THE AXA GROUP 3 1.1 Selected Consolidated Financial Data 4 1.2 Information on the Company 6 1.3 Activity Report 20 1.4 Liquidity and capital resources 82
Certain disclosures about market risk and related matters 3.2 Risk factors 143 3.3 Quantitative and qualitative disclosures about risk factors 156
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 175 4.1 Consolidated statement of fi nancial position 176 4.2 Consolidated statement of income 179 4.3 Consolidated statement of comprehensive income 180 4.4 Consolidated statement of changes in equity 182 4.5 Consolidated statement of cash fl ows 186 4.6 Notes to the consolidated fi nancial statements 188 4.7 Report of the statutory auditors 321
CERTAIN ADDITIONAL INFORMATION 323 5.2 Description of AXA’s share capital 328
Appendix IX Commission regulation of April 29, 2004 - Correspondence table 393
Board of Directors and are presented in the table on page 392 of this Annual Report).
This registration document was fi led with the Autorité des marchés financiers (AMF) on March 21 , 2013, in accordance with the provisions of Article 212-13 of its General Regulations. It may be used in support of a fi nancial transaction if supplemented by an information memorandum approved by the AMF. This document has been prepared by the issuer, and its signatories are responsible for its content.
The Company publishes its Consolidated Financial Statements in Euro (“Euro”, “euro” or “€”). Unless otherwise stated, all amounts in this Annual Report are expressed in Euro. The currency of the United States will be referred to as “U.S. dollars”
For a discussion of the impact of foreign currency fl uctuations on AXA’s fi nancial condition and results of operations, please see
Part 1 – “The AXA Group ”, Section 1.3 “Activity Report” of this Annual Report.
Cautionary Statements concerning the use of non-GAAP measures and forward-looking statements
Part 1 – “The AXA Group ” of this Annual Report.
(In Euro million except per share data) 2012 2011 Restated (a)
Net income per share (c) : Net income per share from discontinued operations: Balance Sheet Data
(e) An annual dividend is generally paid each year in respect of the prior year after the Annual General Shareholders’ Meeting (customarily held in April or May) and before September of that year. Dividends are presented in this table in the year to which they relate and not in the year in which they are declared and paid. A dividend of €0.72 per share will be proposed at AXA’s Shareholders’ Meeting that will be held on April 30, 2013. The dividend will be payable on May 14, 2013, with an ex-dividend date of May 9, 2013.
The Company pays dividends in Euro. Future dividends will depend on a variety of factors including AXA’s earnings, consolidated fi nancial condition, applicable capital and solvency requirements, prevailing fi nancial market conditions and the general economic environment. Proposals for dividend payments are made at the discretion of the Board of Directors based upon the recommendation of its Finance Committee, and are submitted for fi nal approval to the Shareholders’
A dividend of €0.72 for the 2012 fi scal year will be proposed to the Shareholders’ Meeting to be held on April 30, 2013.
The following table sets forth information on the dividends declared and paid during the last fi ve years: Fiscal year Distribution (In Euro million)
Dividend per share eligible for a tax relief (In Euro )
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2013.
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.16 per share for fi scal year 2008.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.22 per share for fi scal year 2009.
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2011.
France and its telephone number is +33 (0) 1 40 75 57 00.
Référence): (i) the Charter of the Company, (ii) the reports or other documents prepared by any expert at the Company’s request, any part of which is included or referred to in this Annual
Report, and (iii) the parent Company fi nancial statements as well as the consolidated fi nancial statements of the Company for each of the two fi nancial years preceding the publication of this Annual Report.
AXA’s asset management subsidiary Alliance Capital, which subsequently changed its name to AllianceBernstein; and
Establishment of a long-term partnership agreement with the bank BMPS (Italy) through the joint venture company AXA MPS.
(1) The acquisition of HSBC P&C operations in Mexico will be completed in due course.
At December 31, 2012, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
AXA’s social, societal, environmental and governance performance is rated by a number of specialists, including investors, brokers and rating agencies that focus specifi cally on the socially responsible investment (SRI) market. AXA is ranked above the average for its industry and is included in the three major global ethical indices: ■ DJSI World and DJSI Europe (based on RobecoSAM
The Company is the holding company for the AXA Group, a worldwide leader in fi nancial protection. Based on available information at December 31, 2012, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €90 billion for the year ended December 31, 2012. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at
December 31, 2012 of €1,116 billion. Based on available information at December 31, 2012 and taking into account companies engaged in the asset management business, AXA
(1) Ranking based on internal reports as of September 30, 2012.
The table below summarizes certain key fi nancial data by segment for the last two years: (In Euro million, except percentages)
(iv) Profi t or loss on fi nancial assets accounted for under fair value option (excluding assets backing liabilities for which the fi nancial risk is borne by the policyholder) and derivatives related to invested assets, including all foreign exchange rate impacts on assets, liabilities and derivatives.
(f) Restated means comparative information relative to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition cost.
Assets backing contracts with fi nancial risk borne by policyholders (unit-linked) 147,162 134,230
Part 1 “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”, Section 1.3
AXA offers Investment and Saving products as well as Life and
For additional information on markets, see section “Insurance and Asset Management Markets” included in “Part 1.3 –
The table below presents consolidated gross revenues (after inter-segment elimination) and gross insurance liabilities by major product for the periods and as of the dates indicated for AXA’s Life & Savings segment: GROSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
Fees and charges relating to investment contracts with no participating features 334 350 30,235
Of which: Contracts with fi nancial risk borne by policyholders (unit-linked) 15,232 28% 12,051 24% 147,984
AXA’s distribution strategy focuses on strengthening traditional channels and developing new ones, such as direct selling and partnerships. Staff hiring, retention of veteran staff, professionalism and commercial performance are the main initiatives to strengthen traditional distribution channels. To serve increasingly sophisticated and demanding customers,
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2012 and 2011, is presented below : Based on gross revenues in 2012
(a) 2011 published (50% proprietary network and 50% for non proprietary network) were restated for portfolios transferred to Resolution in November 2011 and the disposal of Bluefi n Corporate Consulting in April 2012.
Savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual Life & Savings products issued by AXA have front-end charges to the policyholder (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges (charges assessed in the case of early surrender). Both front-end charges and surrender charges are intended to offset a portion of the acquisition costs.
Total surrenders and lapses for 2012 amounted to €25,056 million (2011: €24,717 million) and the ratio of surrenders and lapses was 6.3% (2011: 6.2%).
Life & Savings Global Business line, as part of its role to defi ne a common strategy has set the following priorities: ■ focus on inforce optimization; ■ increase productivity and effi ciency; ■ reshape the Savings business; ■ actively grow Protection and Health business.
Gross insurance liabilities at of which high growth markets 3,843 14% 3,335 12% 4,426
Asia (notably Singapore, Malaysia, Hong Kong, and Thailand), the Middle East and Latin America (Mexico). In addition, AXA
The tables below sets forth gross revenues and gross insurance liabilities by major product for the periods and as at the dates indicated: G ROSS REVENUES & INSURANCE LIABILITIES PER PRODUCT LINE
The split of distribution channels used by AXA’s Property & Casualty operations (excluding Direct), based on gross revenues for the year ended December 31, 2012 and 2011, is presented below: Based on gross revenues in 2012
P&C defi nes the common Property & Casualty strategy and objectives. AXA Global P&C is responsible for managing activities that have been identifi ed as being critical to the profi tability and growth of the Group’s Property & Casualty business: cost control, optimized claims management, creation of a professional family made up of Property & Casualty professionals to build up the quality of technical expertise, dedicated offer to small and medium size entities, excellence in underwriting standards and pricing policy.
■ AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to providing global insurance programs to large national and multinational corporations; ■ AXA Global Life and AXA Global P&C (ex AXA Cessions)
AXA Corporate Solutions Assurance provides global insurance programs to large international corporations that require coverage for all their worldwide locations. AXA Corporate
AXA Corporate Solutions Assurance reviews annually its exposure to ensure that the risks underwritten are diversifi ed geographically and by lines of business in order to manage concentration risk. In 2012, AXA Corporate Solutions Assurance ceded €901 million of premiums (2011: €855 million) to thirdparty reinsurers.
Also, in 2012, approximately €895 million of premiums were placed externally by AXA Global Life and AXA Global Property
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on Asset management companies only. AXA Group (including insurance companies) assets under management amounted to €1,116 billion as of December 31, 2012.
At December 31, 2012, AllianceBernstein had €349.0 billion of assets under management, including €245.7 billion of assets managed on behalf of third party clients (2011: €335.0 billion and €242.2 billion, respectively). AllianceBernstein accounted for €2.019 billion or 60% of asset management segment consolidated gross revenues for the year ended December 31,
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset management business. AXA IM provides its clients with a wide range of global products and expertise via
(i) institutional investors, (ii) individual investors to whom Mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and unit-linked fund backing insurance products. AXA IM’s expertises include (i) AXA Fixed Income, (ii) AXA Framlington,
(iii) AXA Rosenberg , (iv) AXA Real Estate, (v) AXA Structured
At December 31, 2012, AXA IM had €553.6 billion of assets under management, including €188.4 billion of assets managed on behalf of third party clients (2011: €512.4 billion and €178.1 billion, respectively). AXA IM accounted for €1.324 billion or 40% of asset management segment consolidated gross revenues for the year ended December 31,
Europe. For the years ended December 31, 2012 and 2011, the Banking segment accounted for €0.5 billion each year, or less than 1% of AXA’s consolidated gross revenues.
AXA Bank products and services in Belgium are mainly distributed by a network of 864 exclusive independent bank agents. The bank’s products and offers are linked with insurance business and are primarily focused on retail products. AXA
Based in Paris, AXA Banque had more than 750,000 registered customers at the end of 2012, with a retail banking product offer (innovative current accounts with advantages on insurance premiums, savings and credit). Directly linked with the Group’s insurance business, banking products are offered to AXA France clients through its distribution networks. AXA
Hungary has stopped its lending activity and refocused solely on retail deposit business.
In Europe, the Life and Savings market suffered from the low interest rates environment and economic uncertainty that affected the attractiveness of traditional savings and unit-linked products. As a result, and despite a growth in the Protection and Health market in 2012, a decrease in the overall insurance industry has been observed in most European countries. In this particular context, the only exception were the Belgian
After a positive evolution in 2011, Life and Savings market signifi cantly increased in high growth countries in 2012. Asian countries such as Hong Kong, Singapore and Thailand, as well as countries such as Morocco and Mexico showed doubledigit growth rates. This mainly resulted from an easier access to insurance products and a change in individual habits for the concerned populations. In Central & Eastern Europe countries, the recent changes in regulation (in particular of Pension Funds business), as well as the consequences of the fi nancial crisis strongly affected the Life and Savings insurance volumes.
(b) Source: LIMRA and MARC annuity sales Employer Sponsored sales only includes K-12 market. Numbers for 9 months ended September 30, 2011 and 2010.
(f) Source: Estimation SIA (Swiss Insurance Association) for 2012 and Offi cial FINMA for 2011; Market share is based on statutory gross written premiums.
(g) Source: Assuralia (Belgium Professional Union of Insurance companies). Based on September 30, 2012 and 2011. Figures measured on gross written premiums.
(j) Source: Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 2010 and 2011 with cross border markets.
(l) Source: Offi ce of Commissioner statistics as of September 30, 2012 and 2011 (measured on APE individual life in-force business).
(m) Source: AAJI statistics as of September 30, 2012 and 2011 (measured on Weighted New Business Premium).
(n) Source: TLAA statistics report as of August 31, 2012 and October 30, 2011 (measured on APE).
(p) Source: IRDA statistics as of November 30, 2012 and 2011 (measured on APE).
(q) Source: CIRC statistics as of November 30, 2012 and September 30, 2011 (measured on total premium income and on APE).
(c) Source: Irish Ins Federation/Central Bank of Ireland Statistical Review/Northern Ireland Vehicle & Driver Agency 2010, 2011 and 2012. Based on the Motor market.
(g) Source: Spanish Association of Insurance Companies. ICEA as of September 30, 2012 and 2011.
(h) Source: Portuguese Insurance Association as of September 30, 2012 and 2011.
(i) Source: Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 2010 and 2011.
(k) Source: AMIS (Asociacion Mexicana de instituciones de Seguros) as of September 30, 2012 and 2011.
(m) Source: Moroccan Association of Insurance Companies as of December 31, 2012 and 2011.
Aviation, Marine and Space insurance, prevention and claims management of large national and multinational corporations, is amongst the top fi ve players in Europe. After several years of soft underwriting conditions, corporate risks insurance pricing conditions continued to tighten in 2012.
In the asset management market, AXA Investment Managers ranked 15th (1) and AllianceBernstein 22nd (1) based on assets under management. On a combined basis, AXA ranked 8th (1), while top 7 players each manage more than €1 trillion.
United States, poor prospects in domestic demand, along with uncertainties in global markets, took a toll on companies’
confi dence. The manufacturing ISM index declined in June, below 50, for the fi rst time in three years, showing contraction in the industrial production.
Global growth remained fairly weak in late 2012 although some early signs of recovery emerged, mostly from emerging markets and to a lesser extent, the United States. ECB’s commitment to guarantee the integrity of the euro area has put a lid on the euro crisis, leading to the tightening of credit conditions and the decrease in interest rates.
Markets in Japan were buoyed by positive change as the election heralded a win for Shinzo Abe and his Liberal Democratic party.
Emerging Markets provided solid gains over the year, but were held back by concerns that China was facing a worse than expected economic slowdown despite robust exports and resilient domestic demand.
MSCI World Index increased by 13% with the positive returns from European and Emerging countries. European markets performed well, with investors encouraged by the steps taken by the European Central Bank and political leaders towards tackling the region’s sovereign debt and banking problems.
Japanese shares were supported by the election victory of the liberal Democratic Party.
The US 10-year T-bond ended the year 2012 at 1.76%, a decrease of 12 bps compared to December 31, 2011. The 10-year German Bund yield decreased by 51 bps to 1.32%.
The French 10-year government bond yield decreased by 115 bps to 2.00%. The 10-year Japanese government bond ended the year at 0.79%, a decrease of 20 bps. The 10-year
European peripheral countries: Italy ended the year at 4.50% (a decrease of 261 bps compared to December 31, 2011), Spain ended the year at 5.27% (an increase of 18 bps compared to December 31, 2011), Greece ended the year at 11.90%
Ireland ended the year at 5.10% (a decrease of 335 bps compared to December 31, 2011), Portugal ended the year at 7.01% (a decrease of 635 bps compared to December 31, 2011).
In Europe, the iTRAXX Main spreads decreased by 56 bps compared to December 31, 2011 and ended 2012 at 117 bps while the iTRAXX Crossover decreased by 273 bps to 482 bps.
The evolution of Euro against the main currencies was mixed during the year 2012.
Yen decreased by 14% against the Euro (closing exchange rate moved from Yen 99.88 at the end of 2011 to Yen 114.00 at the end 2012). The Pound Sterling gained 3% against the
On March 7, 2012, AXA and HSBC announced they had entered into an agreement whereby AXA would acquire HSBC’s
P&C businesses in Hong Kong, Singapore and Mexico. In addition, AXA would benefi t from a 10-year exclusive P&C
This transaction positions AXA as the number one P&C player in Hong Kong, and strengthens its leading positions in Mexico and Singapore. The acquired Hong Kong and Singapore businesses benefi t from multi-channel distribution, including through HSBC Bank branches, as well as strong agent and broker networks.
The net upfront cash consideration for AXA was USD 494 million or ca. Euro 374 million, and was funded through internal resources.
As of December 31, 2012, AXA total share capital amounted to 2,388,610,984 shares.
In the fi rst half of 2011, a number of class action law suits were fi led against AXA Rosenberg on behalf of certain AXA
Rosenberg clients. These suits made various allegations including breach of fi duciary duty, negligence/gross negligence in connection with the coding error and requested damages in an unspecifi ed amount to be determined at trial. In March 2012, the Federal District Court for the North District of California approved a settlement of these class actions under the terms of which AXA Rosenberg paid USD 65 million.
Launch of the Joint-Venture in China between ICBC, AXA and Minmetals
Minmetals), established in 1999. Following the equity transfer agreement reached on October 28, 2010 between ICBC,
Insurer Financial Strength ratings at “AA-”, revising the outlook from stable to negative.
USD 850 million undated subordinated debt (5.50% annual coupon, fi xed for life) and on January 18, 2013 the issuance of €1 billion subordinated debt due 2043 (5.125% annual coupon, fi xed until the fi rst call date in July 2023 and fl oating thereafter with a step up of 100 basis points), to anticipate the refi nancing of part of subordinated debt instruments maturing on January 1, 2014. Both transactions have been structured to comply with the expected eligibility criteria for a Tier 2 capital treatment under Solvency II.
of which Gross written premiums 53,572 50,918 of which Fees and revenues from investment contracts with no participating feature 334 350 -
Consolidated gross revenues for full year 2012 reached €90,126 million, up 4.7% compared to 2011.
(1) Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premiums, in line with EEV methodology. APE is
High growth markets APE increased by 4% as strong growth in South-East Asia, India and China (+21% or €+65 million) and
& Eastern Europe (-34% or €-73 million), negatively impacted by regulatory developments in Poland and more selectivity with regard to distribution networks.
(+48% or €+41 million) refl ecting higher sales of G/A Protection products, (ii) China (+126% or €+19 million) mainly on G/A
Hong Kong APE increased by €+47 million (+14%) to €408 million, mainly driven by higher sales of G/A Protection
(+6% or €+36 million) in both individual and group business and (ii) in unit-linked sales (+7% or €+13 million) refl ecting the success of new structured products in a downward oriented market, partly offset by lower sales of G/A Individual Savings
(-34%) to €136 million. The decrease was driven by (i) Pension
UK APE decreased by €32 million (-6%) to €535 million driven by unit-linked products (-21% or €-67 million) as a result of lower volumes in Individual Pension business and in Offshore
Bond business written through Isle of Man. This was partly mitigated by Mutual funds sales (+17% or €+28 million) through the Elevate wrap platform.
G/A Savings products (-33% or €-59 million) as a result of the increased focus on unit-linked products and a highly competitive environment, partly offset by (ii) unit-linked products (+26% or €+33 million).
& Ireland, France and Asia. Overall tariff increases amounted to 3%.
Personal lines (60% of P&C gross revenues) were up by 3% on a comparable basis, stemming from both Motor (+2%)
(+12%) from higher volumes and Italy (+3%) due to a positive mix effect from the agency network restructuring, partly offset by Spain (-10%) due to a competitive market in a depressed economic environment; ■ Asia (+6%) driven by a strong increase in car sales in
Spain in a diffi cult economic environment, partly offset by 7% growth in other countries mainly in Italy, Poland, France and Japan (+54%, +30%, +12% and +8% respectively).
on comparable basis to €2,987 million mainly driven by (i) AXA
Corporate Solutions up 3% to €2,069 million mainly as a result of positive portfolio developments and tariff increases in
Construction and Property, partly offset by non renewal of a large contract in Liability and tariff decrease in Aviation as well as (ii) AXA Assistance up 10% to €832 million.
AllianceBernstein and a decrease in performance and real estate transactions fees at AXA IM. This was partly offset by higher management fees at AXA IM as a result of higher average assets under management.
AllianceBernstein revenues were down 4% on a comparable basis to €2,019 million, primarily due to lower management fees
(-11%) resulting from lower bps (-3.1 bps) refl ecting change in business mix, and lower average assets under management
Assets Under Management (AUM) increased by 4% or €14 billion from year-end 2011 to €349 billion driven by €+28 billion from market appreciation, partly offset by
AXA Investment Managers revenues were down 0.4% to €1,324 million. Excluding distribution fees (retroceded to distributors) and on a comparable basis, net revenues increased by €+6 million (+1%) mainly driven by higher management fees
(+5%), partly offset by lower performance and Real Estate transaction fees (-48%).
AUM increased by 8% or €+41 billion from year-end 2011 to €554 billion mainly as a result of (i) €+45 billion market appreciation, (ii) €+3 billion net infl ows and (iii) €+2 billion favorable foreign exchange rate impact, partly offset by
due to higher interest paid to customers on savings account as a result of the promotional campaign realized during the fi rst half of 2012, while AXA Bank Belgium increased by 13% to €298 million mainly driven by a growing investment portfolio, partly offset by lower funding costs as result of lower interest rates.
Phase II project as well as change in USGAAP indicate that accounting standards are moving to lower capitalization and therefore less deferral of acquisition expenses. In this context, the Group changed its accounting policy on deferred acquisition costs as of January 1, 2012 and retrospectively restated comparative information related to previous periods. The impact of this change led to a reduction of total shareholders’
Change in unearned premium reserves net of unearned revenues and fees (441) (547) (547)
Technical charges relating to insurance activities (a) (c) (91,734) (75,623) (75,623)
Profi t or loss on fi nancial assets (under fair value option) & derivatives 45 110 114
(c) For the period ended December 31, 2011, €201 million have been reclassifi ed from administrative expenses to technical charges relating to insurance activities to ensure consistency of the information.
India and China (€+22 million), partly offset by Germany (€68 million), mainly resulting from: (i) Higher Investment margin (€+243 million or +10%), mainly driven by (i) lower investment income more than offset by lower allocation to policyholders in France (€+100 million)
France, Japan and Italy, b. loadings on premiums and Mutual funds were up €99 million mainly driven by (i) strong unit-linked sales in the Mediterranean and Latin American Region
East Asia, India and China (€+24 million), c. other fees were down €4 million; (iii) Net technical margin was up €599 million to €357 million mainly driven by the United States (€+604 million), primarily due to: (a) lower GMxB losses resulting from decreased volatility and basis losses, positive GMxB reserve adjustments including premium suspension on old contracts and other model and assumption refi nements, partially offset by higher GMxB reserve strengthening for lapses and other policyholder behavior assumptions changes,
DAC amortization notably following the improved technical margin, (ii) the Mediterranean and Latin American Region
(€11 million in Germany and €-9 million in the UK in 2012 vs. €16 million in 2011).
International Insurance underlying earnings amounted to €167 million. On a constant exchange rate basis, underlying earnings decreased by €103 million (or -37%) mainly due to
P&C, down €30 million, mainly driven by the non-repeat of €32 million positive prior year reserve developments due to favorable weather in 2011.
Asset Management underlying earnings amounted to €382 million. On a constant exchange rate basis, underlying earnings increased by €44 million (+14%) driven by
Holdings and other companies underlying earnings amounted to €-833 million. On a constant exchange rate basis, holdings underlying earnings increased by €10 million (+1%)
(€+148 million), partly offset by lower realized gains on real estate (€-175 million); (ii) €+562 million lower impairments to €-283 million in 2012, mainly driven by the non repeat of €-387 million net impairment charge on Greece government bonds in 2011, as well as lower impairments on equities; (iii) €-81 million from decrease in the impact of equity hedging derivatives.
(-4%) mainly as a result of: (i) lower exceptional operations: down €2,158 million to €-94 million, mainly due to the non repeat of 2011 exceptional capital gains of €2,326 million relating to the disposal of the stake in Taikang Life, Canadian operations as well as Australia and New Zealand operations, partly offset by
As of December 31, 2012, consolidated shareholders’ equity totaled €53.7 billion. The movements in shareholders’ equity since
Change in DAC accounting methodology adopted retrospectively as at 01/01/2012 2011 restated 2012
Net income (Euro per Ordinary Share) 1.65 1.64 1.69 1.69 1.75 1.75 -3% -3%
(a) Restated means comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs.
Net capital gains or losses attributable to shareholders net of income tax 214 (36) (35)
Contribution to consolidated gross revenues 55,016 52,431 of which high growth markets 2,887 2,617 of which mature markets 52,129 49,814
(d) Other correspond to Australia/New Zealand, Luxembourg, AXA Global Distributors, Architas and Family Protect .
(e) Other correspond to Australia/New Zealand, Luxembourg, AXA Global Distributors, Architas and Family Protect.
Net realized capital gains or losses attributable to shareholders 214 (36) (35)
Net capital gains or losses attributable to shareholders net of income tax 124 193 193
Protection and Health increased by €83 million (+1%) driven by a €53 million increase in Group Protection and €23 million increase in Individual Protection refl ecting positive portfolio developments; (1) Source FFSA December 2012.
■ G/A Savings sales decreased by €104 million (-2%) refl ecting the negative performance of Individual G/A Savings (-11%) in line with the French traditional savings market trend (-10% ) (1), mostly offset by higher infl ows in Group Retirement (+74%), mostly occurring at the end of year, ahead of potential unfavorable fi scal changes in 2013 for “Article 39” defi ned benefi t schemes.
driven by €32 million in Group Protection and Health and €13 million in Individual Protection refl ecting new long term care and funeral product success. Individual Health decreased by €10 million following the termination of an assumed business with a French Mutuelle; ■ G/A Savings sales decreased by €12 million (-2%) refl ecting the negative performance of Individual Savings (-10%) in line with the French traditional savings market trend, mostly offset by higher infl ows in Group Retirement (+99%), in particular at the end of year, ahead of potential unfavorable fi scal changes in 2013 for “Article 39” defi ned benefi t schemes.
Expenses increased by €89 million (+4%) to €-2,298 million mainly due to €70 million higher DAC amortization (of which €43 million fully offset in URR), and €14 million higher administrative expenses, as continuing efforts to contain expenses were more than offset by lower favorable tax items compared to previous year.
and lower impairments (€+141 million) on equities and fi xed income assets, partly offset by lower net realized capital gains mostly on real estate.
Net income increased by €286 million (+39%) to €1,014 million due to a favorable change in fair value of Mutual funds and derivatives, mainly driven by the decrease in interest rates and credit spreads, as well as higher adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax (37) (11) (11)
products, partially offset by lower additional contributions received for certain old GMxB fi xed rate contracts prompted by the suspension of additional contributions earlier in 2012; ■ l ife revenues (25% of gross revenues) decreased by 1%
investment only and fl oating rate GMxB products launched since 2010, represented a combined 54% of 2012 Variable
Investment margin increased by €66 million (+14%) to €541 million. On a constant exchange rate basis, investment margin increased by €28 million (+6%), as the decrease in investment income (refl ecting lower yields on fi xed income assets, partly compensated by higher income on alternative assets), was more than offset by lower crediting rates.
Fees & revenues increased by €62 million (+3%) to €1,993 million. On a constant exchange rate basis, fees & revenues decreased by €80 million (-4%) primarily driven by the non-repeat of 2011 assumption change on Unearned Revenue
Net technical margin rose by €559 million from €-1,192 million to €-632 million. On a constant exchange rate basis, net technical margin increased by €604 million primarily due to lower GMxB losses resulting from decreased volatility and basis losses, positive GMxB reserve adjustments including premium suspension on old contracts and other model and assumption refi nements, partially offset by higher GMxB
On a constant exchange rate basis, expenses increased by €134 million (+13%): ■ expenses, net of capitalization (including commissions and DAC capitalization) decreased by €33 million (-3%) to €1,108 million mainly due to productivity actions (reduction of FTE, changes to benefi t plan and staff relocation savings)
As a result, the underlying cost income ratio decreased by 19.2 points to 66.0%.
Adjusted earnings increased by €261 million (+117%) to €484 million. On a constant exchange rate basis, adjusted earnings increased by €227 million (+102%) mainly refl ecting the increase in underlying earnings, partially offset by higher impairments on fi xed income assets.
On a constant exchange rate basis, net income increased by €759 million (+179%). This was primarily driven by higher adjusted earnings, and the non repeat of 2011 Goodwill reduction, partially offset by an unfavorable change in fair value of interest-rate derivatives refl ecting interest rates and implied volatility evolutions.
Net capital gains or losses attributable to shareholders net of income tax - 2
Profi t or loss on fi nancial assets (under FV option) & derivatives 2 3
For consistency, 2012 fi gures have been compared to the same scope for 2011, i.e. excluding portfolios transferred to Resolution in November 2011 and Bluefi n Corporate
Consulting which was sold in April 2012. This is referred to as a comparable scope basis in the commentary below.
Gross revenues decreased by €3 million to €648 million. On a constant exchange rate and comparable scope basis, gross revenues increased by €102 million (+20%) mainly attributable to €85 million premiums from the Variable Annuity product, €20 million increased regular premiums on Sun Life Direct
APE remained the same at €535 million. On a constant exchange rate and comparable scope basis, APE was 6%
(+17%). The platform grew faster than the market and continues to establish itself as one of the leaders in the UK
mainly due to an increase in Elevate wrap platform revenues due to growth of new business partially offset by a decrease in
(-77%) relating to the non repeat of a favorable change in reserve assumption for policyholder taxes on Sun Life Direct
As a consequence, the underlying cost income ratio increased by 10.4 points to 120.9%. On a constant exchange rate and on a comparable scope basis, the underlying cost income ratio decreased by 5.4 points.
(+36%) refl ecting €27 million one-off tax benefi t in 2012, partly offset by lower impact of pre-tax underlying earnings.
On a constant exchange rate and on a comparable scope basis, underlying earnings increased by €31 million.
On a constant exchange rate and on a comparable scope basis, adjusted earnings increased by €31 million due to the underlying earnings movement.
Net income increased by €60 million to €-33 million. On a constant exchange rate basis, net income increased by €62 million, mainly due to the non-repeat of 2011 adjustment related to the completion of the held for sale portfolios transfer
■ Health revenues (29% of gross revenues) decreased by €-8 million (-0%) driven by lower in-force revenues resulting from Cancer product discontinuation in 2010 not fully offset by higher revenues from Medical Whole life products and
APE increased by €135 million (+29%) to €598 million. On a comparable basis, APE increased by €78 million (+17%): ■ Protection (44% of APE) increased by €+27 million (+13%)
mainly supported by higher sales of Term Rider, Whole life and Long Term Protection products promoted through CCI
Fees & revenues increased by €150 million (+10%) to €1,606 million. On a constant exchange rate basis, fees & revenues remained stable.
(€+50 million) partly offset by the non-repeat of 2011 positive tax one-off (€-15 million).
Adjusted earnings increased by €72 million (+23%) to €387 million or increased by €35 million (+11%) on a constant exchange rate basis, in line with underlying earnings evolution.
Net income increased by €80 million to €414 million. On a constant exchange rate basis, net income increased by €41 million, mainly due to higher adjusted earnings
Profi t or loss on fi nancial assets (under FV option) & derivatives (5) 2 2
(“TwinStar”); ■ Health revenues (38% of gross revenues) increased by €111 million (+5%) to €2,530 million due to higher new business and premium adjustments.
Investment margin decreased by €2 million (-2%) to €111 million as the decrease in investment income, mainly on fi xed income assets as a result of exceptional coupon payments in the previous year, was partly compensated by a lower share allocated to policyholders.
Fees & revenues increased by €15 million (+5%) to €340 million due to higher loadings on Health business in line with portfolio growth and lower share allocated to policyholders.
Net technical margin fell by €71 million (-93%) to €6 million mainly due to (i) a decrease in the hedging margin on GMxB
Expenses increased by €7 million (+3%) to €-267 million due to lower share allocated to policyholders, partly offset by savings due to productivity programs and lower amortization of deferred acquisition costs driven by an update of long-term interest rates which partly revised the impact of last year’s update.
As a result, the underlying cost income ratio increased by 6.8 points to 63.5%.
Adjusted earnings decreased by €21 million (-14%) to €125 million due to lower underlying earnings, partly offset by lower impairments on fi xed income assets as well as higher realized capital gains.
Profi t or loss on fi nancial assets (under FV option) & derivatives (4) 100
Group Life as well as Individual Life revenues: ■ Group Life revenues increased by €209 million (+4%) to €5,620 million mainly driven by premiums from full protection schemes contracts (€+242 million) consequently to lower surrenders and the strong new business written in prior year; ■ Individual Life revenues increased by €27 million (+3%)
APE decreased by €23 million (-6%) to €374 million. On a comparable basis, APE decreased by €32 million (-8%): ■ Group Life decreased by €31 million (-11%) consequently to the expected decline in full protection schemes contracts
(€-34 million) after the exceptional growth in previous year; ■ Individual Life slightly decreased by €1 million (-1%) driven by lower unit-linked and Variable Annuity business demand, partially offset by higher Protect Plan product sales.
On a constant exchange rate basis, expenses increased by €40 million (+20%) driven by acquisition expenses as well as administrative expenses. Acquisition expenses rose by €14 million (+27%) mainly due to higher amortization of deferred acquisition costs attributable to updated actuarial assumptions for the Individual Life business. Administrative expenses increased by €26 million (+17%) driven by higher regulatory project costs and marketing expenses related to new product launches.
Amortization of VBI decreased by €40 million (-69%) to €-18 million. On a constant exchange rate basis, amortization of VBI decreased by €41 million (-70%) mainly impacted by updated actuarial assumptions in Group and Individual
As a result, the underlying cost income ratio slightly decreased by 0.1 point to 39.9%.
Underlying earnings increased by €25 million (+8%) to €317 million. On a constant exchange rate basis, underlying earnings increased by €17 million (+6%).
On a constant exchange rate basis, net income decreased by €851 million (-73%) mainly due the non-recurring realized gain on the sale of the stake in Taikang Life in 2011 (€-798 million)
and less favorable changes in the fair value of interest rate derivatives and foreign exchange positions, partially offset by higher adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax 52 (88) (88)
Profi t or loss on fi nancial assets (under FV option) & derivatives 87 (70) (70)
APE increased by €2 million (+1%) to €175 million: ■ Individual Life & Savings APE decreased by 2% (or €-3 million) mainly driven by G/A Savings Crest products due to less attractive guaranteed rates especially in the second half of the year consequently to lower Belgian sovereign interest rates; ■ Group Life & Savings APE increased by 16% (or €+4 million)
to €31 million mainly driven by the acquisition of a large contract.
Investment margin increased by €18 million (+6%) to €306 million as a result of an increase in underlying investment income driven by a higher asset base, partly offset by a lower increase in policyholder bonus allocation.
Fees & revenues decreased by €21 million (-13%) to €143 million, mainly driven by the non-repeat of 2011 update of actuarial assumptions on the unearned revenue reserve (partly offset in deferred acquisition costs).
Net technical margin increased by €7 million (+21%) to €42 million mainly due to the disposal of the “Vie Populaire”
As a result, the underlying cost income ratio improved by 1.7 points to 56.5%.
Adjusted earnings increased by €134 million to €202 million due to higher realized capital gains (€+128 million) mainly on equities and fi xed income assets, as well as lower impairments
(€+34 million), partly offset by a decrease in the impact of equity hedging derivatives (€-24 million) and by underlying earnings decrease.
Net income increased by €281 million to €272 million mainly driven by higher adjusted earnings (€+134 million) and by a favorable change in fair value and realized gains and losses of
Net capital gains or losses attributable to shareholders net of income tax 5 (0)
Profi t or loss on fi nancial assets (under FV option) & derivatives 0 (0)
APE decreased by €76 million (-36%) to €136 million. On a comparable basis, APE decreased by €73 million (-34%) due to a progressive drop in the Pension Fund business (€-36 million or -49%) following the regulatory changes in Poland, and the lower Life & Savings APE (€-37 million or -27%) in unitlinked product sales (€-32 million or -29%) mainly in Poland and Czech Republic as a result of the decision to stop the cooperation with low quality brokers.
Profi t or loss on fi nancial assets (under FV option) & derivatives (26) 14 14
Annuities products (€-248 million); ■ high growth markets increased by €9 million (+2%), mainly driven by higher Group Protection new business in Morocco and Mexico.
(€-59 million) and the curtailment of Variable Annuities products (€-15 million), partly offset by a better performance on unit-linked Savings products (€+48 million), mainly at
Turkey (€+3 million) due to a good performance in Pension business and Morocco (€+2 million) thanks to Group
Investment margin increased by €24 million (+9%) to €288 million. On a comparable basis, investment margin increased by €23 million (+9%) mainly driven by both (i) mature markets (€+20 million) following non recurring items decreasing policyholder’s bonus charge in Italy (AXA Assicurazioni and
(€+57 million) driven by higher unearned revenues reserves amortization (partly offset in deferred acquisition cost) mainly refl ecting strong sales of new “Protected Unit” unit-linked products combined with higher surrenders.
Net technical margin rose by €68 million (+93%) or €68 million
As a result, underlying cost income ratio decreased by 5.4 points to 65.0%.
APE increased by €77 million (+23%) to €408 million. On a comparable basis, APE increased by €47 million (+14%) mainly driven by higher sales of G/A Protection & Health products
Workers’ Compensation and actuarial timing differences, partly offset by higher mortality margin and the non-repeat of 2011 exceptional items, mainly the early termination of an internal co-insurance treaty.
On a constant exchange rate basis, expenses increased by €27 million (+15%) mainly due to higher investments in business infrastructure and higher acquisition expenses driven by new business and in-force growth.
increased by €22 million refl ecting an update of actuarial assumptions (€-4 million) and the non-repeat of 2011 positive updates and exceptional items (€-16 million), in particular the early termination of an internal co-insurance treaty.
On a constant exchange rate basis, income tax expenses decreased by €18 million mainly due to a tax benefi t driven by a change in the tax base for a block of insurance business in the context of the on-going merger of two insurance entities
Underlying earnings increased by €42 million (+20%) to €252 million. On a constant exchange rate and scope basis, following the AXA APH minority interests buy-out in April 2011, underlying earnings remained stable.
On a constant exchange rate and scope basis, net income increased by €29 million (+15%) due to higher adjusted earnings (€+15 million) and favorable changes in fair values of Mutual funds (€+25 million) and interest rate derivatives
Net capital gains or losses attributable to shareholders net of income tax (1) 2
Note: In order to align reporting periods with Group calendar year, 2012 reported earnings included 1 additional month for
(€+19 million) refl ecting the launch of ICBC-AXA joint-venture which commenced in July 2012; and sales growth in unitlinked products in Philippines (€+5 million).
(2) Adjusted for AXA APH minority interests buy-out in April 2011 (€4 million), and excluding the additional contribution from reporting period alignment with the Group in 2012 (€13 million).
On a constant exchange rate and scope basis (1), net income increased by €27 million (+63%), mainly refl ecting growth in adjusted earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 0 5
Direct protection commercial activities were launched during the second semester of 2011.
As a consequence, underlying earnings as well as adjusted earnings and net income reached €-22 million in 2012, refl ecting continued investments and direct marketing expenditure to ensure the progressive ramp-up of its activity.
Following the disposal of the Australia and New Zealand operations on April 1, 2011, Australia and New Zealand contributed only to the fi rst quarter of 2011.
Net income from investments in affi liates and associates 43 38
Underlying earnings 1,895 1,848 of which high growth markets 77 178 of which Direct 54 (33)
(b) Mediterranean and Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region, and Mexico.
Net capital gains or losses attributable to shareholders net of income tax 58 (52)
Gross revenues increased by €135 million (+2%) to €5,730 million (1), or €5,749 million excluding the internal transfer to AXA Assistance of some service guarantees: ■ Personal lines (58% of gross revenues) were up 2% to €3,325 million as a consequence of tariff increases, partly offset by negative net new contracts in the fi rst half of the year notably in Motor and household; ■ Commercial lines (42% of the gross revenues) were up 3% to €2,376 million mainly driven by tariff increases, partly offset by lower volumes in a context of selective underwriting.
Net technical result rose by €58 million (+4%) to €1,667 million: ■ current accident year loss ratio decreased by 0.1 point to 73.5% mainly driven by tariff increases, partly offset by the higher charges from climatic events notably impacting household; ■ all accident year loss ratio decreased by 0.2 point to 70.9%
Expense ratio decreased by 0.3 point to 24.2%, mainly driven by a contained cost base as well as a higher non-recurring positive impact relating to tax contribution (€+17 million in 2012 vs. €+7 million in 2011).
Income tax expenses increased by €11 million (+4%) to €-305 million mainly refl ecting a less favorable corporate tax rate mix.
Adjusted earnings increased by €99 million (+22%) to €544 million as a consequence of higher realized capital gains
(€+142 million) and lower impairments (€+27 million) mainly on equities and fi xed income assets, refl ecting improved market conditions, partly offset by a decrease in the impact of equity hedging derivatives (€-57 million) and lower underlying earnings.
Net income increased by €152 million (+35%) to €583 million due to a favorable change in fair value of Mutual funds and interest rate derivatives (€+41 million) mainly driven by the decrease in interest rates and credit spreads, a positive foreign exchange impact (€+13 million) and higher adjusted earnings.
Gross revenues increased by €378 million (+10%) to €4,150 million (1). On a comparable basis, gross revenues increased by €163 million (+4%) mainly driven by: ■ Personal lines (54% of the total gross revenues) were up 2% at €2,175 million. Motor was down 1% to €569 million due to increased competition both in the UK and Ireland resulting in lower new business volumes and lower average premiums, this was partly offset by tariff increases. Non-
to €639 million principally due to new schemes, increased volumes and improved retention in the UK. Health was up 4% to €620 million following further expansion of the international business and a broadening UK proposition.
refl ecting the change in business mix and increased coverage, higher charges of weather related claims (+0.7 point) and
As a result, the enlarged expense ratio was down 0.4 point to 33.2% and the combined ratio was up 2.3 points to 100.7%
Income tax expenses decreased by €24 million (-33%) to €-49 million. On a constant exchange rate basis, income tax expenses decreased by €26 million (-36%) mainly refl ecting lower pre-tax underlying earnings. One-off tax charges were stable (€-8 million in 2011 vs. €-9 million in 2012).
Motor (+7%) and Property (+6%) triggered by tariff increases for both renewals and new business as well as positive net new contracts; ■ Commercial Lines (35% of gross revenues) rose by 2% to €1,333 million resulting from new business especially in
Property (+4%); ■ Other Lines (8% of gross revenues) rose by 17% to €313 million mainly driven by higher assumed business in
Net technical result increased by €188 million to €1,163 million: ■ current accident year loss ratio decreased by 2.1 points to 71.3% as a consequence of tariff increases, mainly in
Motor and Non-Motor and lower Nat Cat charge, despite an increase in tap water freeze claims due to the severe winter; ■ all accident year loss ratio decreased by 3.6 points to 69.4%
mainly due to lower current accident year loss ratio and to higher positive prior year reserve developments.
Expense ratio rose by 0.1 point to 30.4% refl ecting an increase in non commission expenses, including non recurring items offset in the German holding companies.
Enlarged expense ratio decreased by 0.7 point to 33.4%, benefi tting from a positive one time release of claims handling cost reserves.
As a result, the combined ratio was down by 3.5 points to 99.7%.
Income tax expenses increased by €55 million (+161%) to €-91 million, mainly due to higher pre-tax underlying earnings and lower positive tax one-offs (€11 million in 2012 compared to €24 million in 2011).
Net income increased by €106 million (+57%) to €292 million, mainly driven by higher adjusted earnings and higher favorable changes in fair value of fi xed income funds.
Net capital gains or losses attributable to shareholders net of income tax 17 5
Gross revenues increased by €101 million (+4%) to €2,744 million (1). On a comparable basis, gross revenues increased by €33 million (+1%): ■ Personal lines (53% of the gross revenues) increased by 3%
Net technical result increased by €34 million (+4%) to €1,010 million. On a constant exchange rate basis, net technical result increased by €10 million (+1%): ■ current accident year loss ratio increased by 0.3 point to 69.2% mainly driven by slightly higher large claims and a higher number of freeze claims in Property, partly offset by a lower Nat Cat charge; ■ all accident year loss ratio increased by 0.1 point to 63.2% as a consequence of the current accident year loss ratio development and higher positive prior year reserve developments.
As a result, the combined ratio down by 0.4 point to 88.7%.
Underlying earnings increased by €23 million (+6%) to €420 million. On a constant exchange rate basis, underlying earnings increased by €13 million (+3%).
Adjusted earnings increased by €35 million (+9%) to €437 million. On a constant exchange rate basis, adjusted earnings increased by €24 million (+6%) mainly driven by higher underlying earnings and higher realized capital gains mainly on equities.
On a constant exchange rate basis, net income increased by €11 million (+3%) mainly driven by higher adjusted earnings, partly offset by an unfavorable change in fair value mainly on foreign exchange derivatives.
Net capital gains or losses attributable to shareholders net of income tax 11 98
due to the non renewal of a large portfolio and Motor
(€-13 million) due to portfolio losses, were partly offset by an increase in Workers’ Compensation (€+10 million) and
Net technical result increased by €109 million (+16%) to €768 million: ■ current accident year loss ratio decreased by 4.8 points to 68.8% mainly driven by a lower Nat Cat charge (-1.8 points), lower frequency (-1.9 points) mainly driven by portfolio pruning and tariff increases (-1.6 points); ■ all accident year loss ratio decreased by 5.1 points to 63.4%
Expense ratio decreased by 0.3 point to 30.2% due to lower administrative expenses (-0.4 point) mainly due to a non-recurring reclassifi cation from administration expenses to claims handling costs, partly offset by a slight increase in commission rates following a change in portfolio mix.
As a result, the combined ratio was down by 5.4 points to 93.6%.
Net investment result increased by €12 million (+6%) to €196 million mainly due to an increase in investment yield and despite a lower asset base.
Net income decreased by €17 million (-7%) to €215 million mostly refl ecting a less favorable change in fair value of infl ation derivatives mainly on long term business.
Net realized capital gains or losses attributable to shareholders (5) (19)
Underlying earnings increased by €6 million to €43 million on a constant exchange rate basis, driven by an improvement in claims experience and a strong portfolio growth (+24%), partly offset by a lower investment income. As a result, the combined ratio was down 4.2 points to 93.5%.
Net capital gains or losses attributable to shareholders net of income tax 40 (17)
Gross revenues increased by €258 million (+4%) to €7,107 million (1). On a comparable basis, gross revenues increased by €216 million (+3%) driven by a strong contribution from high growth markets (+12% or €+346 million), partly offset by mature markets (-3% or €-129 million), due to Spain and
■ Personal lines (58% of the gross revenues) were up 3% to €4,148 million driven by Motor lines (+4% or €+103 million), mainly in high growth markets (€+152 million), coming from both positive volume effects in Turkey and Mexico and tariff increases in Turkey, notably in the second half of 2012, partly offset by mature markets (€-49 million) mainly in
(€-10 million) especially in Spain; ■ Commercial lines (41% of the gross revenues) were up 4% to €2,951 million driven by Motor lines (+8% or €+69 million) in
(€-210 million), Spain (€-40 million) and Portugal (€-36 million), partly offset by the improvement in the rest of the region: ■ current accident year loss ratio decreased by 0.4 point to 73.0% including a lower Nat Cat charge of -0.1 point mainly in Italy. Mature markets decreased by 2.5 points while high growth markets increased by 2.2 points. Excluding Nat Cat charge, improvement in mature markets was mainly driven by lower frequency in Motor and Personal Property and decrease of average cost in Health. Deterioration in high growth markets was linked to adverse claims development in Turkey, partly offset by positive results from profi tability actions in Mexico; ■ all accident year loss ratio increased by 3.3 points to 74.8%
Liability, as well as in Spain, Portugal and Mexico with less favorable prior year reserve developments.
Expense ratio decreased by 0.3 point to 25.7% mainly driven by administrative expense ratio (-0.3 point). High growth markets improved by 1.0 point benefi tting from a positive volume effect and a positive one-off from a litigation settlement in Mexico. Mature markets deteriorated by 0.4 point due to negative volume effect in Spain and Portugal offsetting productivity programs.
As a result, combined ratio was up 3.0 points to 100.5%.
to €384 million. On a constant exchange rate basis, net investment result increased by €4 million (+1%) driven by higher yields on fi xed income assets in Mexico (€+12 million)
Underlying earnings decreased by €121 million (-34%) to €232 million. On a constant exchange rate basis, underlying earnings decreased by €125 million (-35%).
Net capital gains or losses attributable to shareholders net of income tax 0 (4)
Profi t or loss on fi nancial assets (under FV option) & derivatives (1) (15)
(-22% or €-119 million) as a result of lower new business volumes and retention, change in business mix refl ecting selective underwriting as well as increased competitiveness of the market, and (ii) Other countries (+7% or €+98 million)
As a result, the combined ratio was down by 4.8 points to 100.6%.
On a constant exchange rate basis, underlying earnings increased by €86 million.
Adjusted earnings increased by €91 million to €55 million. On a constant exchange rate basis, adjusted earnings increased by €90 million mainly due to higher underlying earnings, €6 million lower impairment charges partly offset by €2 million lower realized capital gains mainly on equities.
Net income increased by €109 million to €46 million. On a constant exchange rate basis, net income increased by €108 million due to higher adjusted earnings and €14 million less unfavorable movement in the fair value of fi nancial assets and derivatives and €4 million lower restructuring costs.
Net realized capital gains or losses attributable to shareholders 5 2
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (0) (0)
Gross revenues increased by €104 million (+25%) to €529 million (2). On a constant exchange rate and scope basis, excluding HSBC portfolio acquisition in Hong Kong and
Singapore, gross revenues increased by €47 million (+11%): ■ Personal lines (47% of the gross revenues) were up €18 million (+9%), mainly driven by both Motor (€+9 million)
(€+7 million) in all countries, combined with (ii) focus on SME
On a constant scope basis, all accident year loss ratio decreased by 0.6 point to 67.9% due to higher positive prior year reserve developments in Hong Kong and Singapore.
Expense ratio decreased by 0.5 point to 28.4%. On a constant scope basis expense ratio decreased by 0.5 point to 28.3%
mainly driven by productivity gains with strong volume increase in Hong Kong and Malaysia.
As a result, the combined ratio was down by 1.3 points to 96.0%. On a constant scope basis combined ratio was down by 1.1 points to 96.2%.
Net realized capital gains or losses attributable to shareholders (7) 17
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 23 (15)
Net capital gains or losses attributable to shareholders net of income tax (3) 5
Profi t or loss on fi nancial assets (under FV option) & derivatives 24 (13)
Gross revenues increased by €69 million (+3%) to €2,072 million (1) On a comparable basis, gross revenues increased by €62 million (+3%) notably in Construction
Aviation) and also to the positive experience on large claims in Property; ■ all accident year loss ratio decreased by 0.1 point to 82.2%
as a result of improvement in the current year loss ratio, partly offset by lower positive prior year reserve developments.
to €195 million. On a constant exchange rate basis, net investment result decreased by €6 million (-3%) mainly driven by lower income from fi xed income assets (€-13 million), partly offset by higher distributions from Mutual funds (€+9 million).
Net income decreased by €27 million to €25 million, mainly due to lower adjusted earnings, partly offset by €7 million more favorable change in fair value of fi nancial assets and derivatives.
Adjusted earnings decreased by €1 million to €20 million driven by lower underlying earnings.
Net income decreased by €6 million to €12 million due to lower adjusted earnings, €4 million lower realized capital gain on foreign exchange rates and €1 million exceptional capital gain recorded in 2011 following the disposal of a UK based company.
Adjusted earnings decreased by €87 million to €-23 million. On a constant exchange rate basis, adjusted earnings decreased by €82 million as a consequence of lower underlying earnings.
Net income decreased by €88 million to €-25 million. On a constant exchange rate basis, net income decreased by €84 million refl ecting lower adjusted earnings.
(€-12 million), partly offset by a decrease in effective tax rate mainly due to lower state taxes and higher foreign earnings.
AXA ownership of AllianceBernstein at December 31, 2012 was 65.5%, up 0.9% from December 31, 2011 due to repurchases of AllianceBernstein units during 2012 to fund deferred compensation plans, partly offset by the granting of units in 2012 for 2011 deferred compensation.
Net capital gains or losses attributable to shareholders net of income tax (4) (2)
Profi t or loss on fi nancial assets (under FV option) & derivatives 9 (18)
Equity and AXA Real Estate, partly offset by the voluntary exit from unprofi table employee shareholding schemes (€-4 billion)
As a result, the underlying cost income ratio decreased by 2.9 points to 70.7%
Underlying earnings increased by €8 million (+4%) to €223 million. On a constant exchange rate basis, underlying earnings increased by €2 million (+1%).
Adjusted earnings increased by €7 million (+3%) to €219 million. On a constant exchange rate basis, adjusted earnings were fl at as higher underlying earnings were offset by a higher impairment charge.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and the net income attributable to AXA’s banking for the periods indicated: CONSOLIDATED GROSS REVENUES
(a) Of which AXA Bank Europe and its branches: €351 million.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (3) (13)
(a) O f which AXA Bank Europe and its branches: €19 million.
(b) Includes commercial activities in Belgium for €13 million and shared services of AXA Bank Europe (treasury and support functions) for €18 million.
Net banking revenues decreased by €22 million (-19%) to €94 million. On a comparable basis (1), net banking revenues decreased by €27 million (-23%) mainly due to higher interests paid to customers on savings accounts as a result of a promotional campaign during the fi rst half of 2012 which enabled the Company to maintain positive net new money in 2012, partly mitigated by higher interest revenues on mortgages as a consequence of an increase in new credit production.
Adjusted earnings and net income decreased by €15 million in line with underlying earnings.
(1) In Banking Segment, for net banking revenues, « on a comparable basis » means after intercompany eliminations.
September 2011 allowing customers to redeem foreign currency denominated mortgages at non-market rates. In this context, the Hungarian credit production has been stopped.
Underlying earnings as well as adjusted earnings and net income decreased by €1 million to €-6 million mainly driven by higher administrative expenses following marketing campaigns to support business growth.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (228) (17)
Underlying earnings decreased by €30 million to €-590 million mainly due to an increase in fi nancial charges mainly driven by the result of the amendment of the foreign currency hedging policy (€-56 million) as well as a lower income on the net participation in BNP Paribas (€-32 million), partly offset by €+48 million related to the hedging program on Performance
Adjusted earnings increased by €70 million to €-652 million mainly driven by the end of the premium amortization on equity call options (€-48 million in 2012 vs. €-105 million in 2011), and a €31 million realized capital gain on real estate, partly offset by underlying earnings evolution.
Zealand and Canadian operations, (ii) a loss related to a sale of a tax receivable for €84 million and (iii) a €125 million allowance due to the restructuring of the participation in Bharti AXA Life
This new framework started to be implemented in 2011 and mainly covered US dollar, Swiss Franc and Yen currencies. The impact of this new policy was €-123 million in 2012 net income.
Underlying earnings decreased by €27 million (-21%), to €-158 million. On a constant exchange rate basis, underlying earnings decreased by €16 million (-12%), mainly refl ecting the impact of higher share-based compensation expense.
On a constant exchange rate basis, underlying earnings increased by €21 million. 2012 benefi ted from a favorable tax one-off of €6 million against a one off provision of €-14 million in 2011.
Adjusted earnings increased by €23 million to €23 million. On a constant exchange rate basis, adjusted earnings increased by €22 million in line with underlying earnings evolution.
Net i ncome increased by €40 million to €24 million. On a constant exchange rate basis, net income increased by €39 million due to the improvement in adjusted earnings
Net income decreased by €3 million (-20%) to €-16 million, mainly driven by adjusted earnings evolution.
Adjusted earnings increased by €16 million (+24%) to €-52 million. On a constant exchange rate basis, adjusted earnings increased by €17 million (+24%) mainly refl ecting higher underlying earnings.
Derivatives related to invested assets: ■ include all foreign exchange derivatives, except the ones related to currency options in earnings hedging strategies which are included in underlying earnings; and also
■ exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy; ■ exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds, for which cost at inception, intrinsic value and pay-off fl ow through adjusted earnings, and only time value fl ows through net income when there is no intention to sell the derivatives in the short term (if not, fl ows through adjusted earnings).
Discretionary Participation Features (DPF): (i) Gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net
“Fees and Revenues”; (iv) Change in URR (Unearned Revenue Reserve –
(iii) amortization of acquisition expenses on current year and prior year new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition
Mediterranean Holding SA are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio.
The level of internal dividends paid by operating entities to the
The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating needs.
Company” Segment “Information – Life & Savings – Surrenders and lapses”).
These s ubsidiaries’ principal sources of liquidity are operating cash fl ows, proceeds from the issuance of ordinary shares
At year-end 2012, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
(2) (Total net fi nancing debt)/(shareholders’ equity excluding undated subordinated debt and excluding unrealized gains & losses recorded through shareholders’ equity + total net fi nancing debt).
(3) Comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs. The 2011 published debt gearing ratio was 26%.
At December 31, 2012, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
On a consolidated basis, AXA’s total fi nancing debt outstanding amounted to €2,514 million at December 31, 2012, an increase of €8 million from €2,506 million at the end of 2011. On a constant exchange rate basis, the increase was €4 million.
Movements in this item are described in Note 17 of Part 4 —
At December 31, 2012, the amount of debt owed by AXA and its subsidiaries to credit institutions was €831 million versus €807 million at the end of 2011. Debt owed by AXA and its subsidiaries to credit institutions was stable on a constant exchange rate basis.
At December 31, 2012, other debt owed to credit institutions totaled €2,126 million (including €445 million of bank overdrafts), a decrease of €739 million compared to €2,865 million at the end of 2011 (including €1,029 million of bank overdrafts).
Movements in this item are described in Note 18 of Part 4 —
Dividends received by the Company from its subsidiaries amounted to €3,303 million in 2012 (€4,307 million in 2011), of which €845 million were in currencies other than the Euro
(€1,266 million in 2011) or €1,161 million after the impact of hedging derivative instruments (€1,066 million in 2011), of which undated subordinated debt of €449 million (€446 million
The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries monitor compliance with these requirements on a continuous basis and are in compliance with the applicable solvency requirements as of December 31, 2012.
The various components of what the Group considers as available capital are determined in accordance with these regulatory requirements under Solvency I , which are not yet harmonized throughout Europe while waiting for Solvency II . At
AXA is not considered as a fi nancial conglomerate. However, in accordance with the Decree of September 19, 2005, if a company is not subject to the additional supervision applicable to a fi nancial conglomerate, its solvency margin is nevertheless reduced by the amount of its equity interests in credit institutions, investment companies or fi nancial institutions if the
In particular, the Company’s TSS include loss absorption mechanisms which provide that under certain circumstances relating to the consolidated solvency margin of the Group, the principal amount of each of the relevant TSS will be written down. In such a case, interests will become payable on the reduced principal amount. The principal can be reinstated in the future (following the Compagny’s return to fi nancial health as defi ned by the term of the TSS) .
Prudentiel (ACP), which controls the application of these directives in France.
Insurer Financial Strength ratings at ‘AA-’, revising the outlook from stable to negative.
A dividend per share of €0.72 will be proposed at AXA’s Annual
Please refer to Note 32 of Part 4 — “Consolidated Financial
Employees 105 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 106
Transactions involving Company securities completed in 2012 by the members of the Board of Directors 126
On April 29, 2010, AXA’s shareholders approved the change in AXA’s governance structure. The former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors. This unitary board structure was implemented in order to enhance the effi ciency and reactivity of the Group’s governance processes and has been carefully designed to ensure an appropriate balance of powers. In the uncertain market, regulatory and competitive environment coming out of the fi nancial crisis, greater reactivity and increased effi ciency in the Group’s governance processes were considered critical to the Group’s continued future success.
In the context of the change in AXA’s governance structure, the
Chairman who acts as Lead Independent Director in all cases where the positions of Chairman & Chief Executive Offi cer are held by the same person. AXA’s Lead Independent Director has a number of specifi c powers including the power to convene meetings of the non-executive directors without the attendance of the Chairman & Chief Executive Offi cer and/or the Deputy
Chief Executive Offi cer, to inform the Chairman and the Board of Directors about potential confl icts of interests, and to take a variety of other actions designed to ensure that the Company’s governance structures remain robust and well balanced at all times and to avoid an excessive concentration power when the positions of Chairman & Chief Executive Offi cer are held by the same person.
Offi cer; ■ appoints and determines the compensation of the Chief
Offi cer; ■ reviews and set s the Company’s half-year and annual results; ■ approves the report of its Chairman on the composition of the Board including gender balance, the conditions of preparation and organization of the Board of Directors’ work and the internal control and risk management procedures set up by the Company; ■ convenes Shareholders’ Meetings;
Periodically, Board members may meet among themselves without the attendance of the Executive Management. Prior to each meeting, Board members receive documentation concerning matters to be reviewed, generally eight days in advance. In accordance with the Board of Directors’ Bylaws, they are also informed by the Chief Executive Offi cer on a regular basis about the Company’s fi nancial condition, cash position and commitments as well as any signifi cant events or transactions involving the Company or the Group.
Training sessions are provided for new and existing members of the Board of Directors in order to familiarize them with the
To ensure that the interests of members of the Board of
Pursuant to Article 10 of the Company’s Charter, the members of the Board of Directors are in principle appointed by the
Committee currently intends to propose additional women directors for consideration by shareholders at future
(regardless of whether he is a Committee member), to inform the Chairman and the Board of Directors about any potential confl icts of interests, to report to the Shareholders’ Meetings with respect to all corporate governance related matters, to require the Chairman & Chief Executive Offi cer to convene full meetings of the Board on a specifi c agenda at any time, to convene meetings of the non-executive directors at any time without the attendance of the Chairman & Chief Executive
Chairman & Chief Executive Offi cer April 2010/2014 Annual Shareholders’ Meeting
Vice-Chairman of the Board of Directors Lead Independent Director Chairman of the Compensation & Human Resources Committee
Independent director Chairman of the Ethics & Governance Committee Member of the Finance Committee Member of the Compensation & Human Resources Committee
Mrs. Suet Fern Lee (54) Senior Partner of Stamford Law Corporation (Singapore) 10 Collyer Quay #27-00 Ocean Financial Centre – Singapore 049315 – Singapore Singaporean nationality
Oppenheimer and Mr. Paul Hermelin in light of the AFEP/ MEDEF
Shareholders’ Meeting of April 30, 2013, of fi fteen members including twelve members considered independent by the Board of Directors in accordance with the criteria of the
Since April 2010, Mr. Henri de Castries has been Chairman &
Offi cer. In September 2011, further to the combination between the groups Rhodia and Solvay, Mr. Clamadieu became Vice-Chairman of the Executive Committee of Solvay and Chairman of the Board of Directors of Rhodia. Since
In 1978, he joined Rhône-Poulenc to run the Saint-Fons plant, and was then promoted to Senior Executive Vice-President of Rhône-Poulenc for the Specialty Chemicals business unit.
Board in 1997. He left PSA in February 2007. From June 2007 to March 2010, he was Chairman of the AFEP. Since
November 8, 2011, Mr. Jean-Martin Folz has been Chairman of the Board of Directors of Eutelsat Communications.
Wainwright. In 1978, he joined Fox-Pitt, Kelton and was appointed Chief Executive Offi cer in 1994. In 1993, he became a non-executive director of AXA Equity and Law plc (Chairman, 1995) and in 1997 a non-executive director of AXA UK plc.
(1) Mr. Denis Duverne only holds directorships within the AXA Group.
Offi cer of Lyonnaise des Eaux, in charge of the development of activities in Europe. Since October 1st, 2011, Mrs. Isabelle
Senior Partner of Stamford Law Corporation (Singapore). She is Chairman of the Asian Civilisations Museum Board, and is also a member of the National Heritage Board, a member of the
Kurt Hamann foundation prize for his thesis. In October 1983, he joined Bavarian Re (a former Swiss Re subsidiary). From 1985, he was involved in the casualty department’s operations in the German-speaking area. In 1986, he became Head of the non-proportional underwriting department. He was appointed member of the Management Board in 1988 when he assumed responsibility for the Company’s casualty line of business in the German-speaking area. In 1993, he became Chairman of the Management Board of Bavarian Re. Mr. Stefan Lippe was appointed a member of Swiss Re’s Executive Board in 1995, as Head of the Bavarian Re Group. In 2001, he was assigned the role of Head of the Property & Casualty Business Group and appointed a member of Swiss Re’s Executive Committee.
Mr. Ramon de Oliveira is a graduate of the University of Paris and of the Institut d’Études Politiques (Paris). Starting in 1977,
Bank in 2001, Mr. de Oliveira was the only executive from
Member of the AXA Board of Directors, representing the employee shareholders
Romania. From 1983 to 1990, she was subject Matter Expert in AGF (now Allianz) in Cologne (Germany). In 1990, she joined the AXA Group as Reinsurance director of AXA Germany
Crédit Commercial de France. In 1987, he was in charge of its privatization before becoming Chairman & Chief Executive
Chairman: Fédération Bancaire Européenne (FBE), Institut de l’Entreprise, Table Ronde Financière Européenne
Member: International Capital Markets Advisory Committee of the Federal Reserve Bank of New York (FED) (United States)
Chairman & Chief Executive Offi cer of Coca-Cola Entreprise and Vice-Chairman of Coca- Cola Enterprises - Groupe Europe in 2002. From January 2003 to May 2005, she was Chairman of Coca-Cola Enterprises - Groupe Europe. Since May 2005,
Senior Engagement Manager, he was a member of the fi nancial institutions practice. In 1997, he started as a senior associate for Goldman, Sachs & Co. oHG in Frankfurt am Main (Germany).
From 2005 to 2006, he was head of investment banking of the German speaking region. Since December 2006,
Mrs. Doina Palici-Chehab, who is the employee shareholder representative to the AXA Board of Directors, is an employee of AXA Business Services Pvt. Ltd., which is AXA’s principal
The Chairman & Chief Executive Offi cer and the Deputy Chief
During this Meeting, the members of the Board expressed a very favorable opinion in particular on the functioning of the
Board, highlighting the continuous improvement of the quality of the work as well as the supporting documents provided to the Board. The main areas for improvement concern the defi nition of the activities and responsibilities of the Committees, the minutes of the Committees’ work presented to the Board and the information provided to the directors between Board meetings; decisions have been made in order to develop these measures and have already been implemented at this stage.
Composition on December 31, 2012: Anthony Hamilton, Chairman Stefan Lippe Ramon de Oliveira Marcus Schenck
• fi nancing operations that might substantially change the Company’s fi nancial structure,
The Finance Committee met fi ve times in 2012. The average attendance rate was 84.85%. The Committee focused, in particular, on the following issues: ■ fi nancial risk management; ■ liquidity and fi nancing; ■ capital and solvency; ■ risk appetite and asset allocation; ■ acquisitions, restructurings and disposals; ■ proposal for payment of dividend; ■ review of the fi nancial authorizations
Composition on December 31, 2012: Jean-Martin Folz, Chairman François Martineau Michel Pébereau
The Chairman of the Board of Directors, even if not a member of the Committee, takes part in the Committee’s works and attends its meeting except when its personal situation is at stake.
■ to issue proposals to the Board of Directors for the fi xing of: • the compensation of the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer and the preparation of their annual evaluation,
■ to issue proposals on the appointments of the Company’s Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer. The Committee is also informed of the appointments of the main executives of the Group, and in particular of the members of the Management Committee and the Executive Committee. The Committee examines the provisions considered by the Chief Executive Offi cer in order to prepare the renewal of the members of the Executive Management (Chief Executive Offi cer and/or Deputy Chief Executive Offi cer); ■ to examine in more depth certain Group human resources issues.
The Compensation & Human Resources Committee met fi ve times in 2012. The average attendance rate was 88%. The Committee focused, in particular, on the following issues: ■ compensation policy and principles; ■ compensation paid to the Company’s
In addition, the Bylaws of the Board of Directors provide for specifi c limitations of the powers of the Chairman & Chief
Deputy Chief Executive Offi cer who is specifi cally in charge of
AXA’s Management Committee currently comprises eight members and generally meets once a week to discuss strategic, fi nancial and operational Group aspects.
Nicolas Moreau Chairman & Chief Executive Offi cer of AXA France and in charge of overseeing the worldwide operations of AXA Assistance and AXA Global Direct
On January 1st, 2013, the Executive Committee was comprised of the following seventeen members, including nine non-French nationals: Henri de Castries Chairman & Chief Executive Offi cer of AXA
Thomas Buberl Chief Executive Offi cer of AXA Konzern AG (Germany)
Philippe Egger Chief Executive Offi cer of Insurance activities in Switzerland
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: Salaried employees (full time equivalent) At December 31, 2010 At December 31, 2011 At December 31, 2012 - Belgium (Including AXA Bank Belgium) (g) 5,270 5,085 4,813 - Mediterranean and Latin American Region 12,024 11,919 11,706 - Other countries and transversal entities 5,351 5,028 5,275
(c) In 2012, decrease by 427 in the US mainly due to the restructuring plan undertaken in June 2011, offshoring and outsourcing.
(d) In 2012, decrease by 868 in the UK due to (i) UK L&S (-1,106) driven by the disposal of Bluefi n in April, restructuring plans in the Wealth and bancassurance businesses together with non replacement of IT contractors, partly offset by (ii) UK P&C (+274) mainly due to the launch of the «Health-On-Line» brand.
(g) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the bank activities. Consequently, split is not available.
(h) In 2012, increase by 255 in Hong Kong as a consequence of the integration of HSBC acquired business.
(i) In 2012, increase by 511 in AXA Assistance mainly refl ecting business growth.
(k) In 2012, decrease mainly driven by AXA Technology (-512). 2011 fi gures included contractors which were excluded in 2012.
(or, in certain cases, beyond the third quartile) of the benchmark market rate.
For other members of the Management Committee, the variable compensation is also determined on the basis of an individually predefi ned target amount and is based on three metrics: ■ Group performance, as measured by the underlying earnings per share, return on equity, and customer scope index; ■ performance of the business unit or functional area of responsibility, measured against objectives set at the beginning of the year; ■ their individual performance, evaluated on the basis of predetermined strategic objectives.
For Mr. Denis Duverne, who is a member of the Management
Mark Pearson and Jacques de Vaucleroy), the proportion of their variable compensation linked to the Group results accounts for 30%, the proportion linked to results of their operational entity and functional area of responsibility for 40% and the proportion linked to their individual performance for 30%.
Chairman & Chief Executive Offi cer France 2,466,667 2,061,087 84% 2,350,000 2,034,171 87% 2,350,000 2,270,153 97%
& CEO and the Deputy CEO a deferral mechanism with respect to 30% of their variable compensation (“STIC”) for 2012. Under this mechanism, the deferred amounts with respect to 2012 will be paid out in two tranches, in 2014 and 2015. The amount of the payout will vary depending on the AXA share price evolution over the deferral period and will be subject to a cap at 120% of the deferred amount. The introduction of this STIC
For information purposes, the relevant marginal tax rates in the countries where members of the Management Committee exercise or exercised their function are as follows: Belgium: 53.5% (50% corresponding to federal taxes and 3.5% to local taxes); France: 64.5% (including an additional 15.5% for social taxes); Japan: 50%; United States (New York): 43.27% and the
Chairman & Chief Executive Offi cer France 3,070,825 429,550 947,430 - 4,447,805 3,285,743 292,600 1,153,680 - 4,732,023
Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options and performance shares/units or the actual proceeds if and when the options are exercised or the performance shares/units are acquired.
On March 18, 2011, the fair value of one option was €1.89 for options without performance conditions, €1.42 for options with performance conditions, and the fair value of one performance share/unit was €9.57.
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 750,000 1,415,746 - 50,795 4,150 2,220,691 750,000 1,292,542 - 50,795 4,150 2,097,487
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2011
Chairman & Chief Executive Offi cer France 950,000 2,034,171 - 82,504 4,150 3,070,825 950,000 2,031,000 - 82,504 4,150 3,067,654
The only “Benefi ts in kind” for Messrs. Henri de Castries and
During the fi scal year 2012, none of the members of the Board of Directors, except for its Chairman and the Deputy Chief
Shareholders’ Meeting, in accordance with applicable laws, and apportioned by the Board of Directors to its members in accordance with its Bylaws: ■ 50% of the value of the directors’ fees is distributed evenly among the members of the Board of Directors as a fi xed fee, with the Vice-Chairman receiving a double fee; ■ a fi rst half of the remaining amount is distributed among the members of the Board of Directors in proportion to their actual attendance at the meetings of the Board, with the
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA
Offi cer. This compensation consists of 301,183 euros of fi xed compensation and 122,742 euros of variable compensation.
Committee, approves the grant of a global option pool. The pool of options allocated to each business unit is essentially determined on the basis of their contribution to the Group fi nancial results during the previous year and with consideration for specifi c local needs.
Stock options are valid for a period of 10 years. They are granted at market value, with no discount, and become exercisable by tranches generally in thirds between 2 and 4 years following the grant date. Pursuant to the stock option plan rules, benefi ciaries who resign from the Group lose their right to exercise the options.
Usually, annual grants are made during the fi rst half of the year, generally 20 trading days after the date the annual earnings of the Group are published. As such, in 2012, the annual consolidated earnings were published on February 16, 2012 and the option grant took place on March 16, 2012. The strike price, equal to the average of the closing share price during the 20 trading days before the grant date, was set at €12.22.
Group functional department heads. These recommendations are reviewed by the Executive Management to ensure coherence and fairness. Individual grants of options are then decided by the Board of Directors, provided that individual grants to the Chairman & Chief Executive Offi cer, the Deputy
to (i) the Company’s E xecutive O ffi cers (members of the former
Since 2009, this condition was extended and applied to all options granted to the Company’s E xecutive O ffi cers (members of the former Management Board until 2010) and from 2010 to all members of the Management Committee.
December 22, 2010 that the total number of options granted to the executive offi cers (Chairman & CEO and Deputy CEO) each year may not exceed 10% of the aggregate number of options granted to all benefi ciaries during the same year.
Date of the Shareholders’ Meeting 09/05/2001 09/05/2001 03/05/2002 30/05/2001 (b) 03/05/2002 21/05/2002 (b) 03/05/2002 03/05/2002 03/05/2002 03/05/2002
Total number of benefi ciaries 1,655 1,721 229 3 2,186 1 2,132 774 5 238
Start date of exercise 27/02/2004 14/03/2005 14/03/2005 02/04/2005 26/03/2006 14/04/2006 29/03/2007 29/03/2007 06/06/2007 27/06/2007
Number of options exercised at 31/12/12 2,670,294 5,809,838 2,548,794 560,964 1,390,554 - 328,238 116,969 - 2,171
Number of options exercised at 31/12/12 - - 2,877 - - - - - - -
Total number of benefi ciaries 1,163 4 16 2 6 4,339 1,027 2 10 3
or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (b ) 284,022 - 8,903 - - 592,194 265,967 - 12,360 -
Number of options exercised at 31/12/12 - - - - - - - - - -
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008
Grant date (Board of Directors or Management Board) 22/09/2008 24/11/2008 20/03/2009 20/03/2009 02/04/2009 10/06/2009 10/06/2009 21/09/2009 08/12/2009 08/12/2009 19/03/2010
Total number of benefi ciaries 40 7 4,627 759 28 29 17 16 2 13 5,062
Expiry date of options 22/09/2018 24/11/2018 20/03/2019 20/03/2019 02/04/2019 10/06/2019 10/06/2019 21/09/2019 08/12/2019 08/12/2019 19/03/2020
Subscription or purchase price of options (a) 21.19 13.89 9.76 9.76 9.76 13.03 15.47 15.88 16.60 16.60 15.43
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 27/04/2011 27/04/2011
Total number of benefi ciaries 476 3 5 1 17 8 6,372 423 170 467 1
or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries ( b) 75,035 - - - 21,364 - 980,684 21,412 183,500 693,745 -
Expiry date of options 19/03/2020 18/08/2020 18/08/2020 13/10/2020 13/10/2020 22/12/2020 18/03/2021 18/03/2021 04/04/2021 16/03/2022 13/06/2022
Chairman & Chief Executive Offi cer 16/03/2022 100% of options: EuroStoxx Inurance index
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 16/03/2022 100% of options: EuroStoxx Inurance index
Representative of employee shareholders to the Board of Directors - - - - - - - -
STOCK OPTIONS GRANTED AND/OR EXERCISED BY THE TOP 10 BENEFICIARIES (OUTSIDE THE EXECUTIVE OFFICERS) DURING 2012
Stock options granted during the year by AXA or any eligible AXA Group’s subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of stock options (aggregate information) 717,834 11.92
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS AT DECEMBER 31, 2012)
Performance Units/Shares are designed to: ■ reward and retain the best talents by aligning their interests with the performance of the AXA Group and of their operational business unit/region as well as to the performance of the
Shares initially granted are subject to performance conditions measuring both the performance of the AXA Group and the benefi ciary’s operational business unit and/or region, based on pre-determined targets; ■ for benefi ciaries in operating business units, the performance of the business unit and/or region weights 2/3 of the total performance while the AXA Group performance weights 1/3. For benefi ciaries in Group support functions, the performance is measured at AXA Group level only; ■ for the Performance Units and Performance Shares granted in 2010, 2011 and 2012, the cumulated performance in 2010-2011, 2011-2012 and 2012-2013, must be measured over a two year period, based on the following performance indicators: • for the operational business units and/or regions performance: underlying earnings and net income,
As far as Performance Units are concerned: ■ since 2004, units acquired at the end of the 2-year performance period are valued on the basis of the average closing price of the AXA share during the last 20 trading days of the acquisition period; ■ for the grants prior to 2010, if the number of units acquired is less than 1,000, the amount corresponding to the value of these units is paid in cash to the benefi ciary. If the number of units acquired is equal to or higher than 1,000, the benefi ciary only receives 70% of the value in cash to allow her/him to pay social contributions and income taxes calculated on 100% of that value, and 30% of these units are reinvested into AXA
AXA share during the last 20 trading days of the acquisition period; ■ for the Performance Units granted since 2011, the number of Units defi nitively granted at the end of the 2-year performance period will be subject to an additional 1-year acquisition period and will be paid in cash to the benefi ciary.
Each year, the Board of Directors, acting upon recommendation of its Compensation & Human Resources Committee, approves a global Performance Share pool to be granted.
Units are then decided by the Board of Directors, provided that individual grants to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and other members of the Executive Committee are preceded by a proposal of the
(a) The 1,639,604 units acquired (from which 5,722 units acquired by anticipation due to deceased benefi ciaries) by 2,438 benefi ciaries of the April l 1st, 2008 plan have been settled as €21.8 million and 276,786 shares restricted until April 1st, 2012.
(b) The 2,242,026 units acquired by 2,751 benefi ciaries of the March 20, 2009 plan have been settled as €26.9 million and 404,203 shares restricted until March 20, 2013.
(d) The 122,361 units acquired by 182 benefi ciaries of the April 2, 2009 plan have been settled as €1.5 million and 19,492 shares restricted until April 2, 2013.
(e) The 304,926 units acquired by 8 benefi ciaries of the June 10, 2009 plan have been settled as €4 million and 23,933 shares restricted until June 10, 2013.
(h) 3,069 units of the March 18, 2011 plan acquired by anticipation related to deceased benefi ciaries.
(j) 1,619 units of the March 16, 2012 plan acquired by anticipation related to deceased benefi ciaries.
(d) 780 shares of the March 18, 2011 Plan acquired by anticipation related to deceased benefi ciaries.
Representative of employee shareholders to the Board of Directors earning -net income per share
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors
Henri de Castries Chairman & Chief Executive Offi cer 01/04/2008 66,097 01/04/2012
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 01/04/2008 52,877 01/04/2012
January 1st, 2007, the E xecutive O ffi cers must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France, this equals approximately 50% of the post-tax capital gain). These shares shall be held during the entire term of offi ce of the executive offi cer; ■ for Performance Shares granted after January 1st, 2007, the executive offi cers must, at every share acquisition date, hold in registered form at least 25% of the Performance Shares acquired during the entire term of offi ce of the executive offi cer.
On December 31, 2012, based on the AXA share value (€13.35) and on the AllianceBernstein share value (€13.53) at that date, the
Company’s executive offi cers already met their Minimum Shareholding Requirement such as described in the above Section “Share ownership policy for executives of the Group”. The following table summarizes compensations granted to executive offi cers during the fi scal year 2012: Compensation paid in 2012 Shareholding requirement Shareholding on 12/31/2012
Code (Code monétaire et financier). The notifi cations of such transactions state that they have been engaged by an investment services provider, on behalf of the executives, in application of a discretionary management mandate.
December 31, 2012, the number of AXA shares or ADS indicated in the table below.
Marcus Schenck 7,500 (c) - * AXA shares which could be indirectly held through Mutual funds are not taken into account.
I Transactions involving Company securities completed in 2012 by the members of the Board of Directors
(Autorité des marchés financiers) General Regulations, are published on the Company’s website (www.axa.com) and on the AMF
Plan of dividends attached to shares held in the Company Savings Plan
Mrs. Dominique Reiniche 500 * Transaction performed by an independent fi nancial intermediary pursuant to a discretionary mandate.
The amount of the supplementary pension is calculated at the time of retirement and is in addition to the total amount of retirement pensions paid under mandatory schemes (Social s ecurity, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
Denis Duverne Deputy CEO Beginning of current mandate: 04/29/2010 Term of offi ce: 2014 – X X – X – – X
Board (i) noted that Messrs. de Castries and Duverne have been long-standing employees of the AXA Group (for 20 years and 14 years, respectively) and had the same social benefi ts as all other director-level employees of AXA in France (with no special benefi ts or arrangement designed specifi cally for them), and (ii) was concerned that the decision of Messrs. de Castries and Duverne to renounce their employment contracts in accordance with the AFEP/MEDEF recommendations would not jeopardize the continuity of their accrued and future social benefi ts.
Mr. Henri de Castries, and equal to 12 months of this average for Mr. Denis Duverne. For each benefi ciary, one month will be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
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, 2012: Number of shares % of capital ownership % of voting rights (a)
Treasury shares held directly by the Company 57,048 0.00% [0.00%] (c)
Treasury shares held by Company subsidiaries (directly or indirectly) (d) 16,448,654 0.69 % [1.07 %] (c)
(b) AXA Assurances IARD Mutuelle (11.43% of capital ownership and 18.23% of voting rights) and AXA Assurances Vie Mutuelle (2.92% of capital ownership and 4.83% of voting rights).
Treasury shares held directly by the Company 57,048 0.00% [57,048] (c) [0.00%] (c) 979,168 0.04% [979,168] (c) [0.03%] (c) 8,273,983 0.36% [8,273,983] (c) [0.29%] (c)
(d) Treasury shares as indicated in Note 13 to “C onsolidated F inancial S tatements” included in Part 4 of this Annual Report.
In connection with the share repurchase programs which were respectively approved by AXA’s shareholders during their General Meeting held on April 27, 2011 ( resolution 8)
Early redemption ■ The Company may purchase the bonds on any Stock Exchange or otherwise in accordance with applicable law, including by way of tender for purchase or exchange; ■ At the option of the issuer, in cash, from January 1st, 2007 at a price with a gross 6% actuarial yield, if the Company’s share average over 10 consecutive days is above 125% of the anticipated repayment price; ■ At any time, at the option of the issuer, at €269.16 if the number of bonds in circulation is below 10% of the number of bonds issued.
Meeting of April 25, 2012, the Board of Directors increased the
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2012 program.
At the end of the 5 year holding period, the employees can, depending on their country of residence, do any one of the following: (1) receive the cash value of their assets; (2) receive the value of their assets in the form of AXA shares; or (3) transfer their assets invested in the leveraged plan into the traditional plan.
The leveraged plan in 2012 allowed employees to subscribe, on the basis of 10 times their personal investment, to AXA shares
The SharePlan 2012 program was carried out through a capital increase that took place in December 2012 and was open to almost all Group employees through voluntary contributions: ■ over 21,000 employees took part in SharePlan 2012, representing over 18% of eligible employees; ■ the total amount invested was approximately €291 million, as follows: • €17.8 million in the traditional plan, and
• €273.2 million in the leveraged plan; ■ a total of approximately 30 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on January 1st, 2012.
In order to associate all AXA Group employees with the roll-out of the AXA Group’s Ambition AXA strategic plan, 50 free AXA
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was supplied to us, to inform you, the shareholders, of the main features of those agreements of which we have been informed. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to Article R.225-31 of the French Commercial Code, you are asked to form an opinion on the relevance of such agreements for the purpose of approving them.
With AXA ASIA - Directors concerned: Messrs. Henri de Castries (Chairman & Chief Executive Offi cer) and Denis Duverne (Deputy Chief Executive Offi cer)
On June 13, 2012, the AXA Board of Directors authorized the signing of agreements between AXA as seller, on the one hand, and
AXA ASIA as purchaser, on the other hand, regarding the disposal of shares held directly or indirectly by AXA in Asian Life and P&C
AXA has sold to AXA ASIA: ■ 166,152,789 shares of NMI which amount to €2,006,205,415; ■ 2,967,186 shares of Philippines AXA Life Insurance Corporation which amount to €148,445,516; ■ 154,883,738 shares of AXA India Holdings which amount to €15,730,000.
AGREEMENTS AND COMMITMENTS APPROVED DURING PRIOR FISCAL YEARS THAT REMAINED IN FORCE IN 2012
In accordance with Article L.225-30 of the French Commercial Code, we were advised of the following commitments and regulated agreements, approved during previous fi scal years, which remained in force in 2012.
With the BNP Paribas Group - concerned director: Mr. Michel Pébereau (Member of the Board of Directors)
■ In force for a period of three years as from August 5, 2010, this agreement is renewable automatically for successive periods of one year, unless one of the two parties decides to terminate beforehand, in which case it is required to give three month notice prior to the next renewal date.
■ The agreement was made public by the AMF on August 9, 2010.
Under this scheme, a supplementary pension is paid to Executives who retire immediately upon leaving the AXA Group, at age of 60 or older and who have a minimum length of service of 10 years, of which at least 5 years as Executive. May also benefi t from the scheme, Executives whose employment is terminated by the Company after the age of 55, under the condition that they do not resume any professional activity before retiring.
Social S ecurity ceilings; ■ 2.4 Social S ecurity ceilings + 20% of the average gross compensation of the past 5 years preceding the retirement date, if this average is between 8 and 12 annual Social S ecurity ceilings.
During 2012, these commitments applied to Messrs. Henri de Castries and Denis Duverne (respectively Chairman & Chief Executive
With Mr. Henri de Castries (Chairman & Chief Executive Offi cer)
Chairman in addition to his functions as Chief Executive Offi cer.
The initial amount of the severance benefi t would be equal to 19 months of average compensation (fi xed and variable) paid during the 24-month period preceding termination for Mr. Henri de Castries. One month will be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
These commitments are in force upon the effective renunciation by Mr. Denis Duverne of his employment contract i.e. on April 30, 2010 and will continue so long as he remains an executive offi cer of AXA (including under renewed mandates).
The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris. Since the delisting of ADS (American Depositary Shares, each representing one
In France, the Company’s ordinary shares are included in the principal index published by Euronext Paris (the “CAC 40
STOXX Sustainability 40, the index representing the largest sustainability leaders in the Eurozone in terms of long-term environmental, social and governance criteria.
The Company’s insurance subsidiaries are subject to regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specific regulatory capital requirements (including definition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly significantly, during periods of declining equity markets and/or lower interest rates such as those experienced since 2008.
Group level, the Company is required to calculate, in accordance with applicable French “Solvency I” regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital.
December 31, 2012 the Company’s consolidated solvency margin was 233%. The Company’s year-end 2012 solvency margin stood at a higher level than its consolidated solvency margin at December 31, 2011 (188%).
“Commission”), jointly with Member States, has undertaken a fundamental review of the regulatory capital regime of the insurance industry (the “Solvency II” project). Due to come into effect shortly, Solvency II was designed to implement solvency requirements that would have better refl ected the risks that insurance companies face and delivered a supervisory system that is consistent across all European member states. The Solvency II framework is based on three main pillars: (1) Pillar 1 consists of the quantitative requirements around own funds, valuation rules for assets and liabilities and capital requirements, (2) Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers including the requirement for insurers to submit an Own Risk and Solvency Assessment
(ORSA) which will be used by the Regulator as part of the supervisory review process; and (3) Pillar 3 focuses on disclosure and transparency requirements. The Solvency II framework will
At this stage, significant uncertainties on certain of the implementing measures of Solvency II remain. While AXA is actively participating in the various consultation processes through its involvement in industry bodies and trade associations, there is a continuing risk that the effect of the final measures adopted could depart from the initial objective of the Directive (i.e. setting an economic framework) and end up more focused on prudence driven principles which could be adverse for the Group in many respects including potentially imposing a significant increase in the capital required to support existing business. In addition, the application of Solvency II to international groups is still unclear and there is a risk of early application (risk of “phasing in”) and once effective or even before being effective of inconsistent application throughout
AllianceBernstein and AXA Investment Managers are subject to extensive regulation in the various jurisdictions in which they operate. These regulations are generally designed to safeguard client assets and insure adequacy of disclosure 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 and qualifi cations 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.
deferral periods, and performance criteria for vesting of longterm awards) that are designed to ensure an appropriate alignment of interests between (i) Executive Management and certain employees (such as traders) who can have a potentially significant impact on the nature and duration of risks incurred,
These principles and standards are reflected in a variety of regulations and legislative initiatives that have been enacted over the past two years in various jurisdictions where the Group does business. While these restrictions are often aimed primarily at the banking sector and do not apply uniformly to the Group across the various jurisdictions where it does business, the
Exposure Draft is expected for 2013; indeed the IASB decided end of February 2013 to grant the staff permission to ballot the forthcoming Exposure Draft on Insurance Contracts. The new
liabilities and related assets at the date of fi rst application which is not expected to be before 2018.
AXA Group is likely to be among the insurance groups so designated and expects fi nal designations to be made and publicized during April 2013. The precise implications of being designated a G-SII are not yet clear, however, management believes that the draft policy measures for G-SIIs published by the International Association of Insurance Supervisors in
Many of the risks described below are inherent to the nature of our business and the economic, competitive and regulatory environment in which we operate. Given the multiple contingencies and the inherent uncertainties involved with many of these risks, Management is not able to quantify the impact of many of these risks with any level of precision, however, it has put in place numerous risk management processes, procedures and controls to monitor and manage these risks on an on-going basis. These risk management processes, procedures and controls are described in detail in Section 3.3 of this Annual Report and this Section 3.2 should be read in conjunction with Section 3.3. In those cases where the risks described in this Section 3.2 have given rise to quantifi able and material fi nancial impacts and/or material contingent liabilities, those fi nancial impacts and/or contingent liabilities are refl ected in the Group’s consolidated fi nancial statements in accordance with applicable IFRS accounting standards. In presenting the risks set forth in this Section 3.2, m anagement has prioritized the four categories of risks presented and the individual risks within each of these categories in a manner that corresponds to m anagement’s current view as to the potential impact (from higher to lower) of the risk for the AXA Group. While m anagement devotes very substantial resources to risk management on an on-going basis as described in Section 3.3 of this Annual
Our results of operations are materially affected by conditions in the global fi nancial markets and the economy generally. We have been affected by the fi nancial crisis and its aftermath since 2008. A wide variety of factors including concerns over the creditworthiness of certain sovereign issuers, particularly in Europe, the possible exit from the Eurozone of one or more
(including in foreign exchange and interest rates), diminished expectations for the economy in general and negatively impacted business and consumer confi dence levels and spending in many jurisdictions where we do business.
Our ability to make a profi t on insurance products and investment products, including fi xed and guaranteed products, depends in part on the returns on investments supporting our obligations under these products, and the value of specifi c investments may fl uctuate substantially depending on the foregoing conditions. Certain types of insurance and investment products that we offer expose us to risks associated with fl uctuations in fi nancial markets, including certain types of interest sensitive or variable products such as guaranteed annuities or Variable
Annuities, which have crediting or other guaranteed rates or guaranteed minimum benefi ts not necessarily related to prevailing market interest rates or investment returns on underlying assets. Although we use hedging techniques to manage our exposure under certain of these guarantees, not all risks can be effectively hedged and volatility in the fi nancial markets, combined with unanticipated policyholder behavior, may increase the cost of these hedges and/or negatively affect our ability to hedge certain of these risks, which may adversely affect our profi tability. For further risks related to our hedging techniques, see “Risks relating to the structure of our Group, the scope and nature of our business, and the products we offer – Our hedging programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition.”
or access to fi nancing over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position. The principal sources of our liquidity are insurance premiums, annuity considerations, deposit funds, asset management fees, cash fl ows from our investment assets and cash/cash-equivalents on our balance sheet. Sources of liquidity in normal markets also include a variety of short and long-term instruments, including repurchase agreements, commercial paper, committed credit facilities, medium and long-term debt, subordinated debt securities, capital securities and shareholders’ equity.
Company’s consolidated solvency margin was 233% (taking into account the proposed 2012 dividend payment of €0.72 per share) which represented a €32 billion capital surplus at that date: (i) €24 billion of required capital (1), versus (ii) €56 billion of available capital (2). The Company’s consolidated solvency margin ratio is sensitive to capital market conditions (including the level of interest rates, the level of equity markets and foreign exchange impacts) as well as a variety of other factors.
In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or, in extreme cases, putting a company into rehabilitation or insolvency proceedings. A failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements and/or a reduction in the level of their regulatory capital that may negatively impact their competitive position may also result in the Company deciding to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position.
regime, may further effect changes in the insurance industry’s solvency framework and prudential regime. At this stage, signifi cant uncertainty regarding the timeline and the fi nal outcome of the implementation process remains, and it is diffi cult to predict how the regulations resulting from such initiatives and proposals could affect the insurance industry generally or our results of operations, fi nancial condition and liquidity.
Management has developed various contingency plans designed to ensure that the Company’s consolidated solvency margin and the regulatory capital levels of its insurance subsidiaries remain well in excess of regulatory minimum requirements and at levels that leave the Company and its subsidiaries well positioned from a competitive point of view. These plans may involve use of reinsurance, sales of investment portfolio and/or other assets, measures to reduce capital strain of new business or other measures. There can be no assurance, however, that these plans will be effective to achieve their objectives and any failure by the Company and/or
(2) For this purpose, available capital represents (i) tangible net asset value, i.e. consolidated shareholders equity less intangible assets (including
Moody’s reaffi rmed the Aa3 rating for counterparty credit and fi nancial strength on AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, assigning a negative outlook in each case. The negative outlook refl ects Moody’s view that (i) fi nancial risks stemming from the operating and investment exposure to weakened European sovereigns and banks have increased, as well as (ii) Moody’s expectations of continued weak economic growth in certain of AXA’s key markets. In September 2012, Fitch reaffi rmed the AA- fi nancial strength ratings of AXA’s principal insurance subsidiaries assigning a negative outlook. The negative outlook refl ects Fitch’s view that the low interest rates environment may challenge the Group’s ability to improve profi tability. In
Third parties that owe us money, securities or other assets may not pay or perform under their obligations. These parties include private sector and government (or government-backed) issuers whose securities we hold in our investment portfolios (including mortgage-backed, asset-backed, government bonds and other types of securities), borrowers under mortgages and other loans that we extend, reinsurers to which we have ceded insurance risks, customers, trading counterparties,
Our accounting principles and policy with respect to valuation of our investments are set forth in Note 9.10 “Financial Assets
Certain of our investment assets, for which there is no active trading market or other observable market data, are valued using models and methodologies that involve estimates, assumptions and signifi cant management judgment. During periods of market disruption of the type we have experienced over the past several years, a larger portion of our investment assets may be valued using these models and methodologies as a result of less frequent trading or less observable market data with respect to certain asset classes that were previously actively traded in liquid markets. There can be no assurance that our valuations on the basis of these models and methodologies represent the price for which a security may ultimately be sold or for which it could be sold at any specifi c point in time. Use of different models, methodologies and/or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse effect on our results of operations and fi nancial condition.
Our accounting principles and policy with respect to the determination of allowances and impairments on our investments are set forth in Note 1.7.2 “Financial instruments classifi cation” in the 2012 consolidated fi nancial statements included in this Annual Report. The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
In considering impairments, m anagement considers a wide range of factors including those described in Note 1.7.2 and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, m anagement’s evaluation involves a variety of assumptions and estimates about the operations of the issuer and its future earnings potential. Management updates its evaluations regularly and refl ects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that m anagement has accurately assessed the level of impairments taken and allowances refl ected in our fi nancial statements and the need for additional impairments and/or allowances may have a material adverse effect on our consolidated results of operations and fi nancial position.
Ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors (such as lack of market illiquidity, declines in equity prices and the strengthening or weakening of foreign currencies against the Euro, and/or structural reforms or other changes made to the Euro, the Eurozone or the
In certain of our principal markets, an increase in infl ation, as measured by consumer price indices or other means, is a continuing risk. A sustained increase in the infl ation rate in our principal markets would have multiple impacts on AXA
and may negatively affect our business, solvency position and results of operations. For example, a sustained increase in the infl ation rate may result in an increase in market interest rates, with the consequences noted above. A signifi cant and sustained increase in infl ation has historically also been associated with decreased prices for equity securities and sluggish performance of equity markets generally. A sustained decline in equity markets may (i) result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealized capital gains available to us which would reduce our net income and negatively impact our solvency position, (ii) negatively impact performance, future sales and surrenders of our Unit-Linked products where underlying assets are largely invested in equities, and
Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from all our subsidiaries. In particular, our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affi liates. Moreover, should we be designated as “systemically signifi cant” pursuant to the
Note 29.4 “Other items: Restriction on Dividend Payments to shareholders” of this Annual Report. See also “Risks relating to the fi nancial markets, our fi nancial strength ratings and fi nancial condition, the valuation of our assets and related matters –
Certain risks under Accumulator guarantees and under other contracts and policies issued by AXA Equitable are reinsured by AXA RE Arizona Company (“AXA RE Arizona”) an indirect wholly owned subsidiary of the Company, which hedges these risks using the techniques described above. This reinsurance provides important capital management benefi ts to AXA
Equitable to the extent that AXA RE Arizona maintains suffi cient assets in an irrevocable trust (or letters of credit) to back the liabilities assumed under these reinsurance arrangements. The level of assets required to be held in trust (and/or the amount of required letters of credit) fl uctuates depending on market and interest rate movements, mortality experience and policyholder behaviors and may increase in certain circumstances which may impact AXA RE Arizona’s liquidity. In addition, pursuant to its hedging programs, AXA RE Arizona may be required to post collateral and/or cash settle hedges when there is a decline in fair value of specifi ed instruments (which would occur, for example, in the event of a rise in interest rates or equity markets)
AXA RE Arizona has adequate liquidity and credit facilities to deal with a range of market scenarios and increasing reserve but there can be no assurance that AXA RE Arizona will have suffi cient liquidity in all scenarios. In the event AXA RE Arizona were not able to post required collateral or cash settles such hedges when due, it may be required to reduce the size of its hedging program which could ultimately impact its ability to perform under the reinsurance arrangements and AXA
and NBV may be signifi cantly impacted by the state of the fi nancial markets and signifi cant declines could have a material adverse effect on our consolidated results of operations and fi nancial position. Furthermore, certain of these assumptions can be volatile. While AXA’s NBV and EEV calculations are done on a market consistent basis, which is more conservative in many respects than traditional NBV and EEV calculations, changes in assumptions used in calculating these measures may have a material adverse effect on the level of our NBV
These reserve estimates are expectations of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity, frequency, legal theories of liability and other factors.
In our Life & Savings businesses, our earnings depend signifi cantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. AXA uses both its own experience and industry data to develop estimates of future policy benefi ts, including information used in pricing the insurance products and establishing the related actuarial
liabilities. However, there can be no assurance that actual experience will match these estimates and emerging risks such as pandemic diseases could result in loss experience inconsistent with our pricing and reserving assumptions. To the extent that our actual benefi ts paid to policyholders are less favorable than the underlying assumptions used in initially establishing the future policy benefi t reserves, or events or trends cause us to change the underlying assumptions, we may be required to increase our liabilities, which may have a material adverse effect on our business, results of operations and fi nancial condition.
We may, from time to time, retain insurance or reinsurance obligations and other contingent liabilities in connection with our divestiture, liquidation or run-off of various businesses.
Supervisors (“IAIS”) published a proposed assessment methodology for designating global systemically important insurers (“G-SIIs”), as part of the global initiative to identify global systemically important fi nancial institutions (“G-SIFIs”).
G-SII are not yet clear, however, management believes that the draft policy measures for G-SIIs published by the IAIS in
In addition, development of alternative distribution channels for certain types of insurance and securities products, including through the internet, may result in increasing competition as well as pressure on margins for certain types of products.
The AXA Group operates in more than 50 countries around the world and our operations are subject to a wide variety of insurance and other laws and regulations. We are faced with signifi cant compliance challenges due to the fact that our regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and aggressive role in interpreting and enforcing
Compliance Act (the “FATCA”) withholding requirements, could result in higher tax expenses and payments and higher compliance costs. Future interpretations or developments of tax regimes may also affect our tax liability, return on investments and business operations.
In addition, we have been named as defendants in numerous lawsuits (both class actions and individual lawsuits) and involved in various regulatory investigations and examinations and may be involved in such proceedings in the future. Certain of these lawsuits and investigations seek signifi cant or unspecifi ed amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these proceedings have substantial powers over the conduct and operations of our business. Due to the nature of certain of these lawsuits and investigations, we cannot estimate the potential loss or predict with any certainty the potential impact of these suits or investigations on our business, fi nancial condition or results of operations. Please see Part 4 – Note 31 “Litigation” and
We expect the scope and extent of applicable laws and regulations, as well as regulatory oversight, to continue to increase over the coming years. While m anagement proactively manages these risks and has adopted various policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where it does business, we cannot predict with any certainty the potential effects that a change in applicable laws or regulations, their interpretation or enforcement (or that any enactment of new regulation or legislation in the future) may have on the business, fi nancial condition or results of operations of our various businesses. Any failure by AXA to remain in compliance with applicable regulations, as well as the regulations in the countries and markets in which it operates, could result in fi nes, penalties, injunctions or other similar restrictions, any of which could negatively impact AXA’s earnings and reputation.
Please see Part 4 – Note 31 “Litigation” and Section 3.1
“Regulation” of this Annual Report for additional information on these matters.
European Union (the “Standards”). There are continuing discussions at the IASB concerning possible modifi cations to the Standards and certain of these modifi cations may have potentially signifi cant impacts on insurers and other fi nancial institutions, including AXA, that prepare their consolidated accounts in accordance with the Standards.
The Mutuelles AXA, which comprises two French mutual insurance companies, collectively held 14.35% of the
Company’s outstanding shares and 23.05% of its voting rights on December 31, 2012. The Mutuelles AXA have stated their
intention to collectively vote their shares in AXA and may have interests confl icting with other shareholders’ interests. For example, even though the Mutuelles AXA do not hold a majority of the total voting power in AXA, efforts by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may fi nd attractive, may prevent other shareholders from realizing a premium for their AXA ordinary shares or ADS. The Mutuelles AXA may decide to increase their interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.
Agreement and they wish to involve AXA or the depositary in a legal proceeding.
The holders of AXA ADS in the United States may not be able to participate in offerings of rights, warrants or similar securities to holders of our ordinary shares or to receive dividends paid in shares on the same terms and conditions as holders of our ordinary shares. For example, they are likely to be offered cash rather than securities, in light of the registration requirements under the US securities laws in case of payment in securities.
ADS or ordinary shares at or above the price which you paid for them.
France. The majority of AXA SA’s directors and offi cers, as well as some of the experts named in this document, reside outside of the United States, principally in France. A substantial portion of AXA SA’s assets, and the assets of such persons, are located outside of the United States. Therefore, it may not be possible to effect service of process within the United States upon AXA SA or these persons in order to enforce judgments of US courts against AXA SA or these persons based on civil liability provisions of the US federal securities laws. Further, judgments of United States courts may not be enforceable against the Company in French courts and, as a result, AXA’s shareholders who obtain a judgment against the Company in the United States may not be able to require the Company to pay the amount of such judgment.
Information in this Section should be read in conjunction with Note 4 to the consolidated fi nancial statements included in Part 4 of this Annual Report which is covered by the Statutory Auditor’s Report on the consolidated fi nancial statements.
In this section, Risk Management refers to the function aiming at effectively managing local and global risks.
“second line of defense” which objective is to develop, coordinate and monitor a consistent risk framework across the Group.
Offi cers ensure a systematic and independent second opinion, on most of AXA material decision processes, like P&C Reserves, Economic and L&S Reserves, Asset and Liability Management studies & Asset allocation and
Risk Management defi nes and coordinates a decentralized review of risk-adjusted pricing and profi tability for new products prior to launch (the Product Approval Process)
Please refer to the Section “Insurance risk” hereafter for further details on reinsurance strategy.
The roles and responsibilities of local Risk Management teams are approved jointly by the Executive Committees of local entities and the Group Chief Risk Offi cer to ensure a better alignment of Group and local interests.
The minimum missions required for local Risk Management teams are: ■ coordinating the second line of defence locally; ■ implementing risk appetite on all risks consistently with
Group’s risk appetite, with strengthened reporting, risk limits and decision processes; ■ performing a second opinion on P&C reserves, ALM
studies & asset allocation and reinsurance strategy; ■ coordinating pre-launch product approval procedures and regular pricing reviews after launch; ■ performing the calculation of the internal capital model.
CRO. Their teams are responsible for controlling and managing risks within Group policies and limits, validating investment or underwriting decisions through Local Risk Committees.
Resources and Security Departments, are responsible for developing, facilitating and monitoring effective risk and control framework and strategy (second line of defense), in coordination with Risk Management.
Internal Audit Department performs, as part of its role, an assessment of risks and governance processes on a periodic basis to provide independent assurance on the effectiveness of the system of internal control (third line of defense).
Risk Appetite is reviewed by the Board of Directors upon review by its Finance Committee with the Audit Committee considering the effectiveness of the Group’s internal control and risk management frameworks supporting it.
AXA as an insurance company follows an investment strategy that is largely driven by Asset Liability Management, The overall objective of all investment decisions is to ensure that AXA’s obligations to policyholders are met at all times, to protect the solvency of Group entities, and to generate superior returns over time.
CIO leads the central Investment & ALM Department and reports to the Group CFO.
Local CIOs manage local portfolios, maintain reporting lines to the Group, and manage close relationships with asset managers and local stakeholders. They are in particular responsible for the investment performance and for a sound asset liability management.
ALM aims at matching our assets with the liabilities assumed by selling insurance policies. For doing so, the objective is to defi ne the optimal asset allocation in a way that all liabilities can be met with the highest degree of confi dence, while maximizing the expected investment return.
At local entity level, the strategic asset allocation issued from the ALM study must be validated by the local Investment & ALM
The market and credit risks arising from derivatives are regularly monitored in multiple processes: (i) risk appetite process, in which the market risk position is continuously monitored; and,
(ii) Short Term Economic Capital (STEC) calculation, in which the sensitivity of AXA to fi nancial risk factors is monitored. Such monitoring is designed to ensure that market and credit risks, coming either from cash or derivative instruments, are properly controlled and remains within approved limits.
Group Risk Management has established rules on authorized counterparties, minimum requirements regarding collateral, counterparty exposure limits. The collateral process reduces the credit risk arising from OTC derivatives to a limited level compared to the total value of derivatives in position. It includes daily or weekly collateralization for most of the Group’s exposure.
Valuation Risk is addressed through the mandatory centers of expertise. They independently counter-valuate the derivatives positions so as to get appropriate accounting, payment and collateral management but as well on the prices proposed by counterparties in case the AXA entity wished to initiate, early terminate or restructure derivatives. Such capacity in pricing requires high-level expertise, which relies on rigorous market analysis and the ability to follow the most up-to-date market developments for new derivatives instruments.
AXA Investment Managers and AllianceBernstein. Local CIOs continuously monitor, analyse, and challenge asset managers’
Local operating units have the primary responsibility for managing their fi nancial risks (market risk, credit risk, liquidity risk), while abiding by the risk framework defi ned at Group level, in terms of limits/ thresholds and standards. This approach allows operating units to react swiftly in an accurate and targeted manner to changes in fi nancial markets, political and economic environments in which they operate.
structure, to reduce the risk to a desired level; ■ hedging of fi nancial risks when they exceed the tolerance levels set by the Group. Operational management of derivatives is based on stringent rules and is mainly performed by AXA SA for the holding company activities and Group asset managers, AXA Investment Managers and
Group subsidiaries; ■ r isks relating to the management of holding companies’
Disclosures about Risk Factors”; ■ l iquidity risk. Please read “Liquidity position and risk management framework” included in Part 1 – Section 1.4 –
Savings business, as described below; ■ s ensitivities of the adjusted net asset value for other-than-life businesses.
(Spain, Portugal, Italy, Mexico, Morocco, Turkey, the Gulf Region and Greece), Hong Kong and Japan. At December 31, 2012, these subsidiaries represented 99% of AXA’s consolidated invested assets within its insurance operations.
In addition to Life & Savings EEV, AXA calculates a “Group
IFRS shareholders’ equity; ■ e limination of all intangible assets; ■ e limination of unrealized capital gains/losses included in the projection of future cash-fl ows (VIF); ■ a djustment for the differences between AXA’s consolidated accounting basis and local regulatory bases.
The Group EV equals the Life & Savings EEV plus the adjusted net value of other-than-life businesses, refl ecting the consolidated IFRS shareholders’ equity adjusted for: ■ t he elimination of all intangible assets; ■ t he reclassifi cation in the liabilities of all undated debt (TSS/
TSDI) that is treated as equity in IFRS; ■ t he addition of unrealized capital gains or losses not already included in equity; ■ t he mark-to-market of debt.
average infl ation rate was assumed in 2012 (2.0% in 2011);
■ e xpenses are adjusted for non-recurring expenses and onetime strategic spending; ■ s ome benefi t from future mortality improvement on Life business is included, while annuity business does have an allowance for the costs of longevity increasing in all markets; ■ n on-fi nancial risks are provided for through the cost of holding capital consistent with the necessary amount to obtain a AA rating at each entity level; ■ a weighted average tax rate of 29.2 % was assumed in 2012
(31.0% in 2011); ■ c onsistent with previous years, AXA used, at the end of 2012, reference rates which included, where applicable, liquidity premia over the swap curves for some of its entities.
2012 interest rate sensitivities (% of Group EV) for Life &
Annuity products (lower lapses and partial withdrawals), and the reduction in interest rates hedge positions in the US.
2012 equity market sensitivities (% of Group EV) for Life &
Savings business of 3% to upward 10% or -3% to downward 10% (2011 3% and -3%) are more nearly symmetrical, with no complicating effects from changes of discount rates. The limited asymmetries refl ect the impact of guarantees and profi t-sharing rules, along with some hedging programs to limit potential losses. The impacts of equity market value changes can come through General Account exposures or through changing asset balances impacting future fee revenue on separate account business.
2012 equity market sensitivities (% of Group EV) for otherthan -life businesses of 1% to upward 10% or -1% to downward 10% (2011: 1% and -1%) refl ect the impacts on equities including derivatives on equities.
■ Life & Savings business: 77% of Group assets at the end of 2012 (77% in 2011): In France, AXA is exposed to exchange-rate risk through the units it owns in certain investment funds partly invested in foreign currencies (particularly US Dollar: €2,665 million vs. €2,062 million in 2011, Pound Sterling: € 228 million vs. €155 million in 2011, and Japanese Yen: €95 million vs.
€98 million in 2011). AXA France owns these invested funds in order to diversify its investments and enable policyholders to benefi t from the performance of international fi nancial markets.
In Switzerland, the AXA entities are exposed to exchange-rate risk through their investments in foreign currencies (mainly Euro and US dollar) due to the on-going low interest rate environment in Switzerland and to the limited investment possibilities in the
which represented circa 33 % of assets (circa 34% of assets in 2011), of which €19,276 million were hedged (€19,110 million in 2011).
Group’s Life & Savings companies’ assets (99% at the end of 2011).
■ Property & Casualty business: 9% of Group assets at the end of 2012 (9% at the end of 2011): In France, AXA is exposed to exchange-rate risk through the units it owns in certain investment funds and which are partly invested in foreign currencies, mainly US Dollar (€258 million vs. €244 million in 2011) and, to a much lesser extent, Pound
(€94 million in 2011). The foreign exchange risk associated with these liabilities is fully hedged through investments in US Dollar of €122 million (€121m in 2011).
Germany Property and Casualty is exposed to US Dollar exchange-rate risk on certain investment funds for €1,087 million (€1,156 million in 2011) and to a lesser extent to
AXA Ireland also operates in Northern Ireland, and manages a portfolio of pound sterling policies in an amount of €284 million
(€248 million in 2011), hedged with investments in the same currency of €253 million (€224 million in 2011).
In Switzerland, foreign exchange exposure amounted to €4,103 million (circa 30 % of total assets) at the end of 2012, of which €3,622 million were hedged with foreign exchange forwards.
■ International Insurance business (2% of Group assets at the end of 2012 vs. 2% in 2011): In the course of its business,
US Dollar 2.4 2.4 1.8 1.8 In respect of the US activities, mainly in the form of debt
Japanese Yen 206.2 956.3 1.8 9.5 In respect of Japan activities, mainly in the form of derivatives
Pound Sterling 2.8 3.1 3.4 3.7 In respect of the UK activities, mainly in the form of debt
AXA SA’s assets accounted for most of the assets of Group holding companies at the end of 2012.
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 currency-denominated 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 fl uctuations, but also of other key indicators such as liquidity, gearing and solvency ratios. AXA
as well as by banks and holding companies; ■ receivables from reinsurers resulting from reinsurance ceded by AXA.
Credit risk diversifi cation and analysis policies, particularly using credit ratings, are implemented by investment departments and monitored by Risk Management teams.
The exposure to sovereign debt securities issued by governments and related in Greece, Ireland, Italy, Portugal and Spain classifi ed as available for sale as of December 31, 2012 were as follows: Issuer (i n Euro million )
In February 2012, the Group participated to the private sector initiative on Greece, which consisted in exchanging former
Stability Facility bonds, Gross Domestic Product linked note and accrued interest notes issued by European Financial
Stability Facility. Subsequently, the Group sold its exposure to new Greek governments bonds during the fi rst half of 2012. As a consequence, the Group does not hold Greek government bonds and related as of December 31, 2012.
No impairment charges were booked in respect of the Group exposure to sovereign debt securities issued by governments and related in Greece, Ireland, Italy, Portugal and Spain in 2012
(€-387 million for the period ended December 31, 2011 relating to Greek sovereign debt exposure).
In addition, debt securities and related issued by government and related in Greece, Ireland, Italy, Portugal and Spain classifi ed under Fair value option amounted to €625 million as of December 31, 2012.
At December 31, 2012, AXA’s invested assets included a net exposure to US subprime residential and Alt-A mortgage loans of approximately €0.7 billion (4% equalling or above AA rating).
in US Subprime & Alt-A, and 1% in Non conforming RMBS.
At December 31, 2012, the nominal amount of positions taken through credit derivatives was €23.1 billion (1), of which €21.5 billion of CDS (cumulated notional amounts of €11.1 billion protections bought and of €10.4 billion protections sold), which can be broken down as follows: i. €6.1 billion of CDS protections bought to hedge credit risk with regard to certain investments, mostly in corporate bonds; ii. €5.1 billion of CDS protections bought used to lock the liquidity premium through purchasing bonds and CDS
(€0.3 billion); iii. €10.4 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 often implemented to compensate for the lack of depth or liquidity in some markets in order to take synthetic credit risk.
Limits applied to issuers take into account these credit derivative positions.
and more frequently during renewal periods – and decides on any action to be taken with the aim of limiting AXA’s exposure to the risk of default by any of its reinsurers.
The breakdown of all reserves ceded to reinsurers by reinsurer rating as of December 31, 2012 (€10.6 billion) was as follows: A
Credit risks in the banks may be split between: ■ retail credit risk, resulting from the commercial activity - sales of mortgages and other type of loans to retail clients and small enterprises. Credit risk management is done through careful risk selection (e.g. in Belgium ‘Internal Rating Based’
As for retail credit risk in Hungary, it should be noted that in an attempt to reduce Household debt, the Hungarian government adopted legislation in September 2011 allowing customers to pay back foreign currency denominated mortgages at nonmarket rates for a limited time period. This legislation forced banks to provide for the likely cost related to these measures.
As a consequence, in 2011 AXA Bank Europe has provisioned €103 million for the impact of legislation on top of the €54 million additional provisions set up to cover the loan losses on the existing portfolio. In this context, Hungarian lending activities have been stopped.
Group level but performed jointly by central and local teams: ■ profi tability analysis mainly through procedures governing launch product approval before (new product risk control)
that complete well-established underwriting rules; ■ optimization of reinsurance strategies to mitigate the risks in order to cap the Group’s peak exposures to protect our
In each Life & Savings subsidiary, the AXA Group has set up a validation framework to ensure that new products undergo a thorough approval process before they are put to market.
This harmonized approach facilitates the sharing of product innovation across the Group. These procedures are defi ned by Group Risk Management (GRM) but implemented/adapted locally.
The main characteristics of these procedures are: ■ the local decision to launch a new product must result from a documented approval process that complies with
Committee for formal approval; ■ guarantees and options embedded in products must be quantifi ed using market consistent stochastic methods in order to ensure the adequate measure of their “manufacturing cost”. Analyses of return on capital across multiple scenarios also provide for a better understanding of any asset-liability mismatch risk and capital requirement at an early stage of the product’s lifetime; ■ stress tests are required on key fi nancial & technical assumptions to ensure that appropriate “what if” scenarios are considered; ■ pricing reports for material products are sent to GRM, which provides a Group reporting on a quarterly basis.
This profi tability analysis framework is also used in Property &
Casualty as a regular technical & risk audit. Methods are adapted to the underwriting of risks, while maintaining the principle of local decision-making based on a documented approval procedure. The aim is threefold: ■ for pre-launch business, to ensure that new risks underwritten by the Group have undergone a rigorous process before the products are offered to customers; ■ for post-launch business, to ensure the appropriate profi tability and risks control of the in-force P&C underwritings; ■ this profi tability framework complements strong and basic underwriting rules to ensure that no risks are taken outside the Group tolerances and that value is created by adequately pricing the risk.
In order to ensure a consolidated view of insurance risks, GRM
(mortality, longevity, morbidity…) and uses the results of this work to enhance the structure of its product ranges and its reinsurance coverage. These exposure analyses are supported by expert risk models in Life & Savings (mortality, longevity, morbidity…).
Global P&C and AXA Global Life; ■ p rior to ceding risks, in-depth actuarial analyses and modelling are conducted on each portfolio by AXA Global
Centralization and harmonization of reinsurance purchase is based on the same procedures for both the Life & Savings business as for the Property & Casualty one.
As opposed to the other internal pools where the risk is retained within AXA Global P&C, 95% of the Property Pool net year-end fi nancial result is retroceded back to local entities.
regularly monitors its exposure to its main reinsurers, to ensure that consolidated limits remain within Group risk tolerance (see
Withdrawal Benefi ts (GMWB); • biometric risks (e.g. longevity/ mortality) and policyholder behaviours (notably lapses and annuity election rates), are regularly monitored. The hedging programmes embed dynamic policyholder behaviours to a range of possible market situations,
Fund (see appendix 7) is a key contributor to AXA’s commitment to better understand climate change.
By seeking to develop new solutions, acting as an advisor on risk management and actively contributing to the overall debate about the issues involved, along with other major market players, AXA intends to promote a better understanding and better forecasting of the emerging risks and to support sustainable development.
■ i n addition, a loss data collection process is in place in most companies of the Group in order to track and appropriately mitigate actual operational losses. This process is also used as a valuable source of information to back-test the assumptions taken in local risk assessments.
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 176 4.2 CONSOLIDATED STATEMENT OF INCOME 179 4.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 180 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 182 4.5 CONSOLIDATED STATEMENT OF CASH FLOWS 186 4.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 188
NOTE 10 Investments in associates accounted for using the equity method 243
NOTE 29 Contingents assets and liabilities and unrecognized contractual commitments 313
NOTE 32 Subsequent events 320 4.7 REPORT OF THE STATUTORY AUDITORS 321
Receivables arising from direct insurance and inward reinsurance operations 14,968 13,346 13,468
All invested assets are shown net of related derivative instruments impact.
Share capital and capital in excess of nominal value 25,549 25,188 24,723
Minority interests of controlled investment funds and puttable instruments held by minority interest holders 3,775 3,896 4,855
Other debts instruments issued, notes and bank overdrafts (d) 4,510 6,272 6,504
Collateral debts relating to investments under a lending agreement or equivalent 24,397 27,509 23,399
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders (b) 113,921 104,642 108,587
Liabilities arising from investment contracts with discretionary participating features and where the fi nancial risk is borne by policyholders 4,080 3,621 4,700
Change in unearned premiums net of unearned revenues and fees (411) (549)
Net realized gains and losses relating to investments at cost and at fair value through shareholders’equity (e) (f) 2,004 3,153
Charges related to the partial disposal of UK Life & Savings operations - (38)
Income from operating activities before tax 5,867 4,657 10 Income arising from investments in associates - Equity method 119 62 24 Financing debts expenses (j) (568) (329)
Net consolidated income - Minority interests 130 190 27 Earnings per share (k) 1.65 1.69
(d) Net of investment management costs and including gains/losses from derivatives hedging Variable Annuities.
(g) Includes realized and unrealized forex gains and losses relating to investments at cost and at fair value through shareholders’ equity.
(h) Change in fair value of assets with fi nancial risk borne by policyholders is offset by a balancing entry in technical charges relating to insurance activities.
(j) Includes net balance of income and expenses related to derivatives on fi nancing debt (however excludes change in fair value of these derivatives).
Reserves relating to changes in fair value through shareholders’ equity 6,215 (1,628)
Net gains and losses recognized directly through shareholders’ equity 4,760 (2,111)
Shareholders’ equity opening January 1, 2011 Restated (b) 2,320,105 2.29 5,313 20,192 (495)
Capital in excess of nominal value - - - 236 -
Notably dilution impact from AllianceBernstein deferred compensation ( €+107 million offset in minority interests) and €-165 million from open-market purchase of AllianceBernstein holding units (€-106 million group share and €-59 million minority interests) .
(d) Actuarial gains and losses accrued since the opening as of January 1, 2011.
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 4 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(d) Actuarial gains and losses accrued since the opening as of January 1, 2012 .
Reserves relating to the change in fair value of hedge accounting derivatives (cash fl ow hedge) Other (a) Translation reserves Undistri buted profi ts and other reserves
Net increase/(write back) in impairment on investments, tangible and other intangible assets 680 2,144
Change in fair value of investments at fair value through profi t or loss (16,671) 6,859
Adjustment of non cash balances included in the operating income before tax 5,931 16,508
Dividends recorded in profi t or loss during the period (2,970) (3,034)
Investment income & expense recorded in profi t or loss during the period (g) (13,047) (16,704)
Investment expense (excluding interests on fi nancing and undated subordinated debts, margin calls and others) (2,804) (2,733)
Net cash impact of transactions with cash impact not included in the operating income before tax 14,202 20,600
Net cash related to changes in scope of consolidation 86 1,381
Sales of equity instruments and non controlled investment funds (h) (i) 18,507 21,253
Purchases of investment properties held direct or not (h) (1,946) (1,087)
Acquisition/sale of interests in subsidiaries without change in control (221) (3,456)
CASH AND CASH EQUIVALENT AS OF JANUARY 1 (L) 30,042 21,097
Net impact of foreign exchange fl uctuations and reclassifi cation on cash and cash equivalents (336) 825
CASH AND CASH EQUIVALENT AS OF DECEMBER 31 (L) 30,101 30,042
(a) AXA Japan closes its full year accounts at September 30. Given signifi cant movement in foreign exchange rates between September 30, 2011 and December 31, 2011, and between September 30, 2012 and December 31, 2012, balance sheet items have been translated using December 31 exchange rates for both periods.
“carve out” option allowing not to apply all hedge accounting principles required by IAS 39. Furthermore : ■ the European Union has not yet endorsed some standards and amendments published by the International Accounting
Standards Board (IASB) whose application was not mandatory as of December 31, 2012; and
IASB Insurance Working Group on October 24, 2011 around direct costs of acquiring a portfolio of insurance contracts which so far differs from ASU-2010-26 by not limiting the deferral to expenses from successful efforts only and in the detail of how that principle is applied (incremental direct cost of acquisition and specifying some other costs). The Group’s aim was to better align with US GAAP applicants starting when the ASU-2010-26 change was applicable for such companies while conscious that the Group would be subject to IFRS 4
Phase II whenever applicable. The impact of this change led to a reduction of retained earnings in shareholders’ equity of €1,954 million (of which €1,951 million group share) as of
Deferred acquisition costs and equivalents (a) 19,641 (2,875) 16,766 21,785 (3,161) 18,624
(a) Corresponds to Group Gross DAC amount. DAC assets should be looked at in conjunction with unearned revenues and reserves (URR: Revenues received at inception to cover future services - see paragraph 1.6.4), policyholder participation and tax. Life and Savings DAC net of URR, policyholders’ participation and tax amounted to €8,467 million as of December 31, 2011.
AMENDMENTS TO STANDARDS AND INTERPRETATIONS PUBLISHED AND ADOPTED ON JANUARY 1, 2012
Assets published on October 7, 2010, increases the disclosure requirements for transactions involving transfers of fi nancial assets. The amendment is intended to provide additional information regarding risk exposures when a fi nancial asset is transferred but the transferor retains some level of continuing exposure to the asset.
The amendment provides a practical approach in such cases, by introducing a presumption that an asset is recovered entirely through sale unless the entity has clear evidence that recovery will occur in another manner. The presumption would apply when investment properties, property, plant and equipment or intangible assets are remeasured at fair value or revalued at fair value.
Comprehensive Income and realized gains or losses would be recycled through profi t or loss upon sale. The adoption date of IFRS 9 including its different phases (the second and third phases respectively relate to the impairment methodology and the hedge accounting), its method of implementation and its impact are currently being examined within the Group.
Union endorsed these fi ve standards but decided to postpone to 2014 the 2013 mandatory application date required by IASB, still with early application permitted. As a result, the Group has chosen January 1, 2014, as application date. The potential impact on the Group’s consolidated fi nancial statements with regard to the package of fi ve new and revised standards is currently being analysed.
IFRS 13 – Fair Value Measurement, published on May 12, 2011, defi nes fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements.
The amendment to IAS 19 – Employee Benefi ts, published on
The amendments to IAS 32 – Financial Instruments: Presentation and the amendments to IFRS 7 – Financial Instruments Disclosure published on December 16, 2011, provide clarifi cations of the application of the offsetting rules and amend the related disclosure requirements. The amendments to IAS 32 clarify that in order to result in an offset of a fi nancial asset and a fi nancial liability, a right to set-off must be available today rather than be contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy. Additional clarifi cations are presented regarding the settlement process.
May 17, 2012, includes amendments to IFRS that are not part of a major project. They are presented in a single document rather than as a series of small changes. They are applicable for annual periods beginning on or after January 1, 2013.
IAS 27), published on October 31, 2012, provides an exemption from consolidation of subsidiaries under IFRS 10 – Consolidated
IFRS requires the use of estimates and assumptions. It requires a degree of judgment in the application of Group accounting principles described below. The main balance sheet captions concerned are goodwill (in particular impairment tests described in paragraph 1.6.1), 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 benefi t 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.
As recommended by IAS 1, assets and liabilities are generally classifi ed globally on the balance sheet in increasing order of liquidity, which is more relevant for fi nancial institutions than a classifi cation between current and non-current items. As for most insurance companies, expenses are classifi ed by destination in the income statement.
Control is presumed to exist when AXA directly or indirectly holds more than 50% of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are also considered when assessing whether AXA
Entities that are controlled in substance, even without any ownership interest, are also consolidated, as well as entities that are controlled in substance because of a specifi c statute or an agreement, even without any ownership interest. In particular this relates to special purpose entities, such as securitization vehicles.
Upon fi rst consolidation, all assets, liabilities and contingent liabilities (unless they are not present obligations) of the acquired company are estimated at their fair value. However, in compliance with an exemption permitted by IFRS 4, liabilities related to life insurance contracts or investment contracts with discretionary participating features are maintained at the carrying value prior to the acquisition date to the extent that this measurement basis is consistent with AXA’s accounting principles. The fair value of acquired business in force relating to life insurance contracts and investment contracts with discretionary participating features is recognized as an asset corresponding to the present value of estimated future profi ts emerging on acquired business in force at the date of acquisition (also referred to as value of acquired business in force or VBI and refl ecting the difference between the fair value and the carrying value of the liabilities). The present value of future profi ts takes into consideration the cost of capital and is estimated using actuarial assumptions based on projections made at purchase date but also using a discount rate that includes a risk premium.
Foreign exchange differences 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 differences and are recycled in the income statement as part of the realized gain or loss on disposal of the hedge net investment.
AXA performs an impairment test of goodwill at least annually based on cash generating units, using a multi-criterion analysis with parameters such as the value of assets, future operating profi ts and market share, in order to determine any signifi cant adverse changes. It also considers the interdependence of transactions within sub-groups. Within each cash generating unit, a comparison is made between net book value and the recoverable value (equal to the higher of fair value less costs to sell and value in use). Value in use consists of the net assets and expected future earnings from existing and new business, taking into account the cash generating units’ future cash fl ows.
The value of future expected earnings is estimated on the basis of the life insurance and investment contracts embedded value models or similar calculations for other activities. Fair values less costs to sell are based on various valuation multiples.
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 profi ts emerge over the life of the contracts’ portfolio. In conjunction with the liability adequacy test (see paragraph 1.13.2), VBI is subject to annual recoverability testing based on actual experience and expected changes in the main assumptions.
1.6.3. Deferred acquisition costs (DAC) relating to insurance contracts and investment contracts with discretionary participating features – Rights to future management fees, also known as Deferred origination costs (DOC) relating to investment contracts with no discretionary participating features
The direct costs of acquiring a portfolio of insurance contracts and investment contracts with discretionary participating features, primarily related to the selling, underwriting and initiating the insurance contracts in a portfolio, are deferred by recognizing an asset. In Property and Casualty, DAC
If, in subsequent periods, the appraisal value rises to at least 15% more than the net carrying value, previously recorded impairment is reversed to the extent of the difference between a) the net carrying value and b) the lower of the appraisal value and the depreciated cost (before impairment).
Depending on the intention and ability to hold the invested assets, fi nancial instruments are classifi ed in the following categories: ■ assets held to maturity, accounted for at amortized cost; ■ assets held for trading and assets designated as at fair value with change in fair value through profi t or loss; ■ available-for-sale assets accounted for at fair value with changes in fair value recognized through shareholders’
The Group is party to repurchase agreements and securities lending transactions under which fi nancial assets are sold to a counterparty, subject to a simultaneous agreement to repurchase these fi nancial assets at a certain later date, at an agreed price. While substantially all of the risks and rewards of the fi nancial assets remain with the Group over the entire lifetime of the transaction, the Group does not derecognize the fi nancial assets. The proceeds of the sale are reported separately. Interest expense from repurchase and security lending transactions is accrued over the duration of the agreements.
Assets backing liabilities arising from insurance or investment contracts where the fi nancial risk is borne by policyholders are presented in a separate aggregate of the balance sheet so that they are shown in a symmetrical manner to the corresponding liabilities. This presentation is considered more relevant for the users and consistent with the liquidity order recommended by IAS 1 for fi nancial institutions, since the risks are borne by policyholders, whatever the type of assets backing liabilities
Unrealized gains and losses are recognized in the statement of income unless they relate to a qualifying hedge relationship as described below. The Group designates certain derivatives as either: (i) hedging of the fair value of recognized assets or liabilities or of a fi rm commitment (fair value hedge); or (ii)
The Group holds fi nancial investments that include embedded derivatives. Such embedded derivatives are separately recorded and measured at fair value through profi t or loss if the impact is deemed material.
The purpose and condition of the use of derivatives within the
1.10. ASSETS/LIABILITIES HELD FOR SALE AND ASSETS/ LIABILITIES INCLUDING DISCONTINUED OPERATIONS
Details on information presented in the statement of fi nancial position and statement of income are provided in the notes to the consolidated fi nancial statements.
Ordinary shares are classifi ed in shareholders’ equity when there is no obligation to transfer cash or other assets to the holders.
Any fi nancial instrument issued by the Group with an equity component (for example an option granted to convert the debt instrument into an equity instrument of the Company) and a liability component (a contractual obligation to deliver cash) is classifi ed separately on the liability side of the balance sheet with the equity component reported in Group shareholders’
In compliance with IFRS 4 option, shadow accounting is applied to insurance and investment contracts with discretionary participating features. Shadow accounting is applied to technical liabilities, 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. When unrealized gains or losses are recognized, a deferred participating liability (DPL)
or asset (DPA) is recorded. The DPL or DPA corresponds to the discretionary participation available to the policyholders and is generally determined by applying on the basis of estimated participation of policyholders in unrealized gains and losses and any other valuation difference with the local contractual basis. Jurisdictions where participating business is signifi cant are Switzerland (for example “legal quote” for group insurance policies), Germany and France where the minimum is set to 90%, 90% and 85% respectively, of a basis which may include not only fi nancial income but also other components such as in Germany or Switzerland. Participating business is less prevalent in the United States or in Japan.
DPA, DAC and VBI. For non-life insurance contracts, an unexpired risk provision is accounted for contracts on which the premiums are expected to be insuffi cient to cover expected future claims and claims expenses.
Note 4.2 for : ■ fi nancial assets and liabilities; ■ insurance and investment contracts related assets and liabilities including the value of Life & Savings business inforce; EMBEDDED DERIVATIVES IN INSURANCE AND INVESTMENT CONTRACTS WITH DISCRETIONARY PARTICIPATING FEATURES
Transactions relating to reinsurance assumed and ceded are accounted in the balance sheet and income statement in a similar way to direct business transactions provided that these contracts meet the insurance contracts classifi cation requirements and in agreement with contractual clauses.
In particular, a deferred tax liability is recognized for any taxable temporary difference relating to the value of shares in a consolidated company held, unless the Group controls at what date the temporary difference will reverse and it is probable that the temporary difference will not reverse in the foreseeable future. If a group company decides to sell its stake in another consolidated entity, the difference between the carrying value and the tax value of these shares for the c ompany that holds them leads to the recognition of a deferred tax (including as part of a business combination when the Group as the buyer intends to sell or carry out internal restructuring of the shares following the acquisition). The same approach applies to dividend payments that have been voted or deemed likely, to the extent that a tax on dividends will be due.
Comprehensive Income) in full in the period in which they occur. Similarly, any adjustment arising from the asset cap is recognized in shareholders’ equity. Unrecognized past service cost represents non-vested benefi ts on the date of a change in the amount of benefi ts following an amendment to the plan.
The cost of the traditional formula of Shareplan is valued according to the specifi c guidance issued in France by the ANC
Net revenues from banking activities include all revenues and expenses from banking operating activities, including interests expenses not related to fi nancing, banking fees, capital gains and losses on sales of fi nancial assets, change in fair value of assets under fair value option and related derivatives.
AXA Beteiligungsgesellschaft mbH Merged with AXA Konzern AG - - 100.00 100.00
AXA Non Life Insurance Co. Ltd. (Japan) 100.00 99.02 100.00 98.94
(c) UK Direct activities are held by AXA Insurance UK Plc.
France, Germany and Japan and mainly relating to the Life &
As of December 31, 2012, the 34 consolidated real estate funds corresponded to a total of €6,717 million invested assets
AXA Investment Managers Asia Holdings Private Limited (c) 49.00 46.95 50.00 47.77
(a) Following the approval by China Insurance Regulatory Commission (CIRC) in 2012, AXA Minmetals Assurance Company Limited restructured its shareholding and became ICBC-AXA Life insurance Co.Ltd, a joint-venture between Industrial and Commercial Bank of China Co. Ltd (ICBC), AXA and China Minmetals Corporation. As a consequence, AXA was diluted from 51% to 27.5%, with no change in the consolidation method as equity method. This new Company is expected to become a leader in the Chinese life insurance market by capitalizing on each p arty’s strengths.
As of December 31, 2012, real estate companies accounted for using the equity method represented total assets of €296 million (€306 million at the end of 2011) and investment funds accounted for using the equity method represented total assets of €4,900 million (€3,829 million at the end of 2011), mainly in the United States, France, Germany and Belgium.
The ACACIA SPV was consolidated within the operations of AXA France Vie. This structure has been put in place to improve AXA France Vie assets/liabilities adequacy ratio by ceding receivables against cash. This program was ended in
Held assets amounted to €1,200 million as of December 31, 2012.
Life & Savings: AXA offers a broad range of Life & Savings products including individual and group savings retirement products, life and Health products. They comprise traditional term and Whole life insurance, immediate annuities and investment products (including endowments, savings-related products, such as variable life and Variable Annuity products).
Company, and the Group Property & Casualty run-off managed by AXA Liabilities Managers.
The Asset Management segment includes diversifi ed asset management (including investment fund management) and related services offered by AXA Investment Managers and
Fees and charges relating to investment contracts with no participating features 334 - - - - - - 334
Change in unearned premiums net of unearned revenues and fees (217) (143) (48) - - - (3) (411)
Technical charges relating to insurance activities (72,443) (19,169) (1,986) - - - 271 (93,326)
Net result from outward reinsurance (40) (956) (456) - - - 129 (1,323)
(b) Includes gains/losses from derivatives hedging Variable Annuities within Life & Savings and International Insurance segments.
Net income from operating activities before tax 3,589 2,858 312 538 (52) (1,829) 1 5,417
Net consolidated income after tax 2,928 1,966 181 396 (36) (1,151) - 4,283
Split between: Net consolidated income - Group share 2,873 1,975 178 314 (38) (1,151) - 4,152
Fees and charges relating to investment contracts with no participating features 350 - - - - - - 350
Technical charges relating to insurance activities (55,548) (18,159) (2,248) - - - 199 (75,757)
Net result from outward reinsurance 181 (905) (217) - - - 208 (733)
(d) Includes gains/losses from derivatives hedging Variable Annuities within Life & Savings and International Insurance segments.
(e) Includes net realized gains on sale of Australian and New Zealand operations (€742 million gross or €626 million net) and Taikang Life (€830 million gross or €798 million net).
Amortization of the value of purchased business in force (249) - - - - - - (249)
Change in tangible assets impairment 4 - - - - 25 - 29
Change in goodwill impairment and other intangible assets impairment (1,035) (82) - - (89) - - (1,206)
Other operating income and expenses (63,523) (26,486) (3,058) (3,318) (745) (615) 644 (97,101)
Income from operating activities before tax 2,773 2,276 418 233 (218) 65 (889) 4,657
Net income from operating activities before tax 2,704 2,288 414 191 (236) (1,003) 31 4,390
Net consolidated income after tax 2,185 1,730 277 145 (235) 277 - 4,380
Split between: Net consolidated income - Group share 2,059 1,699 276 153 (237) 240 - 4,190
(a) As described in Note 1.10, the result of 2011 discontinued Canadian operations is shown in a separate line of the income statement.
(c) Revenues net of intercompany eliminations amounted to €52 billion for Life & Savings, €27 billion for Property and Casualty and €3 billion for International Insurance (see Note 21).
Please refer to pages 166 to 169 of the “Quantitative and
Please refer to pages 170 to 172 of the “Quantitative and
Please refer to pages 82 to 87 , “Liquidity and capital resources”
AXA Bank Hungary (ELLA Bank) 2007 59 (59) - 59 (59) -
(1) Sanford C. Bernstein: €21 million was transferred to Group share following accretion of Group share of interest as of December 31, 2012, while €73 million was transferred to Group share following accretion of Group share of interest as of December 31, 2011.
Net value for goodwill, by operation and by segment, is as follow as of December 31, 2012: (I n Euro million)
AXA Bank Hungary (ELLA Bank) 2007 - - - - - -
(a) to (p) The related amounts contribute to the goodwill of the different cash-generating units as detailed in the table below. In the table below, breakdown of net value of goodwill by cash-generating unit (CGU): Related amounts footnote Name of the cash-generating unit (CGU) including the related amounts CGU goodwill net value
(b) Life and Savings - Mediterranean and Latin American Region 900
(a) Mainly corresponds to HSBC portfolio acquisition in Asia (€169 million). Please refer to Note 5.3.1 for more details.
The recoverable amount of each cash-generating unit or group of units is the higher of (i) the cash-generating unit or group of units’ fair value less costs to sell and (ii) its value in use.
Management businesses (tested separately), the calculation uses cash fl ow projections based on business plans approved by management covering a three to fi ve year period and a risk adjusted discount rate. Cash fl ows beyond that period have been extrapolated using a steady growth rate and terminal value.
For all cash-generating units, to the extent that securities valuations and interest rates levels remain depressed for prolonged periods of time, volatility and other market conditions stagnate or worsen, new business volumes and profi tability together with the inforce portfolio value would likely be negatively affected. In addition, the future cash fl ow expectations from both the inforce and new business and other assumptions underlying management’s current business plans could be negatively impacted by other risks to which the
However, subsequent impairment tests may be based upon different assumptions and future cash fl ow projections, which may result in an impairment of these assets in the foreseeable future.
AXA and HSBC announced on March 7, 2012 that they had entered into an agreement whereby AXA would acquire HSBC’s
Property and Casualty businesses in Hong Kong, Singapore and Mexico. In addition, AXA was to benefi t from a 10-year exclusive Property and Casualty bancassurance agreement with HSBC in these countries as well as in India, Indonesia and
China. The net upfront cash consideration for AXA is €375 (1)
On November 5, 2012 AXA completed the acquisition of HSBC’s general insurance business in Hong Kong and Singapore for an acquisition price of €281(1 ) million and €4(1 ) million respectively.
In Mexico, closing of the transaction is expected in the course of the fi rst semester of 2013.
AXA Bank Switzerland closed its operations on February, 29 2012 following the transfer of its customer portfolio to Bank zweiplus on January 1, 2012.
Related assets and liabilities (€189 million) were classifi ed as held for sale as of December 31, 2011.
The change in Value of Business In-force (“VBI”) in the Life & Savings segment was as follows: (I n Euro million) 2012 2011
Deferred acquisition costs relating to Life & Savings (b) 17,528 16,656
Deferred acquisition costs and equivalent relating to Life & Savings 17,244 16,938
Changes in deferred acquisition costs and equivalent for Life & Savings were as follows: (I n Euro million)
DAC and similar costs capitalization for the period 2,154 140 2,005 186
Acquisitions and disposals of subsidiaries and portfolios - - - 1
DAC net of unearned revenues and unearned fees reserves 13,977 370 13,627 336
Other intangible assets represented €3,349 million net value as of December 31, 2012 and mainly included: (I n Euro million)
The 2010 pension law reform in France led to an increase of policyholder reserves (€480 million). As a result of this law, insurers were also granted with rights to collect price increases and penalties. As a consequence, a corresponding €379 million intangible asset amount was recognized as of December 31, 2010 in other intangibles refl ecting such rights with a fi nite useful life.
As of December 31, 2012, the accumulated amortization of this intangible asset amounted to €206 million and its net value amounted to €173 million.
AXA Bank Hungary (ELLA Bank) 2007 38 (9) (29) - 35 (8) (27) -
(a) Following the distribution agreement with HSBC in Hong-Kong and Singapore.
(b) Following the sale of Bluefi n Corporate Consulting (€21 million) and the deconsolidation of SBJ Group Limited (€5 million).
Intangible assets recognized in business combinations mainly include value of distribution agreements and customer related intangibles, including €1,446 million assets with indefi nite useful life.
Greek interest rates environment which led to revise upwards the discount rate.
The Property and Casualty intangible was also reviewed, leading to the conclusion that no amortization acceleration was required.
(a) Includes €145 million from the distribution agreement with HSBC in Hong-Kong and Singapore.
(b) Includes notably assets measured at fair value under the fair value option.
Investment in real estate properties designated as at fair value through profi t or loss (a) 1,243 1,243 0.22%
Debt instruments (at cost) that are not quoted in an active market (c) 6,740 6,789 1.19%
Equity instruments designated as at fair value through profi t or loss (a) 5,391 5,391 0.95%
Change in impairment and amortization of investments in real estate properties at amortized cost (all activities): (I n Euro million)
As of December 31, 2012, the end of year balance of impairment on investment in real estate properties amounted to €890 million and the amortization balance amounted to €2,058 million. The impairment increase for the period amounted to €91 million, of which €10 million without impact on AXA net income Group Share, as related to some real estate funds operated by AXA Investments
Equity instruments available for sale 9,547 11,757 11,757 2,257 47 8,988 10,886 10,886 2,010 111
Equity instruments available for sale 3,108 3,483 3,483 380 5 2,762 2,750 2,750 281 293
Non consolidated investment funds available for sale 386 386 386 - - 175 180 180 5 -
(a) Net of impairment - including premiums/discounts and related accumulated amortization.
The table below sets out the contractual maturities of debt instruments held by the Group. Effective maturities may differ from those presented, mainly because some assets include clauses allowing early redemption, with or without penalty or duration extension features. In some case, the effect of derivatives also modifi es the maturity profi le of asset presented below.
Debt instruments (at cost) that are not quoted in an active market, the effect of derivatives (detailed in Note 20.3), loans and debt instruments backing contracts where the fi nancial risk is borne by policyholders are excluded from the table below. The effect of derivatives modifi es in certain cases the maturity profi le of assets presented below. Most of the debt instruments and loans held by the Group are fi xed-rate debt instruments (i.e. exposed to fair value interest rate risk).
Excluding the effect of derivatives (detailed in Note 20.3) and equity instruments of real estate companies, the breakdown by industry of equity instruments owned across the Group is as follows: (I n Euro million) Financial
The detail of non-consolidated investment funds breakdown was as follows: (I n Euro million)
Fair value (a) Fair value (a) Fair value (a) Fair value (a) Fair value (a) Fair value (a)
Non consolidated investment funds mainly holding equity securities 1,636 265 1,900 1,889 356 2,245
Non consolidated investment funds mainly holding debt instruments 4,462 271 4,733 2,928 109 3,037
Derivatives related to non consolidated investment funds 25 - 25 (158) - (158)
Equity instruments available for sale 15,144 (2,488) 12,656 2,386 15,042 14,635 (2,883) 11,752 1,800 13,552
Non consolidated investment funds available for sale 6,937 (1,038) 5,899 868 6,767 7,336 (1,141) 6,195 656 6,851
Impairment - Non consolidated investment funds 1,141 81 (154) - (30) 1,038
Impairment - Non consolidated investment funds 1,107 87 (76) - 23 1,141
The amount of assets which are not traded in an active market is disclosed in l evel 2 and 3 of the table shown below in
The dislocation of certain markets may be evidenced by various factors, such as very large widening of bid ask spreads which maybe helpful indicators in understanding whether market participants are willing to transact, wide dispersion in the prices of the small number of current transactions, varying prices over time or among market participants, inexistence of secondary markets, disappearance of primary markets, closing down of dedicated desks in fi nancial institutions, distress and forced transactions motivated by strong needs of liquidity or other diffi cult fi nancial conditions implying the necessity to dispose of assets immediately with insuffi cient time to market the assets to be sold, and large bulk sales to exit such markets at all costs that may involve side arrangements (such as sellers providing fi nance for a sale to a buyer). Primary transactions’ prices in markets supported by government through specifi c measures following the fi nancial crisis do not represent fair value.
For those assets for which the Group used mark to model valuations because of dislocated market conditions, sensitivities are disclosed in Note 9.10.2 below, even when such techniques are based on a majority of observable inputs.
Fair value not based on a majority of observable market data
Investments in real estate properties - 1,117 107 1,224 - 1,148 95 1,243
Financial investments and loans designated as at fair value through profi t or loss 22,652 20,349 5,767 48,767 16,079 22,206 6,103 44,389
Financial investments and loans held for trading 451 350 - 802 453 185 - 638
Methods applied to determine the fair value of held assets measured at fair value in the fi nancial statements are described in
Level 2 and 3 assets are investments which are not quoted in an active market or for which there is no active market. Fair values for l evel 2 and 3 assets include: ■ v alues provided by external parties which (i) are readily available including last transaction prices but relate to assets for which the market is not always active, or (ii) values provided at the request of the Group by pricing services and which are not readily publicly available; ■ a ssets measured on the basis of valuation techniques including a varying degree of assumptions supported by market transactions and observable data.
a) Fair values determined in whole directly by reference to an active market (l evel 1)
Moreover, quantitative market indications have shown an increase in liquidity level both on sovereign and corporate bonds. As of December 31, 2012, some corporate bonds have been classifi ed back to l evel 1 due to the tightened bid ask spreads. Belgian sovereign bonds were also reclassifi ed in l evel 1 consistently with improved market indicators observed during the year.
b) Fair values of assets not quoted in an active market – no active markets (l evel 2 and l evel 3)
Amounts presented in l evel 2 and 3 represent a variety of circumstances. A fi nancial instrument is regarded as not quoted in an active market if there is little observation of transaction prices as an inherent characteristic of the instrument, when there is a signifi cant decline in the volume and level of trading activity, in case of signifi cant illiquidity or if observable prices can not be considered as representing fair value because of dislocated market conditions. Characteristics of inactive markets can therefore be very different in nature, inherent to the instrument or be indicative of a change in the conditions prevailing in certain markets.
CDOs (Collaterized Debt Obligations) held by the Group were transferred mainly as l evel 2 as of December 2007 when markets became no longer active while still measured using the same valuation approaches (mainly external valuations and indices). As of December 31, 2008, the turmoil reached a further point of dislocation. Many fi nancial institutions closed their desks dedicated to structured assets deals and were no longer in a position of delivering meaningful quotes with the appropriate knowledge and dedication at the end of year 2008.
Other main movements related to l evel 3 assets to be noted are: ■ €-0.6 billion of sales mainly debt instruments and equity securities accounted as available for sale; ■ €+1.2 billion of new investments; ■ €-0.6 billion of change in unrealized gains and losses; ■ €-0.1 billion of foreign exchange fl uctuation impact.
Krungthai AXA Life Insurance Company Ltd (c) 64 - 34 1 (10) 89
AXA Investment Managers Asia Holdings Private Limited - - (3) (0) 4 1
(c) Starting from 2012, those entities close their full year accounts as of December 31.
(d) Following the approval by China Insurance Regulatory Commission (CIRC) in 2012, AXA Minmetals Assurance Company Limited restructured its shareholding and became ICBC-AXA Life insurance Co.LTD, a joint-venture between Industrial and Commercial Bank of China Co. Ltd (ICBC), AXA and China Minmetals Corporation. As a consequence, AXA was diluted from 51% to 27.5%, with no change in the consolidation method as equity method. This new company is expected to become a leader in the Chinese life insurance market by capitalizing on each Party’s strengths.
(€1,554 million as of December 31, 2011); ■ gross revenues: €1,283 million (€1,024 million as of
At the end of 2012, Neufl ize Vie’s fi nancial information was as follows (on a 100% basis): ■ total assets: €9,404 million (€8,935 million as of December 31, 2011); ■ total liabilities (excluding shareholders’ equity): €9,218 million
(€8,796 million as of December 31, 2011); ■ gross revenues: €872 million (€727 million as of December 31, 2011).
ICBC-AXA Assurance Co Ltd (previously AXA Minmetals Assurance Co Ltd) 56 - (3) 7 28 89
Kyobo AXA Investment Managers Company Limited (b) 26 - 1 - (1) 27
In 2011, “Other changes” notably included: ■ the dividend paid by Reso Garantia (€-30 million) and PT
Current accounts receivables from other Companies 1,377 (10) 1,367 1,367 1,515 (11) 1,504 1,504
Receivables from policyholders, brokers and general agents 8,761 (342) 8,419 8,419 7,622 (369) 7,253 7,253
Premiums earned not yet written 3,631 - 3,631 3,631 3,109 - 3,109 3,109
(c) including €1,129 million deposits in the central banks in 2012 and €593 million in 2011.
The table below reconciles assets and liabilities cash and cash equivalent balances with the statement of consolidated cash fl ows: (I n Euro million) December 31, 2012 December 31, 2011
Cash and cash equivalent as of December 31 (b) 30,101 30,042
(b) The “Cash and cash equivalents” balances shown in the statement of consolidated cash fl ows do not include cash balances of consolidated investment funds from the Satellite Investment Portfolio (see Note 1.7.2). The “Cash and cash equivalents” item in the Statement of Consolidated Cash Flows excludes cash backing contracts where the fi nancial risk is borne by policyholders (Unit-Linked contracts).
Net cash and cash equivalents increased by €59 million compared to 2011 mainly due to: ■ AXA Bank Europe €+628 million mainly due to an increase in the settlement account with central bank; ■ Switzerland Life & Savings €+549 million mainly driven by operating cash not yet totally reinvested; ■ Germany Life & Savings €+505 million mainly driven by realized capital gains mainly on bonds; ■ together with other positives variations mainly in Property &
borrowing collateral receivables and payables; ■ €+86 million net cash related to change in scope of consolidation, mainly following Swiss Bank portfolio disposal and cash received from ICBC linked to its investment in ICBC-
New Zealand operations. This amount should be looked at together with the amount from fi nancing activities regarding minority shares in AXA APH Asian operations buy back; ■ €+1,144 million of net cash impact of assets lending/
Net cash relating to fi nancing activities totaled €-2,647 million in 2012 mainly due to: ■ d ividends payments of €-1,793 million.
AXA APH Asian operations. This amount should be looked at together with the amount from investing activities regarding the disposal of Australian and New Zealand operations.
The Consolidated Statement of changes in Equity is presented as a primary fi nancial statement following the amendment to
AXA’s share capital and capital in excess of nominal value: ■ i ncrease in capital of €309 million mainly following employee share offering (December 2012); ■ s hare-based payments for €49 million.
As of December 31, 2012, the carrying value of treasury shares and related derivatives was €363 million. This fi gure included €0.8 million relating to AXA shares held by consolidated m utual funds (61,455 shares) not backing contracts where fi nancial risk is borne by policyholders.