For additional information on AXA’s revenues by segment, see Note 21 “Information by segment” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
In Health, the main areas of focus are cost and access to quality healthcare across all seven markets. Various adjacent services have thus been launched ranging from teleconsultation (in United Kingdom, Germany, Italy, Switzerland and Spain) to corporate health portals (in Belgium), with plans of expansion in the next years.
• in Thailand and in Indonesia, AXA launched a range of new Protection, Health and Unit-Linked products;
In the United Kingdom, the Brexit agreement reached in November with the European Union was rejected by a large majority of the UK Parliament on January 15, 2019. While negotiations are still ongoing, the possibility of a no deal Brexit remains.
United Kingdom (incl. Health) 2 8.0 n/a n/a UK General Insurance: Competitor Analytics 2018, Verdict Financial, as of December 31, 2017.
Italy 5 5.6 7 3.7 Associazione Nazionale Imprese Assicuratrici (ANIA) as of December 31, 2017
In connection with the completion of the acquisition, XL Group’s common shares ceased trading prior to market opening on September 12, 2018 and were delisted (2) from the New York Stock Exchange and the Bermuda Stock Exchange.
On May 23, 2018, going beyond their successful 2017 partnership, Uber and AXA announced the expansion of benefits to all Uber’s independent partner drivers and couriers within Europe. Since June 1, 2018, Uber provides Partner Protection – a range of protections including accident, injury, illness, and paternity benefits for drivers and couriers when they are on and off the Uber app in European markets. Uber’s Partner Protection is funded by Uber at no cost to all eligible drivers and courier partners.
Uber and AXA also announced the signing of a memorandum of understanding to build a joint aff inity marketplace for independent workers. The aim was to empower partner drivers and couriers to be able to maintain their independent lifestyle in full security. Through a digital platform, Uber and AXA expect to propose a full set of personalized off ers tailored to the diff erent profiles and needs of each partner driver or courier, notably including injury protection, income protection, family protection, health covers, retirement, and savings. This innovative platform would provide a simple seamless customer experience.
■ T he Model Transformation is expected to result in a temporary reduction in AXA Group underlying earnings of ca. €20 million from 2019, and led to a one-time negative impact in Net income of CHF 495 million (or €428 million (5)) at FY18 linked to the transfer of the portfolio (6) to the Foundations.
■ T he reduction of guarantees on AXA’s balance sheet is expected to lead to a release of local risk capital requirement of ca. CHF 2.5 billion (or ca. €2.2 billion (2) ) in 2019 and to an enhanced cash remittance to AXA Group over the next three years, subject to regulatory approvals.
• USD 0.52 billion or €0.43 billion (1 ) of additional IPO proceeds; ■ O verall proceeds (4 ) of USD 4.02 billion or €3.26 billion (1).
On November 28, 2018, AXA held its 2018 Investor Day in London presenting the following topics: ■ AXA Asia – Gordon Watson, CEO of AXA in Asia, presented his vision and strategy for AXA in Asia where he has attracted local and experienced talents to increase focus on Agency, Health, Brand and China; ■ AXA XL – Greg Hendrick, CEO of AXA XL, presented his vision and priorities, for the newly created AXA XL entity, built around portfolio optimization, profitable growth and volatility management and shared increased synergy targets, an earnings outlook for 2020 and an update on the 2018 natural catastrophe environment; ■ Capital Management – Gérald Harlin – Deputy CEO and Group CFO, provided a financial update, notably AXA’s new capital management policy, with an increased dividend payout range.
This new division has been named AXA XL and will operate under the master brand AXA. Its off erings will be identified along three main lines: ■ XL Insurance – which will comprise XL Group’s insurance business and AXA Corporate Solutions, and will include XL Art & Lifestyle, the combination of XL Group’s Fine Art and Specie business and AXA Art off erings; ■ XL Reinsurance – that will incorporate XL Group’s reinsurance business; ■ XL Risk Consulting – that will incorporate AXA Matrix and XL Group’s Property Risk Engineering GAPS.
(a) Restated: as per the new governance. (b) Changes are on comparable basis.
France (€2,232 million, 34% of total) up €384 million (+21%) on a comparable basis mainly stemming from Group Health (€+365 million) due to the strong development of the international market and Protection (€+34 million), partly off set by Group Pension (€-53 million).
■ O n a constant exchange rate basis and excluding the contribution of XL Group , VBI amortization increased by €15 million (+34%) primarily in Japan (€-10 million) driven by a change in interest rates.
(in Euro million, except percentages) December 31, 2018 December 31, 2017 December 31, 2018/
On October 31, 2018, AXA Germany completed the disposal of a part of its occupational pension business. Life & Savings 2017 comparable basis in Gross revenues, APE and NBV have been adjusted accordingly to exclude the contribution of this business in 2017.
Underlying earnings before tax increased by €81 million (+10%) to €851 million: ■ Property & Casualty (€+19 million or +4%) to €438 million driven by an improved current year combined ratio (-0.3 point) from lower large losses (-0.7 point) and a lower expense ratio (-0.3 point) due to lower acquisition costs, partly off set by higher Nat Cat charges (+0.8 point), combined with more favorable prior year reserve developments (-0.2 point); ■ Life & Savings (€-11 million or -5%) to €190 million due to higher D eferred A cquisition C ost amortization due to a change in interest rate assumptions as well as lower fees & revenues from lower volumes; ■ Health (€+2 million or +2%) to €117 million due to higher volumes while the combined ratio remained stable at 96.3%; ■ Other (€+71 million) to €107 million from Holdings (€+71 million) mainly due to a higher investment income driven by an exceptional distribution from an investment fund and lower pension costs.
Adjusted earnings increased by €48 million (+12%) to €454 million mainly driven by higher underlying earnings.
Profit or loss on financial assets (under fair value option) and derivatives (23) (32)
Underlying earnings before tax increased by €97 million (+28%) to €437 million. On a constant exchange rate basis, underlying earnings before tax increased by €100 million (+29%): ■ Property & Casualty (€+21 million or +9%) to €250 million. On a constant exchange rate basis, Property & Casualty underlying earnings before tax increased by €23 million (+10%) as a higher current year combined ratio (+2.3 points) mainly driven by higher Nat Cat charges, increased severity of Motor damage claims and higher expenses from investments in transformation programs, was more than off set by favorable prior year reserve developments (-3.0 points);
Adjusted earnings increased by €26 million (+15%) mainly driven by higher underlying earnings.
(a) Restated: as per new governance. (b) Net of intercompany eliminations. (c) Other corresponds to holdings.
• Turkey (€+100 million or +16%) to €520 million mainly in Commercial Motor and Commercial Property,
Profit or loss on financial assets (under Fair Value option) and derivatives (1) 10
Each of the major operating subsidiaries of the Group is responsible for managing its own liquidity position, in coordination with the Company. The Company, as the holding company of the AXA Group, coordinates funding and liquidity management and, in this role , participates in financing the operations of certain of its subsidiaries. Certain of AXA’s subsidiaries, including XL Group Limited, AXA Equitable Holdings, Inc., AXA Konzern AG, AXA UK Plc. and AXA Mediterranean Holding SA, are also holding companies and consequently, depend on dividends received from their own subsidiaries to meet their obligations. The Group’s operating (re) insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating subsidiaries must therefore take into account these constraints. Cash positions also fluctuate as a result of cash-settled margin calls from counterparties related to collateral agreements on derivatives. The Company’s statutory results may be significantly impacted by unrealized gains and losses on derivatives used to hedge, in particular, currency and interest rate risks.
In addition, as part of its risk control framework, AXA remains vigilant regarding contractual provisions, such as rating triggers or restrictive covenants in financing and other documentation that may give lenders, security holders or other counterparties, the right to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse eff ect on the Group’s consolidated financial position. At year-end 2018 , AXA had no rating triggers and no financial covenants in its credit facilities.
André François-Poncet (59) Chairman of the Management Board of Wendel SE 89, rue Taitbout – 75009 Paris - France French nationality
Rachel Duan Member of the Board of Directors of AXA (independent)
Expertise and experience Mrs. Doina Palici-Chehab is a graduate of the University of Bucharest (Romania) (Magister Artium) and of the Deutsche Versicherungsakademie of Munich (Germany) (Degree in insurance management (Versicherungsbetriebswirt (DVA)). From 1980 to 1983, she was a teacher for foreign languages in Romania. From 1983 to 1990, she was subject Matter Expert in AGF (now Allianz) in Cologne (Germany). In 1990, she joined the AXA Group as Reinsurance Director of AXA Germany (Germany). In 2000, she became head of Group Reinsurance of AXA Global P&C in Paris (France). From 2010 to March 2013, she was Chief Executive Off icer of AXA Business Services in Bangalore (India). From April 2013 to December 2016, she was Chief Executive Off icer of AXA Insurance Singapore (Singapore) and from July 2016 to December 2016, Chief Executive Off icer of AXA Life Insurance Singapore (Singapore). From January 1, 2017 to June 30, 2017, Mrs. Doina Palici-Chehab was Chief Executive Off icer of AXA Insurance Pte Ltd (Singapore) (new entity further to the merger of the two entities in Singapore). From July 2017 to March 2018, she served as interim Chief Executive Off icer of AXA Asia. As from April 1, 2018, she has been Executive Chairman of AXA Corporate Solutions, AXA Matrix Risk Consultants and AXA ART and assumes the role of Chief Integration Off icer following the acquisition of the XL Group . Since April 2012, Mrs. Doina Palici-Chehab has been the employee shareholder representative to the AXA Board of Directors.
Directorships held during the last five years Chairman: AXA ASIA (SAS), Chambre de Commerce Française (Singapore) Chief Executive Officer: AXA Business Services Pvt. Ltd. (India), AXA Insurance Singapore Pte Ltd (Singapore), AXA Life Insurance Singapore (Singapore), Red Switch Pte. Ltd. (Singapore) Director: AXA China Region Limited (Bermuda), AXA China Region Insurance Company (Bermuda) Limited (Bermuda), AXA China Region Insurance Company Limited (Hong Kong), AXA Financial Services (Singapore) Pte Ltd (Singapore), AXA General Insurance Hong Kong Limited (Hong Kong), AXA Insurance Public Company Limited (Thailand), AXA Insurance Pte Ltd (Singapore), AXA MATRIX Risk Consultants India Private Limited (India), AXA Wealth Management (HK) Limited (Hong Kong), Charter Ping An Insurance Corporation (Philippines), Krungthai AXA Life Insurance Public Company Limited (Thailand), Philippine AXA Life Insurance Company Limited (Philippines), Red Switch Pte. Ltd. (Singapore) Member of the Advisory Board: Singapore Management University Lee Kong Chian School of Business (Singapore) Member of the Management Committee of the General Insurance Association of Singapore to the Board of Governors: Singapore College of Insurance (Singapore).
The Committee in particular focused on the following issues: Compensation issues: ■ the compensations paid to the Chief Executive Off icer, the Company dirigeants effectifs (as defined under the Solvency II) and the members of the Management Committee; ■ the 2018 and 2019 equity allocations (stock options and performance shares) and their performance conditions; ■ the grant of performance shares dedicated to retirement; ■ the Group Remuneration policy; ■ the ex post and ex ante “say-on-pay” for the corporate off icers; and ■ the amount and allocation of the directors’ fees.
(e) In 2018, the increase by 953 in Germany was mainly driven by the full consolidation of Roland Rechtsschutz from October 1st, 2018. (f) Some employees of AXA Bank Belgium provide common services for both insurance and banking activities and vice versa. (g) In 2018, the decrease by 139 in Belgium was mainly driven by the restructuring plan announced in September 2016. (h) In 2018, the increase by 120 in UK & Ireland was mainly driven by Health business growth.
■ ensure compliance of AXA’s practices with all applicable regulatory requirements.
Individual performance is assessed both on (i) the achievement of results for each predetermined individual objective and (ii) qualitative factors, including leadership skills demonstrated by the members of the Management Committee measured against AXA’s l eadership framework.
The assessment of the leadership competencies is based on the dimensions of the AXA l eadership framework, which includes: ■ vision; ■ customer; ■ transform; ■ deliver; ■ develop; ■ lead; ■ collaborate.
(a) This amount includes the part of the variable compensation with respect to 2016, 2017 and 2018 which has been deferred in accordance with the mechanism described on page 133 . The total amount paid depends on performance conditions and may then vary.
These amounts reflect the evolution of the AXA share price and were set at 113% of the deferred variable compensation granted in respect of the 2016 fiscal year and at 92% in respect of the 2017 fiscal year.
(2) Directors’ fees due to Mrs. Martine Bièvre, member of the Board of Directors representing the employees, were, at her request, directly paid by the Company to the “Fédération des Banques et des Assurances CFDT” (French trade union organization).
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 27/04/2011 27/04/2011 27/04/2011 27/04/2011 23/04/2014
End of restriction 24/03/2018 19/06/2020 (b) 06/06/2021 21/06/2022 27/06/2023 Number of shares acquired at 31/12/18 2,591,435 2,233,172 5,455 (e) 0 0 Number of Performance Shares cancelled 142,676 190,213 175,741 97,824 20,412
Pursuant to the AXA Compliance & Ethics Code, corporate off icers and other employees of the Company must refrain from any purchase or sale of AXA securities during specific time periods (“blackout periods”) prior to the earnings releases. These blackout periods generally begin about 30 days before its annual or halfyear earnings releases and 15 days before its quarterly financial information. Depending on the circumstances, these blackout periods could be declared at other times or be extended.
The Compensation & Governance Committee, the role and composition of which are presented in detail in Section 3.1 of this Annual Report, is responsible for, among others, formulating propositions to the Board of Directors regarding the Company’s principles and policy on corporate off icers’ compensation.
In order to ensure that AXA remains aligned with current market practice and regulations, both in France and abroad, within the financial industry, the Board of Directors has decided to continue to use a deferral mechanism with respect to the Chief Executive Off icer’s annual variable compensation.
More generally, to the extent the economic environment in the jurisdictions in which we do business may become characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our financial and insurance products could be adversely aff ected. In addition, in such circumstances, we may experience an elevated incidence of lapses or surrenders on certain types of policies or funds, lower surrender rates than anticipated on other types of products, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could accordingly have a material adverse effect on our business, results of operations and financial condition.
our business mix further towards Property & Casualty lines, particularly commercial and specialty lines and reinsurance. In May 2018, we also conducted the IPO of AEH, and further reduced our stake in AEH to 59.3% following an additional share sale in November 2018; we have also announced our intention to continue to reduce our stake in AEH as market conditions allow. The combined eff ect of the XL acquisition and the eventual disposal of our remaining stake in AEH would result in our overall business mix shift ing significantly, with reduced exposure to life/annuity business lines and significantly increased exposure to Property & Casualty lines, both in our direct business and in reinsurance. In addition, we have announced other major initiatives in the areas of life/health insurance; digital transformation and “insurtech”; increased exposure to Asian markets; and a new capital management policy. All of these initiatives are designed to focus on operational delivery, reduce our exposure to financial risks (including market, credit and life risks), bring us closer to our customers and demonstrate our commitment to sustainable value creation for our shareholders. There can be no assurance, however, that any or all of such initiatives will be successful, or that the process of achieving their implementation will not cause significant disruption to our business operations, management and personnel in particular periods. Any failure to properly manage and successfully implement these strategic initiatives could in turn materially impact our results of operations, share price, and competitive position.
We may also carry out divestitures, such as the IPO and selldown in AEH in 2018, or the announced sale of AXA Life Europe, or reorganization of existing businesses, including AXA Switzerland in 2018, which may have adverse effects on our business, financial condition or results of operations. Such divestitures and reorganizations may not be carried out within the expected timeframe: the anticipated profit and/or positive eff ect on our overall risk profile and SCR may not be realized; or we may incur a loss on such transactions. Divestments of equity participations we hold, including AEH, may also be subject to volatility and other market-related risks, which could impact the carrying value of our remaining stake in such companies, including related goodwill, and adversely aff ect our results of operations. For additional information on the impact of divestitures, acquisitions and other transactions on goodwill, please refer to Note 5 “Goodwill” in Part 5 “Consolidated Financial Statements” of this Annual Report.
imposed new restrictions on data usage/processing (including profiling), disclosure to customers and a stronger enforcement regime, under which competent data protection authorities will be able to fine companies which do not comply with EU rules up to 4% of their global annual turnover. While we have adopted a global Data Privacy Organization/Governance policy designed to manage risks related to data protection, there can be no assurance that our existing or planned data protection rules, including our privacy-related Group Binding Corporate Rules, and governance organization will not need to be updated or replaced to comply with new laws and regulations and regulatory guidance applicable in the European Union or other jurisdictions where we operate or may operate in the future.
The scope of the ARCC covers all of the Group’s operations and include the following: ■ the Group’s overall risk appetite, material breaches of risk limits and proposed remedial actions, the Group’s risk framework as well as action plans proposed to reduce or otherwise modify the Group’s material risk positions when they are beyond defined limits; ■ the Group’s standards and limits to ensure they are consistent with the Group’s defined risk appetite; ■ the Own Risk & Solvency Assessment (“ORSA”) and the other Solvency II reports (Group Solvency and Financial Condition report, Group Regular Supervisory report, Actuarial Function Holders reports); ■ the systemic documentation (Systemic Risk Management Plan, Liquidity Risk Management Plan, Recovery Plan); ■ the major findings identified by internal audit; and
The local PBR units are responsible for producing their respective contribution to the Group consolidated financial statements.
■ the Group Financial Risk Committee is co-chaired by the Group Chief Financial Off icer and the Group Chief Risk Off icer. The Group Chief Investment Off icer is also member of this Committee (please refer to the paragraph “Audit Risk and Compliance Committee” above).
Valuation Risk is also addressed through the use of dedicated teams, within the Group’s asset managers and banks. They independently counter-valuate the derivatives positions so as to achieve appropriate accounting, payment and collateral management. They also challenge the prices proposed by counterparties in the event that the applicable AXA entity wishes to initiate, terminate or restructure derivatives. Such capacity in pricing requires strong expertise, which relies on rigorous market analysis and the ability to follow the most up-to-date market developments for new derivatives instruments.
Information on the Group EOF is disclosed in the “Embedded Value and Solvency II Own Funds report 2018” which is available on AXA Group website www.axa.com.
The Group’s top 50 reinsurers accounted for 87% of reinsurers’ share of insurance and investment contract liabilities in 2018 (versus 77% in 2017).
Suitable Risk Management policies have been put in place with respect to these products: • derivatives are used to help mitigate reserve changes linked to these guarantees due to movements in equity, fixed income and foreign exchange markets. Benefits include Guaranteed Minimum Death Benefits (GMDB), Guaranteed Minimum Income Benefits (GMIB), Guaranteed Minimum Accumulation Benefits (GMAB) and Guaranteed Minimum Withdrawal Benefits (GMWB),
Reputation risk is the risk that an event, internal or external, will negatively influence the stakeholders’ perception and trust of the Company or where there is a gap between stakeholders’ expectation and the Company’s behaviors, attitudes, values, actions, or inactions.
Emerging risks surveillance is organized through a detection process including watch on scientific publications, court decisions, etc. Risks are monitored and classified within a risk mapping constituted of six sub-groups (regulatory & legal, environmental, socio & political, economic & financial, medical and technological). Aft er prioritization of the monitored risks or aft er a warning from an entity, a working group is launched on a yearly basis by GRM to review a specific risk and its potential impact in terms of insurance.
Other debt instruments issued, notes and bank overdraft s (a) 7,104 6,651
Other operating cash impact and non cash adjustment (405 ) 688
Sales of equity instruments and non consolidated investment funds (f) (g) 20,072 39,810
Purchases and/or issues of loans and other assets (g) (h) (21,370) (28,287)
IFRS 9 – Financial Instruments, published on July 24, 2014, has replaced IAS 39. The new standard addresses the following items related to financial instruments: ■ classification and measurement: IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss. A financial asset is measured at amortized cost if both a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”). If both a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale and b) the contractual terms of cash flows are SPPI, the financial asset is measured at fair value through other comprehensive income and realized gains or losses would be recycled through profit or loss upon sale. Assets not meeting either of these categories are measured at fair value through profit or loss. Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in profit or loss. Additionally, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the eff ects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss; ■ impairment: The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition; ■ hedge accounting: IFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The amendments apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”). For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.
(2) adopt IFRS 9 but, for designated financial assets, remove from profit or loss the eff ects of some of the accounting mismatches that may occur before the new insurance contract standard is implemented. During the interim period, additional disclosures are required.
Companies in which AXA exercises control are subsidiaries. They are fully consolidated from the date on which control is transferred to AXA. Under IFRS 10, AXA controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to aff ect those returns through its power over the investee. Only substantive rights (i.e. the holder must have the practicability to exercise them) and rights that are not protective shall be considered. AXA can have power with less than a majority of the voting rights of an investee, in particular through: ■ the proportion of ownership with regards to the other investors; ■ potential voting rights; ■ a contractual arrangement between the investor and other vote holders; ■ rights arising from other contractual arrangements; or
• debt held by structured bond (primarily Collateralized Debt Obligations) funds controlled and consolidated by the Group; ■ portfolios of managed financial investments whose profitability is valued on a fair value basis: mainly securities held by consolidated investment funds, managed according to the Group Risk Management policy (“Satellite Investment Portfolio”, see definition below).
Jurisdictions where participating business is significant are Switzerland (for group insurance policies), Germany and France where the minimum is set to 90%, 90% and 85% respectively, of a basis which may include not only financial income but also other components such as in Germany or Switzerland. Participating business is less prevalent in the United States or in Japan.
Revenues from other activities mainly include: ■ commissions received and fees for services relating to Asset Management activities; ■ insurance companies revenues from non-insurance activities, notably commissions received on the sales or distribution of financial products; and
AXA XL: T he AXA XL market mainly consists of Property & Casualty activities at XL Group, as well as AXA Corporate Solutions Assurance and AXA Art. XL holdings are also included.
The total goodwill Group share amounted to €16,691 million as of December 31, 2018 and €14,285 million as of December 31, 2017.
ALL CASH-GENERATING UNITS (CGU) The results of cash flow projections exceed the carrying amount of each related cash-generating unit or group of units.
These intangible assets are amortized over the residual life of the contracts except the syndicate capacity that is deemed to have an indefinite useful life.
Deferred Acquisition Costs relating to Life & Savings (a) 23,798 21,935
Debt instruments available for sale 4,228 4,184 4,184 93 137 4,199 4,216 4,216 144 126
Investment in real estate properties - 1,435 - 1,435 1,435 - 1,456 - 1,456 1,456
Financial investments and loans designated as at fair value through profit or loss 31,014 20,378 15,167 66,560 66,759 32,377 20,033 12,773 65,183 65,313
Since the 2008 financial crisis, a significant volatility related to corporate spreads has been observed leading to transfers between level 1 and 2 with both yield and bid ask spreads widening and narrowing from one closing to another. Since 2010, this volatility has also been experienced on European government bonds with yields and bid ask spreads widening significantly leading to transfers from level 1 to level 2 and then also subsequent sustained improved market liquidity for certain government issuers resulting in transfers back to level 1 from level 2. As of December 31, 2018, Irish, Portuguese and Spanish government bonds were transferred from level 2 to level 1. Indeed, a sustained improvement has been observed over the previous years and current year on the market indicators especially on bid/ask spreads of these sovereign bonds reflecting an increased market liquidity of these securities.
(1) There are external ratings corresponding to the average of the three main rating agencies, which are S&P, Fitch and Moody’s.
Total amount of loans that pass the SPPI test and for which the credit risk information is based on ratings 13,393 13,077 11,875 11,832
(a) Includes increase in capital, dividend distributions, changes in consolidation method, and impacts of revaluation to fair value of financial investments in shareholders’ equity.
DIVIDENDS PAID On April 26, 2018, Shareholders’ Meeting, shareholders approved a dividend distribution of €1.26 per share corresponding to €2,998 million with respect to the 2017 financial year.
Reinsurers’ share in insurance and investment contracts’ liabilities (E) 4,563 1,258 251 13,641 5,251 1,057 (270) 25,751
Total insurance and investment liabilities (D = A+B+C) 573,569 104,650 678,219 590,295 66,643 656,938
Reinsurers’ share in insurance contracts liabilities 12,280 13,358 25,637 8,272 4,730 13,002
Gross reserves for unpaid claims and claims expenses developed initially at the booking date 44,046 44,470 46,367 45,946 46,440 47,031 49,868 51,965 53,286 52,973 82,134 Gross reserves for unpaid claims and claims expenses developed in 2018 adjusted for changes in exchange rates and scope of consolidation 41,450 38,775 39,138 39,752 40,623 41,560 43,040 43,728 45,132 52,912 82,134 Cumulative payments at: Eight years later 20,990 19,093 19,833
TOTAL GROSS CLAIMS RESERVES AND OTHER RESERVES FOR PROPERTY & CASUALTY 84,134 55,165
(b) Includes reserves inward reinsurance (€1,033 million in 2018, €1,029 million in 2017).
At year-end 2018, key data relating to asbestos claims were as follows: (in Euro million)
Liabilities arising from insurance and investment contracts 32 ,792 87 ,403 513 ,163 633 ,358 28,551 72,764 506,306 607,620 of which Life & Savings liabilities relating to contracts including a surrender option with some surrender benefit before maturity 14 ,481 57,692 354,384 426 ,557 14,929 52,438 352,491 419,858 14.10.2 Insurance and investment contract liabilities – discount rates
Amounts are presented excluding the impact of derivatives on insurance and investment contracts (presented in Note 20.4) and excluding liabilities related to unearned revenues and fees, and to policyholders’ participations. Liabilities relating to contracts where the financial risk is borne by policyholders are also excluded. (a) Subject to liability adequacy tests.
■ many of the features would themselves qualify as insurance contracts under Phase I (IFRS 4).
The fair value option is used to measure the fair value through profit or loss of certain banking liabilities. As of December 31, 2018, the carrying value and fair value amount and the related contractual amount due at maturity for such liabilities were €2,125 million and €1,997 million respectively (€2,710 million and €2,483 million at December 31, 2017), including the Euro Medium Term Notes.
• €707 million as of December 31, 2018 (€808 million as of December 31, 2017) mainly based on observable market data inputs and are considered as level 2 fair values, and
Provisions for risks and charges included the following items: (in Euro million) December 31, 2018 December 31, 2017
As on December 31, 17.2 FAIR VALUE MEASUREMENT OF FINANCING DEBT
Other debt instruments issued, notes and bank overdrafts excluding TRS (a) 2,739 3,043
Income from operating activities, gross of tax expenses (excluding result from investments consolidated using equity method) 1,243 7,421
Deferred tax through reserves relating to the change in fair value of financial instruments available for sale and financial liabilities measured at fair value through profit and loss that are attributable to changes in own credit risk 5,615 9,800 (4,186) (5,520)
(€2,862 million), the United States (€2,248 million), Switzerland (€1,616 million) and Belgium (€769 million).
(a) The movements through shareholders’ equity mainly concern net investment hedge in the Company, revaluation to fair value of financial investments through shareholders’ equity and employee benefits actuarial gains and losses.
AXA uses derivatives primarily to hedge various risks stemming from both sides of the balance sheet in the context of its Asset Liability Management (ALM) strategy in insurance companies, as well as holdings and banks. Notional amount of such hedging strategies amounted to €443.6 billion as of December 31, 2018 (€453.5 billion at the end of 2017) and includes: ■ managing interest rate exposures on fixed maturity investments, long-term debt and guaranteed interest rates on insurance contracts; ■ reducing foreign-currency exposures on foreign-currency denominated investments and liabilities; ■ managing liquidity positions (including the ability to pay benefits and claims when due) in connection with Asset Liability Management and local regulatory requirements for insurance and banking operations; ■ limiting equity risk; ■ limiting credit risk with regard to certain investments in corporate debt instruments.
As of December 31, 2018, the notional amount of equity derivative instruments totaled €43.4 billion (€38.0 billion at the end of 2017). Their net fair value totaled €1,660 million as of December 31, 2018 (€1,966 million at the end of 2017). AXA mainly uses (i) equity option contracts (72% of total notional amount of equity derivative instruments), (ii) equity futures and forwards (15%) and (iii) equity swaps (13%).
For more information about the Group’s segments identification, please refer to page 253 to 257 of Note 3 “Consolidated statement of income by segment”.
Transversal & Central Holdings 2,684 2,640 of which direct premiums 89,160 86,198 of which reinsurance assumed 7,149 5,852 of which fees and charges on investment contracts with no participation features 249 211 of which revenues from other activities (including revenues from banking activities) 6,316 6,288
AXA operates various defined post-employment benefit plans mainly in the United Kingdom, the United States, Germany, Switzerland, France and Belgium.
Benefits directly paid by the employer 300 310 44 38 344 348 Benefits paid by Separate Assets 121 134 1 1 122 135 Net transfer In/(Out) (including acquisitions, disposals and reclassifications) (89) 0 (67) (0) (156) Actuarial gains and losses recognized in OCI 329 894 34 (5) 362 889
Moreover, caps on inflationary increases are in place to protect the plans against extreme inflation in the United Kingdom and in the United States.
Amount subscribed by employee (in Euro million) 39.8 29.0 37.5 40.6
S hares to designated senior executives in France. Under this plan, beneficiaries of Performance Shares have the right to receive at the settlement date, a certain number of AXA shares based on the achievement of a performance condition related to the average AXA Group Solvency II ratio calculated during the performance period of three years.
During the fourth quarter of 2011, AB amended all outstanding year-end long-term incentive compensation awards of active employees, so that employees who terminate their employment or are terminated without cause may retain their awards, subject to compliance with certain agreements and restrictive covenants set forth in the applicable award agreement, including restrictions on competition, employee and client solicitation, and a clawback for failing to follow existing Risk Management policies. This amendment eliminated employee service requirement but did not modify delivery dates contained in the original award agreements.
The Group calculates a basic net income per ordinary share and a diluted net income per ordinary share: ■ the calculation of the basic net income per ordinary share assumes no dilution and is based on the weighted average number of outstanding ordinary shares during the period; ■ the calculation of diluted net income per ordinary share takes into account shares that may be issued as a result of stock option plans. The eff ect of stock option plans on the number of fully diluted shares is taken into account only if options are considered to be exercisable on the basis of the average stock price of the AXA share over the period.
In France, AXA ordinary shares are included in the principal index published by Euronext Paris, the CAC 40 Index, which comprises the 40 most capitalized and actively traded shares on Euronext Paris. AXA ordinary shares are also included in Euronext 100, the index representing Euronext’s blue chip companies based on market capitalization and liquidity and in EURO STOXX 50, the blue chip index comprised of the 50 most highly capitalized and most actively traded equities of the main industry sectors of the eurozone. In addition, AXA ordinary shares are also included in STOXX® Europe 600 Insurance, the insurance sector index for European companies and in the EURO STOXX Sustainability 40, the index representing the largest sustainability leaders in the eurozone in terms of long-term environmental, social and governance criteria.
(b) AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle. (c) These shares will be entitled to vote when they cease to be treasury shares (e.g. upon their sale or other transfer to an unaff iliated third party). (d) Treasury shares as indicated in Note 13 “Shareholders’ equity and minority interests” in Part 5 – “Consolidated Financial Statements” of this Annual Report. (e) Source: Euronext Notice of January 11, 2019.
Policyholders’ liabilities are currently accounted for according to IFRS 4, which generally allows the use of a wide variety of accounting practices for insurance contracts, reflecting diff erent national accounting requirements, and the continuation of accounting policies applied prior to conversion to IFRS. On May 18, 2017, the IASB issued IFRS 17 – Insurance Contracts, which will replace IFRS 4, finalizing a long-standing project of the IASB to develop a single, consistent approach to the accounting for insurance contracts. In particular, IFRS 17 requires insurance obligations to be accounted for using current values, instead of historical costs. Subject to adoption by the European Union, IFRS 17 is scheduled to become effective for annual periods beginning on or aft er January 1, 2021. On November 14, 2018, the IASB voted to propose a further one-year deferral to January 1, 2022 of (i) the eff ective date of IFRS 17 and (ii) the expiry date of the temporary exemption from applying IFRS 9. This deferral and other proposed amendments to IFRS 17 remain subject to the final approval of IASB and their adoption by the European Union.
In particular, Chief Financial Officers must ensure that (re) insurance policies entered into represent a true transfer of risk and that their status as (re)insurance contracts could not be subject to challenge. Business between Group companies must be transacted at market prices where a market price exists, or in the absence of market prices, must be supported by formally documented justification for the charge made.
■ Health risk and disease prevention: as a trusted partner of our clients and with our expertise as risk managers, we develop our health risk prevention eff orts to achieve positive outcomes for public health.
Our Community Investment Survey, as described under Chapter 7.4, covers 73% of AXA’s FTEs.
Through the Organization and Talent Review (OTR) that is in place since 2005, AXA performs a systematic review of the organization structure required by its current business and its future needs. OTR is the review of the senior leadership roles in all AXA markets and functions. Commitments, embedded in recruitment, talent, performance and learning and development processes, have been taken to guide the way AXA employees work and interact with each other and take the management of their career in their own hands. AXA ambitions to act on 5 key dimensions of the employee lifecycle: ■ employer brand, to continue attracting the workforce of tomorrow, and integrate candidate satisfaction in our recruitment strategy, both internally and externally; ■ resourcing, where qualified professionals are enablers of the decision making in the business; ■ manage the performance of our employees and grow high potentials, by putting in place systemic performance and
Finally, for the sixth time, in 2018, 140 people, mainly senior executives, gathered to work and reflect on “Inclusive Leadership: how can we act as catalysts for change?” to demonstrate that diversity and inclusion remains a priority at AXA and discuss on areas for progress.
■ All Executives 3,657.6 ft e 3,203.2 ft e ■ All Professionals 46,263.1 ft e 14,804.2 ft e ■ Associates 49,213.7 ft e 73,102.3 ft e
Entries 4,368 emp. +26.1% 3,464 emp. ■ Number of external recruitments (including re-hires) 4,265 emp. 3,336 emp. ■ Number of fixed-term contracts transformed into open-ended contracts 98 emp. 94 emp. ■ Number of entries following mergers and acquisitions 5 emp. 34 emp.
Movements of salaried workforce with fixed-term contract Net headcount evolution of salaried non-sales force (entries versus departures) 2,212 emp. 1,828 emp.
Internal mobility rate of salaried workforce 8.9 % -1.6pts 10.5 %
AXA also divested from the main oil sands producers, defined as producers with at least 30% of their reserves based on oil sands. The production volumes of oil sands is largely influenced by the development of certain pipelines. As a result, AXA also divests from the main associated pipelines players.
AXA’s environmental reporting is part of its broader management system which includes internal controls, processes, and progress on target deployment. The data collected and reported via the reporting is validated locally by the Chief Financial Off icer of the entities. Further, AXA conducts group and entity level audits to ensure data quality as well as measures the eff iciency of the local environmental management systems. The accuracy of the data and indicators reported is measured by conducting the following steps: ■ review of Environmental Protocol and reporting procedures at Group and entity levels; ■ data review and detailed tests on selected entities, which includes testing data accuracy, verifying local reporting processes and feedback on reported data; ■ data review consolidation covering all indicators, as well as consistency and control tests carried out by the Group and our auditors; ■ audit review of the qualitative information (organization, policies and actions), as well as quantitative information (indicators, using sampling techniques). The audit covers all the entity data that is used to feed the environmental information published in this report. Please refer to S tatutory Audit statement at the end of Chapter 7.
AXA’s Group Compliance and Ethics Guide seeks to establish Group-wide rules and guidelines to ensure that AXA Group companies and employees have a common understanding of the compliance and ethical standards the Group requires. The Guide covers a variety of matters, including specific rules concerning conflicts of interest, transactions involving AXA securities confidentiality, control of sensitive information and record keeping. The Guide is available on the Group’s website (www.axa.com). In 2019, a new AXA Group Compliance & Ethics Code was launched. The Code includes some subjects that have become increasingly important in recent years; these include Health & Safety at work, Protection and Responsible use of Customer Data, Engagement with Social Media, Prevention of Discrimination and Harassment and Fair and Professional Treatment of customers. The content and style of the Code has also been revised to make it more accessible and easier to reference.
AXA is the first insurance group to have adopted Binding Corporate Rules (BCR), an internationally recognized standard for the protection of personal data. They were approved by the French Data Protection Authority (CNIL) and 15 other EU Data Protection Authorities (Germany, Austria, Belgium, Spain, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland, Czech Republic, Romania, United Kingdom, Slovakia, and Sweden). Today, 315 AXA entities have signed up to the BCR. AXA has also published a “Data Privacy Declaration” with a clear commitment to not sell client data to third parties.
It sets out, subject to local law and regulation, certain guiding principles and Group-wide policies designed to ensure that the AXA Group companies and their employees have a common vision of the AXA Group’s standards related to human rights and the environment and operate accordingly.
The AXA Group is also committed to using information relating to an identified or identifiable physical person (“Personal Data”) in a responsible manner and safeguarding employee and client privacy, to ensure responsible, transparent and ethical treatment of Personal Data in line with the applicable legislation on Personal Data protection. AXA’s Data Privacy Declaration, the public statement covering AXA’s network of privacy-related policies, including the fact that AXA Group undertakes not to sell Personal Data of its customers, is available on the AXA Group’s website.
Other shareholders’ equity, including the undated deeply subordinated debts totaling €4,032 million, compared to €4,640 million in 2017, due to a debt repayment of $750 million (or €569 million).
AXA BANK BELGIUM (ex AXA BANK EUROPE SA) 636,318 396,594 100.00% 915,000 25, Boulevard du Souverain - 1170 BRUXELLES - Belgium - - 313 Terrasses de l’Arche - 92727 Nanterre - France - - 313 Terrasses de l’Arche - 92727 Nanterre - France - - 313 Terrasses de l’Arche - 92727 Nanterre - France - - AXA CORPORATE SOLUTIONS ASSURANCE 190,069 694,698 98.75% 489,251 61 rue Mstislav Rostropovitch - 75832 Paris - France - - AXA EQUITABLE HOLDINGS INC (567,577) 5,042,764 59.25% 7,364,854 1290 Avenue of the Americas -New York, NY 10104 - Etats-Unis - - AXA EQUITY AND LAW PLC 1,140 2,192,091 99.96% 1,133,234 5 Old Broad Street - EC2N 1AD - LONDON - Royaume-Uni - - -
The fair value of investments in subsidiaries and aff iliates is their going concern value for the firm. This may be determined as a function of (i) their share price, or (ii) their shareholders’ equity (including unrealized gains) or (iii) prospects for the subsidiary.
Unrealized foreign exchange gains amounted to €1,099 million at year end, compared to €1,253 million at December 31, 2017. This item reflects the eff ects derived from the revaluation of foreign currency denominated assets and liabilities at the closing exchange rate. It decreased mainly due to an unfavorable impact of the US dollar on debts.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with French accounting principles and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
• Italy (insurance activities and holding); ■ Asia, consisting of: • Japan (insurance activities),
• reserves relating to the change in the fair value of financial investments available for sale are excluded from the average shareholders’ equity.
This ratio is calculated as per Solvency II, and is equal to the total amount of the Group’s Eligible Own Funds (“EOF”) divided by the Group’s Solvency Capital Requirement (“SCR”). The solvency capital requirement, i.e., the denominator of the Solvency II ratio, is set at a level ensuring that insurers and reinsurers are able to meet their obligations towards policyholders and beneficiaries over the next 12 months, with a 99.5% probability. The solvency capital requirement can be calculated either based on the standard formula or an internal model. The Group is using an internal model.
Assets under management (AUM) are defined as the assets whose management has been delegated by their owner to an asset management company such as AXA Investment Managers and AB. AUM only includes funds and mandates which generate fees and exclude double counting.
Report of the Statutory Auditors on the financial statements of AXA, the parent company 470 to 473