Group’s solvency position, as well as available surplus; ■ a change in foreign-exchange rates would have limited impact for the operating units since foreign-currency commitments are matched to a large extent by assets in the same currency or covered by hedges, but it could aff ect the earnings contribution in euros; ■ furthermore, Health and Property & Casualty activities are subject to inflation which may increase the compensation payable to policyholders, so that the actual payments may exceed the associated reserves set aside. This risk can be significant for long-tail businesses but is managed through regular pricing adjustments or specific protections against peaks of inflation.
AXA Group’s exposure to market risks is covered by AXA Group’s
Management” of this Annual Report and is taken into account in AXA’s Liquidity Risk Management framework (please refer to
This approach aims to allow reacting swift ly in an accurate and targeted manner to changes in financial markets, political and economic environments in which the Group operates.
AXA Investment Managers for operating units; ■ a regular monitoring of the financial risks on the Group Solvency ratio; and
As regards the market risks relating to the management of holding companies’ foreign exchange and interest rates exposure, the following Risk Management measures have been defined and implemented.
For the purpose of optimizing the financial management and control of financial risks linked to AXA SA and its sub-holding companies, the Group Corporate Finance and Treasury department has defined a methodology to monitor and assess financial risks.
The policy on the management of holding companies’ interest rate risk aims at monitoring and limiting the potential mediumterm variation in interest expenses and consequently at partially protecting future levels of interest expenses against movements in interest rates. Regarding foreign exchange risk, the implemented policy’s objective is to limit variations in net foreign currencydenominated assets resulting from movements in exchange rates. The purpose of the policy is therefore to protect partially or in full the value of AXA’s net foreign-currency investments in its subsidiaries and thus reduce the variability of Group consolidated shareholders’ equity against currency fluctuations, but also of other key indicators such as liquidity, gearing and solvency ratio at Group level. In 2020, the Company has adjusted the protection of its net foreign-currency investments in its main subsidiaries outside the Eurozone to focus it on near term expected cash flows. These adjustments have allowed to maintain a similar level of protection on key financial indicators.
AXA regularly monitors its exchange rate hedging strategy and will continue to review its eff ectiveness and the potential need to adapt it taking into account impacts on earnings, value, solvency, gearing ratio and liquidity.
The Group Corporate Finance and Treasury department is in charge of producing reporting data that consolidate interest rate, foreign exchange and liquidity risk exposures, as well as the interest expenses of AXA SA and its sub-holdings. This reporting also includes medium-term forecasts.
AXA Group analyzes sensitivities to movements in interest rates and equity markets looking at two diff erent measures: ■ sensitivities of the Group Eligible Own Funds (“EOF”), as described below; ■ sensitivities of Group Solvency ratio (please refer to Section 4.2
AXA Group Risk Management is monitoring EOF sensitivities and the EOF is derived from IFRS equity.
Holdings, Inc. This metric however reflects the IFRS accounting value of liabilities and not their economic value which is better reflected within Solvency II EOF.
IFRS reserves to best estimate liabilities (€+20.3 billion) and the risk margin (€-11.8 billion); and
Group EOF are then the sum of Unrestricted Tier 1, Restricted
All sensitivities are presented net of tax, and where applicable, net of policyholders’ participation.
2019 interest rate sensitivities for Life & Savings business (% of
of L&S EOF) of 7% to 25% higher value and -7% to 25% lower value reflect mainly the impact of guarantees and profit-sharing rules, along with some hedging programs to limit potential losses. The impacts of equity market value changes can come from General
A 10% change in foreign exchange rate as at December 31, 2019 and December 31, 2018 between euro and main functional currencies of the Group (USD, JPY and CHF) would have had the following impacts on Shareholders’ equity Group share and underlying earnings
■ France: 32% of Group assets at the end of 2019 (24% in 2018): In France, AXA was exposed to exchange-rate risk for a total amount of €22,994 million at the end of 2019 (€19,424 million in 2018) held both directly and indirectly through investment funds partly invested in foreign currencies (US Dollar: €18,743 million versus €16,134 million in 2018, Pound Sterling: €2,618 million versus €2,781 million in 2018 and Japanese Yen: €1,327 million versus €248 million in 2018). This exposure allows AXA France to diversify its investments and enable policyholders to benefit from the performance of international financial markets. AXA France off sets its exposure to exchange-rate risk by using foreign exchange forwards and other derivatives (notional of €20,406 million versus €15,632 million in 2018).
■ Europe: 34% of Group assets at the end of 2019 (30% in 2018): Switzerland
US Dollar) due to limited investment possibilities in the Swiss market. A major portion of the exposure is hedged back into Swiss
Francs with foreign exchange swaps, options and forwards. At the end of 2019, Switzerland foreign exchange exposure amounted to €16,751 million (€24,473 million in 2018) which represented 27% of total assets (28% of total assets in 2018), of which €11,971 million were hedged (€21,838 million in 2018).
In Germany, AXA held €10,945 million investments denominated in foreign currencies at the end of 2019 (€9,417 million in 2018)
both directly and indirectly through investment funds with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments were mainly denominated in US Dollar (€8,500 million versus €7,363 million in 2018) and in Pound Sterling (€1,242 million versus €1,232 million in 2018). AXA Germany controls and limits its exchange-rate risk by using foreign exchange forwards for a notional amount of €7,059 million (notional €6,701 million in 2018), currency swaps for a notional amount of €1,003 million (notional €853 million in 2018), foreign exchange collars for a notional amount of €1,703 million (notional €1,194 million in 2018) and congruent coverage (matching assets and liabilities denominated in the same currency) for €17 million (€29 million in 2018).
In the United Kingdom, AXA is exposed to exchange-rate risk through its AXA Insurance and AXA PPP Healthcare subsidiaries, which operate in Pound Sterling, and through AXA Ireland which operates in Euro. It has diversified its investment portfolios in line with Asset & Liability Management objectives. As at
(€303 million) in Ireland. This exposure is held both directly and indirectly through investment funds (CLO funds, Alternative Credit funds, Assets Backed Securities, Commercial Real Estate loans and other investment funds). Of this exposure, €3,728 million are hedged through foreign exchange forwards, options or cross currency swaps, with a further €304 million of exposure hedging liabilities held within the business.
In Spain, AXA entities held investments in foreign currency for €913 million in 2019 (€907 million in 2018), directly and indirectly through physical assets. These investments are mainly in US
■ United States: 0% of Group assets at the end of 2019 ( 21%
Note 3 “Consolidated statement of income by segment” in Part 5
Japanese market in order to diversify and optimize investments and enhance returns. At the end of 2019, the total assets denominated in foreign currencies held both directly and indirectly through investment funds (mainly US Dollar) represented an amount of €9,517 million (€9,799 million in 2018) excluding assets backing unit-linked contracts. The corresponding exchange-rate risk was fully hedged through the use of derivatives.
AXA Hong Kong holds investments denominated in foreign currencies €21,434 million (€14,921 million in 2018), both in directly and indirectly through investment funds.
(€14,064 million in 2018), partly in congruence to the technical liabilities denominated in US dollar (€8,434 million) and the remaining in order to take advantage of the US bond market which is more developed than the HK bond market one notably in terms of liquidity and available maturities. Exchange-rate risk exposure is hedged using foreign exchange forwards and cross currency swap for a notional amount of €8,873 million
■ Transversal and Central Holdings: 8% of Group assets at the end of 2019 (6% in 2018): AXA SA & other Central Holdings
Note 4 “Financial and insurance Risk Management” in Part 5 -
Information in this section should be read in conjunction with the paragraph “Credit and liquidity-related risks” in the Section 4.1
(excluding assets backing separate-account products where the financial risk is borne by policyholders) as well as by banks and holding companies; ■ receivables from reinsurers resulting from reinsurance ceded by the AXA Group; and
Solvency Capital Requirement metric, except for XL entities, as detailed in the paragraph “Internal Model” in the Section 4.2
A specific set of limits take into account all AXA Group exposures on a given ultimate shareholder through debt securities, cash, equity, derivatives, reinsurance receivables, insurance and assumed reinsurance commitments. They aim at managing globally the default risk of a given counterparty.
CIO teams. The Group Financial Risk Committee is regularly kept informed of the main credit risks.
As at December 31, 2019, the breakdown of the debt security portfolio (€429 billion) by credit rating category was as follows: BBB
AA, 24% in A, 24% in BBB, 2% in BB and lower, and 3% in other.
The AXA Group, as part of its investment and credit r isk m anagement activities, uses strategies that involve credit derivatives (mostly Credit Default Swaps or CDS), which are mainly used as an alternative to debt security portfolios, when coupled with government debt securities, but also as a protection on single corporate names or specific portfolios.
As at December 31, 2019, the nominal amount of positions taken through credit derivatives was €18.1 billion (1) of CDS (cumulated notional amounts of €4.0 billion protections bought and of €14.2 billion protections sold), which can be broken down as follows: i. €3.94 billion of CDS protections bought to hedge credit risk with regard to certain investments, mostly in corporate bonds; ii. €0.05 billion of CDS protections bought used to lock the liquidity premium through purchasing bonds and CDS
and Hong Kong (€0.02 billion); iii. €14.2 billion of CDS protections sold as an alternative to the direct purchase of a corporate bond mainly by holding government bonds and at the same time selling protection on very good quality names. This type of ALM strategy is oft en implemented to compensate for the lack of depth or liquidity in some markets in order to take synthetic credit risk.
As at December 31, 2019, the breakdown of these CDS’s underlying debt securities gross exposure by rating was as follows: BBB
(1) This figure represents an accounting view i.e. 100% of assets held directly and in consolidated investment funds “Core Investment Portfolios”, and excluding credit derivatives in non-consolidated investment funds, in line with Note 20 to the Consolidated Financial Statements. The Group holds €21.0 billion (notional amount) of credit derivatives as total exposure including consolidated investment funds “Satellite Investment Portfolios” (€2.6 billion).
As at December 31, 2019, the breakdown of counterparty exposure coming from OTC derivatives by rating was as follows (positive fair value net of collateral received): A+
To manage the risk of reinsurers’ insolvency, a Security Committee is in charge of assessing reinsurers’ quality and acceptable commitments. The Committee is u nder joint authority of GRM
and AXA Global Re. This risk is monitored to oversee the credit reinsurance exposure of the Group and to avoid any excessive exposure to any specific reinsurer. The Group Security Committee meets monthly – and more frequently during renewal periods –
AXA Group’s exposure to the risk of default by any of its reinsurers.
AA, 18% in A, 1% in BBB, 21% in BB and lower and 13% in others.
Among those exposures to ca. 21,000 obligors, the larger ones are reported monthly on a per name basis and are aggregated wherever relevant with exposures coming from other sources, mainly investments, to maintain concentrations under control.
Utilizations of Group limits per name are shared with local r isk m anagement and business teams, in order to avoid excessive concentrations and breaches.
At December 31, 2019, total invested assets of banking activities amounted to €14.7 billion (€35.8 billion as at December 31, 2018), the decrease is mainly driven by AXA Bank Belgium that was reclassified into held for sale and for which the disposal process was not finalized at year-end.
AXA Banking operations, based in Belgium, France and Germany, are mostly limited to retail banking activities, distributing simple investment and credit products.
Belgium’s internal capital adequacy assessment and strategic planning processes take into account capital required to mitigate all material risks, capital required for expected business growth, liquidity requirements and stress testing results.
“Consolidated Financial Statements” of this Annual Report. Only information referred to in Note 4 is covered by the report Statutory
Life risks also include risks related to mortality, longevity, lapses, disability and pandemics among others. The main risks to which the Life business is exposed are longevity risk and lapse risk, which are both sensitive to changes in interest rates, and could be defined as follows: ■ longevity risk is the risk related to the overestimation of mortality rates for business contingent on longevity; ■ lapse risk is the risk of experiencing lapses lower (or higher)
than expected on a permanent basis for businesses adversely sensitive to a decrease (or an increase) in lapses.
Group’s Solvency Capital Requirement metric, as detailed in the paragraph “Internal Model” in Section 4.2 “Internal Control and
Group level but performed jointly by central and local teams: ■ implementing a product approval process, which entails risk controls on new products that complement underwriting rules and product profitability analyses; ■ optimizing reinsurance strategies in order to limit the Group’s peak exposures thereby protecting its solvency by reducing volatility and to mitigate risk within the Group to benefit from diversification; ■ reviewing technical reserves including a roll forward analysis; and
Group Risk Management (GRM) has defined a set of procedures to approve new products launches. These procedures are adapted and implemented locally, and aim to foster product innovation across the Group while maintaining risks under control. The validation framework relies among others on the results of the
Group’s minimum requirements, which allows maintaining timeto -market product launches. For sophisticated products, local entities require Group’s approval before launch to ensure all long-term commitments are monitored at Group level and benefit from the Group expertise on enhanced or specific guarantees.
For Life & Savings, Health and Property & Casualty activities, GRM
This enables the Group to verify that its exposure complies with consolidated risk appetite limits along the dimensions of earnings, Eligible Own Funds (“EOF”), solvency and liquidity. These tools also contribute substantially to monitoring the major risks
This framework is included in the governance set out previously for product development control.
Regarding the Property & Casualty exposures, ad hoc concentration risk models (both internal and external for natural catastrophe and internal for man-made catastrophe) are developed to ensure yearly natural catastrophe volatility, coming from events such as windstorm, earthquake, hurricane or typhoon, or catastrophe man-made events, such as cyber or liability ones, are not likely to aff ect the Group above the set tolerance levels.
Since 2015, the Group has strategically developed a strong in-house expertise of development and validation of natural catastrophe models to cope with their dynamic nature in the context of global climate change.
Centralization and harmonization of treaty reinsurance purchase is based on the same procedures for both the Life & Savings, Health businesses as for the Property & Casualty activities.
In order to build adjusted and optimized protection, the Group’s operating entities are reinsured by AXA Global Re (“AGRe”). AGRe can place a variable part of the local treaties on the reinsurance market, for regulatory reasons for example. A portion of the risk exposure is retained and mitigated within AGRe through the internal Group covers (including through a pool mechanism for
Group reinsurance protections ensure reaching risk appetite as in 2019 and further limit the impacts of volatility (Nat Cat and man-made) induced by frequency of mid-size events. These protections consist of major Group covers (CAT covering direct business and reinsurance business from XL Re, Property Per Risk,
As opposed to the other Group covers where the Group retention is kept by AXA Global Re, in 2019, 93.9% of the Property Pool year-end financial result net of external reinsurance protections is retroceded back to local entities, through a pool mechanism managed by AGRe on behalf of those local entities.
Finally, in addition to the analyses described above, AGRe regularly monitors its credit exposure and other AXA entities’
credit exposures to reinsurers, to ensure that consolidated limits remain within Group risk tolerance (see Section 4.4 “Credit Risk
The additional reserves’ calculations are initially carried out locally by a two-opinion process, one given by the local Technical or
They notably ensure that: ■ a suff icient number of operating elements have been scrutinized
In addition, the Solvency II regime requires insurance and reinsurance companies to provide for an eff ective actuarial function to: ■ coordinate the calculation of technical provisions; ■ ensure the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions; ■ assess the suff iciency and quality of the data used in the calculation of technical provisions; ■ compare best estimates against experience; ■ inform the management and the Board of the reliability and adequacy of the calculation of technical provisions; ■ oversee the calculation of technical provisions; ■ express an opinion on the overall underwriting policy; ■ express an opinion on the adequacy of reinsurance arrangements; and
The Group Actuarial Function Holder has been set with a specific role to monitor the tasks undertaken by the Group actuarial function stakeholders (notably GRM, PBRC) as well as the local actuarial functions established in insurance entities across the
The AXA Group Actuarial Function Holder prepares the actuarial function report to inform the management and the Board on their conclusions about the reliability and adequacy of the calculation of technical provisions. This report also provides an overview of the activities undertaken by the actuarial function in each of its areas of responsibility during the reporting period.
Property & Casualty reserves cover Motor insurance business; ■ 9% at the end of 2019 (9% at the end of 2018) of the Group’s
Property & Casualty reserves cover Property insurance business; ■ 11% at the end of 2019 (11% at the end of 2018) of the Group’s
(Unit-Linked) products that do not materially aff ect AXA’s risk exposure. On these products, the underlying financial market performance is mostly passed on to the policyholders. This category also includes products that may provide a stand-alone guarantee on invested capital in the event of death. Overall, they present only a limited market risk for the Group through reduction of shareholders’ value; ■ 1% at the end of 2019 (11% at the end of 2018) of the Group’s Life
& Savings technical reserves cover separate-account products with related interest-rate or equity guarantees provided by the insurance companies, called Variable Annuities.
■ 20% at the end of 2019 (16% at the end of 2018) cover savings products without guaranteed cash values upon surrender; ■ 24% at the end of 2019 (18% at the end of 2018) are related to savings products off ering one-year guaranteed rates that are updated every year. The risks arising from a sustained fall in interest rates in the financial markets are limited for these types of products. Hedging programs have been implemented to cover long-term fixed maturities from the risk of an increase in interest rates; ■ 35% at the end of 2019 (35% at the end of 2018) cover other products like Protection. These reserves cover surrender guarantees and, in some cases, a guaranteed long-term rate.
Group’s total technical reserves at the end of 2019 (5% at the end of 2018). Technical reserves for Health Life-like contracts (i.e.
AXA Group has defined a single framework for identifying, quantifying and monitoring the main operational risks that may arise from a failure in its organization, systems, processes and resources or from external events.
Both quantitative and qualitative requirements are defined: ■ across the Group, the most critical operational risks of each entity and a set of stress scenarios are identified and assessed following a forward-looking and expert-opinion approach. These risk scenarios are then used to estimate the capital requirement needed to cover operational risks based on advanced models based on Solvency II principles.
In 2019, the Group Operational Risk Profile is reasonably well spread out with all seven operational risk categories covered and the main risks being the following: ■ transaction capture, execution and maintenance risk is a top risk and relates to process error, failure, and/or misperformance; ■ compliance risk due to increases in legislation and regulation remains a major concern and is under the close monitoring of Group Compliance; ■ external fraud & system security risk continues also to be a top priority. AXA Group’s exposure to cyber risk is still high with more and more new technology into AXA Group’s products and services. Information on cyber risks should be read in conjunction with the paragraph “Operational and businessrelated risks” in Section 4.1 “Risk factors” of this Annual Report; AXA Group’s exposure to operational risk is captured in the
Management (IRM) practice to enable information risk decisions to be made consistently across the organization and establish sustainable Risk Management capabilities that are integrated with the business.
AXA relies on third-party providers for outsourcing of services at diff erent stages of the value chain. Although relying on partners is a strategic advantage, onboarding a vendor into AXA’s organization requires AXA to assess the risks it might bring, such as regulatory, compliance, IT security, etc.
(OpARCC) and launched in 2018 in order to enhance the existing
AXA control framework. This program is supported by Group functions (Compliance, Data Privacy, Information Security,
The Vendor Risk Framework defines a set of requirements for each relationship, with a risk-based approach, i.e. existing and potential new contracts. Aft er identification of the criticality through pre-determined criteria, an appropriate level of due diligence, minimum requirements and oversight is implemented.
Control Program, have been scheduled between 2019 and beginning of 2021.
(b) adverse business decisions regarding: ■ significant changes in footprint, including through disposals or acquisitions; ■ changes in product off ering and client segmentation; ■ changes in distribution model (channel mix including alliances/
projects). The Group governance standards require among other things a risk management second opinion on key processes, including significant transactions and strategic plans. Furthermore, the ORSA report provides an assessment on the overall solvency needs which include the Solvency II ratio projection made until the strategic plan horizon and in stress scenarios as detailed in
Section 4.2 “Internal Control and Risk Management - Own Risk and Solvency Assessment (“ORSA”)” of this Annual Report.
AXA Group has a Global Reputation Network whose purpose is to implement locally a Reputation Risk Management framework.
Given the nature of emerging risks, there is no capital charge assessment but the AXA Group has established processes to qualify emerging risks which could develop over time and become significant. The emerging risk framework encompasses a network of circa 100 people within the AXA Group (based in insurance, bank, asset management and support function entities such as AXA Group Operations) which allows expertise to be shared within the business and risk communities and ensures adequate underwriting policies are defined.
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 five sub-groups (environmental, societal, regulatory
Management and actively contributing to the overall debate about the issues involved, along with other major market players, AXA
Group intends to promote a better understanding and better forecasting of the emerging risks and to support sustainable development.
5.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 210 5.2 CONSOLIDATED STATEMENT OF INCOME 212 5.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 213 5.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 214 5.5 CONSOLIDATED STATEMENT OF CASH FLOWS 218 5.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 220
I UNIVERSAL REGISTRATION DOCUMENT - ANNUAL REPORT 2019 - AXA I
Notes 6 Value of purchased business in force 1,520 2,087 7 Deferred acquisition costs and equivalent 16,684 26,415 8 Other intangible assets 4,872 5,041
Tangible assets 2,872 1,599 14 Deferred policyholders’ participation assets - 303 19 Deferred tax assets 651 915
Receivables arising from direct insurance and inward reinsurance operations 27,087 25,259
Shareholders’ equity – Group share 69,897 62,428 13 TOTAL SHAREHOLDERS’ EQUITY 74,627 73,252
Liabilities arising from investment contracts with no discretionary participating features and where the financial risk is borne by policyholders 13,306 11,747
14 LIABILITIES ARISING FROM INSURANCE AND INVESTMENT CONTRACTS 539,630 678,219 15 Liabilities arising from banking activities (a)
Minority interests of consolidated investment funds and puttable instruments held by minority interest holders 8,567 6,796
Collateral debts relating to investments under lending agreements or equivalent 37,920 32,814
(c) As of December 31, 2019, amounts included the assets relating to AXA Bank Belgium, AXA Life Europe and the remaining Group Life portfolio in Switzerland, for which disposal processes were not finalized at year-end. Held for sale classification previously applied for the AXA Wealth Management (HK) Limited portfolio has been unwound.
Net realized gains and losses relating to investments at cost and at fair value through shareholders’ equity (c) 1,356 1,982
Change in goodwill impairment and other intangible assets impairment and amortization (153) (6,441)
Net loss on Group Life portfolio in Switzerland (i) (24) (428)
Split between : Net consolidated income - Group share 3,857 2,140
(b) Net of investment management costs and including gains/losses from derivatives hedging variable annuities.
(e) Change in fair value of assets with financial risk borne by policyholders is off set by a balancing entry in technical charges relating to insurance activities.
(h) Includes net balance of income and expenses related to derivatives on financing debt (nonetheless excludes change in fair value of these derivatives).
Reserves relating to changes in fair value through shareholders’ equity 7,879 (4,584)
Reserves relating to changes in fair value of financial liabilities measured at fair value through profit and loss that are attributable to changes in own credit risk (13) 31
Net gains and losses recognized directly through shareholders’ equity 7,841 (2,747)
(c) Includes the first time application impact of IFRS 16 Leases (€-68 million in Group share) and IFRIC 23 Uncertainty over Income Tax Treatments (€-111 million in Group share). AXA has chosen to adopt this standard and this interpretation retrospectively through the cumulative eff ect approach with an adjustment to the opening balance of retained earnings in 2019. Therefore there is no restatement of comparative information for the year 2018.
Financial expenses - Undated subordinated debt (b) - - - - -
(c) Includes the first time application impact of IFRS 15 Revenue from Contracts with Customers. AXA has chosen to adopt the new standard through the cumulative eff ect approach meaning the cumulative eff ect was recognised as an adjustment to the opening balance of retained earnings in 2018.
Change in goodwill impairment and other intangible assets impairment (b) 115 6,323
Net increase/(write back) in impairment on investments, tangible and other intangible assets 819 1,250
Change in fair value of investments at fair value through profit or loss (19,130) 12,596
Dividends recorded in profit or loss during the period (2,993) (3,489)
Net cash related to changes in scope of consolidation 51 (9,654)
Purchases of investment properties held direct or not (f) (4,644) (3,338)
Net cash related to sales and purchases of tangible and intangible assets (388) (447)
Acquisition/sale of interests in subsidiaries without change in control (51 ) 3,688
Net impact of foreign exchange fluctuations and reclassification on cash and cash equivalents 471 1,956
(g) Includes equity instruments held directly or by consolidated investment funds as well as non consolidated investment funds.
AXA SA, a French société anonyme (the “Company” and together with its consolidated subsidiaries, “AXA” or the “Group”), is the holding (parent) company of an international financial services group focused on financial protection. AXA operates principally in Europe, the Americas, Asia and Africa. The list of the main entities included in the scope of AXA’s consolidated financial statements is provided in Note 2 of the Notes to the consolidated financial statements.
Union before the balance sheet date with a compulsory date of
IFRS 16 – Leases, published on January 13, 2016, sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (“lessee”) and the supplier (“lessor”). Under the previous standard, IAS 17, a lessee had to classify its leases as operating leases or financial leases. Leases of the Group were mainly classified as operating leases, meaning leases payments were accounted for as expenses and off balance sheet commitments were disclosed. Under the IFRS 16 model, a lessee is required to recognize (i) assets and liabilities for all leases and (ii) depreciation of lease assets separately from interest on lease liabilities in the income statement. Lessors continue to classify and account for their leases as (i) operating leases with recognition of the underlying assets; or (ii) finance leases by derecognizing the underlying asset and recognition of a net investment, similar to the previous IAS 17 requirements. The cumulative eff ect of initially applying IFRS 16 totaled €68 million and was recognized as a negative adjustment to the opening balance of retained earnings on January 1, 2019. There is no restatement of comparative data.
(€2.6 billion) mainly results from the discount impact, as the lease liability is calculated as the present value of future lease payments. At the transition date, discount rates for leases denominated in Euro range from -0.20% to 2.009% depending on their duration.
(“EQH”). As permitted by the standard, lease payments related to short-term leases (i.e leases with a term of less than 12 months)
the tax return. The cumulative eff ect of initially applying IFRIC 23 totaled €111 million and was recognized as a negative adjustment to the opening balance of retained earnings on January 1, 2019.
Amendments to IAS 39, IFRS 9 and IFRS 7 related to Phase 1 of the IBOR reform
The key reliefs provided by the amendment relate to the following hedge accounting requirements: ■ risk components remain clearly identifiable for fair value hedges; ■ “highly probable” requirements remain for cash flow hedges; ■ recycling of the cash flow hedging reserve from other comprehensive income to profit or loss; ■ prospective assessments (economic relationship or expected to be ‘highly eff ective’) and IAS 39 retrospective eff ectiveness test.
Derivative instruments involved in aforementioned hedges are interest rate derivatives and foreign exchange derivatives like interest rate swaps, forward interest rate swaps, bond and foreign exchange forwards and cross currency swaps.
December 12, 2017 Collection of amendments to IFRS in response to issues that are not part of a major project.
Indeed, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the period aft er the remeasurement are determined using the assumptions used for the remeasurement.
Amendments also clarify the eff ect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.
IFRS 17 – Insurance contracts, published on May 18, 2017, establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts. The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts: (i) embedded derivatives, if they meet certain specified criteria, (ii) distinct investment components, and (iii) distinct performance obligations to provide non-insurance goods and services. These components should be accounted for separately in accordance with the related standards.
• an adjustment to reflect the time value of money (i.e.
At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of: ■ the liability for remaining coverage, which comprises the FCF
related to past services allocated to the group at that date.
The CSM is adjusted subsequently for changes in cash flows related to future services. However, the CSM cannot be negative, so negative changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. Interest is also accreted on the CSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the estimated cash flows). Moreover, the
CSM will be released into profit or loss based on coverage units, reflecting the quantity of the benefits provided and the expected coverage duration of the remaining contracts in the Group.
The Variable Fee Approach (VFA) is a mandatory model for measuring contracts with direct participation features (also referred to as “direct participating contracts”). A contract has a direct participation feature if it meets all three requirements below: ■ the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items; ■ the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying items; ■ the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in fair value of the underlying items.
For these contracts, the CSM is adjusted (i) for changes in the variable fee (entity’s share in the change of value of underlying items that corresponds to the revenue of the insurer), (ii) for the time value of money, and (iii) for eff ect of changes in financial risks not arising from underlying items (such as options and guarantees).
is permitted for the measurement of the liability for remaining coverage if it provides a measurement that is not materially diff erent from the general model or if the coverage period is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less acquisition costs and amounts already recognized as insurance revenue at the closing date. However, the general model remains applicable for the measurement of incurred claims.
In terms of presentation, the amounts recognized in the statement of financial performance have to be disaggregated into: ■ an insurance service result, comprising insurance revenue
■ the fair value approach: the CSM is determined as the positive diff erence between the fair value determined in accordance with IFRS 13 and the fulfilment cash flows (any negative diff erence would be recognized in retained earnings at the transition date).
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 i) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and ii) 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 i) 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 ii) 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 fitting either of these categories are measured at fair value through profit or loss.
The implementation of IFRS 9 and the assessment of its potential impact on the Group’s consolidated financial statements, in combination with IFRS 17, are in progress.
(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 IFRS 17 is implemented.
The Group has determined that it is eligible for the temporary exemption option (1). The eligibility conclusion is based on an analysis of the percentage of the total consolidated carrying amount of liabilities connected with insurance activities relative to the total consolidated carrying amount of all liabilities, which indicates AXA’s activities are predominately connected with insurance. Indeed, the amount of its insurance liabilities determined as of December 31, 2015 represent more than 90% of its total consolidated carrying amount of all liabilities. Consequently, the Group has decided to defer the implementation of IFRS 9 until the effective date of the new insurance contracts standard, as mentioned above with the
As mentioned above, the IASB, following a recommendation of its Staff , could decide to extend the expiry of the temporary exemption from applying IFRS 9 to annual periods beginning on or aft er January 1, 2023, in order to enable qualifying insurers to adopt IFRS 9 and IFRS 17 simultaneously.
In addition, amendments to IFRS 9 - Financial instruments: prepayment features with negative compensation, published on
The following amendments and interpretation are not expected to have a material impact on the Group’s consolidated financial statements: Amendments and interpretations Publication date
October 22, 2018 January 1, 2020 * The amendments: ■ confirm that a business must include inputs and a process; ■ narrow the definitions of a business; and
■ add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
IAS 1 – Presentation of financial statements & IAS 8 –
IFRS requires the use of estimates and assumptions. It requires a degree of judgment in the application of the Group accounting principles described below. The main balance sheet captions concerned are goodwill (in particular impairment tests described in paragraph 1.7.1), intangible assets acquired in a business combination, the value of acquired business in force, deferred acquisition costs and equivalent, certain assets accounted at fair value, deferred tax assets, liabilities relating to the insurance business, pension benefit obligations and balances related to share-based compensation. The principles set out below specify the measurement methods used for these items. These methods, along with key assumptions where required, are discussed in greater depth in the notes relating to the asset and liability items concerned where meaningful and useful.
liquidity, which is more relevant for financial institutions than a classification between current and non-current items. As a standard practice for insurance companies, expenses are classified by destination in the income statement.
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
Companies in which AXA exercises significant influence are accounted for under the equity method. Under IAS 28, significant influence is presumed when AXA directly or indirectly holds 20%
or more of the voting rights. Significant influence can also be exercised through an agreement with other shareholders.
Under the equity method, AXA’s share of equity investments’ postacquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in reserves is stated under “Other reserves”.
of the IASB’s insurance project such as described above, under which the fair value of acquired liabilities is booked through the recognition of an asset corresponding to the value of acquired business in force. Liabilities relating to investment contracts with no discretionary participating features are measured directly at fair value. In accordance with IAS 39, the fair value of these contracts cannot be less than surrender value when they contain a demand feature.
Other identifiable intangible assets such as the value of customer relationships should be recognized. The value of customer relationships intangible represents the value of future cash flows expected from renewals and the cross-selling of new products to
(i) the companies acquired or portfolios of business acquired according to their expected profitability, and (ii) the entities already within the AXA Group that will benefit from the synergies of the combination with the activities acquired. This allocation of goodwill is used both for segment reporting and for impairment testing.
Since the balancing entry to this liability is not specified by current IFRS, the Group’s method is to (i) reclassify minority
interests from equity to liability, (ii) re-measure this liability at the present value of the option price, and (iii) recognize the difference either as an increase in goodwill for puts existing before January 1, 2009, or as a decrease in equity (Group share)
(with a balancing entry recorded in minority interests). This impact is identified in the “other” changes of the consolidated statement of shareholders’ equity.
Foreign exchange diff erences arising from the translation of a net investment in a foreign subsidiary, borrowings and other currency instruments qualifying for hedge accounting of such investment are recorded in shareholders’ equity under translation diff erences and are recycled in the income statement as part of the realized gain or loss on disposal of the hedged net investment.
Regarding the cumulative amount of the exchange diff erences related to disposed business, the Group applies the step-by-step consolidation method (IFRIC 16).
The Group applies the IFRS 13 fair value hierarchy as described below for all assets and liabilities where another IFRS requires or permits fair value measurement or disclosures about fair value measurement in the Notes. Principles below address mostly assets given the nature of the activities of the Group.
Fair values of assets and liabilities traded on active markets are determined using quoted market prices when available. An instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis between a willing seller and a willing buyer. For financial instruments traded in active markets, quotes received from external pricing services represent consensus prices, i.e. using similar models and inputs resulting in a very limited dispersion.
The fair value amounts of assets and liabilities for which fair value is determined in whole directly by reference to an active market are disclosed as level 1 in the Notes to the financial statements.
Fair values of assets and liabilities that are not traded in active market mainly based on observable market data are disclosed as level 2 in the Notes to the financial statements. Fair values mainly not based on observable market data are disclosed as level 3 in the Notes.
External pricing services may be fund asset managers in the case of non-consolidated investments in funds or brokers. To the extent possible, the Group collects quotes from external pricing providers as inputs to measure fair value. Prices received may form tight clusters or dispersed quotes which may then lead to the use of valuation techniques. The dispersion of quotes received may be an indication of the large range of assumptions used by external pricing providers given the limited number of transactions to be observed or reflect the existence of distress transactions. In addition, given current market conditions since the financial crisis and the persistency of complete inactivity of some markets since then, many financial institutions closed their desks dedicated to structured assets deals and are no longer in a position to deliver meaningful quotes.
amount; • cost approach: the consideration of amounts that would currently be required to construct or replace the service capacity of an asset.
Valuation techniques may be used when there is little observation of transaction prices as an inherent characteristic of the market, when quotes made available by external pricing providers are too dispersed or when market conditions are so dislocated that observed data cannot be used or need significant adjustments.
An impairment loss is recognized for a cash generating unit if, and only if, the recoverable amount of the unit or group of units is less than the carrying amount of the unit or group of units.
Fair value approach is based on risk neutral valuation techniques taking into account: ■ the current shareholders’ net asset value plus the future profitability of the business in force: • the current shareholders’ net asset value is adjusted to take into account any diff erence between the basis of cash flows projections used in the value of business in force calculations and IFRS,
• the profitability of business in force is determined using the embedded value methodology, which is an industrywide and specific valuation approach, consistent with the principle of discounted earnings, as the value of business in force is represented by the discounted value of future earnings from the in-force portfolios. The Group uses however both market consistent risk neutral approaches, aligned with fair-value calculations, and traditional discounted cash flows projections; ■ the profitability of future new business: • the value of future new business is computed either on the basis of multiples of a standardized year of new business
The recoverable value of the Life & Savings segment is first assessed on a risk free basis (basic test) and then on the basis of illustrative investment assumptions suitable for a traditional embedded value approach if the recoverable value determined for the basic test is lower than the carrying amount.
The value of purchased insurance contracts and investment contracts with discretionary participating features recognized in a business combination (see paragraph 1.3.2) is amortized as profits emerge over the life of the contracts’ portfolio. In conjunction with the liability adequacy test (see paragraph 1.14.2), VBI is subject to annual recoverability testing based on actual experience and expected changes in the main assumptions.
This asset is amortized by taking into account projections of fees collected over the life of the contracts. The amortization of DOC is reviewed at each closing date to reflect changes in assumptions and experience. This asset is also tested for recoverability.
They also include customer relationships intangibles as well as distribution agreements recognized as a result of business combinations. If these assets have a finite useful life, they are amortized on a straight-line basis over their estimated life. In all cases, they are subject to impairment tests, at each closing for assets with a finite useful life and at least annually for other assets. In the event of a significant decline in value, an impairment is booked corresponding to the diff erence between the value on the balance sheet and the higher of value in use and fair value less costs to sell.
Investment in real estate properties that totally or partially backs liabilities arising from contracts where the financial risk is borne by policyholders is recognized at fair value with changes in fair value through profit or loss.
Loans which are not designated under the fair value option are accounted at amortized cost using the eff ective interest rate method.
If such evidence exists for an available for sale financial asset, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment on that financial asset already booked in the income statement – is removed from shareholders’ equity and an impairment is recognized through the income statement.
Equity instruments impairment recognized in the income statement cannot be reversed through the income statement until the asset is sold or derecognized.
For financial investments accounted for at amortized cost, including loans and assets classified as “held to maturity” or assets designated as “Loans and receivables”, the impairment test is first performed at the asset level. A more global test is then performed on groups of assets with similar risk profile.
Management (ALM) strategies as these strategies have been set up to take into account specific commitments to policyholders.
These methods may diff er within the Group provided that they are used consistently at each entity level.
(investment in real estate properties, debt instruments or equity instruments, etc.). Details of these assets are provided in the
The Group designates certain derivatives as either: (i) hedging of the fair value of recognized assets or liabilities or of a firm commitment (fair value hedge), or (ii) hedging of highly probable expected future transactions (cash flow hedge), or (iii) hedging of net investments in foreign operations.
The Group documents, at inception, the hedge relationship, as well as its Risk Management hedging objectives and strategy. The
Group also documents the hedge eff ectiveness, both at inception and on an ongoing basis, indicating the actual or expected eff iciency level of the derivatives used in hedging transactions in off setting changes in the fair values or cash flows of hedged underlying items.
The eff ective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedge is recognized in shareholders’ equity. The gain or loss relating to any ineff ective portion is recognized in the income statement. Cumulative gain or loss in shareholders’ equity is recycled in the income statement when the hedged underlying item impacts the profit or loss for the period (for example when the hedged future transaction
equity are released in profit or loss when the initially hedged future transaction ultimately impacts the income statement.
In the event of a discontinuation of operations representing either a business line, a main and distinct geographical region or a subsidiary acquired solely with a view to reselling, their aft er-tax contribution is stated on a separate line of the income statement. For comparison purposes, the same applies to the presentation of income statements relating to previous periods that are included in the financial statements. This separate line also includes the post-tax gain/loss recognized on the disposal of the discontinued operation at the date of loss of control.
Any financial instrument issued by the Group with an equity component (for example certain options granted to convert the debt instrument into an equity instrument of the Company) and a liability component (a contractual obligation to deliver cash)
is classified separately on the liability side of the balance sheet with the equity component reported in Group shareholders’
equity (in the “other reserves” aggregate) and the liability component reported in financing debt. Gains and losses relating to redemptions or refinancing of the equity component are recognized as changes to shareholders’ equity.
Insurance contracts, including assumed reinsurance contracts, are contracts that carry significant insurance risks. Such contracts may also transfer financial risk from the policyholders to the insurer. Investment contracts are contracts that carry financial risk with no significant insurance risk.
Except where IAS 39 applies, according to IFRS 4, recognition and derecognition are based on the AXA accounting policies existing prior to IFRS and are described below, except for the elimination of equalization provisions, selective changes as permitted by
The main characteristics of the accounting principles applied prior to IFRS and retained aft er the conversion to IFRS are as follows: ■ reserves must be suff icient; ■ life reserves cannot be discounted using a discount rate higher than prudently estimated expected assets yield; ■ acquisition costs are deferred to the extent recoverable and amortized based on the estimated gross profits emerging over the life of the contracts; ■ Property & Casualty claims reserves represent estimated ultimate costs. Post claims reserves are generally not discounted, except in limited cases (a detail of discounted reserves is shown in Note 14.10).
“savings contracts” in AXA’s accounting principles) that carry low mortality and morbidity risk are generally calculated using a prospective approach based on discount rates usually set at inception with reserves similar to the retrospective approach (i.e.
Except when these guarantees are covered by a Risk Management program using derivative instruments (see next paragraph), guaranteed minimum benefits reserves relating to contracts where the financial risk is borne by policyholders (insurance contracts because they include such guarantees or investment contracts with discretionary participating features), are built over the life of the contract based on a prospective approach: the present value of future benefit obligations to be paid to policyholders in relation to these guarantees is estimated on the basis of reasonable scenarios. These scenarios are based on assumptions including investment returns, volatility, surrender and mortality rates. This present value of future benefit obligations is reserved as fees are collected over the life of the contracts.
Some guaranteed benefits such as Guaranteed Minimum Death or Income Benefits (GMDB or GMIB), or certain guarantees on return proposed by reinsurance treaties, are covered by a Risk
Management program using derivative instruments. In order to minimize the accounting mismatch between liabilities and hedging derivatives, AXA has chosen to use the option allowed under IFRS 4.24 to re-measure its provisions: this revaluation is carried out at each account closing based on guarantee level projections and considers interest rates and other market assumptions. The liabilities revaluation impact in the current period is recognized through income, symmetrically with the impact of the change in value of hedging derivatives. This change in accounting principles was adopted on the first time application of IFRS on January 1, 2004, for contract portfolios covered by the Risk Management program at that date. Any additional contract portfolios covered by the Risk Management program aft er this date are valued on the same terms as those that applied on the date the program was first applied. These contracts were mainly subscribed by Equitable Holdings, Inc.
that has no longer been within the consolidation scope of the
In compliance with the option in IFRS 4, shadow accounting is applied to insurance and investment contracts with discretionary participating features. Shadow accounting includes adjustments to technical liabilities, policyholders participation, other obligations, deferred acquisition costs and value of business in force to take into account unrealized gains or losses on insurance liabilities or assets in the same way as it is done for a realized gain or loss of invested assets.
For example, for contracts with discretionary participating features, shadow accounting consists in recognizing policyholders participation in unrealized capital gains and losses. Thus, when an unrealized gain is recognized, a deferred participating liability (DPL) is recorded. In case of an unrealized loss, a deferred participating asset (DPA) should be recognized only to the extent that its recoverability as defined below is highly probable. Deferred participating liabilities and assets are calculated using an appropriate long-term participation rate based on a contractual, regulatory and constructive obligation to allocate a percentage of gains/losses to policyholders.
DPL is fully recognized in the liabilities. As a consequence, there is no component recognized as an equity component and AXA
Unrealized gains and losses on assets classified as trading or designated at fair value through profit and loss, along with any other entry impacting the income statement and generating a timing difference, are accounted for through the income
statement with a corresponding shadow entry adjustment also in the statement of income. The shadow accounting adjustments relating to unrealized gains and losses on assets available for sale
VBI assets and deferred policyholders’ participation asset. To perform these tests, entities group contracts together according to how they have been acquired, are serviced and have their profitability measured. Entities use current best estimates of all future contractual cash flows as well as claims handling and administrative expenses, and take into account guarantees and investment yields relating to assets backing these contracts: ■ such tests are based on the intention and capacity of entities to hold financial assets according to various sets of scenarios, excluding the value of new business; ■ they include projections of future investments sales according to estimated surrender patterns; and
Contract specific risks directly related to the contracts (insurance risk, asset return risk, inflation risk, persistency, adverse selection, etc.) are also considered.
Any identified deficiency is charged to the income statement, initially by respectively writing off DPA, DAC or VBI, and subsequently by establishing a LAT provision for losses arising from the liability adequacy test for any amount in excess of DPA,
Embedded derivatives that meet the definition of an insurance contract or correspond to options to surrender insurance contracts for a set amount (or based on a fixed amount and an interest rate) are not separately measured. All other embedded derivatives are bifurcated and booked at fair value when material
When these contracts meet the insurance contracts classification requirements, transactions relating to reinsurance are accounted for in the balance sheet and income statement in a similar way to direct business transactions in agreement with contractual clauses. Reinsurance premiums ceded are expensed (and any commissions recorded thereon are earned) on a monthly prorata basis over the period the reinsurance coverage is provided.
If the Group determines that reinsurance contracts do not meet the insurance contracts definition and/or principally transfers financial risk, the agreement is recorded using the deposit method of accounting. Deposits received are included in payables and deposits made are included within receivables. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted as appropriate.
Deferred taxes for taxable temporary diff erences relating to tax deductible goodwill are recognized to the extent they do not arise from the initial recognition of goodwill. These deferred taxes are only released if the goodwill is impaired or if the corresponding consolidated shares are sold.
(retirement compensation, additional pension benefit, health insurance). In order to meet those obligations, some regulatory frameworks have allowed or enforced the set up of dedicated funds (plan assets).
The present value of the future benefits paid by the employer, known as the DBO (Defined Benefit Obligation), is calculated annually on the basis of long-term projections of rate of salary increase, inflation rate, mortality, staff turnover, pension indexation and remaining service lifetime. The amount recorded in the balance sheet for employee defined benefit plans is the difference between the present value of the Defined Benefit
(in Other Comprehensive Income) in full in the period in which they occur. Similarly, the actual return on assets and any change in asset ceiling, excluding the net interest income on assets, is recognized in shareholders’ equity. The regular impact in the income statement mainly relates to the current service cost
The AXA Shareplan issued under a specific French regulatory framework includes a traditional and a leveraged formula (with an application subject to specific local regulations within the
The cost of the traditional formula of Shareplan is valued according to the specific guidance issued in France by the ANC
Reinstatement premiums are recognized at the time a loss event occurs where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms and are fully earned when recognized.
No such situation currently exists within the Group. In accordance with IFRS 4, the Group continues to use the accounting principles previously applied by AXA to insurance contracts and investment contracts with discretionary participating features. According to these principles, all rights and obligations related to contracts are recognized.
Net revenues from banking activities comprise all revenues and expenses from banking operations, including interest expenses not related to financing, banking fees, capital gains and losses on sales of financial assets, changes in the fair value of assets under the fair value option and related derivatives.
They exclude bank operating expenses and change in bad debt provisions, doubtful receivables or loans, which are recorded in
Management activities; ■ insurance companies revenues from non-insurance activities, notably commissions received on the sales or distribution of financial products; and
IFRS 15, revenue is recognized only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As a result, as management fees and performance fees received by the Group are generally calculated based on a percentage of assets under management
(AUM), they are considered as variable considerations, which are subject to market volatility and are recognized only when uncertainty is resolved.
Financial Statements if they provide evidence of conditions that existed at the balance sheet date; ■ such events result in additional disclosures if indicative of conditions that arose after the balance sheet date, and if relevant and material.
AXA Aurora Vida, S.A. de Seguros Relution 99.84 99.84 99.83 99.83
(a) XL Group mainly operates in the United States, the United Kingdom, Bermuda, Switzerland, France, Ireland, Singapore, germany, Australia and Canada.
“Minority interests of consolidated investment funds”. As of December 31, 2019, minority interests in consolidated investment funds amounted to €8,567 million (€6,799 million as of December 31, 2018). Minority interests related to consolidated investment funds and real estate companies that are classified in shareholder’s equity amounted to €2,848 million as of
As of December 31, 2019, 26 consolidated real estate companies corresponded to a total of €17,876 million invested assets
(€12,798 million at the end of 2018) mainly in France, Germany,
(including AXA and external share but excluding goodwill related to AXA’s holdings and before intercompany eliminations with other companies of the Group):
Excluding minority interests related to consolidated investment funds and real estate companies that are classified in shareholders’ equity, these minority interests represent 49% of minority interests of the Group as of December 31, 2019 (1% as of December 31, 2018).
AXA SPDB Investment Managers Company limited Dilution 39.00 38.05 39.00 38.11
Kyobo AXA Investment Managers Company Limited Dilution 50.00 48.79 50.00 48.86
The Group’s asset manager companies also receive fees for the services they provide when they manage investment funds.
AXA’s Chief Executive Off icer (CEO), acting as chief operating decision maker, is a member of the Board of Directors. He is assisted by a Management Committee in the operational management of the Group and by a group of senior executives, the so-called Partners’ Group, in developing and implementing any strategic initiatives. The financial information related to
The results of operating activities and non-operating activities are presented on the basis of seven segments: France, Europe,
As a consequence of the loss of control of AXA Group over
Equitable Holdings, Inc. (“EQH”) as of March 31, 2019, the United
As of December 31, 2019, the CEOs supervising the other main geographies (respectively CEO of AXA France, CEO of AXA in
France: The France market consists of Life & Savings and Property
Savings and Property & Casualty activities in 14 countries within Europe, Middle East, Africa & Latin America as well as in
(b) Includes gains/losses from derivatives hedging variable annuities within the Life & Savings activity.
(d) Include losses related to the disposal processes of AXA Bank Belgium and AXA Life Europe (see Note 5.3).
Net realized gains and losses and change in fair value of other investments at fair value of which change in fair value of assets with financial risk borne by policyholders (2,558) (942) (785) - (6,109) (29) (280) (2) (10,706) (10,706)
(b) Insurance covers the three insurance activities: Life & Savings, Property & Casualty and Health.
(e) Mainly related to the VBI impairment related to the Group Life portfolio in Switzerland.
from investment accounted for using the equity method 20 (6) 119 (3) - 137 20 - 286 274
(d) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’ equity.
All of the following paragraphs form an integral part of the Group financial statements. They appear in Section 4 “Risk Factors and Risk Management” and Section 2.4 “Liquidity and capital
Internal Control Organization”, “Financial reporting, disclosure, controls and procedures” and “Conclusion”.
Please refer to pages 192 to 196 of Section 4.3 “Market risks”, subsections “Interest rates & equity risks related to the operating activities of Group subsidiaries” and “Exchange-rate risk related to the operating activities of Group subsidiaries”.
“Impact of regulatory requirements” and “Subsequent events aft er December 31, 2019 impacting AXA’s liquidity”.
The total goodwill Group share amounted to €17,695 million as of
December 31, 2019 and €16,691 million as of December 31, 2018.
(a) Increase in the valuation of a contingent consideration corresponding to a buyout of minorities interest (€+117 million) related to the business combination occurred in 2006 (see Note 31).
(“CGUs”) recoverability of goodwill is assessed using a fair value approach. For AXA Belgium, the recoverability of the goodwill is assessed using the value in use approach. Both approaches are described in Note 1.
For the CGUs within the Property & Casualty business segment recoverability of goodwill is also assessed using the value in use approach, as described in Note 1. For AXA Investment
Casualty business segment, the value in use approach uses cash flow projections based on business plans approved by management covering up to three years and discounted using a risk adjusted rate. Cash flows beyond that period are extrapolated using sustainable perpetual growth rates assumed to be achievable over the long term to derive a terminal value.
The earnings included in the business plan of each CGU are agreed with AXA Management and defined locally considering best estimate operating assumptions, including expenses and loss ratios, investment income, economic capital, premium rates and taxes, all compliant with the various standards and the requirements of supervisory authorities, when applicable.
The discount rates used for the valuation have been derived using the Capital Asset Pricing Model (CAPM) which includes assumptions for risk-free interest rates, equity risk premiums, insurance activity beta and leverage ratio that are consistent with the view of AXA’s Management for the specific market(s)
in which the CGU operates. For the main CGUs discount rates range from 3.0% to 7.4% in 2019, compared to a range of 5.6% to 8.4% in 2018, and growth rates, applied beyond the strategic plan horizon, where applicable, vary from 0.0% to 4.4%, compared to a range of 2.4% to 4.2% in 2018.
For Life & Savings CGUs, recoverable amounts are calculated using a risk neutral approach, relying on European Embedded
Value (EEV) techniques, that are industry specific and widely used. The EEV represents the excess of the market value of assets over the market value of liabilities. The market value of the liabilities is based on best estimate liabilities which are the probability weighted average of future cash flows adjusted to allow for the time value of money, using the relevant term structure of the risk-free interest rates, as well as for deviations related to the cost of non-hedgeable, i.e. non-financial, risks.
The calculation of the best estimate liabilities involves the use of operational and economic assumptions. Operational assumptions include demographic factors, such as mortality, morbidity and lapse/surrender rates, expenses allowance and taxes, all compliant with the requirements of supervisory authorities. Future cash flows are discounted using reference rates that are compliant with EIOPA specifications of using swap rates adjusted for credit and volatility risk. The table below shows the adjustments in basis points by currency: Reference Yield Curve (in bps) EUR GBP USD JPY CHF HKD
December 13, 2019, and December 31, 2019, was deemed immaterial with respect to the AXA Group’s consolidated income.
Financial Statements at year-end based on IFRS accounting policies. In accordance with IFRS 3 Business combinations, adjustments can be made within twelve months of the acquisition date if new information becomes available to complete the initial accounting.
(1) AXA acquired the initial 50% stake in AXA Tianping in February 2014. At the acquisition date of the remaining stake, the initial participation has a fair value of €541 million.
(2) This includes an immediate cash consideration of RMB 3.5 billion (€450 million), and a payment of RMB 1.1 billion (€146 million) deferred by 12 months from completion. The deferred payment replaces the capital reduction of AXA Tianping RMB 1.5 billion (€193 million) communicated at the time of the signing of the transaction. It does not include a Net Investment Hedge of €36 million which is also considered as part of the total consideration transferred.
(3) EUR 1 = RMB 7.8009 as of December 12, 2019 (Source: Bloomberg).
ASSETS AND LIABILITIES FAIR VALUED AT THE ACQUISITION DATE: (in Euro million) At the acquisition date
AXA Tianping acquisition led to the recognition of a goodwill of €665 million.
These intangible assets are amortized over a useful life expected to be 15 years.
These figures are estimates based on IFRS guidelines. This information is not necessarily indicative of the results that could have been achieved within the AXA Group if the acquisition had actually taken place on January 1, 2019. In particular, the information does not factor in any synergy, nor does provide an indication of future results.
Inc. (“EQH”) and the sale to EQH of 30,000,000 shares at the per share price paid by the underwriters in the Off ering. In addition, the underwriters exercised in full the over-allotment option to purchase an additional 6,000,000 EQH shares.
The reduction of its voting rights below 50% combined with the reduction of its Board membership to a minority share led to the loss of control of AXA over EQH, while continuing to retain a significant influence over its residual shareholding of EQH. As a result, AXA: ■ deconsolidated EQH and accounted for its remaining ownership in EQH using the equity method; and
(2) EUR 1 = USD 1.1297 as of March 22, 2019 (Source: Bloomberg).
(3) EQH’s issued and outstanding common stock as of March 7, 2019, was comprised of 521,051,204 shares.
(4) Including the shares to be delivered on redemption of the mandatory exchangeable bonds into EQH shares, issued by AXA in May 2018.
The Off ering and the Share Buyback resulted in a negative net income impact of €-598 million as detailed in the table below: (in Euro million)
JUNE 7 SECONDARY OFFERING OF EQUITABLE HOLDINGS, INC.’S COMMON STOCK (INCLUDING GREEN SHOE)
On June 7, 2019, AXA completed a secondary public off ering of 40,000,000 shares of EQH’s common stock and further 6,000,000 shares from the full exercise of the over-allotment option granted to the underwriters.
Net proceeds (1) to AXA, corresponding to the sale of 46,000,000 EQH shares, amounted to USD 959 million or €850 million (2). Following this transaction, AXA’s ownership in
The net gain of the sale amounted to €2 million as detailed below: (in Euro million)
Employee benefits actuarial losses were reclassified from other comprehensive income to retained earnings for €-4 million.
(1) As of November 5, 2019, EQH’s issued and outstanding common stock comprised 489,329,559 shares.
(5) Crelan has a call option to purchase the Crelan NV and AXA Bank Belgium shares held by AXA.
In addition, AXA Belgium will take a 9.9% minority equity stake (5)
Employee benefits actuarial losses were reclassified from other comprehensive income to retained earnings for €15 million.
As such, the major classes of assets and liabilities (net of intercompany balances with other AXA entities) presented as held for sale related to: ASSETS
Assets and liabilities were classified as held for sale in AXA’s
(1) Collective group pensions schemes, which are managed by an independent Board.
As of December 31, 2019, the other comprehensive income of invested assets in the scope of the transaction was nil.
As of December 31, 2019, the consolidated statement of income included an impact of €-24 million.
On August 1, 2018, AXA received an irrevocable off er from Cinven for the sale of AXA Life Europe. The sale is expected to take place in the first semester of 2020. The completion of the transaction is subjected to customary closing conditions, including the regulatory approvals that were not yet received as of December 31, 2019. Given these circumstances, the held for sale classification was therefore extended beyond one year.
As of December 31, 2019, the major classes of assets liabilities (net of intercompany balances with other AXA entities) presented as held for sale related to: ASSETS
As of December 31, 2019, the other comprehensive income of invested assets and currency translation adjustment in the scope of the transaction amounted to €+91 million.
The change in Value of Life Business In-force (“VBI”) was as follows: (in Euro million) 2019 2018
The change in Value of non-life Business In-force (“VBI”) was as follows: (in Euro million) 2019 2018
Deferred Acquisition Costs relating to Life & Savings (a) 13,534 23,798
DAC and similar costs capitalization for the period of Life DAC 1,718 25 2,130 26
Deferred Acquisition Costs and equivalent net carrying value of which shadow accounting on DAC (1,227) - (488) -
(a) Relating to contracts subject to IFRS 4, i.e. insurance contracts and investment contracts with discretionary participating features.
(c) In 2019, the amount includes the deconsolidation of Equitable Holdings, Inc.
Unearned revenues and unearned fees reserves 1,883 328 2,464 258 of which shadow unearned revenues reserves (352) - (278) -
Intangible assets recognized in business combinations mainly include value of distribution agreements and customer related intangibles, including €1,936 million (net carrying value) assets with indefinite useful life.
(a) In 2019, mainly includes €101 million related to the acquisition of AXA Tianping (see Note 5.3.1).
Debt instruments designated as at fair value through profit or loss (c) 22,274 22,274 3.77%
Equity instruments designated as at fair value through profit or loss (b) 9,563 9,563 1.62%
Non consolidated investment funds designated as at fair value through profit or loss (b) 6,286 6,286 1.06%
Assets backing contracts where the financial risk is borne by policyholders 72,660 72,660 12.30%
(d) Eligible to the IAS 39 Loans and receivables measurement category.
Investment in real estate properties at amortized cost (a) 28,461 19,504 2.76%
Investment in real estate properties designated as at fair value through profit or loss (b) 1,435 1,435 0.20%
Debt instruments designated as at fair value through profit or loss (c) 36,059 36,059 5.10%
Non consolidated investment funds designated as at fair value through profit or loss (b) 5,361 5,361 0.76%
Assets backing contracts where the financial risk is borne by policyholders 160,176 160,176 22.67%
(a) Includes changes in the scope of consolidation and the impact of changes in exchange rates.
Of which Financial investments exposed to fair value interest rate risk 23,701 86,591 309,788 420,080 32,586 112,885 327,949 473,420
Additionally, the Group is party to total return swaps where financial assets are sold to a counterparty with an agreement in which the Group retains substantially all the risk and rewards of the financial instruments. Therefore, the Group doesn’t derecognize the assets.
Methods applied to determine the fair value of investments measured at fair value in the financial statements are described in Note 1.5.
The common characteristic of level 2 and 3 assets is that their markets are considered as inactive. Their value is generally based on mark to market basis, except when there is no market or when the market is distressed, in which case a mark to model approach is used. Assets not quoted in an active market which are marked to market mainly using observable inputs are classified in level 2. Assets not quoted in an active market for which fair value determination is not mainly based on observable inputs are classified as level 3. For all assets not quoted in an active market/no active market and for which a mark to model approach is used, the classification between level 2 and level 3 depends on the proportion of assumptions used supported by market transactions and observable data (market observable inputs): ■ assumed to be used by pricing services or; ■ used by the Group in the limited cases of application of mark to model valuations.
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.
b) Fair values of assets not quoted in an active market –
Valuation teams make the maximum use of current transaction prices (if any) and observable data but some of the underlying sectors to which the investments relate may be so particular that significant adjustments are performed or unobservable data are used. Private equity funds of funds are measured on the basis of the latest net asset values of funds provided to the Group.
of the total assets at fair value (4.1% in 2018 or €20.2 billion).
The Group applies the IFRS 13 fair value hierarchy as described in Note 1.5. Specifics to the valuation of investments are further described in Note 9.10.1 and the same principles apply to the fair value of investments at amortized cost.
Note 1.5 and Note 9.10.1, the assessment of the significance of an input against the fair value measurement in its entirety involves judgment and a diff erent weighting could produce a diff erent categorization.
FROM IFRS 9 9.12.1 Solely Payment of Principal and Interest (SPPI) test
Each investment item is presented gross of tax and excluding the eff ect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges) and the potential impact resulting from the application of the future IFRS 17 standard on insurance contracts that will avoid accounting mismatches in particular for contracts eligible to the variable fee approach measurement model.
Fail the SPPI test Pass the SPPI test Fail the SPPI test Pass the SPPI test
Debt instruments available for sale 5 - 2,213 49 3 - 4,298 (64)
Equity instruments available for sale 2,582 403 - - 1,466 228 - -
Debt instruments available for sale 3,717 (7) 384,350 18,577 4,786 (179) 396,351 (9,114)
For loans, the credit risk information is available through three categories: rating grades, range of probability of default (range of PD)
and scoring which is issued by AXA banking entities and past due information.
Fair v alue of loans that pass the SPPI test Fair v alue of loans that pass the SPPI test
Total amount of loans that pass the SPPI test and for which credit risk information is based on scoring 12,469 12,405 31,549 33,175
Krungthai AXA Life Insurance Company Ltd. 224 - 83 27 (0) 334
PT AXA Mandiri Financial Services 67 - 44 4 (15) 100
Philippine AXA Life Insurance Corporation 76 - 20 0 (13) 83
Krungthai AXA Life Insurance Company Ltd. 181 - 32 12 0 224
Total assets (including cash and cash equivalents) 10,287 - 7,543 1,407
Change in unearned premiums net of unearned revenues and fees (7) (40) 1 89
Disclosures about the temporary exemption from IFRS 9 for ICBC-AXA Assurance Co., Ltd.
The table below sets out the result of the SPPI test (Solely Payment of Principal and Interest) for the assets not currently designated as at fair value with change in fair value through income statement as of December 31, 2019. The amounts exclude the impact of derivatives.
Equity instruments available for sale 941 39 - - 371 (43) - -
(b) The “Cash and cash equivalents” item excludes cash backing contracts where the financial risk is borne by policyholders (Unit-Linked contracts).
As of December 31, 2019, total consolidated net cash and cash equivalents amounted to €21,269 million, net of €679 million bank overdraft s classified under “Other debt instrument issued and bank overdraft s” in the consolidated statement of financial position.
Net cash and cash equivalents decreased by €9,287 million compared to 2018 mainly in: ■ Switzerland (€-5,35 4 million) due to higher surrenders in the context of Group Life portfolio disposal; ■ the United States (€-4,094 million) due to the deconsolidation of Equitable Holdings, Inc.; ■ France (€-1,354 million) mainly due to regular insurance activities (€-1,885 million), partly off set by a temporary cash position invested in money market funds (€+417 million).
Net cash used in investing activities amounted to €-10,665 million in 2019, mainly reflecting: ■ €-15,158 million of net cash used in purchases and sales of financial invested assets; ■ €+4,831 million of net cash impact of assets lending/borrowing collateral receivables and payables.
Net cash used in investing activities amounted to €-2,124 million in 2018, mainly reflecting: ■ €-9,247 million of net cash used in the acquisition of the XL
Group; ■ €+4,015 million of net cash used in purchases and sales of financial invested assets; ■ €+3,962 million of net cash impact of assets lending/borrowing collateral receivables and payables.
The Consolidated Statement of changes in Equity is presented as a primary financial statement.
During 2019, the following transactions had an impact on AXA’s share capital and capital in excess of nominal value: ■ a capital increase of €375 million from the employee share off ering of 17.8 million shares in December 2019; ■ a capital increase of €67 million due to the exercise of stock options; ■ share-based payments for €40 million; ■ a capital decrease of €683 million corresponding to 29.3 million shares in order to eliminate the dilutive eff ect of employee share off ering of 17.8 million shares and other share-based compensation schemes of 11.5 million shares (AXA SA’s stocks options and performance shares plans).
As of December 31, 2019, the Company and its subsidiaries owned 31.3 million AXA shares, representing 1.3% of the share capital, a decrease of 10.3 million shares compared to
In 2019, the following transactions pertaining to undated subordinated debt had an impact on AXA’s other reserves: ■ €-253 million from repayment of undated subordinated debt; ■ €+113 million from foreign exchange rate fluctuations; ■ €-194 million from interest expenses related to the undated subordinated debt (net of tax).
As of December 31, 2019 and December 31, 2018, undated subordinated debt recognized in shareholders’ equity broke down as follows: (in million)
Undated subordinated debt oft en contains the following features: ■ early redemption clauses (calls) at the Group’s option, giving
On May 6, 2019, Shareholders’ Meeting, shareholders approved a dividend distribution of €1.34 per share corresponding to €3,189 million with respect to the 2018 financial year.
As of December 31, 2018, 1.9 million treasury shares backing contracts where financial risk is borne by policyholders held in consolidated investment funds were not deducted from shareholders’ equity. Their total estimated historical cost was €33 million and their market value €35 million at the end of
As of December 31, 2018, the carrying value of treasury shares and related derivatives was €1,038 million. There was no AXA
shares held by consolidated Mutual funds other than those backing contracts where financial risk is borne by policyholders.
In 2018, the following transactions pertaining to undated subordinated debt had an impact on AXA’s other reserves: ■ €-665 million from repayment of undated subordinated debt; ■ €+123 million from foreign exchange rate fluctuations; ■ €-222 million from interest expenses related to the undated subordinated debt (net of tax).
The increase of gross unrealized gains and losses on assets available for sale totaled €+22,669 million, of which a €+18,756 million increase in unrealized capital gains on debt securities driven by the decrease in interest rates.
Less unrealized gains and losses attributable to: Shadow accounting on policyholder participation and other obligations (34,196) (22,154)
Unrealized gains and losses net of tax – assets available for sale 19,831 11,863
Investments bought in the current accounting period and changes in fair value 8,593 (3,715)
Unrealized gains and losses (net of tax) 100%, closing 19,887 11,831
Less unrealized gains and losses attributable to: Shadow accounting on policyholders’ participation and other obligations (15,886) (8,984) (2,530) (2,927)
Shadow accounting on Deferred Acquisition Costs (b) (303) - (122) (79)
Shadow accounting on Value of purchased Business In force - - (93) (2)
Unallocated unrealized gains and losses before tax 4,906 1,482 1,008 3,299
Unrealized gains and losses net of tax – equity accounted companies 16 - - -
UNREALIZED GAINS AND LOSSES (NET OF TAX) – 100% – TOTAL 3,669 1,008 821 2,540
(a) Unrealized gains and losses on total available for sale invested assets including loans and assets held for sale.
(€+113 million) and International (€+107 million), partly off set by the deconsolidation of Equitable Holdings, Inc. (€-1,014 million).
The total impact of foreign exchange rate movements was €+1,553 million (of which €+1,869 million from Group share and €-317 million from minority interests) as at December 31, 2018.
The change in Group share translation reserves €1,869 million was mainly driven by Japan (€+495 million), Switzerland
Model – CMI); It was partly off set by: ■ losses on plan assets backing the defined benefit obligation mainly in the United Kingdom, the United States and
The €6,094 million decrease in minority interests to €4,730 million was driven by transactions with minority interests’ holders and comprehensive income: ■ the comprehensive income for the period notably included the following: • net income attributable to minority interests for €+325 million,
■ transactions with minority interests’ holders mainly included: • decrease in minority interests as a consequence of the deconsolidation of Equitable Holdings, Inc. for €-5,172 million (see Note 5.3.2),
14.1.1 Segment breakdown of liabilities arising from insurance and investment contracts
(a) Other liabilities comprised unearned revenue and unearned fee reserves, liabilities arising from policyholders’ participation and other obligations, and derivatives instruments relating to insurance and investment contracts.
Liabilities arising from insurance contracts 267,454 108,800 376,253 333,688 103,327 437,015
Liabilities arising from insurance contracts where risk is borne by policyholders 56,709 - 56,709 146,058 - 146,058
Liabilities arising from investment contracts with no discretionary participating features 67 - 67 3,973 864 4,837
Unearned revenue and unearned fee reserves 2,211 - 2,211 2,711 10 2,722
Liabilities arising from insurance contracts, including those where the financial risk is borne by policyholders, as disclosed in the total
Liabilities arising from insurance contracts (A) 267,454 108,800 376,253 333,688 103,327 437,015 of which measured at current assumptions (c) 226 - 226 14,123 - 14,123
Reinsurers’ share in future policy benefit reserves 4,689 (7) 4,681 9,525 (6) 9,519
Reinsurers’ share in unearned premiums reserves 50 3,157 3,208 49 2,705 2,754
Reinsurers’ share in liabilities arising from insurance contracts where the financial risk
(c) See Note 1.14.2 “Reserves measured according to the option off ered by IFRS 4.24” for selective re-measurement of reserves at current market assumptions.
The following table shows a breakdown of liabilities arising from investment contracts including those where the financial risk is borne by policyholders, as disclosed in the sub total (B) of Note 14.1.1: (in Euro million)
Liabilities arising from investment contracts with no discretionary participating features (B) 67 4,837
Liabilities arising from investment contracts where the financial risk is borne by policyholders (C) 16,444 14,532
TOTAL LIABILITIES ARISING FROM INVESTMENT CONTRACTS – NET OF REINSURERS’ SHARE (I = D-H) 52,451 53,502
Note: Liabilities relating to unearned revenues and fees (see Note 7.3), to policyholders’ participation (see Note 14.9), and derivative instruments (see Note 20.4), are excluded from the table above. Reinsurance’s share in investments contracts liabilities relating to policyholders’ participation (none in 2019 and 2018), as well as derivatives instruments (none in 2019 and 2018) are excluded from the table above.
The table below gives information on change in reserves in Property & Casualty presented in Note 14.2: (in Euro million)
The table below gives information on change in reinsurers’ share in claims reserves in Property & Casualty presented in Note 14.2: (in Euro million)
Reinsurers’ share in claims reserves as of January 1 10,670 3,952
Change in scope of consolidation, portfolio transfers, change in accounting principles and other changes 47 6,014
14.5.1 Change in liabilities arising from insurance and investment contracts – Gross of reinsurance
In 2019, the effect of the change in scope of consolidation amounted to €183,488 million, mainly due to the deconsolidation of Equitable Holdings, Inc. (€182,152 million) and the classification as held for sale of additional small occupational benefit foundations in 2019 in Switzerland (€2,212 million), partly offset by the unwinding of held for sale classification of AXA
(€5,108 million), partly off set by the acquisition of the XL Group
Reinsurers’ share in change in reserves relating to technical and actuarial
Impact of foreign currency fluctuation 175 1 176 206 1 207
The table below gives detailed information on liabilities arising from investment contracts presented in Note 14.3 (D): (in Euro million)
(Non Unit-Linked) – Liabilities arising from: Investment contracts with Discretionary Participation Features measured according to existing accounting policies (a) (d) 36,036 34,225
(Unit-Linked) – Liabilities arising from contracts where financial risk is borne by policyholders: Investment contracts with Discretionary Participation Features measured according to existing accounting policies (a) (c) 3,139 2,785
(a) In accordance with IFRS 4 which allows, under certain conditions, to continue to use a previous accounting policy for liabilities arising from contracts with discretionary participating features.
(b) See Note 1.14.2 “Reserves measured according to IFRS 4.24” option which allows to evaluate certain portfolios with current assumptions.
IFRS 15 (Rights to future management fees also known as Deferred Origination Costs “DOC”) – see Note 1.7.3 and Note 7.
In the context of the current IFRS 4, the IASB acknowledged the diff iculties involved in the recognition and the measurement of discretionary participating features included in insurance or investment contracts. The IASB issued guidance to measure fair value but with no principles addressing policyholder participation features. It would therefore be premature to interpret this definition before the implementation guidance of the future standard IFRS 17 (see Note 1.2) clarified it.
The loss reserve development table shows movements in loss reserves between 2009 and 2019, based on previously applied accounting standards. All contracts concerned are insurance contracts as defined by IFRS.
The first line labelled “Gross reserves for unpaid claims and claims expenses developed initially at the booking date”
represents the loss reserves developed in the Group’s balance sheet on the reporting date for the year indicated in the column heading. For example, the amount of €44,470 million appearing in the first line of the table in the 2009 column represents all loss reserves developed in all years of occurrence prior to and including 2009, recognized on the Group’s balance sheet as of
The second line titled “Gross reserves for unpaid claims and claims expenses developed in 2019 adjusted for changes in exchange rates and scope of consolidation” indicates the amount that would have been developed initially at the booking date, had the exchange rates for the current year been used (for reserves recognized by AXA Group entities that do not use the
The surplus (shortfall) of the initial reserve with respect to the re-estimated (gross) final cost for each year represents, for a given year N, the diff erence between the amount shown in the second line (gross reserves for unpaid claims and claims expenses developed in 2019 adjusted for changes in exchange rates and scope of consolidation) and the amount shown in the final diagonal under “Reserve re-estimated”.
Gross reserves for unpaid claims and claims expenses developed initially at
(c) Amounts prior to 2015 contains the Life & Savings entities historically reported in the International Insurance segment.
The data prior to 2015 does not present the impact of the new segmentation.
Reserves for unpaid claims and claims expenses developed in 2019 adjusted for changes in exchange rates and scope of consolidation 35,327 36,136 26,027 26,025
Cumulative redundancy (deficiency) from the initial gross reserves in excess of re-estimated gross reserves: Reconciliation between developed reserves and recognized claims reserves
TOTAL GROSS CLAIMS RESERVES AND OTHER RESERVES FOR PROPERTY & CASUALTY 87,222 84,134
(a) Total gross claims and other reserves developed are presented on the basis of the loss reserves development table.
(b) Includes reserves inward reinsurance (€1,043 million in 2019, €1,033 million in 2018).
There is considerable uncertainty as to the future cost of asbestos claims. The ultimate cost of claims is very much dependent on legal factors that are diff icult to predict with any certainty. It is common to have issues of allocation of responsibility among parties, as well as involvement of multiple insurers and multiple policy periods. This causes considerable coverage issues.
Claims are managed by dedicated teams of experts who use a variety of claims payment including settlements, policy buybacks and, in certain cases, litigation. In addition, they focus specifically on final resolutions of exposures, either through commutations or other solutions.
The calculation of reserves for asbestos risks raises specific diff iculties as conventional reserving techniques cannot be used for evaluating IBNR. AXA evaluates the future cost of those claims using a range of specific methods based either on exposure analysis, frequency/cost projections or reserving benchmarks.
Asbestos reserves are reviewed on a yearly basis to ensure that they adequately reflect the latest claims experience, as well as legal and economic developments. Consistent with AXA’s reserving practices, and despite the particularly long-tail nature of those risks, reserves for asbestos are undiscounted.
Reserves adequacy ratios 3-Year survival ratio excluding commutations (a) 16 years 17 years 15 years 15 years
The following table shows liabilities and assets arising from policyholder participation and other obligations as of December 31, 2019: (in Euro million)
TOTAL LIABILITIES ARISING FROM POLICYHOLDER PARTICIPATION AND OTHER OBLIGATIONS 52,766 40,625
The deferred policyholder participation and other obligations liabilities and deferred policyholder participation assets include the impact of shadow accounting (see definition in Note 1.14.2)
Occasional mismatches result mainly from administrative timing diff erences in the processing of day-to-day operations.
(excluding contracts where the financial risk is borne by policyholders). Actual maturities may diff er significantly from the estimates set out below, mainly because some of the contracts contain a surrender option controlled by the policyholder that may reduce their duration.
Property & Casualty and Health claims, net of premiums due from policyholders under contracts in-force. These cash flows are based on assumptions regarding mortality, incapacity and disability, surrender and settlement frequency for Property &
They are gross of reinsurance. Given the strong use of estimates, it is likely that actual payments will diff er.
As shown in the table below, as at December 31, 2019: 84% of
By convention, contracts with zero guaranteed rates are deemed undiscounted, except for products off ering guaranteed rates updated annually and for one year: these contracts are presented in discounted reserves. Reserves for savings contracts with non-zero guaranteed rates are discounted at the technical restatements at closing and mainly consist of reserves for guarantees (Guaranteed Minimum Death Benefits, etc.).
Discount rates are qualified as locked-in when those used in the first recognition of the technical liabilities remain unchanged in the subsequent years and are qualified as unlocked when updated in subsequent years.
Life & Savings – Unlocked discount rate 33,515 2.61% 59,282 2.73%
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.
This following table shows the reconciliation of previous table with the Consolidated Statements of financial position (section 5.1).
Liabilities arising from insurance contracts (as per Note 14.2) 376,253 437,015
Liabilities arising from investment contracts with discretionary participating features (as per Note 14.3) 36,036 34,225
In accordance with IFRS 7, the Group discloses, in Note 4 of its
Note 4. They are not embedded derivatives which AXA reports separately at fair value because: ■ many of the features would be considered clearly and closely related to the host contract; and
The risk of GMDB and GMIB features to AXA are related to the unhedged portion of the benefits and to the policyholder behavior becoming materially different from the expected behavior. Reserves are established for these features on the basis of actuarial assumptions related to projected benefits and related contract charges. The determination of estimated
There can be no assurance that ultimate experience will not diff er from management’s estimates. In addition to providing for risk through establishing reserves, AXA also manages these risks through asset-liability management programs including derivatives to protect against a decline in interest rates.
Banking liabilities issued at fair value – Retail customers 772 772 2,125 2,125
The fair value option is used to measure the fair value through profit or loss of certain banking liabilities. As of December 31, 2019, the carrying value and fair value amount and the related contractual amount due at maturity for such liabilities were €772 million and €715 million respectively (€2,125 million and €1,997 million as of December 31, 2018), including the Euro
(€772 million as of December 31, 2019): values are based upon market prices that are available in active markets and are considered as level 1 fair values; ■ retail customers (€4,298 million as of December 31, 2019) and
Thus, the fair value of amounts displayed above for these instruments are considered to be level 3 fair values; ■ interbanking refinancing (€1,869 million as of December 31, 2019): • €1,500 million as of December 31, 2019 (nil as of
December 31, 2018): values are based upon market prices that are available in active markets and are considered as level 1 fair values,
• €369 million as of December 31, 2019 (€1,517 million as of December 31, 2018): mainly based on non-observable market data inputs and are considered to be level 3 fair values; ■ other liabilities arising from banking activities (€4,436 million as of December 31, 2018) related to bonds issued with fair values mainly based on observable market data inputs. As such, the fair values of these liabilities were considered as level 2 instruments.
As of December 31, 2019, debt relating to investments under lending agreements and equivalent in banking activities amounted to €188 million and €431 million as of December 31, 2018.
(a) As of January 1, 2019, Uncertain Tax Positions that amounted to €862 million were reclassified from “Other provisions for risks and charges” to “Payables-current tax” and “Deferred tax assets”.
For the sensitivity to movements in interests rates, please refer to page 192 of the “Interest rates & Equity risk related to the operating activities of Group subsidiaries” Section 4.3 Market risks.
(b) Mainly driven by AXA XL preferred shares for €1,086 million, AXA XL senior debt for €330 million, AXA SA undated subordinated debt for €253 million and UK senior debt for €172 million.
(c) Mainly related to Equitable Holdings, Inc. deconsolidation for €3,659 million partly off set by Mandatory Exchangeable Bonds reclassified from non-controlling interests for €614 million.
The fair value of financing debt as of December 31, 2019, excluding accrued interests, was €15,155 million, including related hedging derivative instruments. The fair value decreased by €1,206 million compared to December 31, 2018, mainly driven by the deconsolidation of Equitable Holdings, Inc. (€3,413 million)
Other debt instruments issued, notes and bank overdraft s excluding TRS (a) 2,633 2,739
Payables arising from direct insurance and inward reinsurance operations 10,702 10,307
(b) Excludes collateral debts relating to investments under lending agreements and equivalent in banking activities (see Note 15).
caption is the counterparty of assets recognized on the diff erent lines of the consolidated balance sheet for the share not held by the Group in consolidated investment funds. Movements in this caption both depend on the changes in the Group’s ownership and the changes in fair value of these funds.
Minority interests in funds under this caption amounted to €8,567 million as of December 31, 2019, an increase of €1,771 million compared to December 31, 2018, mainly coming from France.
Collateralized debt – JPY Libor 3M + 4 bps annual interest – maturity March 27, 2021 154 150
As of December 31, 2019, other debt instruments issued and bank overdraft s excluding total return swap agreement (“TRS”) amounted to €2,633 million, a decrease of €106 million compared to December 31, 2018.
18.3 FAIR VALUE MEASUREMENT OF OTHER DEBT INSTRUMENTS ISSUED AND BANK
The fair value of other debt instruments issued and bank overdraft s excluding total return swap agreement (“TRS”) was €2,633 million as of December 31, 2019. Among the elements included in the preceding table, fair value is only calculated for other debt instruments issued.
As of December 31, 2019, payables arising from direct insurance and inward reinsurance operations as disclosed in the Note 18.1, amounted to €10,702 million, an increase of €395 million compared to December 31, 2018, mainly related to AXA XL.
The table below sets out the contractual maturities of other debt instruments (excluding the impact of derivatives which is detailed in Note 20.1). These maturities are mostly “12 months or less”, therefore the diff erence between maturities based on contractual cash flows or based on carrying values is not significant. Eff ective maturities may differ from those presented, mainly because some instruments include clauses allowing early redemption, with or without penalty.
Other debt instruments issued, notes and bank overdraft s excluding TRS –
TOTAL INCOME TAX FROM LOSS ON GROUP LIFE PORTFOLIO IN SWITZERLAND (6) (110)
Income from operating activities, gross of tax expenses (excluding result from investments consolidated using equity method) 5,120 1,243
Impact of diff erences in tax rate and impact of taxes not linked to pre-tax income 7 11
Deferred tax assets not recognized on tax losses of the year 76 79
Tax Liabilities (DTL) carried on the Group’s consolidated statement of financial position. Note that the breakdown of DTA/
of which deferred tax through Profit and Loss 8,033 8,078 (45) (603)
of which deferred tax through other equity reserves 949 (91) 1,040 1,082
As of December 31, 2019, the €17,132 million DTA were mainly related to entities located in France (€6,969 million), Germany
(a) In 2018, prior to the reclassification done in the context of the first application of IFRIC 23 on January 1st 2019, the Uncertain Tax Positions were presented in provisions for risks and charges in Note 16.
As of December 31, 2018, the €3,706 million net DTL position included €15,932 million DTA of which €1,008 million DTA on tax losses carried forward of which €509 million for the French Tax Group.
The tables below are broken down by (i) in the first part the maturity by which the Group expects to use the DTA accounted at year-end and the corresponding tax losses carried forward,
(a) The movements through shareholders’ equity mainly concern the tax impact related to subordinated loans.
Notional amount Positive fair value Negative fair value Net fair value
(a) Notional amounts impacted by the IBOR reform: as mentioned in Note 1.2, the IAS 39 amendment ensures prospective assessments and highly probable requirements are maintained in the context of the transition to the new benchmark rates.
As of December 31, 2019, the notional amount of all derivative instruments totalled €412.5 billion (€457.9 billion at the end of 2018). Their net fair value amounted to €-1,509 million as of
(€443.6 billion at the end of 2018) and were mainly used to: ■ manage interest rate exposures on fixed maturity investments, long-term debt and guaranteed interest rates on insurance contracts; ■ reduce foreign-currency exposures on foreign-currency denominated investments and liabilities; ■ manage 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; ■ limit equity risk; ■ limit credit risk about certain investments in corporate debt instruments.
For example, the Group is exposed to credit risk in respect of its counterparties to the derivative instruments but is not exposed to credit risk on the entire notional amounts. AXA actively manages counterparty risk generated by derivatives through a specific group-wide policy. This policy includes a limit framework and an exposure monitoring process. Limits are specifically set for each authorized counterparty, based on an internal scoring system. This policy also includes daily to weekly collateralization for the majority of the Group’s exposure. The total net collateral given communicated for all derivative instruments including those related to derivatives held within investment funds of the
“Satellite Investment Portfolio” (see Note 1.8.2) was €2.6 billion as of December 31, 2019 (€-0.5 billion at the end of 2018). This net total includes amounts recognized in the Consolidated
In particular, hedging activities are one of the most important instruments to decrease the risk of the options and guarantees that are embedded in most Life & Savings products and in some
In 2019, the use of derivatives within the Group decreased overall by €45 billion in terms of notional amount for the main reasons listed below (see also details in Note 20.2.1.): ■ notional amount of equity derivatives decreased by €24.6 billion notably explained by the deconsolidation of Equitable
Holdings, Inc.; ■ notional amount of other derivatives decreased by €19.2 billion notably explained by the deconsolidation of Equitable
It was partly off set: ■ notional amount of interest rates derivatives increased by €5.7 billion mainly driven by the additional hedges of duration gap, the increase within investment funds of the “Satellite
The AXA Group’s primary interest rate exposure is related to contracts with guaranteed benefits and the risk that the value of the financial assets purchased with the consideration received from the contract holders is insuff icient to fund the guaranteed benefits and expected discretionary participation payable to them. To hedge against potential adverse market conditions, derivative strategies are used to reduce the risk arising from the guarantee liability over time.
Liability Management strategies mainly in France for €64.9 billion (versus €61.5 billion at the end of 2018), Japan for €17.9 billion at the end of 2019 (versus €17.3 billion at the end of 2018), Germany for €15.3 billion at the end of 2019 (versus €12.6 billion at the end of 2018) and in Switzerland for €5.8 billion at the end of 2019 (versus €5.4 billion at the end of 2018); ■ minimize the cost of Group debt and limit volatility of financial charges, mainly in the Company, with notional amount of €37.7 billion at the end of 2019 (versus €30.9 billion at the end of 2018), mainly due to the management of its interest rate derivatives in a context of low interest rate environment; ■ hedge interest rate risk and interest volatility risk as part of the Asset Liability Management strategy associated with the guaranteed minimum benefits on Variable Annuity products, with notional amount of €3.3 billion at the end of 2019 (versus €25.4 billion at the end of 2018). The decrease is mainly related to the deconsolidation of Equitable Holdings, Inc. (versus €20.8 billion at the end of 2018); ■ hedge interest rate risk exposures arising in the context of its ordinary banking activities, in order to manage an interest rate exposure between its interest-earning assets and interestbearing liabilities mainly by interest rate swaps. There is no longer significant amount in this category following the classification as held for sale of AXA Bank Belgium (€21.7 billion at the end of 2018).
As of December 31, 2019, the notional amount of equity derivative instruments amounted to €18.7 billion (€43.4 billion at the end of 2018). Their net fair value amounted to €223 million as of December 31, 2019 (€1,660 million at the end of 2018). AXA
mainly uses (i) equity option contracts (71% of total notional amount of equity derivative instruments), (ii) equity swaps (19%), and (iii) equity futures and forwards (10%).
Solvency; ■ hedge equity risk as part of the Asset Liability Management strategy associated with the guaranteed minimum benefits on
Variable Annuity products, which amounted to €0.1 billion at the end of 2019 (€5.9 billion at the end of 2018). The decrease is mainly related to the deconsolidation of Equitable Holdings,
The Group has entered into diff erent currency instruments to reduce its exposure to foreign currency risk. Currency derivative instruments represent agreements to exchange the currency of one country for the currency of another country at an agreed price and settlement date.
One of the main objectives of currency derivatives instruments is to limit variations in net foreign currency-denominated assets resulting from movements in exchange rates in order to protect partially or in full the value of AXA’s net foreign-currency investments in its subsidiaries and thus reduce the variability of Group consolidated shareholders’ equity against currency fluctuations, but also of others key indicators such as liquidity, gearing and solvency ratios. Notional amount of derivatives used by the Company to hedge the foreign currency exposure decreased from €36.0 billion at the end of 2018 to €34.6 billion at the end of 2019.
A description of exchange-rate risk related to the operating activities of Group subsidiaries and the Company is included in
Credit derivative instruments are mainly used to: ■ hedge credit risk involving the purchase of CDS as a protection mainly on single corporate names or specific portfolios starting from a certain level of losses through tranches instruments
strategy is implemented to compensate for the lack of depth or liquidity in some markets by taking a synthetic credit risk
(notional amount of €14.2 billion at the end of 2019 versus €14.3 billion at the end of 2018).
Macro-hedge and other derivatives (150) 894 744 1 59 59 (149) 952 803
The impact of derivative instruments is presented in the balance sheet within their related underlying financial liabilities (and assets see Note 20.3). The tables below set out the impact of derivative instruments on the related underlying liabilities: (in Euro million)
Financing debt owed to credit institutions - - - - - -
(a) Financing debts are disclosed in the balance sheet net of the impact of derivatives. As a result, the amount showing in the column “value including eff ect of derivatives” is their carrying value.
As of December 31, 2019, derivatives related to banking liabilities shown in Note 15 are used to hedge interest rate risk exposures in the context of ordinary banking activities, in order to achieve an appropriate interest rate spread between its interest earning assets and interest bearing liabilities. Related hedged assets are disclosed in Note 9.4.2 and liabilities in Note 15.
Principles applied by the Group in order to proceed with the classification of financial instruments into the IFRS 13 fair value hierarchy categories and the fair value hierarchy applicable to such instruments are described in Note 1.5. Same principles apply as far as derivatives instruments are concerned.
For more information about the Group’s segments identification, please refer to page 247 to 251 of Note 3 “Consolidated statement of income by segment”.
of which direct premiums 87,822 89,160 of which reinsurance assumed 12,030 7,149 of which fees and charges on investment contracts with no participation features 244 249 of which revenues from other activities (including revenues from banking activities) 3,436 6,316
Revenues from non-insurance contracts including revenues from other activities (€2,924 million), fees & charges relating to investment contracts with no participating features (€244 million), and commissions from banking activities (€146 million) correspond to the following types of services: (in Euro million)
Administration services Assistance Other Total of which recognized over time 1,645 93 12 280 207 2,238 of which recognized at a point in time 447 278 90 119 142 1,077
(a) Relates to liabilities arising from investment contracts without discretionary participation features including contracts where the financial risk is borne by policyholders.
Investment in real estate properties at amortized cost 1,085 632 - (345) 1,372
Non consolidated investment funds available for sale 324 144 27 (186) 310
Non consolidated investment funds designated as at fair value through profit or loss 288 - 2 - 290
Non consolidated investment funds held for trading 13 - (26) - (13)
(b) Includes debt instruments held by consolidated investment funds, designated as at fair value through profit or loss.
Net investment income is presented net of impairment charges on directly-owned investment properties, and net of amortization of debt instruments premiums/discounts. All investment management fees are also included in the aggregate figure.
Net realized gains and losses and change in fair value of investments designated as at fair value through profit or loss consist mainly of: ■ adjustments relating to investments backing contracts where the financial risk is borne by policyholders which are off set by an adjustment of related policyholder reserves, as there is a full pass through of the performance of held assets to the individual contract holder; ■ changes in the fair value of investments designated as at fair value through profit or loss held by funds of the “Satellite
Investment Portfolios” as defined in Note 1.8.2; ■ changes in fair value of underlying hedged items in fair value hedges (as designated by IAS 39) or “natural hedges” (i.e.
underlying assets designated as at fair value through profit or loss part of an economic hedge not eligible for hedge accounting as defined by IAS 39).
As of December 31, 2019, financing debt expenses, which include income and expenses relating to hedging derivative instruments on financing debt, amounted to €720 million (€562 million as of December 31, 2018) mainly in the Company: for €445 million (€387 million as of December 31, 2018).
Increase/ write back of tangible assets amortization 0 - - 0 0
Expenses increased by €2,498 million compared to December 31, 2018. On a constant exchange rate basis, expenses increased by €1,950 million mainly from: ■ AXA XL (€+3,853 million) mainly due to the full impact in 2019 of the acquisition of the XL Group completed on September 12, 2018; ■ International (€+662 million) mainly due to the loss related to the expected disposal of AXA Bank Belgium (€+568 million); ■ Europe (€+266 million) notably in Germany (€+258 million)
Kingdom & Ireland (€+72 million) from business growth and investments in transformation programs; ■ France (€+245 million) mainly due to higher commissions on premiums resulting from volume growth in Life & Savings and higher staff costs to enhance service quality; ■ Transversal (€+132 million) notably from AXA Life Europe
(€+122 million) due to the loss related to the expected disposal, and AXA Assistance (€+85 million) as a result of higher commissions from a change in business mix and higher investments to improve customer experience and simplification; ■ Asia (€+117 million) mainly in Japan (€+100 million) notably from higher acquisition costs given volume growth in Health and Protection with Unit-Linked.
This is partly off set by the United States (€-3,329 million), only contributing to 3 months of operations on the expenses of the
(1) For further information, please refer to Note 3 “Consolidated statement of income by segment” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
(€17 million in 2018 for the three months since the acquisition date).
AXA operates various defined post-employment benefit plans mainly in the United Kingdom, Germany, Switzerland, France and Belgium.
The defined benefit pension plans within AXA are mostly final salary pension plans or based on a cash balance formula, which provide benefits in the form of a guaranteed level of lump-sum payable at retirement age or pension payable for life. The level of benefits is generally based on members’ length of service and their salary in the final years leading up to retirement.
In the United Kingdom, the main defined benefit plan was closed to new members on August 31, 2013, and members who were part of defined benefit sections had the option to participate in the defined contributions sections.
assumed liabilities and plan assets associated with defined benefit plans sponsored by those entities in the United Kingdom, the United States and Germany. Main pension plans are closed to new entrants, partially funded, governed by local regulations and trustees. AXA XL also maintains deferred cash awards which are qualified as other long-term benefits under IAS 19.
Inc. (“EQH”), all pensions and other defined benefit plans sponsored by EQH, including AB, have been deconsolidated as at March 31, 2019.
Salary increase for future years 2.4% 1.7% N/A N/A 2.3% 3.8%
Defined Benefit Obligation at the beginning of the year 19,754 20,497 622 566 20,376 21,062
Actuarial (gains) and losses arising from changes in demographic assumptions (b) (106) (158) (0) (3) (107) (161)
Actuarial (gains) and losses arising from changes in financial assumptions (c) 2,073 (579) 21 (31) 2,094 (610)
Actual return on plan assets, excluding interest income 967 (279) 0 (0) 967 (279)
Net transfer In/(Out) (including acquisitions, disposals and reclassifications) (d) (2,144) 72 - - (2,144) 72
Benefits paid by plan assets (406) (515) - - (406) (515)
Interest income on separate assets 13 12 - - 13 12
Actual return on separate assets, excluding interest income 54 (36) - - 54 (36)
Net transfer In/(Out) (including acquisitions, disposals and reclassifications) 1 14 - - 1 14
Cumulative eff ect of asset ceiling at the beginning of the year 19 17 - - 19 17
Net position (excluding separate assets) (8,037) (7,633) (228) (617) (8,266) (8,250)
Net balance sheet position (including separate assets) (6,761) (6,400) (228) (617) (6,990) (7,017)
(b) In 2019, actuarial gains pertaining to changes in demographic assumptions resulted mainly from the update for the latest CMI mortality projections model in the United Kingdom.
Interest income on separate assets (13) (12) - - (13) (12)
Similarly in some other countries (mainly in Switzerland), although non-transferable insurance policies related to Defined
December 31, 2019, shown below only captures the evolution of the liability recorded in the Group’s statement of financial position net of Plan Assets and does not include Separate Assets and Swiss assets included in the Insurance General Account liabilities (which are presented in Note 26.2.8 ). The table below shows the detailed roll-forward of the statement of financial position liability, with the Separate Assets added at each year end.
Benefits paid by separate assets 105 121 1 1 106 122
Fair value of separate assets at the end of the year 1,276 1,233 - - 1,276 1,233
A description of the risk that pension schemes are exposed to is presented in Note 26.2.10. The sensitivity analysis for significant actuarial assumptions showing how the Defined Benefit Obligation (totaling €19,703 million as of December 31, 2019 and €20,376 million as of December 31, 2018) would have been aff ected by changes in the relevant actuarial assumption that is reasonably possible for year ended as of December 31, 2019, and 2018 is presented below: Eff ect of 0.50%
In the United Kingdom, the Pensions Act 1995 legislation governs pension funds and the Pensions Act 2004 introduced regulations on the funding of defined benefit pension arrangements and several other measures. Central to the funding regime are the
(SFP) which is a document prepared by the Trustees which sets out their policy for ensuring that the SFO is met. As part of the actuarial valuation, the appropriate level of future contributions to be paid to the pension plan is determined and a schedule of contributions is prepared by the Trustees of the pensions scheme following discussions with the entity. This includes a 10-year recovery plan to ensure that the Statutory Funding Objective
In Switzerland and Belgium, entities should fund the cost of the entitlements expected to be earned on at least a yearly basis where contributions are determined as a percentage of pensionable salaries depending on the age-class of the beneficiaries.
In summary, considering both the Swiss case (and other entities in a similar case) and Separate Assets, the net economic situation of the funding for defined benefit plans is the following: Pension benefits Other benefits Total
Assets other than plan assets (b) 2,723 2,701 - - 2,723 2,701
(a) Amounts representing the defined benefit obligation less plan assets adjusted for assets not recoverable by asset ceiling impact.
(b) Amounts including separate assets or right to reimbursements and other assets managed within the Group but not taken into consideration in the pension disclosures as described in Note 26.2.6.
From year N+11 until the last benefit payments is paid 18,919 62
The following tables disclose the fair values of Plan Assets and their level within the fair value hierarchy for the defined benefit plans of AXA Group as at December 31, 2019, and 2018, respectively (fair value hierarchy principles as described by the Group are described in Note 1.5): Total Group United Kingdom Switzerland Other
The estimated amount of 2020 employer contributions for pension benefits is €228 million (€205 million estimated in 2018 for 2019).
Defined benefit plans expose AXA mainly to market investment risk, interest rate risk, inflationary risk and longevity risk: ■ a decline in asset market value (equity, real estate, alternatives etc.) will immediately increase the balance sheet liability and the near-term cash flows for countries where there is minimum funding requirements; ■ a decrease in corporate bond yields will result in an increase in plan liabilities even if this eff ect will be partially off set by an increase in the value of the plans’ bonds; and
In most countries, Trustees or Investment Committees set the general investment policies and guidelines regarding the allocation of plan assets in accordance with the long-term horizon of the benefit plans. The investment strategy is reviewed regularly, following actuarial valuations of the funded benefit plans.
In 2015, the UK pension scheme entered into a longevity swap transaction with the aim of economically hedging longevity risk inherent within the pensioner population of the Scheme. In 2019, the scheme entered into another longevity swap, covering pensioner members that retired prior to April 1, 2019. Moreover, caps on inflationary increases were in place to protect the plan against extreme inflation in the United Kingdom.
(a) Net position (excluding separate assets) for pension benefits and other benefits as reported in Note 26.2.6.
(b) Included in the net position above (related to AXA Bank Belgium) classified in separate asset and liability items on the statement of financial position.
(c) It corresponds to a liability of €8,409 million as of December 31, 2019 (€8,716 million as of December 31, 2018) included in the statement of financial position under the caption “provision for risks and charges”, and an asset of €79 million included in the statement of financial position under the caption “other receivables”.
(i) granted at a price not less than the average closing price of the ordinary share on the Paris Stock Exchange during the 20 trading days preceding the date of grant, (ii) valid for a maximum term of ten years, and (iii) vest in instalments of 33.33% per year on each of the third, fourth and fift h anniversaries of the grant date.
Committee have been subject to the fulfilment of this marketbased performance condition.
The following table shows AXA SA stock options status: Options (in million) Weighted exercise price (in Euro)
The fair value of AXA SA stock options was calculated using the
The number of outstanding options and the number of exercisable options among the outstanding options are shown below by maturity date. The vesting of the grants in 2015, 2016 and 2017 to the employees of Equitable Holdings, Inc. was accelerated aft er the loss of control of AXA over EQH.
Weighted average fair value per option at grant date (in Euro) 1.21 1.81 1.80 1.42
Normes Comptables). The ANC approach values the restricted shares through a replication strategy whereby the employee would sell the restricted shares forward at the end of the lockup period, borrow enough money to buy unrestricted shares immediately, and uses the proceeds of the forward sale together with dividends paid during the lock-up period to finance the loan.
In 2019, the cost of the lock-up period was measured at 19.32%
The table below shows the main features of the plan, the amounts subscribed, valuation assumptions, and the cost of the plan for 2018 and 2019: Traditional Leveraged Traditional Leveraged
[B] Cost of the lock-up for the employee 19.32% 4.98% 19.40% 5.85%
(as a percentage of the reference price) 0.68% 0.91% 0.60% 0.89%
Performance Shares are granted to executive off icers and other key employees mainly in France. These Performance Share plans are equity-settled award plans subjected to a non-market performance criteria and have a three years vesting period.
In 2019, the valuation was based on a market price of €23.12 per share at grant date and an estimate 5% pre-vesting lapse rate per year. The grant date average fair value of Performance Shares granted in 2019 was €16.39 (€14.06 for 2018 grants).
Performance Units recorded as of December 31, 2019, was €71.9 million in earnings (€59.2 million as of December 31, 2018).
As voted by the Shareholders’ Meeting of April 24, 2019, AXA’s
AXA Group Solvency II ratio calculated during the performance period of three years.
For the grants from 2016 to 2018, aft er the three years performance period, the performance shares definitively acquired are subject to (i) an additional restriction on transfer period of two years following the performance period, and (ii) an obligation to hold the shares until retirement, provided that the beneficiaries may sell their shares for diversification purposes (following the threeyear performance period and two-year restriction on transfer period), as long as the sale proceeds are invested in a long-term savings plan until the beneficiary’s retirement.
The total cost of the Performance Shares Retirement recorded as of December 31, 2019, was €15.1 million in earnings, gross of tax (€14.0 million as of December 31, 2018).
Main share-based compensation plans issued by AXA subsidiaries are described below: AXA INVESTMENT MANAGERS SHARE-BASED
Managers Performance Shares incentive plan is a long-term award plan in which participants are allocated AXA Investment
The total cost of AXA Investment Managers Performance Shares recorded as of December 31, 2019, amounted to €14.6 million in earnings (€25.4 million as of December 31, 2018), gross of tax.
Plan are in the form of restricted AB Holding units or cash which are granted to certain key employees.
For the period from January 1, 2019 to the deconsolidation of Equitable Holdings, Inc. including AB as at March 31, 2019, the cost for AB share-based compensation plans amounted to €16.6 million (€158.8 million in 2018), gross of tax.
Compensation costs/expenses: ■ short-term benefits: compensation paid to members of the Management Committee in 2019 totaled €22.6 million
(€7.4 million in 2018); ■ post-retirement benefits: the estimated cost to the Group of providing defined benefit pensions and other post-retirement benefits to members of the Management Committee for the current year of service measured in accordance with IAS 19 amounted to €3.2 million in 2019 (€2.7 million in 2018).
At December 31, 2019, the Group employed 99,843 salaried people on a full-time equivalent basis (104,065 at the end of
Net income including impact of undated subordinated debt A 3,603 1,878
(a) Except for number of shares (million of units) and earnings per share (Euro).
In 2019, net income per ordinary share attributable to continuing operations stood at €1.51 on a basic and fully diluted basis.
Company’s Executive Management and Board of Directors serve as directors or executive off icers of the Mutuelles AXA.
and AXA France Vie respectively (the “Subsidiaries”), are parties to an agreement pursuant to which they provide a full range of management services to manage the insurance operations and portfolios of the Mutuelles AXA. The agreement includes provisions designed to ensure the legal independence and protection of the respective client portfolios of the Mutuelles
AXA and these Subsidiaries. Certain costs and charges (excluding commissions) are allocated between the Subsidiaries and the Mutuelles AXA through an economic interest grouping
French law, created to perform various common services for their members and to allocate associated costs and expenses among their members. The allocation of costs and expenses invoiced to GIE members is based on various agreed criteria including particular activity drivers. The GIEs of which the Company was a member during 2019 covered a variety of common services including services performed by the Group’s central functions
Certain of these guarantees are given by the Company for the benefit of its subsidiaries and affiliates for various business purposes including to promote development of their business
Commitments granted by the Company to its subsidiaries are disclosed in Appendix III of this Annual Report “AXA parent
Group companies may, from time to time, purchase insurance, wealth management or other products or services off ered by
AXA in the ordinary course of its business. The terms and conditions of these transactions are substantially similar to the terms and conditions generally available to the public or to AXA employees in general. In addition, certain members of the Board of Directors are corporate off icers, directors or have interests, directly or indirectly, in companies that may have agreements or enter into transactions from time to time with AXA Group entities including extensions of credit, loans, purchases of securities (for their own account or for third parties), underwriting of securities and/or furnishing of other types of services or goods. These agreements or deals are generally fully negotiated and performed on arm’s length terms and conditions.
I Note 29 Contingent assets and liabilities and unrecognized contractual commitments 29.1 BREAKDOWN OF COMMITMENTS RECEIVED
Commitments received by AXA totaled €51,848 million at the end of 2019, and decreased by €29,783 million compared to the end of 2018, mainly due to a decrease in pledged assets and collaterals mostly following the held for sale classification of AXA
Equitable Holdings, Inc. for €6,014 million (notably impacting letters of credit (€2,425 million), and pledge assets and collaterals
These commitments can be broken down as follows: Financing commitments received totaled €11,305 million at the end of 2019, and mainly consisted of: ■ credit facilities received by holdings for €9,058 million mainly at AXA SA (€8,468 million); ■ commitment lines granted to AXA XL (€1,874 million) and
Belgium (€574 million), (ii) €7,038 million guarantees related to loans mainly at AXA Banque France (€6,951 million), and
(iii) €6,310 million other guarantees received from customers, mainly at AXA Banque France (€6,308 million).
France (€1,707 million) and Japan (€483 million); ■ collaterals for reinsurance operations totaled €3,509 million mainly in France (€2,583 million), AXA Global Re (€653 million)
and AXA XL (€196 million); ■ collateral for derivatives totaled €2,262 million mainly in
Letters of credit received totaled €277 million at the end of 2019 mainly related to from AXA Global Re (€156 million) and
Commitments given totaled €87,237 million at the end of 2019, increasing by €5,796 million compared to the end of 2018, mainly due to an increase of €12,195 million in pledged securities and collateralized commitments, and €2,241 million in letters of credit partly off set by a decrease of €5,216 million in guarantees commitments and €2,101 million in financing commitments.
(€538 million) and AXA XL (€370 million); ■ pledged assets and collaterals for reinsurance operations totaled €6,851 million mainly in AXA XL (€5,658 million) and
France (€1,099 million); ■ pledged assets and collaterals for derivatives instruments totaled €3,167 million mainly in Japan (€1,359 million),
Letters of credit given totaled €2,374 million at the end of 2019 and were mainly from AXA XL (€2,274 million).
Other commitments given totaled €18,528 million at the end of 2019 and mainly consisted of: ■ €8,821 million commitments to private equity funds mainly in France (€3,956 million), Germany (€2,066 million), Japan
(€338 million) and AXA XL (€122 million); ■ €5,511 million commitments to invested assets other than real estate funds or private equity funds mainly in
and Japan (€340 million); ■ €1,314 million commitments to Real Estate funds mainly in
■ €1,052 million commitments related to Group insurance contracts mainly from AXA SA (€947 million); ■ €777 million commitments to insurance protection funds and other regulatory requirements in Germany (€391 million),
AXA subsidiaries are required to indemnify their employees and directors against certain liabilities and costs that they may incur from time to time in performing activities within the scope of their duties. These activities may include, for example, service as a director, off icer, agent, general partner, or in a similar capacity for (i) an AXA Group company other than the employee’s principal employer or (ii) a company outside the AXA Group where service is at the request of (or for the benefit of) the Group (e.g.
AXA SA is exposed to foreign currency fluctuations notably stemming from its Non-Euro participations. The aim of the hedging programs of the Company is to protect the shareholder value while managing the associated costs.
Courbevoie Cedex, first appointed on April 27, 2016. The current appointment is for a period of 6 years, until the Annual General
The table below distinguishes the fee amounts paid by AXA to each of the Statutory Auditors in charge of auditing the Group’s financial statements between the fees for the legal mission of Statutory Auditors of the statements and for other services.
However, it is oft en diff icult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages, the litigation is in its early stages, or when the litigation is highly complex or broad in scope.
AXA SA is involved in lawsuits, investigations and other actions arising in the various jurisdictions where it does business, including the following: In 2007, AXA SA completed the squeeze out of the minority shareholders at two German subsidiaries, AXA Konzern AG
In the first half of 2016, an initial expert valuation report was delivered to the court based on recent precedents in other
German minority buy-out transactions and recommending a significant increase in the cash compensation to be paid to minority shareholders. In addition, interest will be payable on any additional amount finally decided. AXA SA appointed an independent expert to challenge this report and submitted its statement in February 2017. A court-appointed expert provided a revised report in response to AXA’s expert in November 2018.
A first instance decision was issued in December 2019. The court decided that the AKAG and KVAG valuation compensation should be increased by approximately 22% of the amount paid by AXA
in 2007. The decision requires AXA to make a further payment of approximately €116 million as at December 2019 which amount was significantly less than the increase proposed by the court appointed expert. The minority shareholders have appealed the decision and AXA counter appealed. Annual interest will accrue in the amount of €3.14 million per annum while the appeal is pending. The appeal determination could take several years.
AXA SA on demand for 90% of certain costs related to complaints alleging misselling of payment protection insurance underwritten by FICL and FACL. Following a claim for indemnification for
obtained a first instance judgement in its favour. Genworth has appealed that judgement, but this appeal will not postpone a hearing to determine the amount of damages to be awarded which is scheduled for June 2020.
AXA and its subsidiaries are involved in various legal actions and proceedings of a character normally incidental to their business including claims litigation arising in connection with the Group’s insurance business and litigation arising from the Group’s Asset
A number of lawsuits have been filed against insurers in the United States and elsewhere involving the scope and interpretation of policies, insurers’ sales practices, alleged misconduct or misrepresentation, alleged failure to properly supervise agents, compensation of intermediaries, product features, fees or performance as well as numerous other matters.
A class action was brought against AXA France and AGIPI (a
The underlying liabilities in question arise out of a series of lawsuits (more than 500 individual suits) brought against Enedis by local electricity producers in France engaged in production of solar/green energy. These local producers allege financial losses due to Enedis’ delay in processing their applications to be connected to the public grid within the statutory period, resulting in their inability to profit from attractive buyback rates under certain French government Decrees promulgated in 2006 and 2010 (the “Decrees”). AXA XL Division was joined to proceedings, as insurer, in over 200 cases. AXA XL Division pleaded the illegality of the Decrees as its defense and in September 2016, the Court of
Division insured the primary layer (up to £5 million per claim or series of related claims) under these policies. RBS seeks coverage for potential liabilities arising out of three class actions brought against NatWest (an RBS subsidiary) between 2005-2007 in New
York Federal Court under the US Anti-Terrorism Act for aiding and abetting terrorism due to certain accounts it maintained.
NatWest succeeded in having this case dismissed in March 2013 on a summary judgment motion but in 2014 this was overturned and the case was remanded to the court of first instance who granted NatWest’s motion for summary judgment and dismissed the claims under the US Anti-Terrorism Act. AXA XL Division is not a party to this litigation. The plaintiff s appealed the Court’s decision and a decision is not expected before the end of 2020.
In the event the appellate court reverses the summary judgment decision, the exposure, if any, of AXA XL Division in this matter cannot be reasonably estimated at this time and will depend on a variety of factors including (i) the ultimate outcome of the litigation for NatWest and, in the event of an adverse outcome,
In addition to the various matters noted above, AXA and certain of its subsidiaries are involved in numerous legal actions and proceedings arising out of transactions involving the acquisition or sale of businesses or assets, mergers or other business
France. While a criminal complaint against or indictment of a corporate entity may not pose material financial risk, it has broad potential implications for a regulated financial institution like
AXA both from a reputation point of view and from a regulatory perspective because a criminal conviction can have potentially far reaching negative implications for AXA Group companies engaged in regulated businesses around the world (including for their ability to obtain or maintain licenses to engage in certain types of regulated business activities such as Asset Management, insurance and banking).
Beyond litigation risks of the type described above, AXA and its subsidiaries are subject to comprehensive regulation in the various jurisdictions where they do business. In this context,
AXA and its subsidiaries are subject, from time to time, to examinations, investigations, enforcement proceedings and other actions by regulatory and law enforcement authorities (involving civil and/or penal matters) as well as to proposed changes in law and/or regulation that may significantly impact their business and results of operations. For additional information on these matters as well as other risks and contingent liabilities aff ecting the Group and its business, please see Section 4.1 “Risk Factors”
Although the outcome of any lawsuit cannot be predicted with certainty, particularly in the early stages of an action,
On February 7, 2020, AXA entered into an agreement with UNIQA
Under the terms of the agreement, AXA would sell 100% of its
Central and Eastern Europe for a total cash consideration of €1,002 million, representing an implied 12.4x 2019 P/E multiple (2).
The completion of the transaction is expected to result in a positive impact on AXA Group’s Solvency II ratio of ca. 2 points.
Since December 2019, a significant number of cases of pneumonia associated with the Coronavirus, now called
COVID-19 by the World Health Organization (“WHO”), has been reported worldwide. Initially reported in the province of
Hubei in the People’s Republic of China, it has spread across other countries, resulting in reported infections and deaths in numerous countries, including South Korea, Iran, Italy, France, the United Kingdom and the United States, and new cases and fatalities are reported daily. Furthermore, it is currently not possible to know or to predict the extent to which the current levels of reported cases reflect the actual transmission of the virus within populations, and accordingly the scale of the pandemic may be significantly larger than is presently recorded.
AXA and each of its regulated entities has or is in the process of establishing plans to address how it will manage the eff ects of the outbreak, and assess disruptions and other risks to its operations. These include the protection of employees, sustaining our services to clients and other stakeholders and ensuring eff ective processes are in place to communicate and execute such plans.
AXA is closely monitoring the Group’s exposure, including (i) the operational impact on its business, (ii) the consequences of a deterioration in macroeconomic conditions or of a slowdown in the flow of people, goods and services, especially on new business volumes, (iii) the extent of insurance coverage impacted, including Life, Health, Protection and Property & Casualty insurance and reinsurance cover (following, for example, increased business interruptions, travel and event cancellations and higher medical costs), and (iv) change in asset prices and financial conditions (including interest rates).
(1) Includes AXA Ubezpieczenia Towarzystwo Ubezpieczeń i Reasekuracji SA (P&C business), AXA Życie Towarzystwo Ubezpieczeń SA (L&S business) and AXA Powszechne Towarzystwo Emerytalne SA (Pension business) in Poland, and AXA pojišťovna a.s. (P&C business), AXA životni pojišťovna a.s (L&S business) and AXA penzijni společnost a.s. (Pension business) in Czech Republic, together with their subsidiaries and branches in Slovakia. AXA XL’s and AXA Partners’ operations in the three countries are not within the scope of this transaction.
This is a translation into English of the Statutory Auditors’ report on the consolidated financial statements of the Company issued in
French and it is provided solely for the convenience of English speaking users. This statutory auditors’ report includes information required by European regulation and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report and other documents provided to shareholders.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2019, and of the results of its operations for the year then ended in accordance with International
Our responsibilities under those standards are further described in the Statutory Auditors’ Responsibilities for the Audit of the
We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2019 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5 (1) of Regulation
In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks.
At December 31, 2019, the Group has recorded material Life & Savings liabilities arising from insurance contracts (€267,454 million) and liabilities arising from investment contracts with discretionary participation features (€36,036 million), where risks are born by the group, as described in Notes 14.2 and 14.3 to the consolidated financial statements.
The primary assumptions that must be made as part of the valuation include assumptions about mortality, longevity, lapses, morbidity, disability and costs as well as economic assumptions such as interest rates and equity market performance.
As described in Notes 1.14.2 and 4.4 to the consolidated financial statements, measurements of Life & Savings technical reserves are as follows: ■ For life and protection insurance contracts, the future policy benefit reserves relating to these contracts are generally measured based on a prospective basis using assumptions on investment yield, mortality, longevity, lapses, morbidity and expenses.
Assumptions used are generally locked-in at inception, and for some Life & Savings reserves are based on unlocked discount rates as stated in note 14.10.2.
Measurement of claim reserves in the Property & Casualty line of business
As stated in Note 1.14.2 to the consolidated financial statements, these reserves correspond to the estimated ultimate cost of settling an insurance claim. They include claims incurred and reported, claims incurred but not reported (IBNR) as well as claims handling costs.
For some line of business, these estimates require a high degree of judgment, and the assumptions selected may have a significant impact on the ultimate claims cost of these reserves at the end of the reporting period as the inherent uncertainty is higher. This is especially the case for Property & Casualty lines of business that are considered long-tail such as general and professional liability, worker’s compensation, and other specialty lines.
Accordingly, due to these inherent uncertainties to calculate the estimates, we deemed the measurement of claim reserves in the
Our audit approach to the risk relating to the valuation of claim reserves was as follows: ■ We assessed the compliance of the methodology applied by the
As stated in Note 1.3.2 to the consolidated financial statements, goodwill corresponds to the excess of the consideration of the business combination over the net identifiable assets acquired and liabilities assumed on the acquisition date. Goodwill is allocated to the CGUs of the activities into which that business was incorporated.
■ long-term growth rates thus, requiring significant judgment from management. This is especially the case for the AXA XL CGU.
Group with current accounting standards and its implementation; ■ We also applied procedures to test that: – the projected future cash flows are consistent with management’s most recent estimates, as calculated during the budget process; – the assumptions made with respect to projected future cash flows are reasonable in terms of the economic and financial context of the CGU and, by assessing the reasons for diff erences between projected and actual performances, that the process by which the estimates were calculated is reliable.
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by laws and regulations of the Group’s information given in the management report of the Board of Directors.
International Financial Reporting Standards (IFRS) as adopted by the European Union and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
The consolidated financial statements were approved by the Board of Directors.
The principal trading market for AXA ordinary shares is Euronext Paris (Compartment A). Since the delisting of AXA ADRs (American
Depositary Receipts representing American Depositary Shares (“ADS”), each representing one AXA ordinary share) from the New York
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and related voting rights on December 31, 2019: Number of shares
Treasury shares held directly by the Company 31,102,295 1.29% [1.09%] (c)
(d) Treasury shares as indicated in Note 13 “Shareholders’ equity and minority interests” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
Boards. The Strategy Committee has elected amongst its members Mr. François Martineau and Mr. Philippe Guerand as co-chairmen. It is generally consulted on all significant matters relating to the Mutuelles AXA including their collective shareholding in AXA and overall relationship with the Company and the AXA Group.
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights on December 31, 2019 except as indicated in the table above.
Certain of the Company’s shares are entitled to double voting rights as described in Section 6.3 – “General information
Significant changes in the Company’s share capital ownership between December 31, 2017 and December 31, 2019 are set forth in the table below: On December 31, 2019 (a)
In connection with the share repurchase programs approved by AXA’s shareholders during their Shareholders’ Meetings held on April 25, 2018 (resolution 18) and April 24, 2019 (resolution 11) and pursuant to Article L.225-209 of the French Commercial
Furthermore, for information purposes, it should be noted that on December 31, 2019, the total number of treasury shares held by Company subsidiaries was 240,194 (or 0.01% of AXA’s share capital at that date). The booking value of these 240,194 treasury shares on December 31, 2019 is €7,055,000.
Company’s share capital through the issue of shares reserved to the Group employees under the Shareplan 2019 program. The shareholders waived their preferential subscription rights so that this off ering could be made exclusively to Group employees
In countries that met the legal, regulatory and tax requirements to participate in Shareplan, two investment options were off ered to the Group employees in 2019: ■ the traditional plan, off ered in 38 countries; ■ the leveraged plan, off ered in 37 countries.
with a 4.99% discount. These shares are held within the Group
Share capital reduction by cancellation of shares (23,272,226) (531,851,334) 2,420,265,818 5,542,408,723
Exercise of stock options 4,969,933 73,161,594 2,425,235,751 5,553,789,870 2018 Share capital reduction by cancellation of shares (2,935,769) (63,784,085) 2,422,299,982 5,547,066,959
Share capital reduction by cancellation of shares (15,423,549) (323,167,103) 2,423,347,096 5,549,464,849
Exercise of stock options 1,569,530 17,745,639 2,424,916,626 5,553,059,074 2019 Share capital reduction by cancellation of shares (1,644,442) (35,703,764) 2,423,272,184 5,549,293,301
Share capital reduction by cancellation of shares (17,815,616) (368,227,901) 2,414,962,409 5,530,263,917 31/12/2019 Exercise of stock options 2,732,714 38,290,141 2,417,695,123 5,536,521,832
The following table indicates the Company’s fully diluted share capital, assuming that the maximum number of new shares is issued following the exercise of all outstanding stock options.
AXA’s authorizations to issue shares or other types of securities as at December 31, 2019 are summarized in the tables below: issues with preferential subscription rights for shareholders
Ordinary shares or securities giving access to the capital, reserved for employees – 135 million (c) 18 months October 24, 2020
(b) The aggregate nominal value of debt instruments associated with the issue of securities with or without preferential subscription rights may not exceed the global upper limit of €6 billion.
Please see paragraph “Employee shareholders” of Section 6.2 of this Annual Report.
Register (Registre du commerce et des sociétés) under number 572 093 920. AXA’s legal entity identifier (LEI) is
until the filing of AXA’s next Universal Registration Document with the AMF: (i) the Bylaws of the Company, (ii) the reports or other documents prepared by any expert at the Company’s request which are (in whole or in part) included or referred to in this
Universal Registration Document. These documents are also available on AXA’s website and, more specifically, at the following links for the Bylaws of the Company (
AXA is engaged in regulated business activities on a global scale through numerous operating subsidiaries. The Group’s principal business activities of (re)insurance and Asset Management are subject to comprehensive regulation and supervision in each of the various jurisdictions where the Group operates. AXA SA, the ultimate parent holding company of the AXA Group, is also subject to extensive regulation as a result of its listing on Euronext Paris and its direct and indirect shareholding in numerous regulated insurance and Asset Management subsidiaries. Given that the
While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s (re)insurance subsidiaries operate have laws and regulations governing distribution practices, standards of solvency, levels of capital and reserves, permitted types and concentrations of investments, and business conduct to be maintained by (re)insurance companies, as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or filing of rates.
In certain jurisdictions, regulations limit sales commissions, fees and certain other marketing expenses that may be incurred by the insurer and impose product suitability and disclosure requirements. In general, insurers are required to file detailed annual financial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or unexpected examinations of the (re)insurers’ operations and accounts and request additional information from the (re)insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed (re)insurer. This holding company legislation typically requires periodic disclosure, reporting concerning the corporation that controls the licensed insurer and other aff iliated companies, including prior approval (or notice) of transactions between the (re)insurer and other aff iliates such as intra-group transfers of assets and payment of dividends by the controlled
as an insurance holding company. In general, these regulatory schemes are designed to protect the interests of policyholders rather than shareholders. For additional information, see the paragraph “Our businesses are subject to extensive regulation and regulatory supervision in the various jurisdictions in which we operate” in Section 4.1 “Risk Factors” of this Annual Report.
(the “Solvency II Directive”) and the regulations promulgated thereunder (together with the Solvency II Directive, “Solvency II”).
States. Solvency II is based on three pillars: (1) Pillar 1 consists of the quantitative requirements around own funds, valuation rules for assets and liabilities and solvency capital requirements; (2) Pillar 2 sets out qualitative requirements for the governance and Risk Management of insurers, as well as for the eff ective supervision of insurers, including the requirement for insurers to submit an Own Risk and Solvency Assessment (“ORSA”); and
(3) Pillar 3 introduces an enhanced reporting and disclosure regime, pursuant to which subject insurance undertakings headquartered in the European Union are required to prepare the Regular Supervisory Report (“RSR”), to be submitted by the undertaking to the competent national regulator on a regular basis as determined by the regulation, and the Solvency and
AXA continues to regularly review the scope, underlying methodologies and assumptions of the Internal Model, and will adjust its SCR accordingly. In addition, AXA’s Internal Model has been and may be revised from time to time in accordance with applicable regulations. However, any significant change to the
Internal Model would be subject to the prior approval of the ACPR
AXA SA, and (re)insurance companies, including prohibiting payment of dividends, ordering portfolio transfers, establishing temporary bridge institutions and imposing a temporary stay on early termination rights. Under the French Resolution
subsidiaries thereof, and any other entity of such groups, providing key services (services indispensables) thereto, and to ensure that such recovery plan remains up-to-date thereaft er.
In addition, there are continuing discussions regarding the development of recovery and resolution frameworks and strategies in the insurance industry, as the FSB and the
(“EIOPA”) is working towards harmonization and strengthening of recovery and resolution frameworks within the EU and crossborder coordination between EU competent authorities in this respect.
internal models. Such review may lead to further regulatory changes to increase convergence and to strengthen oversight of cross-border groups, as well as changes to internal models and
States of America on Prudential Measures Regarding Insurance and Reinsurance” (the “Covered Agreement”) which sets out principles governing the imposition of Group capital and supervisory standards for insurance groups headquartered in an EU Member State or the United States with operations in both.
Agreement entered into force on April 4, 2018 and will be fully implemented within five years from its signing date. Pursuant to the Covered Agreement, the AXA Group will remain subject to group supervisory and capital requirements, as currently provided under Solvency II, with AXA’s US insurance subsidiaries remaining subject to local requirements. The Covered Agreement also addresses various regulatory information-sharing and reporting matters, as well as EU/US reinsurance market issues.
For further information on the risks related to regulatory capital requirements, see the paragraph “The Group’s or its
and an assessment methodology for designating GSIIs. From 2013 to 2016, the FSB, in consultation with the IAIS and national authorities, annually published a list of GSIIs, which included
IAIGs can be asked by their supervisors to compute an ICS, on a voluntary basis, for confidential reporting and discussion in supervisory colleges. The end objective for the IAIS is to have the ICS implemented in all jurisdictions as a group-wide prescribed capital requirement for IAIGs aft er the monitoring period. On November 14, 2019, the IAIS also adopted a holistic framework for the assessment and mitigation of systemic risk in the insurance sector (the “Holistic Framework”), in lieu of the previous individual GSII designation mechanism, which will be implemented starting in 2020.
IAIS had formerly adopted for application to GSIIs only. In light of the development and adoption of the Holistic Framework by the IAIS, the FSB has decided to continue suspending the annual identification of GSIIs as from the beginning of 2020.
In November 2022, the FSB will review the need to either discontinue or re-establish an annual identification of GSIIs based on the initial implementation of the Holistic Framework.
Framework, ICPs and ComFrame and expects the regulatory landscape with respect to (re)insurance and financial markets to continue to evolve in 2020 and beyond with further legislative and regulatory initiatives.
AXA Investment Managers and other AXA Asset Management entities are subject to extensive regulation in the various jurisdictions in which they operate. These include, in Europe,
These regulations are generally designed to safeguard client assets and ensure adequacy of disclosures concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity, regulatory approvals and qualifications of the investment manager.
These regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment company, censures and/or fines.
The European Union (Regulation (EU) No. 648/2012 of July 4, 2012, also referred to as the European Market Infrastructure
CRR II further implement the Basel III framework by amending various CRD and CRR provisions regarding, e.g. holding company rules, leverage ratios, large exposures, liquidity, market risk and counterparty credit risk, as well as reporting and disclosure requirements (including on remuneration).
EU of May 15, 2014 on markets in financial instruments (as amended, “MiFID II”) and Regulation (EU) No. 600/2014 on markets in financial instruments, as amended (together with
“MiFID II Package”) which entered into force in 2018. The MiFID II
Union’s financial markets and increase cross-border investments, market transparency and investor protection, imposes a wide variety of new requirements including with respect to trading/
clearing of certain derivatives on organized platforms, regular reporting with respect to derivatives positions and certain other types of financial instruments, enhanced governance and investor protection standards, restrictions and/or prohibitions on certain types of compensation arrangements or other monetary inducements to firms providing independent investment advice and greater regulation of structured products and other complex financial instruments.
which entered into force in 2018, the objective of which is to enhance retail investor protection by standardizing the information through predefined key information documents.
(ii) an increased harmonization of the applicable law across the European Union and a “one-stop-shop” that will streamline cooperation between the data protection authorities on issues with implications for all the European Union, and (iii) a stronger enforcement regime, under which data protection authorities will be able to fine companies which do not comply with EU rules up to 4% of their global annual turnover. The GDPR applies to both EU and non-EU companies, if the latter are off ering goods and services or monitoring the behavior of individuals in the
applies primarily, in the insurance and reinsurance sector, to companies operating in the European Union.
In France, the EU Data Protection Reform has been transposed by Law No. 2018-493 regarding personal data protection, which entered into force on May 25, 2018, and various implementing measures, including Decree No. 2018-687 of August 1, 2018.
accordingly been relying on the above-mentioned mechanisms to transfer personal data from the Company or its EU-based affiliates to its banking and insurance affiliates based in the
Solvency II sets out the remuneration policy principles and governance requirements to be implemented by European insurers and specifies that the companies subject to Solvency II
must adopt a written remuneration policy compliant with a number of principles set out in the Delegated Regulation (EU)
Risk Management and does not encourage risk-taking that exceeds the risk tolerance limits of the Company. In this context,
Compensation Practices”, together with implementation standards. Among the matters covered in these standards and principles are a variety of mechanisms (including minimum recommended deferrals of cash bonuses, greater use of longterm equity grants rather than cash as a form of compensation, minimum vesting/deferral periods, and performance criteria for vesting of long-term awards) that are designed to ensure an appropriate alignment of interests between (i) Executive
These principles and standards are reflected in a variety of regulations and legislative initiatives that have been enacted over the past few years in various jurisdictions where the Group does business. While these restrictions are oft en aimed primarily at the banking sector and do not apply uniformly to the Group across the various jurisdictions where it does business, the
Group has largely aligned its global executive compensation practices with these standards and principles, and conducts regular reviews of its compensation practices and policies in light of these standards as well as applicable legal and regulatory requirements. The application of these principles and standards may vary among the diff erent actors in the financial sector (such as banks, insurers, asset managers, private equity funds, hedge funds) and across the various jurisdictions where the Group does business, which may give rise to certain competitive issues for the Group, including by aff ecting the Group’s ability to attract and retain top-rate talents.
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,
Financial Instruments. The published eff ective date of IFRS 9 was January 1, 2018. However, given the interaction between financial assets and insurance liabilities, the IASB issued amendments to IFRS 4 allowing, under certain criteria, entities issuing insurance contracts within the scope of IFRS 4 to defer the implementation of IFRS 9 until the eff ective date of IFRS 17, but no later than January 1, 2021. Those amendments were adopted by the European Union on November 3, 2017. The Group is eligible for this temporary exemption and has decided to apply it.
The implementation of these two standards within the Group is in progress and M anagement is currently assessing the impact of their adoption.
There are various initiatives at the French, EU and international levels with respect to climate change and sustainable finance, which generally aim at proposing reforms to and potential changes affecting (i) investment activities, (ii) disclosure requirements, such as the recently adopted Regulation (EU)
Benchmarks, EU Paris-aligned Benchmarks and sustainabilityrelated disclosures for benchmarks, or (iii) requirements relating to the inclusion of environmental, social and governance considerations in insurance and Asset Management products and advice. In particular, EIOPA has been working towards the integration of sustainability considerations into the prudential and conduct framework for (re)insurance undertakings and insurance distributors. EIOPA released its technical advice to the EU Commission on the integration of sustainability risks and factors in the delegated acts under the Solvency II Directive and Directive (EU) 2016/97 of January 20, 2016 on insurance distribution (as amended, the “IDD”) on April 30, 2019, as well as its opinion on sustainability within the Solvency II framework on September 30, 2019. Those or similar initiatives are expected to continue in 2020 and could result in new or additional requirements for financial institutions.
In particular, Regulation (EU) 2016/1011 of June 8, 2016 (as amended, the “Benchmark Regulation”), which entered into force on January 1, 2018, imposed additional requirements on the provision of financial market-related benchmarks, the contribution of input data to a benchmark and the use of benchmarks within the EU.
Several interbank market benchmarks have been designated as critical benchmarks under the Benchmark Regulation, including Libor, Euribor and Eonia, and their related benchmark methodologies have been made subject to review. Certain critical benchmarks might be discontinued in the future, including,
We are closely following industry and regulatory developments with respect to the potential impacts of future benchmark changes, which could have implications for our capital models,
Banking Authority have issued a consultation on amendments to the PRIIPs Regulation. Subject to endorsement procedures and an adequate implementation period for market participants, the amendments proposed in the consultation could become applicable to existing packaged retail and insurance-based investment products in the course of 2021.
Finally, financial crime compliance programs of financial institutions (anti-money laundering, anti-corruption and international sanctions compliance) continue to be a major focus of regulatory and law enforcement authorities with increasingly significant penalties imposed for compliance failures. In particular, French Law No. 2016-1691 of December 9, 2016 on transparency, fight against corruption and modernization of the economy, known as “Sapin II”, which entered into force on June 1, 2017, introduces new requirements for all large
The litigation environment in which the Group operates also continues to evolve. In continental Europe, the introduction of class actions, including in France in 2014, has, and is likely to continue to, increase litigation risks and costs for insurers, asset managers and other financial institutions. Most recently, on April 11, 2018, the EU Commission proposed a directive on representative actions for the protection of the collective interests of consumers, as part of its ‘New Deal for Consumers’
(including data protection and financial services), in order to provide an eff ective and eff icient way of protecting the collective interests of consumers. The EU Parliament adopted this proposed directive in March 2019, and the EU Council adopted a general approach with respect to such proposed directive on
November 28, 2019. Trilateral negotiations among EU institutions are expected to commence in 2020.
“Risk Factors” and Section 4.8 “Other material risks – Regulatory risks” of this Annual Report.
In the countries where it operates, AXA is both a tax payer and a tax collector, given that many specific taxes are levied on (re)
As a part of the global internal risk assessment, a specific tax internal control program is implemented. These controls must be reported and documented by each team in scope to ensure full compliance.
A Tax Code of Ethics, agreed between Group Tax Department and local tax teams, highlights the key principles guiding the actions of the various tax teams: ■ to remain up to date with respect to applicable laws and regulations; ■ to comply with tax laws and regulations; ■ to maintain a good relationship with the local tax authorities; ■ and not to engage in aggressive tax driven transactions that could compromise the good reputation of the Group.
The satisfaction of this Code of Ethics is a prerequisite of the activities performed by all AXA tax teams. In this respect, a biannual tax review process of each key entity or business line is performed by the Group Tax Department in connection with each local team. During these reviews, specific attention is given to tax audits and associated tax risks as well as market positions on tax matters that may impact AXA. These reviews off er a global framework for the tax teams to identify, analyze, control, and report tax risks.
More globally, AXA does not use non cooperative jurisdictions to avoid taxes on operational activities performed elsewhere.
Bermuda is a low-tax jurisdiction, it is a center of expertise and one of the key location of the worldwide reinsurance market. It is not considered as a non-cooperative jurisdiction according to the
Statements” of this Annual Report). Accounting for income taxes recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of the entity’s assets and liabilities, as required by IAS 12 (see Note 1.17.1
operates, the income and capital gains on savings-products benefit from a favorable tax treatment, also when such products are included in life insurance products. This leads to a lower eff ective tax rate for life insurance companies.
Annual Report and are broken down by business segment and country. For each, a dedicated paragraph provides a comment about the line related to Tax Income (see Section 2.3 “Activity
The Group has set up a validation framework to ensure that new products undergo a thorough approval process before they go to market.
Moreover, AXA has established strict policies regarding its cross-border activities and knowledge of its customers, in order to ensure that our products and services are not misused for money laundering or tax evasion purposes and are governed by specific rules according to which cross-border life insurance proposals must be presented to the Group Tax and Compliance
Pursuant to Council Directive (EU) 2018/822, AXA may, as a provider of investments and savings products, have tax reporting obligations with respect to certain cross-border products it designs or implements. In particular, certain investments and savings products with no particular tax motive may be reportable under the above-mentioned Directive.
Certain material provisions of applicable French law, in force at the filing date of this Annual Report, and of the Company’s
Terms of Reference include a number of specific provisions concerning members of the Board of Directors and corporate off icers, including the following: Compensation
Members of the Board of Directors receive a fixed annual directors’
fee, the maximum overall amount of which is determined by the
Notwithstanding the term of off ice for which the Chief Executive
Off icer is appointed, his/her functions shall terminate at the latest at the end of the Ordinary Shareholders’ Meeting convened to approve the financial statements of the preceding fiscal year and held during the year the Chief Executive Off icer reaches the age of 65. The same rule applies for the Deputy Chief Executive
An individual aged 70 or older may be appointed or reappointed to the Board of Directors exclusively for a two-year term of off ice.
December 31 of the preceding fiscal year, shall correspond to an amount at least equivalent to the gross director’s fees earned in respect of the previous fiscal year. The shares purchased for the purpose of this holding objective will be held in registered form.
In the event of a capital increase by capitalization of existing reserves, profits or premiums, shares granted for free to any shareholder holding shares entitled to double voting rights will also carry double voting rights.
With the exception of double voting rights, there is currently only one class of shares with equal rights for all shareholders.
Upon proposal by the AXA Board of Directors, the shareholders of AXA may decide to allocate all or part of distributable profits to special or general reserves, to carry them forward to the next fiscal year as retained earnings, or to allocate them to the shareholders as dividends. If AXA has earned a distributable profit since the end of the previous fiscal year, as reflected in an interim balance sheet certified by its Statutory Auditors, the Board of
AXA’s Bylaws require AXA to distribute any dividends between its shareholders in proportion to their share in the capital.
Under French law, shareholders have preferential subscription rights to subscribe, on a pro rata basis, additional ordinary shares (and/or convertible, exchangeable or other securities giving a claim, directly or indirectly, to AXA ordinary shares).
AXA shareholders up to the amount of the liquidation balance and the par value of the shares held by each shareholder. Any surplus will be divided among all shareholders, subject to rights arising, if any, from diff erent classes of shares, in proportion to the rights they own in the Company’s share capital.
A notice of meeting must be published in the Bulletin des annonces légales obligatoires (“BALO”), at least 35 days before any Shareholders’ Meeting (or 15 days in certain specific cases), and must indicate, in particular, the agenda and the proposed resolutions.
All shareholders are entitled to attend these meetings, either in person or by proxy, provided that they show valid proof of ID and share ownership as specified under French law. This ownership is justified by a book entry showing the number of shares in the name of the shareholder (or the intermediary for the account), on the second business day preceding the meeting at 0:00 am, Paris time (France), either in the registered share accounts kept by the
Company or in the bearer share accounts kept by a qualified intermediary.
In accordance with the provisions of Article L.225-37-4 (9) of the
In addition, the information referred to in Article L.225-37-5 of the French Code de commerce is made public in the corporate governance report approved by AXA’s Board of Directors’ and attached to the Board of Directors’ report of AXA included in this Annual Report. For further information, please refer to
AXA shares with double voting rights, which are described above, and specific notification requirements applicable when holdings exceed specified thresholds, as described below.
Company by registered letter with acknowledgment of receipt within five days from the threshold crossing. This notification shall detail the total number of shares and voting rights held as well as the total number of securities giving a diff ered claim to the share capital and the potential voting rights attached thereto.
In the event of failure to comply with the notification requirements described above, shares exceeding the fraction that should have been notified will be deprived of voting rights at Shareholders’
Meetings if, at such meetings, the notification failure has been recorded and if one or more shareholders jointly holding at least 5% of the share capital so request. Loss of voting rights shall be applicable in all Shareholders’ Meetings that would be held up until two years following proper notification.
The Company’s share capital may be modified only under the conditions stipulated by the legal and regulatory provisions in force. The provisions of the Bylaws or the Board’s Terms of
Reference shall not prevail over changes in the law governing the Company’s share capital.
AXA’s contribution to the sustainable development goals of the united nations 395
Diversity and Inclusion breeding talent and innovation 404 7.3 CLIMATE CHANGE AND BIODIVERSITY 411
Identification and evaluation of risks to human rights and the environment 433
Follow-up and report on the eff ective implementation of the vigilance plan 436
This statement includes the AXA Group’s business model and information on its main extra-financial risks related to environmental, social, human rights, tax evasion and corruption issues.
In-depth information on the AXA Group’s Corporate Responsibility-related policies and practices is also available in the “Integrated
(1) Directive 2014/95/EU of the European Parliament and of the Council of October, 22, 2014, amending Directive 2013/34/EU as regards disclosure of nonfinancial information and information relating to diversity by certain large companies and groups.
(2) Articles L.225-101-1, R.225-105 and R.225-105-1 of the French Commercial Code.
AXA’s business is to protect people, goods and assets over the long-term, by better understanding, selecting, quantifying and managing risks.
AXA not only contributes to global economic growth, but also to social stability in line with its ambition of “Empowering people to live better”. This approach is inherent to AXA business and guides its Corporate Responsibility strategy.
For more information on AXA’s business model presented on page 9 , please refer to Section 1.3 “Business overview” of this Annual Report.
Our Corporate Responsibility (CR) strategy is a key driver of employee engagement, customer trust and brand image. CR
AXA aims to provide protection and risk prevention to underserved populations in many countries where it operates, thereby contributing to global socio-economic development.
uses the various levers of action related to its expertise and business lines, as well as its international footprint: investments, insurance, but also the responsible use of its data and its partnerships and philanthropic activities.
AXA is also committed to being a responsible employer, striving to keep employee engagement at the heart of its strategy and to create a workplace inspired by its values that fosters diversity and equal opportunity for all, promotes engagement, encourages professional development and supports employee well-being.
Section 7.3 “Climate change and biodiversity” of this Annual Report is largely dedicated to AXA’s action against climate change, which meets the 3 targets of SDG
Our “green” investment target of €24 billion by 2023 as described in Section 7.3
“Beating Obesity and Diabete Initiative (BODI) and the Unicef partnership described in Section 7.4 “Inclusive Insurance”, which aimed at struggling against the dual global epidemic of obesity and diabetes, aff ecting both mature and emerging countries (SDG 3.4). AXA also contributes to the prevention of road accidents (SDG
AXA Hearts in Action volunteers provide assistance to people living in extreme poverty and help eradicate the phenomenon, notably through a financial education program (SDG 1.1 and 1.2). In addition, the AXA-Care partnership contributes directly to building the resilience of poor people and reducing their exposure to extreme weather events (SDG 1.5). These actions are described in Section 7.4
“Inclusive Insurance”) are also part of SDG 10.2, helping to empower all people and promote their social, economic and political integration, regardless of age, gender, disability, race, ethnicity, origin, religion or economic or other status.
strategy and promoting best practices. This network is supported by local CR teams.
In addition, the November 2019 session was largely devoted to the integration of social and environmental issues into the new
EU related to extra-financial reporting, AXA has conducted an internal risk assessment to identify its main “sustainability risks”.
Group Risk Management and Corporate Responsibility teams, which consisted in identifying risk factors for each area related to corporate responsibility: social impact, respect for human rights, environmental impact, societal impact and to business behavior. These risks have been revised and assessed by experts according to their frequency and potential impact (financial, human, reputation, operational, environmental). The rating scale from 1 (“Low”) to 3 (“High”) is the same as for the Group operational risks mapping.
Report) as well as AXA’s Emerging Risks Survey, which outlines major emerging risks for society at large (for more information on emerging risks, please refer to Section 4.8 “Other material risks”).
In order to update non-financial risk assessment carried out in 2018, results were reviewed by the Group departments initially involved: Group Corporate Responsibility, Group Risk
September 2018, CR and Risk teams of XL Group have been included in this review. From this year update, the following emerged: ■ the consideration of UN sustainable development objectives no longer as a risk but as a framework for strategic thinking developed in the paragraph “AXA’s contribution to UN
More information on these risks can be found in Sections 7.4
Sections 7.5 “Business behavior” and 7.6 “Vigilance plan” for more information; ■ biodiversity: AXA has chosen to develop an ambitious biodiversity strategy. Indeed, as explained in Section 7.3, despite suff ering from a relatively low attention by investors today, biodiversity-related risks may become a significant area within sustainable finance going forward.
In 2019, AXA Tianping had been included in the social reporting for headcount and payroll indicators and excluded from environmental and societal reportings.
PricewaterhouseCoopers Audit, one of AXA SA’s Statutory Auditors, appointed as an independent third-party, presents in its report, featured in Section 7.5 , a reasoned opinion on the compliance of the extra-financial performance statement with the provisions of
French regulations (Article R.225-105 of the French Commercial Code) and on the sincerity of the information provided.
For perimeters defined below, indicators are fully consolidated, unless otherwise indicated.
The social data provided in Section 7.2 “Social Information” are collected from 256 active entities of the AXA Group, all included in the consolidation scope of AXA (i.e. fully consolidated for the preparation of the Consolidated Financial Statements as of
mergers or business disposals. 256 active legal entities reported their 2019 social data. Therefore the subsidiaries that were financially consolidated during the reporting year or whose employees were incorporated during the reporting year are included in the 2019 scope. In particular, AXA Tianping has been included in the social reporting for headcount and payroll indicators only.
sites (unless otherwise indicated) and were then extrapolated, continent by continent, to cover all 121,337 salaried FTEs (all types of contracts) working at AXA Group in average in 2019.
Section 7.3 also describes the manner in which AXA strives to integrate environmental issues into its business, as an insurer and an investor. The perimeter of AXA’s responsible investment strategy (which includes climate finance) covers AXA’s own assets, while our climate-related insurance activities cover essentially our P&C Commercial lines business.
“Inclusive Insurance”, covers 84% of AXA’s FTEs. AXA Tianping has not been included in this year scope for societal indicators.
The indicators cover the period from January 1 to December 31, 2019, unless mentioned otherwise. To facilitate their collection and processing, some data may be collected earlier in the year.
The social data provided in Section 7.2 “Social Information” are collected through a reporting process defined by procedures associated with a list of indicators shared with all entities of the AXA Group. This process is updated and communicated to each entity on a yearly basis. Social data are provided by local correspondents into an IT tool dedicated to the social data reporting process. Consistency checks and quality controls are carried out before and during the data collect process. There
Regarding data published in ratios and percentages, numerator and denominator are realigned for each calculation to exclude entities with empty data points.
Group’s reporting procedures. In 2019, environmental data was collected for 84% of our total FTEs, and the remaining 16% was extrapolated. Please refer to Section 7.3 “Climate change and biodiversity – Environmental reporting process and verification”
Therefore, whenever possible, definitions, methodologies and, where applicable, the associated margins of uncertainty are specified for the concerned indicators.
However for some specific risks such as customer protection, prevention of human rights violations within the supply chain and fight against corruption, the current disclosure includes internal policies, framework and due-diligences measures implemented by AXA. These are described in Sections 7.5
emissions. Other benchmarks are highlighted in the relevant sections, where appropriate.
EU, the AXA Group has identified three main potential social challenges looking forward: ■ not maintaining sustainable and responsible employer practices everywhere through an ambitious employer value proposition, including work conditions and continuous dialogue with our people; ■ insuff icient growth and development opportunities, limited internal and external employability and skills becoming obsolete in a disrupted business environment; ■ not attracting, retaining and managing talents because of inability to build an inclusive and engaging environment.
Asia-Pacific and the Middle-East (+3.5 points compared to 2018), 10% in the Americas (-5.2 points compared to 2018) and 6% in Africa
AXA is a United Nation Global Compact signatory and is committed to uphold the right to freedom of association and collective bargaining. Besides, labor-management communications and social dialogue pave the way for the stability required to implement the Group’s business development strategy. Each AXA
entity, therefore engages with staff and/or their representatives for communications on a regular basis. AXA has also set up a
The frequency has steadily increased from one Pulse survey in 2017 to two in 2018 and three in 2019. AXA, globally measures employee engagement using Employee Net Promoter Score
(eNPS). In 2017, this score was -5, in 2018, it was +7, against a balanced target of 0. The Group had a target of reaching 14 by
For further information on the eNPS and to know more about the eNPS calculation methodology, please refer to the “A new method to collect feedback and measure employee engagement”
The Group is working on building an inclusive workplace environment through the New Way of Working (NWOW)
In Europe, more than 41% of non-sales salaried workforce with open-ended contract do telework.
As a responsible insurer and employer, it is in AXA’s DNA to protect all its personnel as per international best practices, under the legal requirements of “duty of care” and “duty of vigilance”
The physical security baseline defined by Group Security has been implemented in 90% of the Group as of end 2018 – in line with Group Management Committees objectives.
In an unpredictable business environment, with the emergence of new risks and competitors, AXA needs to ensure that its business, organization and people are ready to face new challenges. The insurance sector is changing fast as technologies and customers’
■ AXA established Group-wide mobility policies and processes which allow people to move within the Group and thereby help AXA better source the right people for its business needs. In 2019 the number of international moves supported by the dedicated center of expertise (IMS) remained stable
■ Leadership management, to ensure current and future leaders, as well as supporting employees with potential for future growth to get the continuous support they need to lead and transform our business and culture. 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; ■ Employee development, to off er diff erentiating learning and development actions to employees.