AXA SA (OTCQX:AXAHF) Q1 2019 Earnings Conference Call May 3, 2019 3:00 AM ET
Bertrand Poupart-Lafarge - CFO, AXA France
Gérald Harlin - Deputy CEO & CFO
Conference Call Participants
Peter Eliot - Kepler Cheuvreux
Andrew Sinclair - Bank of America Merrill Lynch
James Shuck - Citigroup
Michael Huttner - JPMorgan Chase & Co.
Jonathan Hocking - Morgan Stanley
Farooq Hanif - Crédit Suisse
Nick Holmes - Societe Generale
Niccolo Dalla-Palma - Exane BNP Paribas
Ralph Hebgen - KBW
Johnny Vo - Goldman Sachs Group
Oliver Steel - Deutsche Bank
Andrew Crean - Autonomous Research
Unidentified Company Representative
Good morning, everybody, and welcome to AXA's conference call on our activity indicators in the first three months of 2019. I'm pleased to welcome Gérald Harlin, our Deputy CEO and Group CFO, who will taking you through the highlights of the release and will be very happy to take your questions afterwards. Gérald, I hand over to you.
Thank you, Andrew. Hello, and good morning to all. Thank you for joining this call. As you can see from yesterday's release, AXA has delivered another strong performance for the first 3 months of 2019. Our total cost for the news grew by 3% at the group level. Importantly, we grew strongly again in each of our 3 preferred segments. P&C Commercial lines revenues were up 6%, Health revenues were 6% and Protection AP plus 5%. Our balance sheet remains very strong with Solvency II ratio at 190%, well within our target range of 170% to 220%. With that, notice a couple of weeks ago that we changed the outlook from negative to stable. All 3 rating agents now have us on double A- equivalents with the -- equivalents with the stable outlook. Let me now take you through the details of the activity for each of our geography.
In France, total group revenue reduced by 2%, impacted notably by lower sales in line continues business. It was a challenging quarter for Unit-Linked sales in France, following adverse financial market conditions in Q4 2018. Our Unit-Linked APE was down 24%, in line with the overall trend savings market. However, with improved market conditions, we would expect to see this recover. Our newer products in France continues to fare well, contributing to a 12% growth in G/A Savings capital linked APE for the quarter. Overall in France, we grew in our preferred segment with P&C Commercial lines revenue up 1%, Health revenues up 7% and Protection APE up 9%.
In Europe now, total revenues grew by 2%, notably driven by a 4% growth in both P&C Commercial lines and unit health. All countries contributed positively to the growth in these lines. Light savings operation in Europe were impacted by our strategy decision undertaken in Swiss group life to shift from full-value insurance to semi-autonomous contracts, leading to a decrease of 5% in APE. Excluding Switzerland, APE in Europe increased by 7%, following strong sales in Germany, Italy and Spain.
Moving to Asia now. Growth in the region was strong for the quarter with APE up 23%, 2 major trends. First, our Asian current engines are performing well, with new business strongly up in both Japan, 22% -- plus 22% APE; and in Hong Kong, plus 14% APE due to successful Protection products launched last year. We would expect some slowdown in Japan APE in the next quarters due to changing regulation, which would impact one of our key products.
Second, our Asia high potential NBV delivered a strong growth, mostly in China. As you know, we got some seasonality in terms of new business growth due to Chinese New Year sales, investment in NBV margin for the single premium product is low. We also saw and Protection products, which is very profitable and the overall NBV margin of China was 17% for the first quarter of '19. So promising result in Asia with an overall increase of 7% in New Business Value.
Let's move now to AXA XL. AXA XL recorded a strong quarter of selective growth with revenues increasing by 7%. Let's go through the details. Revenues in P&C Insurance grew by 16% with higher volumes, particularly in North America as international professional lines. This includes a large contract in North America Professional. Absent this contract, P&C Insurance revenues would have an increased by 10%. We also grew by 4% in specialty with high volumes and positive price effects in Political Risk and Energy where we remain selective in Marine and London wholesale. Reinsurance revenues decreased by 2% with lower volumes in property lines, reflecting reduced Cat exposed business, partly offset by increased volumes in reinsurance specialty lines.
Price increases for the quarter at AXA itself were 3.3% in Insurance. Of which, 4% active sales in 2.5% at ACS and 1.5% in reinsurance. Pricing momentum is building across most lines. The signs are very aggressive on that one.
Moving briefly to the U.S. now. AXA Equitable Holdings recorded good growth in the first 3 months of 2019 with an overall revenue growth of 5%. Life & Savings APE was up 3% mostly from higher sales ACS or now GMxB variable Unit-Linked products.
We also continue to be very successful in our International businesses. Total revenues were up 6% with once again a strong focus on our growth segments. P&C Commercial lines increased by 7% mainly in Mexico, Colombia and Turkey. Health grew by 10% from positive volume and price effects in Mexico and increased sales in the Gulf. Lastly, at the year-end, revenues were the impacted by the adverse financial market condition in Q4 '18, which combined with the less favorable business mix lead to a decrease of 7% in revenues.
Now moving on to our Solvency II ratio, which as I mentioned earlier was at 190%. This is where we offset the change of 170% to 220%. The change in December was driven by a number of different factors which impacted this quarter. I'll start with the negative impacts. Minus 3 points on unfavorable market conditions, mostly lower interest rate, minus 3 points from EIOPA on both Ultimate Forward Rate and reference portfolio weight, at minus 3 on the effect of transitioning XL from the Bermudian equivalence to the Solvency II standard formula. The capabilities [ph] plus 2 points of stronger operating return net of the accrued dividends for the quarter, plus 2 points on our latest sell-down of AXA Equitable Holdings share in March, plus 1 point lead to the Forex as you will depreciate the main currency of the period.
So to conclude, AXA delivered a strong performance in the first 3 months of the year, pretty much in line with our stated priorities. First, we grew our top line overall with particularly strong growth in all our preserved segments. Second, we are publishing well on the integration of XL. AXA XL grew revenues by 7% in the quarter, notably with discipline and selectivity in reinsurance as a positive outlook in terms of pricing across the board. Third, the successful sell-down in March and the subsequent consolidation of AXA Equitable Holdings was key, as we seen, very much on track for our deleveraging targets.
I'm now ready to take your questions.
[Operator Instructions]. We have our first question from Peter Eliot from Kepler Cheuvreux.
The first thing I wanted ask was on Switzerland actually. I guess your Swiss was slice them savings revenues were down 9% on a comparative basis. But I was wondering if you could give us the reported basis. But I don't think we have the number from last year. I just want to see the move. And I guess on that, now that you've got the benefits of seeing what the initial impacts have sort of been, I'm just wonder if you could give us any further insights into your thoughts on the earnings impact and the outlook for the remaining business there?
Secondly, there were a couple of areas where there was quite big swing. I was wondering if you could give a bit more commentary. France health was down 30%. You said on the not repeated exceptionals. I wasn't aware of what those were so I was just wondering if you could confirm. Japan, Hong Kong Protection, very, very strong. I was just wondering if you could elaborate a little bit on what had caused that. And Germany Motor down 5% seems quite a lot. Again if you had a comment, that would be very helpful.
Okay. So let's start with Switzerland. In Switzerland, what I can tell you, Peter, is that remember last time, we said at that time we said at the time we announced Ambition 2020 the impact would be minus €20 million in term of earnings. So not necessarily today that we are not in line with what played at the time. Second, on Switzerland, you can see that on a reported basis, we are at minus 29% in term of revenues. And you can see the result of the press release. So I say that as far as Switzerland is concerned, it's absolutely in line with what we expected. So that means that we transformed, as you know, our business model in Switzerland in group life from a full value to semi-autonomous. And retention was achieved with the retention rate of 90% of corporate customers which was more or less what we expected, and we still expect to upstream CHF 2.5 billion in '19 -- in 2020 and 2021. So that's mostly.
On the big swings that you mentioned, Peter, and starting with France health at the minus 30%. So as you know, the continuous growth in France and in core business both in domestic and international market but as well as individual business. Healthy growth was very strong last year in the first quarter of 2018, it was plus 39%, and it was mostly coming from group international business. And most notably of the initiation of the partnerships that we had with Oscar in the U.S. in first quarter over 18. But as well the initiation of the coverage of capital states that are leading to a high comparison, high watermark, in fact of the first quarter of '19. So nothing -- as you know, new business from last year continues, and it will continue to contribute towards revenue this year and APE, by definition, reflects the new business returns during the period. But anywhere as we still expect to have a good growth in terms of health and your second question was around Japan and Hong Kong and about and on Protection. It's mostly -- as explained in our press release, it's mostly coming from the -- it's mostly coming from the savings products in China but as well as Hong Kong and Japan.
And in Hong Kong and Japan, you remember that we have -- in Japan, we had a tax savings product, which was a Protection product, combining Protection with savings. We've been extremely successful last year but there had been at change in the tax legislation, which means that we cannot expect going forward such a strong growth. And as far as Hong Kong is concerned, as we said, we have a very good start for the year in Hong Kong, and that it's explained in sure recovery of our production business in Hong Kong. As far as the geometrical is concerned, we -- as you know, there is a global environment, which is quite competitive environment in term of pricing, and we decided not to go along with this price competition, I could say and [indiscernible] that explains why we were at minus 5% in Germany Motor. I'm not going not by this minus 5% to price impact to strong profitability.
That's great. If I could just come back very quickly on Switzerland. The €20 million that you gave last year, I think my understanding was that, that was in respect of the investment spread, which you would no longer get. I don't -- I understood it was sort of based on the same volume of business. So I'm just wondering if the loss of impact of business has had any impact on that. And on the 29%, the 29% was on the total. It was the light in savings particular. I asked you, but I could follow-up with IR.
Yes. No. But what I can tell you is that the €20 million that we announced, I will remind you the profitability of the group pension business in Switzerland, it was more than 75% coming from Protection margin and not from the remaining investments mood -- and that investment was more and more declining for quite reason. So I confirmed this figure --
Next question comes from Andrew Sinclair from Bank of America Merrill Lynch.
Andrew Sinclair from Bank of America. Three for me as usual, if that's okay. First they wanted to get a timing update for getting XL on to your internal model. Secondly, as we stay on the XL, I just wondered there's no news on loss experience and the release for Q1. Q3, you gave an update so maybe a slightly tougher period. And should we see no news as good news and this was just a fairly normal quarter? And thirdly, just a continuing on Japan actually again. Just what proportion of business in Japan is affected by the regulatory changes that you mentioned?
Okay. So as far as the timing of XL internal model, we still are expecting to move the internal model by the end of 2020. You know that it will take some time because we will work within -- we will build our internal model in 2019, and we will then prevent it and we should get it validated by EU CPR, by our own supervisor and it will take a while. That's why it will be by the end of 2020. The loss experience itself I would say that, as you know, we don't comment on the planes activity for any of our entities. But I could say that, overall, we believe that the first quarter was mostly normal, at least in term of cat for XL. Then on Japan, it's roughly 30% of the activity. So that gives you an idea. if your question is at its mostly it's 30% of APE. So meaning that it was 30% of APE, and it's much lower in term of top line. And hence, I don't anticipate a negative impact on the bottom line.
Next question comes from James Shuck from Citi.
James Shuck from Citi. So three from my side. First question, just returning to XL. Gérald, I think you just said you don't tend to update on the profit experience in the quarter. I mean, it would be of helpful to get some kind of update on the XL on a more regular basis I think just going forward in terms of cats and manmade losses. If I hear what you said around that cat I think you said that broadly mutual in the period. Do I assume that's also same for man-made as well because a number of players have seen adverse results in Q1 largely due to man-made or Nat cat so just keen to understand that experience at XL please.
Secondly, on Hong Kong. Hong Kong -- you saw very strong growth in Protection. However, the overall margin stayed the same. Now I would have expected Protection margins to be much stronger so just surprising not to see that coming through as an improved margin.
Okay. As far as that thing is concerned, I would say that there have been -- as you can see, have been some man-made disasters in the first quarter of '19, notably Marine and aviation. By definition, these man-made disasters can be lumpy by nature. And we see no evidence of the trend for the time being. And as a whole, I would say that it's material at is the scale of our group. That's what I can tell you. And on Hong Kong, you mentioned the Protection margin. And but no. The NBV margin in Hong Kong was quite stable because we went from -- last year, we were at 43%. Now we are at 44%. I am referring to the NBV margin. So it's quite stable. So that means that just in order to get such a high level of NBV margin, it confirms that the proportion protectionists strong. So let's leave most of our work in Hong Kong if not from savings, it's quite obvious that the Protection the APE reduction was 56%. The savings is much lower, and it was minus 45%. And globally speaking, it means that the Protection content, which brings most of the value, is quite strong. And just to -- as I told you, just focus on the NBV margin, 14% before versus 43% is satisfactory.
I think. I guess so -- and the margins in Protection would be higher than they would be on the General Account savings product, and therefore, to see such a strong improvement in the Protection sales in the period, I would have expected the margin to actually improved. So it hasn't, and that I don't really understand why.
Okay. No, let's be clear, the Protection, what is the important of the Protection for Hong Kong? It's mostly Protection with savings. So on a constant basis, we did our best to limit the pure G/A Savings product because you know that if there is a strong competition in Hong Kong and will be very high illustration giving -- preventive to the plan and we focused on protection because Protection is a combination. When you have a few savings products, you have an NBV margin, which is maybe 20% and you can get this 44% only combining with a strong content as a strong all percentage of Protection.
Next question comes from Michael Huttner from JPMorgan.
Well done. This is amazing stuff. The first question is on leverage. I wonder if you could give us a bit of an update on the how -- on the progress I know you reiterated that you're on track. But maybe you could say where you are at now. What you're thinking about. I'm particularly thinking about these -- the chances in XL which could be redeemed at any time of course with the use of period. And the second is on the asset by chance [ph]. So you stopped selling and you have reasons. That's absolutely fine. But I just wondered if there's any -- you could give us an update on how you see your smaller countries. Are they performing so well that you want to keep them all? Or are you having another think where we're at in this process?
And finally on the XL. You said reinsurance premiums in nat cat were down. And I just wondered if you could give us an update on what this means for the nat cat exposure. I have in mind that figure is €1.5 billion plus or minus €500,000.
Okay, Michael. So let's start with the revenues [ph]. So you remember that last year, we ended the 2018 with a gearing ratio of 32%. We mentioned, and we confirmed in November and then in Feb when we presented in last year accounts that we were expecting to be between 28% and 25% at the end of 2020. Same plan, I would say. By the end of March, we sold the dividend of €1.3 billion of equity on stock which means that we need to consolidate as soon as -- at the end of the present quarter and half year. That means that the end of June. And it means that since the consolidation will lead us from 32% to 31%. This doesn't take into account the possibly of €1.3 billion and the equivalent would lead to 30%. And what I could say is that I'm quite happy to say that we are well positioned in order to achieve. I cannot tell you, I said last year that we would be between 28% and 28% again we would in sales and further AXA equitable shares. In prices, it's the same. I would say that we would be between 28%, 27% and 25%. That's what you should keep in mind.
So clearly, it's very quick deleveraging, and I'm quite happy that -- and look what I said in my introduction from the rating agencies. The fact that we are now at AA minus confirms the strength of our balance sheet, and that's extremely happy on this situation. The smaller countries, so as you can see the smaller countries are behaving extremely well, and it means that the -- when you take these performance of this country as a whole international graphics and in term of revenues, and I would say this is mostly coming from countries like Mexico, and Mexico it's extremely well in health as well. And as well from the I would say, Columbia, the goal. And Turkey, Turkey is doing extremely well, and it's a good recovery. So a bunch of questions relative to -- didn't change. Of course, there are some very -- some strongly performing countries and it's our intention to -- as I said, two years ago, that this country should be managed for profit. And so long this countries are managed for profit, I have no problem, and we'll keep it. So nothing changed on that side. I'm quite happy to report strong performance on the two countries of international. Then you had a question on each sales and the I think the reinsurance part.
And so I could say that on the reinsurance side on the reinsurance side voluntarily would say we're deciding to slightly decrease our exposure. What we said and what I explained just in back in February about our exposure is still the same. That means that we still have an impact 4% normalized at loads it's still quite -- it's still valid. But I believe that on an opportunity basis, we believe that we decided to reduce sales exposed product line in reinsurance and it's what our shareholders are expecting from us and you can expect us to remain disciplined in terms of underwriting going forward. It's an illustration of our discipline. But at the same time, I'm quite happy to report that nevertheless we are plus 7%, which means that as far as XL is concerned, it's clearly focused on the most profitable line. On top of this, as I said, we still are expecting pricing changes, which is a good sign because we see pricing momentum building across many lines, which is a good news. And we are not the only ones to report this. Just refer to our main competitors. It's the same message.
Next question comes from Jon Hocking from Morgan Stanley.
Jon Hocking from Morgan Stanley. I've got three questions please. Firstly, on France. The fall in Unit-Linked we saw in the sort of first quarter as you say, a reaction to the volatility 14. Can you experience how quickly does that take the reverse given very strong market conditions in Q1? And then on XL, a couple of questions. The comment that you just made in terms of reducing the profit cat exposure in reinsurance and to what extent do you also have cat in the property book. I saw the reinsurance. Are trying to reduce that as well? And then just finally on XL. I just wondered what the logic was for writing the multiyear contract, given that we seem to be going through a period of positive rate momentum?
Okay. As far as, Jon, is concerned, I would say that I expect that there will be a recovery. Look, Europe back to the top. The lag effect, and that's why I'm not worried, and we are still expecting a significant growth going forward. So I'm really expecting a recovery on that side. I just wanted to highlight one point, which is the strong performance of remind you that [indiscernible] is not the General Account because it's -- you cannot surrender before eight years. So if you surrender, you surrender at the market value, meaning that you have more leeway for investing in risky asset. And really, what we have been achieving is that, you know, that the government wants to develop it quite strongly because to date compared to €2 billion of the France and the ambition is to multiply it by 10. That's the ambition of the government going forward. So once we have the growth in the Europe by more than 100% in the first quarter. So it highlights just the fact that we are pragmatic. I think that when we are not only dependent from Unit-Linked. When we have -- due to market decline, slowdown in the Unit-Linked, then we have products and that's a good illustration.
So on that side, I believe that we'll recover. On XL, I would say that we all contracted just because we wanted to maintained it because the next year contract is not -- I'm not expecting this professional contract it's not too contract in itself a lot of potential risk. It's not just like it because so long as we take the whole premium upfront, I think that instead of 7%, we would have been at 5%. And the objective was to be fair on the real level of growth, and that's it. But this I don't have any worry at all from this contract and I'm not expecting activity coming from this contract at all.
Okay. And then on the cat exposure on the nonreinsurance part in XL?
Yes. But nothing specific. I believe that the global trend is the same. Meaning, that we try to marginally reduce this cat exposure in line with our own risk capital. That's what you can expect from us going forward. And I repeat what I said. I think that the cat environment up to now has been quite in line with what we could expect.
Next question comes from Farooq Hanif from Crédit Suisse.
It's Farooq Hanif from Crédit Suisse. Just returning to XL for two questions and then one question on China. Can you just talk about some of the logic of your business mix change in XL? So I get that you -- or shareholders want to reduce volatility. But pricing conditions in part for Property cat are very, very good. And if you start to see the middle of the year in U.S. reassurance renewals also good pricing, would you not take the opportunity there?
So are you just on a general reduction of the reinsurance business? Or would you be opportunistic? Secondly, do you have any comment on the further new staff departures and kind of cheap underwriting roles at AXA XL and your concern if any around that? And lastly, could you comment on growth in China Direct P&C now that you have 100% ownership? Just are the trends there?
Okay. So I would say that on property, if you take the example of North America for property, frankly speaking, we were flat so it's not a real decline. I agree with you that the profitability is good but more generally what we have been going on line plus 8%, and you know that it's a very profitable line. And I could give you many examples like this from the family traditional and so on. So globally speaking, we cannot say that today I think that the price environment is improving but I would not say that it's was strong and hard market. It's not the case yet. Which means that taking into account our own in terms of profitability, I would not say that the property and the property cat business, they came together reinsurance and Direct insurance is at the level where we would like to increase.
So I believe that we had some tailwinds I would say because the price environment is better than before. But there is nothing new, and it's not a shift in what -- compared with what we said a few months ago, not at all. We have a risk appetite, we speak to this risk appetite, we have some guidelines that we shared with you in terms of expecting losses in 10 in 20 years, and we stick to it. And that's it and decide this, we are honestly a big opportunity also, and we are trying to push on lines where we benefit from strong rates increase and from what we can consider is a good profitability.
As far as the departure concern you are referring on both to the best and to the fact that following the set up of some people left it's a handful of people. We have 9,000 colleagues at AXA XL and so a handful of people leaving is not impactful for us and we have every day good people who have a wholesale presently. We are the number one in the commercial line so we are active, and the people are interested, and we are attracting a top talent. And now I would say that, for the time being, compared with the lower rated business, and of course, there will be a competitor, but we are not playing in the same impact that we like to compete with us will be down on the slopes. So we tend not to compare such a company with us.
But to stick to your questions, Farooq, no. We are not at all going by this handful of people leaving. And on China, let's be clear, we didn't close the business yet. The closing will take place in long in China. So it will take place a bit later in the year and so we cannot, I would say, hold the license from our present acquisition because it's too early. So let's wait a bit. I remind you that our objective is still the same in China for P&C, which is to combine a strong and quite good profitable mental business with inbound calls. In order to do this inbound calls, it's less to invest in others. And for the time being of being the majority shareholder didn't start yet. And the second ambition is to develop strongly our Health business. So these are the two strategic domains that we are going to develop so please wait a bit before drawing conclusions, and of course, we will update you on a regular basis on our achievements.
Next question comes from Nick Holmes from Societe Generale.
Can you hear me? Yes?
Just a couple of questions. First is on XL. I wondered how the cross-sell off XL products to AXA's corporate customers is going. And then second question on China. With ICDC, just wondered have you got the right balance between profitability and sales? I know this has been an issue in the past. And obviously, you've made a lot of progress in the first quarter. Wondered is there more progress that you can make to improve profitability?
Okay. Thank you for your question. So corporate customers. So you remember that it's part of our synergies the €0.5 billion in tax of synergies. These cost sales that you are referring to should represent €0.1 billion. As I said in our previous calls or presentations, it's the idea that we take a bit more time whereas I'm comfortable that the synergy and that the expense synergies will be spread over 2 years and within two years, we should be done. Yes, it will take more than say a few years. And for example, this year was relatively small compared with the global objective.
I tell you that taking into account the present right here, we are in line. I think we are in line with our expectations. So quite confident. It will take time. I'll remind you that it will be spread over three years. So most important part of this synergy will be 2020 and 2021. But as long as the 2019 program is concerned, we are on track.
On China. I think you see -- you remember that I think we have 27.5% of ICBC XL. We have always -- we did our best in order to privilege profitability. Just last year, the NBV margin on ICBC was 32%, if I'm right. And I mentioned in my introduction for the first quarter, we are at 17%. So that means we are going. No, I remind you that traditionally, the first quarter production, the first quarter new business is Savings business, pure Savings business. And then we stop the Savings business to switch to more Protection. It's exactly the same framework today. What we do more? For sure, we could do more. And could we improve the profitability? It's still our ambition to improve the profitability of ICBC XL? Yes. But don't think this first quarter the indication of the global profitability for the year.
That's great. Just one very quick follow-up, just very briefly would be XL cross-sell plans into AXA. Can you very, very briefly just give us a flavor for that types of products that you think have potential?
It's a type of product that could be sold in some kind of specialty products you know that the need for MVNO in Europe is always increasing. And there will also be cyber. So that's the example of the type of product that we will sell. So in other words, of course with the privilege products are quite profitable. And so that's mostly.
Next question comes from Niccolo Dalla-Palma from Exane BNP Paribas.
Three questions from me. First one would be last one on XL. Could you help us with a pro forma gross earned revenues of last year just to help us with the base to start from which we will see them like-for-like this year as we are learning the seasonality of the gross premiums? And secondly, if I may, question back on cash, actually based on the reporting of full year but taking the opportunity now. So we see in the Annual Report that internal loans compared year-over-year compared to €3.5 billion of cash on hand that use for the transaction. Could you just confirm that the intention is to build €3.5 billion ? And that you don't need to rebuild €6 billion of cash? Because we clearly can see what's happening at the intermediary holding levels. So just confirm that that's the case.
And secondly, on the cash from Switzerland. Again, in the Annual Report, you mentioned that it will come over the next 3 years. Does it mean that some of the €2 billion slips into 2021? Or is it just, let's say, the original reported into the reported? So we still expect the €2.2 billion coming by 2020?
Okay. So Niccolo, as far as AXA is concerned, what I could tell you is that roughly speaking question what percentage did you achieve roughly? And what the seasonality? So roughly speaking, I could say that in the quarter, we did well. That's what you should keep in mind, roughly speaking. So 1/3 of annual production has been done in the quarter. Internal loans. I'll remind you what I said. So that means that it's part of the -- in other words, one other way to explain it is that when I say that if we see that totality of itself off AXA Equitable Holdings, if we sell this -- the totality of the remaining share, then roughly speaking, I could say that the 25% assumes that roughly speaking internal loans will be back at the same level as before. So -- and as a buffer, as I explained before. So nothing changed on that side. So the 25% is 25%, assuming that, roughly speaking, we would back to pre-XL acquisition in the financial situation. Switzerland cash. No, I don't expect that it will slip to -- and switch to 21. I'm still expecting roughly 50% this year, 50% next year.
Next question comes from Ralph Hebgen.
Ralph Hebgen from KBW. Just one question left for me. It's a bit of a technical thing. I was just surprised to see the premiums in 1 quarter for AXA XL up at €6.1 billion. But if I exclude that one contact you wrote in North America and if you exclude the contribution from Corporate Solutions in AXA are like an estimate, maybe it gets to somewhere in the region of €5 billion in gross premiums and or what is basically the XL stand-alone business. And this is basically my question. If you look at the historical accounts of XL when it was a standalone business, that number the run rate was more like an equivalent of €4 billion in the first quarter.
So my question was down to seeing it looks as if there was €5 million for XL standalone in the first quarter '19 versus what I believe is a run rate of €4 billion. So is there anything which you can add or explain why that dynamic occurred? Are there any perhaps translation? Is just going on that the premiums represented under IFRS? Or was there anything else which might have inflated that production in the first quarter?
No, as I said you have these exceptional premium and we would be back from 7 to 4. I would say that this -- as I said, we have present roughly 50%. I don't believe that it was fundamentally in terms of the previous year. But keep in mind as well that the reinsurance part explain roughly speaking you have 50% of the reinsurance, which is return at the beginning of the year. So that explains the seasonality effect. I could say that, except this, we are more or less provider -- I would say generally, represents maybe 25%, roughly 25% of the year. And then you have the contribution mostly of the traditional lines. But I hope that you've answered all your questions. We could go into more detail. There is no mystery. And we can follow-up with you, Ralph, on the detail of '18. And but on XL there is nothing specific there, but there is the seasonality linked to the combination of the business, which is more or less narrow but with a wide significant share of the premium in January and with the reinsurance business where clearly it's 40% of the business, which is returned roughly in January. That's more or less the way I would explain it.
Next question is from Johnny Vo from Goldman Sachs.
A couple of questions. Just in terms of, obviously, you're seeing some seasonal growth in the XL business. But I guess that's from a top line perspective, how should we think about the evolution of the top line translating to the bottom line? So the growth is there. How will that translate into bottom line for this year and going forward?
In terms of the reinsurance business. Clearly, you're obviously changing the scope of that business somewhat. Is the reinsurance part of XL still core to the group? Or is this potentially surplus to supply?
And the third question is we see further liberalization in the Chinese market. I know that you've recently bought out your joint venture partner. But does this potentially change your attitude to the Chinese market in terms of opportunity?
Okay, Johnny. So XL reasonable growth and the question is already translating into the bottom line. I just wanted first to remind you that we have an objective which was shared with you in November last year, which is to achieve 90% combined ratio for AXA itself, meaning itself not XL plus XL and a contribution to earnings to underline €1.4 billion.
So we didn't change it, and I believe that we are doing everything in order to achieve that and this plan and this top line and this evolution into one aim at achieving this goal. We consider rate as a firm commitment. So that keep in mind that roughly speaking, and you can make your own math, but roughly speaking, if we would more or less normalize because we got some of you asked the question in February, roughly speaking, excluding the -- with the normalized cat last we had the combined ratio which was close to 99 between 99 and 100 that improvement is all the point -- all the synergies the synergy starting first with the cost synergies. It's €0.3 billion pretax, and then we have also reinsurance synergies, €0.1 billion. Then we have the revenue synergies, €0.1 billion that we discussed before that we decide that will go beyond 2020. But the impact shouldn't be very high. And then we have also the asset side. And as I said on question in Feb, we can expect to have synergies -- yes, synergy improvement, I could say, improvement of €0.1 billion.
So and on top of this, we can expect, roughly speaking, to improve to achieve the 95, roughly 2 points of combined ratio improvement and all these business mix and evolution that you can hear are commenting as part of this improvement. Is the reinsurance part core? Yes, it's core. And we're clear on deck. It's not because we want to adjust that if our constant efforts in order to improve our profitability mix that we want to be selective and that's the reason why we can't -- why we went down but I remind you as well that the attractiveness of the reinsurance business is also in insurance linked securities and cat bonds meaning that when the profitability of the cat is not sufficient and productivity and then we transform part of this business into a fee business, which is just the [indiscernible] to redistribute, just like in asset management. So that's the reason why I repeat that for us in this call.
Liberalization in China. Johnny, I could say that for the time being I repeat what I said before answering previous questions. So we are just in the process of closing our move from 50% to 100% [indiscernible] business because we have 27.5% of JV with the number one bank in China who. For the time being, we consider that it's good. And November, I could say that we have to improve the profitability of this business, as I explained before. So that's what I can tell you. So -- and we will in the future. But for the time being, all our map is clear.
Next question comes from Oliver Steel from Deutsche Bank.
General, just one question from me, which is looking through the property casualty price increases. Both at XL and in the rest of the group, to what extent are these price increases beating claims inflation?
I could say that, Oliver, if your question is globally -- is your question on the control lines? Or on the Personal lines?
Well, let's start with the XL first of all.
Okay. As far as XL, it's -- yes, it's -- I think that's when you were the present price increase and we had the -- we were at 3.5% in insurance so 1.5% in reinsurance. But this clearly from this I think this is the price -- this correspond to the price increase for the first quarter but the global outlook is very positive. It's positive now, more positive now which means that yes, look at what I said before. This will help increase our profitability and if all of this I would say would participate to the improvement in terms of combined ratio for XL that I just described before. But as far as the other individual lines are concerned no -- yes, the price increase is -- again, the frequency is still -- the frequency is still globally improving. We have severity frequency and severity -- if I take the price effect globally speaking, except for personal matter and for personal nonmotor, the price effect more than offset the combined effect of frequency and severity. So net positive, it is still true and it is still true for the first quarter. And I'm expecting it still to be true for the full year.
Take in mind the fact that -- keep in mind, sorry, Oliver, that as far as Motor is concerned, we can expect going forward to have a frequency still going down and the severity is mostly due to positive reinsurance due to spare parts that -- globally speaking, we can expect to have, some people would say, could be a runoff but it will be a new kind of run off maybe 20 years or 50 years, but we can expect that it will be positive in some of profitability.
Okay. Sorry just to sort of summarize all of that. So excluding XL for a second, elsewhere, what you're saying is that both across Personal lines and commercial lines, these price increases are -- should lead to an improvement to the attritional loss ratio?
Next question comes from Andrew Crean from Autonomous.
Just one question. Can you say anything about potential loss from events in 2018 on XL?
Yes, Andrew. We could say that we -- of course, some of our peers have been reporting the JV. And I would say that not as you remember if you JV cost €162 million, it was impact of salt tax and net of reinsurance. Globally speaking, I would say that these typhoon increase for the whole market from €9 billion to €12 billion.
So for sure, as a consequence, there will be some impact for us. But it's too early to share any preciseness. I would say that there will be some other further developments and we can anticipate my view today is that we had up on the submit other positive developments, favorable development in other areas could offset this potential impact from share price. That's what I can share with you.
Sir, we don’t have any questions.
Unidentified Company Representative
Okay. Well, thank you very much everybody.
Thanks to all and thanks for your time.
Unidentified Company Representative
Have a great day.
And good day. Have a nice weekend as well. Bye.