© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the AXA's Q1 2021 Conference Call. To begin the call, I will now hand the call over to Andrew Wallace-Barnett, AXA Head of Investor Relations. Sir, please go ahead.
Good morning. Good morning, everyone, and welcome to AXA's conference call on our activity indicated for the first 3 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. And then 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, and 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 3 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.Also, 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, and 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 minus 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 cat, 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-GAAP 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 up 6% and individual up 4%, with growth in most of our geographies, in particular, in international and Europe.On the Light 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 G/A savings.In terms of revenues in Life & Savings for the quarter, 2 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 8 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 2 points, favorable market effects, mostly from higher interest rates of plus 7 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 2 points. We expect structural positives on Solvency II in the near-term with the recent issuance of our Green Tier 2 bond as well as the disposal of AXA Bank Belgium expected to be completed in Q2.So in conclusion, 5 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. And fifth, our balance sheet remains very strong with the 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.
[Operator Instructions] The first question from Andrew Sinclair from Bank of America.
Three for me as usual, if that's okay. Firstly, just on XL. I 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, it was just on -- if you could give us an update on the EUR 1.5 billion COVID loss figure, how has that evolved in Q1 in terms of further losses and frequency benefits? And thirdly, I was actually just looking at the French Life APE figures. Pretty huge jump in French health APE, up about 50%. And at the same time, French Protection APE was down about 1/4 year-on-year. Just wondering if you could give us some color on those big moves?
First of all, what we said is that we -- 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. So the non-nat cat 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, and we'll see how things evolve. But so far, I would say, EUR 1.5 billion is our best estimate.Third, you have some questions on the APE in France. And 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. And the U.S., we have a strong franchise with partnerships there with the insurance -- other insurance providers fronting the business for us.
And 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. So on the EB side, which are, from time to time going up or down. So 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.
Next question from Jon Hocking from Morgan Stanley.
I just got 2 questions, please. Firstly, 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. And then 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 the restrictions sort of continue to lift through the summer? Are the agents going to go back to working? It seems that they've been pretty productive in the current situation.
So first of all, we have not changed our policy at AXA XL since what we said in the Investor Day. The year '21 will be dedicated to margin improvement. And so 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, right? We have renewal rates with our customers, which are very high, but we'll reduce the exposure per client. And we don't hesitate to -- not to renew the business or even not to write new business when we think that the pricing is not the right one. And we are not isolated, of course, on the market to do this. But at AXA XL, we have a plan, we stick to it. You know our target, we want to achieve it. And so it's all about consistency.Your second question was related to the performance in France. I think -- and it's true that we are comparing here Q1 '21 with the Q1 2020, where in January and February, there was no COVID impact. So this quarter is particularly difficult in terms of growth; however, you highlight that in Individual Savings, we did well. And 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'Epargne Retraite which is a very strong business with a strong tax incentives and where we have the possibility to have a unit-linked rate above 50%. And this explains this resilience of the individual life savings performance in France.
Next question from Peter Eliot from Kepler Cheuvreux.
Just a few points of clarification, please. The first one, the claims experience at AXA XL you say are higher than usual nat cat charge. I assume you mean higher than 6%, so the new cat budget. Is that the right interpretation? And the second one, just on the earnings guidance. Very helpful that you've reaffirmed that. Just wondering 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're thinking of it, you're assuming that nat cat sort of don't exceed 6% and there's no adverse development on the back book. But yes, anything you could sort of say on the confidence and the risks on that would be very helpful. And then 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 or expected to close 12 months ago and it's been a little bit delayed. But just confirmation that you're fairly confident on closing this quarter would be great?
Peter, so first of all, you're absolutely right. When we say compared to our expectations, it's in terms of nat cat for AXA XL. It's compared to the 6%, absolutely right. And 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. And to a much lower extent, some floods in Australia. So this was the highlights, I would even say, on the first 4 months of the year.The second question relates to the earnings guidance. I would say what are the risks? The nat cat per construction risk, and this is the main one. I don't see the back book has a major risk at this stage. And we don't have news compared to what we said exhaustively at the full year 2020. You know that the -- with the ADC, the liability lines are -- legacy book on liability lines is really under control. And you remember as well what we said on the COVID reserves, which are very conservative. So 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. And the likelihood, and this is my feeling, that we get the authorization is not far away from 99%, I would say, or not away from 100%, at 99%. Now the likelihood that we close before end of June is very, very high, but not 100%.
Next question from Michael Huttner from Berenberg.
I have 3 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 -- 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?And the second, you said just now COVID was mainly reserved. And 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? And then there is 2 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 IM, if you could give a split of the assets with the -- this -- the high-value stuff, the alternative?
So on the Solvency II, we communicate on operating return net [ through ] dividend at plus 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. And you can take the assumption you want for the dividend, but we take always the dividend paid for the previous year. So here EUR 1.43, which we accrue. So you can make the math. And I hope that you can live with this very small uncertainty around the operating return, which is either 4 or 5, 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 volumes are slightly -- so it's -- the volume from country to country are different, but we have still a positive net inflow at group level in terms of number of contracts. 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. So 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. But we are doing pretty well. We think that our performance is pretty resilient. And 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 up 13% in Q1. And we reiterate our target revenue growth of 10% a year until 2023.
Next question from Dominic O'Mahony from Exane BNP Paribas.
Just a couple on AXA XL to start. I understand that you recently consolidated your AXA XL reinsurances -- your reinsurance businesses together in Bermuda. Can you just highlight the rationale for this? Is there any potential financial benefits that might come from it? And then just a clarification on the top line. I understand the business [ assumed the reported ] and the adjusted growth because of the rebasing of the Q1 '20. 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 rebased in '20. Would you expect that activity to bounce back once we're back to normal and claims start flying and so on? Or actually, would you suggest 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. 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 the deregulation of that market might be changing some of the competitive dynamic.
Hello, Dominic. So you had a question on the XL reinsurance reorganization, and 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 the -- to align the management responsibility and accountability on this specific segment of business. And this is the way we deal with all our entities in the group. So we think it will enhance accountability, transparency and efficiency to the benefits of our clients and our business. And I remind you that AXA XL Reinsurance Limited is rated by S&P and AM Best. It's seen as core by both agencies. And it benefits from the same rating as the other group with AA- stable outlook.You are absolutely right in your analysis of the comparable growth for XL. And 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. So 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 2 things happened. The Chinese regulator first said they want to reduce the start-up 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. And 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. So 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. So 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. So you will see this is impacting the whole P&C industry in China at the moment.
Next question from Farooq Hanif from Credit Suisse.
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, I mean it seems like you don't really need it, and I'm 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's been some talk about your Malaysian business. And I'm just wondering whether you feel that there is still significant noncore disposal potential?
So first question -- the first one related to the green bond. First, there is nothing new. You remember that we provided you with the analysis of our plan, finance -- well, our capital management plan during the IR day in December. As you have seen, we can afford at comparable gearing to raise EUR 3 billion of debt between '20 and '23. This was the first part of the plan. We are not forced to raise debt each year. So we will see. But 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 bps, which is an extremely favorable market conditions. So this was, I would say, the reason why, even if it was in the plan, the market timing was excellent. And then 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 sales. 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. So it's a full ecosystem around health, where we think that the customer needs are very high. And the expectations or the customers are not fulfilled today, nowhere. So it's really about a qualitative approach on health, and I'm very positive about the long-term benefits of this project. But it will not -- 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.
Are you -- just to be clear, you'll be implementing these capabilities in countries like the U.K. and France as well, presumably? Was it more Asia-focused?
No, no. So I referred to Asia, sorry, because I have this experience in Asia with a project called Emma. The new venture with Microsoft is starting in Europe. And we had 2 pilots in Italy and Germany, which are highly promising. It will be rolled over the other European countries. And then in a second step to France. But France has itself its own characteristics and is moving into the right direction, and we'll see if they take this platform in a step 2. But I would say, it's -- 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. So 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. We -- I think this is something we explained during the IR day in December. There is nothing new on this. And 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.
Next question from Oliver Steel from Deutsche Bank.
So 3 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 you targeted. It was 3% year-on-year in the first quarter of last year. It's 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 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 fee. So I'm just wondering how much of that margin uplift came from the performance fee or anything exceptional? And then the third question is about sort of French government attitudes. It comes in 2 parts. One is, given that you're still saving money on frequency, and they're 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?
So the first question relates to the growth in Protection business, plus 1%. You might take that as a disappointment compared to the performance in Commercial lines and Health, the other 2 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. So nothing worrying. And I think that once the lockdown will reduce or the effects of the lockdown will reduce, we will see a natural move up on the protection side in terms of new business and business. So I'm not overly worried. We might have also some more potential coming from Asia when -- notably from Hong Kong once the frontiers will open up again. So no, I would say, the plus 1% is not representative of the run rate. It should be higher. And 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 nonrecurring, I would say, performance fees, so sort of one-off; 1/3 to make it very simple, coming from an improvement in business mix, which is due to the [ have ] of the alternative business, but also within the core business, a positive business mix towards multi asset and high-yield lines of business. And 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 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 a 2.6% tax on health sales on 2020 and 1.3% on '21. Both taxes were booked in our accounts in 2020. Now let's say the price is continuing, maybe the 1.3% was not high enough for '21. We are not sure that this will go -- 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. And now we are speaking more about opening up the economy and the cafe, hotel, restaurants slowly, but surely, in the upcoming days. So 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. However, 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.
Next question from William Hawkins from KBW.
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 at the end of June or the end of December? 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 U.S. 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. But in terms of what you've seen in the first quarter, what's most in your mind when you think about inflation?
Hello, William. So the ADC contract has been closed in -- recently. So I hope that it's good news from your point of view. I don't think the market...
I'm sorry, Etienne. Sorry, Etienne. I know the contracts being closed. I just meant when is the first formal reporting scheduled to your counterparty?
So we have actually, as you know, no formal closing after the third quarter. We review our reserves twice a year, so it will be more a topic for the half-year.Regarding the inflation risk. You're right, there is always a question, 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. But 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. So it could be an opportunity. There could be some more inflation on the claim, which would be a slight negative, but nothing -- I would say, at this stage, nothing really significant.
Next question from Andrew Crean from Autonomous.
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 Belgium ], if it completes, your solvency 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? What -- how are we supposed to think about that?
Hello, Andrew. Outside of XL, the nat cat experience was slightly below what we expected. There were no really -- real nat cat events in 1Q. But I would say, we are only at the end of Q1, so let's wait a little bit before drawing conclusions. But if your conclusion is a good start of the year, I would say, yes, from this point of view.On the solvency side, you're absolutely correct that Q2 solvency will go up in a mechanical way because 2 events are already known, which is the impact of the debt of 4 points and the expected 4 points from AXA Bank Belgium disposals. So 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. And 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. But still a bit early to answer this question. Mechanically, you're right. I would see that -- I see that as a positive, I would say, to be comfortably sitting with a sort of caution about our long-term target. And it's a very nice contrast with the situation we experienced last year.
Next question from Thomas Fossard from HSBC.
Two questions. The first one will be on the commitment of AXA to allocate EUR 2 billion to the French recovery participation loan scheme. Could you tell us a bit more how you're going to deploy? What's the expected return? And the risk attached to this new scheme? And how you're going to -- who is going to support ultimately the risk around this scheme? The second question will be related to the cash at the holdco company. So starting from the EUR 4.2 billion reported at the end of the year, could you say there has been any significant positive or negative movement? And maybe if you could update us on your thinking regarding AXA Europe Life restructuring?
So 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, I would say, government. It reminds us a little bit of the system of sponsored loans granted by the banks during the crisis. So it's sort of opportunity and nice way to support the economy at the same stage. So we think that the risk written is favorable to us.Second, at the holdco level, we have -- so 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. And 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.Third, 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 that it's an internal contract, you do whatever you want. I say successfully because we got the authorization from the -- not only from general regulator, but also from the Irish regulator, which is for us something very important. And 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 hundred millions, euros.
Next question from James Shuck from Citi.
So 3 questions for me, please. 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. So 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, 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 know just from the SFCRs that the French Life business hasn't paid a dividend again in 2020. Do you expect to pay a dividend in 2021?
So on 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. And 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. So no change here at all. We just confirm our plan.In terms of solvency. ADC plus 1 point at group level, of course, which means a bit more at the XL level. You -- it's already difficult to isolate one item without looking at the diversification benefits. And this is certainly why you might have expected a bit more, but it's when -- it's absolutely mechanical here. And the solvency situation at AXA XL remains above our risk appetite or -- and in line with the upper range of our risk appetite. So there's absolutely no reason to worry on that. And our capacity to distribute the earnings, whatever level they are in '22 based on the '21 earnings, is confirmed at this stage.The -- you highlight the situation of AXA France. As you know, the cash upstream is managed at group level, so we have various situations between the entities from year-to-year. But the plan for '21 is absolutely in line, I just said that before. With our expectations when we disclosed the plan, it's -- the EUR 14 billion cash upstream absolutely confirmed at this stage. And the solvency situation of AXA France remains much above the risk appetite limit at this stage with 165%.
We don't have any more questions for the moment. [Operator Instructions] There is a new question from Pierre Chedeville from CIC.
Two quick questions. First question regarding 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 ESMA reform, regarding the way of calculating per fees on a 5-year basis instead of 1 year? That's my first question. And my second question is related to the participative loans. I read this morning in Vehicle, 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 is positive. So I wanted to know what will be as a bank or asset manager, you'll make [ a deal now ] with?
Pierre, I fear I will not be able to answer these 2 questions in a very transparent way. The first one is a very precise and technical question on the accounting metrics related to performance fees. And I propose you to discuss with the IR team, which will itself connect with AXA IM to understand to ensure that we give you the proper answer.And on the participating loans, it's true that we are a major market participant, and that this is the -- these loans are distributed by the banks, and we will take our share of this distribution. So I'm not sure to understand exactly what it means to select one partner because it's -- for me, it's -- there is a platform, it's Eurocroissance. And so once again, on this one, please don't hesitate to get back to the IR team if there is something. But 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'll see this morning in the article in Vehicle, you will see a strange article on that and that is huge, 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 [ venom ] between insurers and asset managers, which is mentioned in this article.
Okay. Pierre, I'm sorry, I will not give you more insights and I extend my apologies for this.
Next question from Ashik's Musaddi from JPMorgan.
Just a couple of questions from me. So first of all, like pricing in commercial lines in France was pretty strong at about 4%. I mean 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. And second one is, I mean I'm not sure if I'm going to get the answer for this, but I'll still ask it. You mentioned that you get a lot of cash flows 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 from the subsidiaries to holding company for the group? Any thoughts on that would be great.
I'm not sure I got -- and sorry for that. I'm not sure I got your 2 questions. On the first one, you -- 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 driven by -- all driven by just inflation? Or is it -- there is a bit of extra element on pricing as well?
No. Sorry for that. You are -- it's not an inflation. It's, as you know, the -- it's mainly driven on the large accounts. Certainly, part of it is a sort of impact from the COVID crisis as well. So there is a hardening trend. And it's true these price effects across the whole portfolio; motor, property, construction, liability. So I think it's more than inflation. Your second question, sorry I didn't...
Yes. 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 think 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?
So I will -- so the big part is in 1H for sure. And I will not give you the amount of cash we have today, but it's -- 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.
Next question once again from Andrew Sinclair from Bank of America.
Just one final follow-up for me. Actually, it's about the mandatory convertible bond into EQH share, I think, converts in about 10 days' time, on 15th of May. Just wonder, by my EQH share price means you'll probably have some EQH shares left after the conversion and you'll have some spare ones left? Just really wondered what's the impact on solvency from that conversion? And what would you plan to do with residual EQH shares?
So 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.
Next question once again from Michael Huttner from Berenberg.
One is tricky. I'm going to ask you as delicately as I can. So when you have -- when you arrived as CFO, you probably thought oh my gosh, it's a complicated group and all these moving parts are better to be really careful. And now, clearly after a year in a row, that you not only have 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 of the likely or the confirmed change now, are we going to go for the same cycle again of slight caution 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, is kind of follow-up, I did ask some COVID, you said no, no change. My question was really to know how much of the COVID you've 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?
So Michael, long-term target for cash is EUR 1 billion to EUR 3 billion. So when I speak about the upper end of the range, it's EUR 3 billion, right? So if I say above the upper end of the range, it's above EUR 3 billion. And your question -- your first question, I think it's -- part of the questions you asked relating to the reserve, the COVID, I'm certain will be better answered at the half year because then we will have a closing -- a proper closing of the accounts. It's difficult for me to comment in Q1 on the level of reserves with a high level of accuracy and granularity, as you can understand.And I remind you that we have gone through last year, a very specific year, where we had the COVID crisis. And second, there was the level of earnings at XL, which was not at the level we expected. There's 2 components where -- 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, very close relationship and in a relationship of trust over the last 2 years, I would say.
We don't have any more questions for the moment. [Operator Instructions] It looks like we don't have any more question. Back to you for the conclusion.
So thank you very much to all of you for the quality of your questions, the high attendance. And this was for me my last official con call appearance as a group CFO. And I enjoyed particularly these exchanges with you, and I will miss it. And I'm very happy for my successor, Alban, who is sitting here to me here today. I think he will enjoy it very much. And be sure that there will be a continuity in the messages we are delivering to you in the tone, but also in terms of content. And I'm very confident about us, about our plan, about our capacity to deliver. And I will miss you all. But maybe there will be some roadshows. 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 all for your participation. You may now disconnect your lines.