidance, very helpful that you've reaffirmed that. wondering if you could sort of remind us, when you think of that, how you think of the risks to meeting that guidance. I guess, when you're thinking of it, you're assuming that net cats don't exceed 6% and there's no adverse development on the back book. Anything you could say on the confidence and the risks on that would be very helpful. Finally, AXA Bank Belgium. I know you're expecting it to close this quarter.
Just wondering the sort of degree of confidence there, because I guess obviously originally it was supposed to close 12 months ago, or expected to close 12 months ago, and it's been a little bit delayed. Just confirmation that you're fairly confident on it closing this quarter would be great. Thank you very much.
Hi, Peter. First of all, you're absolutely right. When we say compared to our expectations, it's in terms of Nat-C at for AXA XL, it's compared to the 6%. Absolutely right. The reason for this is that there was the Texas freeze, where the definitive costs are not yet completely known, but where we think it's manageable, but still it has an impact. To a much lower extent, some floods in Australia. This was the highlights, I would even say, of the first four months of the year. The second question relates to the earnings guidance. I would say, what are the risks? The Nat-C ats are per construction a risk, and this is the main one. I don't see the back book as a major risk at this stage. We don't have news compared to what we said exhaustively at the full year 2020.
You know that with the ADC, the liability lines are, legacy book on liability lines is really under control. You remember as well what we said on the COVID reserves, which are very conservative. I would not be overly anxious about the legacy book at this stage. Your third question related to AXA Bank Belgium. I understand your question because there is such an inertia in the administrative process to get banking transactions done in Europe that it's difficult to understand from the outside, but this is a reality. What I can tell you is that we don't have any more questions from the banking regulators, either in Belgium or European one, and it's purely a question, an administrative waiting period. The likelihood, and this is my feeling, that we get the authorization is not far away from 99%, I would say, or not far away from 100%, at 99%.
The likelihood that we close before end of June is very, very high, but not 100%.
Great. That's very helpful. Thank you very much indeed.
Thank you. Next question from Michael Huttner from Berenberg. Please go ahead.
Good morning. Thank you. I have three questions on the Solvency II. You provided some granularity, and 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 have 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. The second, you said just now, COVID was mainly reserved, I just wondered if you could update us, how much of the EUR 1.5 billion figure is still reserved and how much is paid relative to year-end. Then there'd be two more, if I may. 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. AXA IM, if you could give a split of the assets with the high value stuff, the alternatives. Thank you.
On the Solvency II, we communicate on operating return net of dividend at + 2%. I will not confirm the 4% precisely because we don't want to give, as you know, we don't make a full closing at the quarter, and therefore, we don't intend to give you a very precise number on this. You know that we communicated on 20% operating return on a yearly basis, everything being normal. You can take the assumption you want for the dividend, but we take always the dividend paid for the previous year. Here, EUR 1.43, which we accrue. You can make the math. I hope that you can live with this very small uncertainty around the operating return, which is either four or five, depending upon the way you calculate it.
The second is that the EUR 1.5 billion was the number we gave in June, reaffirmed at half year and full year last year. At this stage, we don't have any reason to communicate on a different number, so we stick to it. Third question, the motor environment. You saw we are flat for the reasons we just explained that the volume from country to country are different, but we have still a positive net inflow at group level in terms of number of contract. The pricing is slightly down, and the counterpart is that the frequency is still relatively favorable, even if at a higher level than the Q2 level, I would say, of last year. It's a little bit early to say what will happen on the frequency side for the half year. What we see is that indeed the prices are not increasing.
There is a pretty high level of competition. We are doing pretty well. We think that our performance is pretty resilient. I would like to highlight as well that on the non-motor side, we have quite a positive evolution, so that in total, the personal lines are doing pretty well in this first quarter. Your fourth question is related to AXA IM and to the business in alternatives. It represents around 20% of the average assets under management. It was at 13% in Q1. We reiterate our target revenue growth of 10% a year until 2023.
Thank you very much.
Thank you. Next question from Dominic O'Mahony from Exane BNP Paribas. Please go ahead.
Hello. Thanks for taking my questions. Three, if that's all right. Just a couple on AXA XL to start. I understand that you recently consolidated your AXA XL reinsurance businesses together in Bermuda. Could you just highlight the rationale for this with any potential financial benefits that might come from it? 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 rebased in 2020. Would you expect that essentially to bounce back once we're back to normal and planes start flying and so on? Actually, would you suggest that this is the new normal? Then just a question on Chinese motor.
You highlighted the impact of regulatory change reducing average premiums in Chinese motor. Could 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 that the deregulation of that market might be changing some of the competitive dynamic. Thank you.
Hello, Dominic. You had a question on the XL reinsurance reorganization. It's perfectly right. We have decided to establish a new company in Bermuda, which will carry all reinsurance operations of AXA XL. The rationale for these changes is to reduce complexity within the group, to reinforce and to align the management responsibility and accountability on this specific segment of business. This is a way we deal with all our entities in the group. We think it will enhance accountability, transparency, and efficiency to the benefits of our clients and our business. I remind you that AXA XL Reinsurance Limited is rated by S&P and AM Best. It's seen as core by both agencies. It benefits from the same rating as the other entities of the group with AA- stable outlook. You're absolutely right in your analysis of the comparable growth for XL.
The reason why we made this restatement, if you will, is that it gives this plus 4% growth is more representative of the underlying growth we will disclose in the upcoming quarters, everything being equal. This is what you can take as a sort of trend for this year. Your third question on China. Actually, there was a change in regulation at the beginning of Q4 or end of Q3 last year, where two things happened. The Chinese regulator first said they want to reduce the startup pricing, and second, they wanted to increase the insurance coverage of the policies to better protect the customers with both measures. It has created a lot of movement in the market because actually prices have come down.
In order to maintain a combined ratio below 100%, everybody expected the commission ratio to go down, which is not yet the case, I would say. The Chinese market as a whole is, in the short term, impacted negatively by this change in regulation. We expect it to come back to normal in the upcoming quarters but it's a bit early to say. This explains the reduced momentum on our Chinese business, because at the same time, what we did was to select the best risk and not to run for volumes, in the current context, because it would have been detrimental to our combined ratio. You will see this is impacting the whole P&C industry in China at the moment.
Thank you.
Thank you. Next question from Farooq Hanif from Credit Suisse. Please go ahead.
Hi, everybody. Good morning. In terms of the Green Bond that you've raised, can you talk again about your rationale for raising tiered capital, given your Solvency II position, and given your cash position? It seems like you don't really need it, and I'm just kind of thinking about the philosophy behind that. 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? Last question is on update on disposal. I believe in the press there's been some talk about your Malaysian business, and I'm just wondering whether you feel that there is still significant non-core disposal potential. Thank you.
First question, thank you, Farooq, for your questions. The first one related to the Green Bond. First, there is nothing new. You remember that we provided you with the analysis of our Capital Management Plan in the Investor Day in December. As you have seen, we can afford at comparable gearing to raise EUR 3 billion of debt between 2020 and 2023. This was the first part of the plan. We are not forced to raise debt each year. We will see. Given the extremely good financing conditions at the moment, it was very tempting to take this opportunity. I remind you that we have a spread of just a little bit less than 150 bips which is extremely favorable market conditions. This was, I would say, the reason why even if it was in the plan, the market timing was excellent.
Each year we'll see if we raise debt or if we don't do it. Second, on the Microsoft transaction. It's not a transaction, it's a project, sorry. We have been working on such initiatives for quite a while, including in Asia, with a project called Emma. Here we are accelerating with Microsoft. The objective is not short-term to boost the sale. I think it's really to improve the customer experience around health at AXA. By this, we want to have a better retention of our customers. We want to attract, from time to time, new customers, but it's more retention and also should have a positive experience on the loss ratio because we will improve the prevention, we will improve the sort of triage to our preferred providers.
It's a full ecosystem around health where we think that the customer needs are very high and the expectations of the customers are not fulfilled today, nowhere. It's really about a qualitative approach on health, and I'm very positive about the long-term benefits of this project. It's not like an M&A deal. It's not like spectacular new products, which is going to change the numbers in the upcoming quarters. It's really a fundamental long-term move for our group.
Just to be clear, you'll be implementing these capabilities in countries like the U.K. and France as well, presumably? Is it more Asia focused?
No, I refer to Asia, sorry, because I had this experience in Asia with a project called Emma. The new venture with Microsoft is starting in Europe, we had two pilots in Italy and Germany, which are highly promising. It will be rolled over the other European countries. Then, in a second step to France. France has itself, its own characteristics and is moving into the right direction, and we'll see if they take this platform in step two. I would say at the end of the day, the idea is to have a global approach on health services for AXA customers. Your third question related to disposals. As you know, we are keen to pursue the simplification of the group and to our focus on the countries where we have a competitive advantage in the long run.
We might, from time to time, continue our program of disposals. The priority is to target the countries within the international segment. I cannot comment more than this. I think this is something we explained during the IR Day in December. There is nothing new on this. As you know, we will also have a very strong financial discipline in order to reduce or eliminate the potential dilution coming from such disposals when they come.
Thank you very much. Thank you.
Thank you. Next question from Oliver Steel, from Deutsche Bank. Please go ahead.
Good morning. Three questions from me. The first is on protection volumes, which were up 1%. I am not looking here at the new business so much. I am looking at the sort of the premiums. This is actually now the second year in succession where the growth in protection has actually been a bit less than you targeted. It was 3% year-on-year in the first quarter of last year. It is 1% this year. How much of that is economic? How are you expecting that to sort of pan out as lockdowns end? Second question is on AXA IM. Basically the margin that you have generated on average funds, went up from 17 bips- 19 bips.
Is that all just simply a function of improved mix or, I think you mentioned there a performance fee, so I am just wondering how much of that margin uplift came from the performance fee or anything exceptional. The third question is about French government attitudes. It comes in two parts. One is, given that you are still saving money on frequency and there is still lockdowns in France, are you expecting to have to pay any further contribution towards COVID solidarity funds? 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?
Thank you, Oliver. The third question relates to the growth in protection business, plus 1%. You might take that as a disappointment compared to the performance in commercial life and health, the other two preferred segments. I see that differently because as I said in the introduction, we are comparing our performance with the Q1 last year, which was not impacted by the COVID in January and February. Nothing worrying, and I think that once the lockdown will reduce, or the effects of the lockdown will reduce, we see a natural move up on the protection side in terms of new business and business. I'm not overly worried. We might have also some more potential coming from Asia, and notably from Hong Kong once the frontiers will open up again. No, I would say the + 1% is not representative of the run rate.
It should be higher. At the latest, I hope Q3, Q4. AXA IM, we have a revenue growth of 17%. I would say that you have within that around 1/3, which is linked to non-recurring, I would say performance fees. A sort of one-off. One-third, to make it very simple, coming from an improvement in business mix, which is due to the alternative business, but also within the core business, a positive business mix towards multi-asset and high yield lines of business. The third component is of course the increased average assets under management. Regarding the French government, you're right to say that they are very tempted to come with new creative ideas in terms of taxes every time we make a profit. We haven't heard anything on the motor side.
The only idea which has been put on the table, but it's really an idea or concept, I'm not sure if we go through it on the health side, where I remember you that last year, they said we should have to pay the 2.6% tax on health sales on 2020 and 1.3% on 2021. Both taxes were booked in our accounts in 2020. They say the price is continuing. Maybe the 1.3% was not high enough for 2021. We are not sure that this idea will be further developed, but this is potential risk, which is difficult to assess at this stage. We didn't hear at all about new solidarity taxes, to be frank. Now we are speaking more about opening up the economy and the café, hotel, restaurants, slowly but surely, in the upcoming days. I don't think that the risk is really high.
Regarding potential, the consequences of the disposals and potential share buybacks for us, there is not really anything new. What we just saw is a shift in the supervisor attitude from a blanket ban to a case-by-case approach, which we think is very positive, and this is why we were able to confirm or to announce and confirm the dividend of EUR 1.43, which is a back-to-normal situation, I would say. There are no specific statements from the ACPR on the share buyback. Given the very solid solvency and the positive prospects of the vaccines, we see no reason to be worried for that, especially from Q4 of this year.
Thank you.
Thank you. Next question from William Hawkins from KBW. Please go ahead.
Remarks. You made passing reference to the benign experience of your reserves covered by the ADC protection for AXA XL. Have you actually done a formal close for Enstar at the end of the first quarter to support that statement? If not, when is the first formal close, to assess the ADC? Is it the end of June or the end of December? 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 U.S. tort costs as the courts open up. Some people are worried about the return of drivers to the road. There's always something to worry about, so maybe there's nothing to worry about on this point. In terms of what you've seen in the first quarter, what's most prominent in your mind when you think about inflation?
Hello, William. The ADC contract has been closed recently. I hope that it's good news from your point of view. I don't think the market [crosstalk]
I'm sorry, Etienne. I know the contract's been closed. I just meant when is the first formal reporting schedule to your counterparty?
We have, actually, as you know, no formal closing at the third quarter. We review our reserves twice a year, so it will be more a topic for the half year.
Right.
Regarding the inflation risk, you're right, there's always a reason to worry in our business. On this one, I wouldn't say that it was on top of our agenda in terms of risk. Of course, you can always say the cost of claims could suffer from inflation. At this stage, it's a bit early, and I wouldn't flag any specific risk on top of the agenda really for now. You can say it could be a positive because maybe it will help getting back to a normal interest rate curve. This is, I think, the way we see it more. It's still a little bit early stage to draw conclusions. It could be an opportunity. There could be some more inflation on the claims, which would be a slight negative, but nothing, I would say at this stage, nothing really significant.
Brilliant. Thank you.
Thank you. Next question from Andrew Crean from Autonomous. Please go ahead.
Morning, all. Couple of questions if I can. Firstly, could you talk about the Nat-Cat experience outside of AXA XL in your main European businesses in the first quarter? Secondly, if you take on board the debt and the Banque Belge, if it completes, your sums will be 216, which is, I think, EUR 7 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?
Hello, Andrew. Outside of AXA XL, the Nat-Cat experience was slightly below what we expected. There were no really real Nat-Cat events in one Q. I would say we are only at the end of Q1, so let's wait a little bit before drawing conclusions. If your conclusion is a good start of the year, I would say yes, from this point of view. On the solvency side, you are absolutely correct that Q2 solvency will go up in a mechanical way because two events are already known, which is the impact of the debt, four points, and the expected four points from AXA Bank Belgium disposal. You're absolutely right that we will be above our long-term target of 190%. It's a bit early to say in the year how we are going to manage, I would say, this excess level of solvency.
I would propose to have a discussion more at the half year about this. In the meanwhile, you have also the possibility, even if it's marginal, we could reduce a little bit the level of hedging on some equity positions in order to get a better return on our assets. Still a bit early to answer this question. Mechanically, you're right. I would say that I see that as a positive, I would say, to be comfortably sitting with a sort of cushion about our long-term target. It's a very nice contrast with the situation we experienced last year.
Yeah. Thank you.
Thank you. Next question from Thomas Fossard from HSBC. Please go ahead.
Oh, yes. Good morning, Etienne. Two questions. The first one would be on the commitment of AXA to allocate EUR 2 billion to the French Recovery Participatory Loan scheme. Could you tell us a bit more how you're going to deploy, what the expected return, and the risk attached to this new scheme, and how you're 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. Starting from the EUR 4.2 billion reported at the end of the year. Could you say if there has been any significant positive or negative movement? Maybe if you could update us on your thinking regarding AXA Life Europe restructuring. Thank you.
Thank you, Thomas. Thomas, pardon. Thomas is a German version of Thomas, and I have a bias. Sorry for that. Hello, Thomas, and thank you for your question. The French Scheme, I would say, we think that it's a win-win deal because we are very happy to support the French economy in terms of solidarity. On the other side, the 30% of the risk is taken by the French Government, I would say. It reminds us a little bit of the system of sponsored loans granted by the bank during the crisis. It's sort of opportunity and nice way to support the economy at the same stage. We think that the risk return is favorable to us.
At the HoldCo level, what's happening at the moment is absolutely bang in line with what we expected when we disclosed the strat plan in December during the IR Day, knowing that the cash at the moment is, you can imagine, above the level we had at the end of last year, because a big part of the dividends are being paid in the first part of the year and including in the first quarter. We really think that the prospects in terms of liquidity for the end of the year, we should be at least at the upper end of our long-term target, if not above. AXA Life Europe, we successfully signed reinsurance agreement between AXA Germany and AXA Life Europe to reduce the capital constraints at the level of AXA Life Europe.
When I say successfully signed, you can say, but it's an internal contract. You do whatever you want. I say successfully because we got the authorization not only from German regulator, but also from the Irish regulator, which is for us, something very important. Now we will dedicate the upcoming months to try to get the authorization to distribute an exceptional dividend from Ireland to the holding company, because we have an excess level of capital there.
Can you quantify what it could be?
A few 100 million EUR.
Okay. Next question from James Shuck from Citi. Please go ahead.
Hello, good morning. Three questions from me, please. Etienne, firstly, the Ambition AXA 2023 on the underlying earnings per share. You have the cost reduction target in that number, but there's also efficiency gains. I'm just intrigued to know whether the start that we've had up to this point means that the revenue growth that you've 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, was about a one-point benefit from the ADC. To just clarify that seems a bit low to me. What is it in relation to the risk capital at AXA XL, please. Finally, I noticed from the SFCRs that the French Life business hadn't paid a dividend again in 2020.
Do you expect to pay a dividend in 2021? Thank you.
Thank you, James. On the Ambition 2023, you're absolutely right that the contribution to the UEPS of the cost is significant, both in terms of cost reduction and second, in terms of efficiency, which supposes that the revenues go up. There is no reason for us to change anything in what we said in December. We are confident both in our capacity to reduce cost and second, to continue to grow our revenues in order to have a better expense ratio. No change here at all. We just confirm our plan. In terms of Solvency, the ADC plus one point at group level, of course, which means a bit more at the XL level. It's always difficult to isolate one item without looking at the diversification benefits. This is certainly why you might have expected a bit more, but it's when it's absolutely mechanical here.
The solvency situation at AXA XL remains above our risk appetite or in line with the upper range of our risk appetite. There's absolutely no reason to worry on that. Our capacity to distribute the earnings, whatever level they are in 2022, based on the 2021 earnings, is confirmed at this stage. You highlight the situation of AXA France Vie. As you know, the cash upstream is managed at group level. We have various situation between the entities from year to year. The plan for 2021 is absolutely in line. I just said that before with our expectations when we disclose the plan. The EUR 14 billion cash upstream are absolutely confirmed at this stage, and the solvency situation of AXA France Vie remains much above the risk appetite limit, at this stage with 165%.
Okay. Thank you very much, Etienne.
Thank you. We don't have any more questions for the moment, ladies and gentlemen. If you wish to ask a question, please press o one your telephone keypad. It's zero and one on your telephone keypad. We have a new question from Pierre Chedeville from CIC. Please go ahead.
Yes. Good morning, Etienne. Two quick question. First question regarding perf fees in asset management. I wanted to know if you give the information regarding eligible funds for perf fees, and if you have any concerns regarding ESMA reform, regarding the way of calculating perf fees on a five-year basis instead of one year. That's my first question. My second question is related to the participative loans. I read this morning in "Les Echos" an article which was not very clear for me, where it said that insurers have chosen their asset managers and bankers to work with. They don't mention AXA, while AXA will be, as you said, a significant participant to this participative. I wanted to know what will be the bank or asset manager you will make a binôme with. Thank you very much.
Pierre, hello.
With me.
Hello, Pierre. I fear I will not be able to answer these two questions in a very transparent way. The first one is a very precise and technical question on the accounting metrics related to performance fees. I propose you to liaise with the IR team, which will itself connect with AXA IM to understand, to ensure that we give you the proper answer. On the participating loans, it's true that we are a major market participant. These loans are distributed by the banks, and we will take our share of this distribution. I'm not sure to understand exactly what it means to select one partner, because for me there is a platform, it's Eurotitrisation. Once again, on this one, please don't hesitate to get back to the IR team if there is something I missed.
For me, it's really a sort of no-brainer. There is a platform initiative, and we take our share of it, and the banks are the intermediaries.
Yes. I thought exactly like you, but maybe you will see this morning in an article in "Les Echos" you will see a strange article on that issue, which is not understandable. That's why I was asking the question, because in my view, I was thinking like you. I don't understand this question of binôme between insurers and asset managers, which is mentioned in this article.
Okay. Pierre, I'm sorry, I will not give you more insight.
Okay.
Please accept my apologies for this.
No problem. Thank you very much.
You're welcome.
Thank you. Next question from Ashik Musaddi from JP Morgan. Please go ahead.
Thank you. Good morning, Etienne. Just a couple of questions from me. First of all, pricing in commercial lines in France was pretty strong at about 4%. Could you just give some color as to, is it just inflation driven or is this a bit of extra pricing as well? That's the first one. Second one is, I'm not sure if I'm going to get the answer for this, I'll still ask. You mentioned that you get a lot of cash flows from subs in first quarter. You mentioned that it has already been strong, 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 from the subsidiaries to holding company, for the group? Any thoughts on that would be great. Thank you.
Hello. Sorry for that. I'm not sure I got your two questions. On the first one, I heard the word international.
No, commercial lines in France. The pricing in commercial lines in France was pretty strong at about 4%. Is it all driven by just inflation, or is a bit of extra element on pricing as well?
No. Sorry for that. It's not on inflation. It's mainly driven on the large accounts. Certainly, part of it is a sort of impact from the COVID crisis as well. There is a hardening trend, and it's true, these price effects across the whole portfolio, motor, property, construction, liability. I think it's more than inflation. Your second question, sorry, I didn't-
Yeah. The second question was respect to the cash upstreaming from subsidiaries. Now I remember you mentioned that a lot of the cash upstreaming that you think for the year comes in first quarter. Can you give us any percentage of how much of cash upstreaming has already come through, and how does that compare to last year?
The big part is in one H for sure. I will not give you the amount of cash we have today, but in a nutshell, if I take the cash we have today and I subtract the dividend to be paid, we would be at least at the upper range of our long-term target. If you see what I mean.
Yeah. Okay. Well, that's very clear. Thank you.
Thank you very much.
Thank you. Next question once again from Andrew Sinclair from Bank of America. Please go ahead.
Thanks. Just one final follow-up from me, actually. It's about the mandatory convertible bond into the EQH shares that I think converts in about 10 days' time , May 15th. By my count, EQH share price means you'll probably have some EQH shares left after the conversion. You'll have some spare ones left. Just really wondered, what's the impact on solvency from that conversion? What would you plan to do with the residual EQH shares? Thanks.
I will just tell you that based on the current share price, because the definitive calculation is not made yet. Based on the current share price, we would be left with around 7 million shares of Equitable Holdings.
Thanks.
Thank you. Next question once again from Michael Huttner from Berenberg. Please go ahead.
Thank you. One is tricky. I'm going to ask you as delicately as we can. You know when you arrived at CFO, you probably thought, "Oh my gosh, this complicated group and all these moving parts, I better be really careful." 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 a 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 caution and then kind of reintroduce confidence? 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 ask it. The other is kind of follow-up.
I did ask on COVID, you said no change. My question was really to know how much of the COVID you've set aside, how much is still unpaid? The final one is just, I'm a bit lazy, I'm really sorry. What is the long-term target for cash?
Michael, long-term target for cash is EUR 1 billion- EUR 3 billion. When I speak about the upper end of the range, it's EUR 3 billion, right? If I say above the upper end of the range, it's above EUR 3 billion. Your first question, I think part of the questions you ask relating to the reserve, the COVID, and so on, will be better answered at the half year because then we will have a proper closing of the accounts. It's difficult for me to comment in the Q1 on the level of reserves with a high level of accuracy and granularity, as you can understand.
I remind you that we have gone through, last year, a very specific year where we had the COVID crisis. Second, there was a level of earnings at AXA, which was not at the level we expected. There's two components, that impacted us really last year. I don't think that we're in the same context this year. If it can give you some comfort on my level of confidence and on the tone which will be used by my successor with whom I've been working in very close relationship and in a relationship of trust over the last two years, I would say.
Wonderful. That's very helpful. Thank you.
Thank you. We don't have any more questions for the moment, ladies and gentlemen. If you have a new question, please press o one. It's zero and one, o one on your telephone keypad. Ladies and gentlemen, if you have a new question, please press o one on your telephone keypad. It looks like we don't have any more questions. Back to you for the conclusion.
Thank you very much to all of you for the quality of your questions, the high attendance. This was for me, my last official conf call or appearance, as a Group CFO. I enjoyed particularly these exchanges with you, and I will miss it. I'm very happy for my successor, Alban, who's sitting here to me here today. I think he will enjoy it very much. Be sure that there will be a continuity in the messages we are delivering to you, in the tone, but also in terms of contents. I'm very confident about us, about our plan, about our capacity to deliver. I will miss you all, but maybe there will be some road shows. Don't hesitate to go. Don't forget that Benelux is an important part of AXA. Thank you very much.
Thank you, everyone.
See you soon. Bye-bye.
Have a very good day. Take care.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.