Our global business operations, recent fi nancial performance and fi nancial condition 1.1 Selected consolidated fi nancial data 4 1.2 Information on the Company 7 1.3 Activity Report 46 1.4 Liquidity and capital resources 104
Certain disclosures about market risk and related matters 3.1 Risk factors 192 3.2 Quantitative and qualitative disclosures about market risk and risk factors 214 3.3 Certain fi nancial information 235
CONSOLIDATED FINANCIAL STATEMENTS 237 4.1 Consolidated statement of fi nancial position 238 4.2 Consolidated statement of income 241 4.3 Consolidated statement of comprehensive income 242 4.4 Consolidated statement of changes in equity 244 4.5 Consolidated statement of cash fl ows 248 4.6 Notes to the consolidated fi nancial statements 250 4.7 Report of the Statutory Auditors 409
Appendix IV Statement of the person responsible for the Annual Report 435
referred to in paragraph I of Article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier)
This registration document was fi led with the Autorité des marchés fi nanciers on March 18, 2011, 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.
“ordinary shares” or “AXA ordinary shares”. The principal trading market for the Company’s ordinary shares is the Compartment A
“Euronext Paris”. The Company’s American Depositary Shares are referred to in this Annual Report as “ADS”. Since the delisting of AXA’s ADS from the New York Stock Exchange on March 26, 2010, AXA’s ADS are traded on the U.S. over-the-counter market and are quoted on the OTC QX platform under the ticker symbol
of this Annual Report and have been prepared in accordance with International Financial Reporting Standards (referred to in this Annual Report as “IFRS”) and interpretations from the
(referred to in this Annual Report as “IFRIC”) that were defi nitive and effective as at December 31, 2010, as adopted by the
European Union prior to the balance sheet date. The Group does not, however, use the “carve out” option to avoid applying all the hedge accounting principles required by IAS 39. In addition, the adoption of IFRS 9 published by the IASB in November 2009 has not yet been formally submitted to the European Union. However, the Group would not have used the earlier adoption option of the standard in either 2009 or 2010. Consequently, AXA’s
The adoption date of IFRS 9, including its different phases and its mode of enforcement are currently being reviewed bythe Group.
(1) For more precise details on the Consolidated Financial Statements for the years ended December 31, 2009 and December 31, 2008, please refer to the 2009 Annual Report (Registration Document), the French version of which was fi led with the AMF on March 17, 2010 under reference n° D10-0117, and to the 2008 Annual Report (Registration Document), the French version of which was fi led with the AMF on March 26, 2009 under reference n° D09-0158.
Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predictions of, or indicate, future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and AXA’s plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results).
These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future weatherrelated catastrophic events or terrorist related incidents.
Additional factors which may affect AXA’s business 33 1.3 ACTIVITY REPORT 46
The selected historical consolidated fi nancial data presented below have been derived from AXA’s Consolidated Financial
Statements and related notes for the years ended December 31, 2010 and 2009 in accordance with IFRS.
IAS 39. In addition, the adoption of the new IFRS 9 standard published by the International Accounting Standards Board
Income Statement Data: In accordance with IFRS (a): Net investment result excluding fi nancing expenses (b) 32,031 36,157 (36,068)
Earnings per share from discontinued operations: Other data: Number of outstanding shares 2,320 2,290.0 2,089.2
(a) As described in Notes 1.10, 12.2 and 1.13.2 of Part 4– Consolidated Financial Statements of this Annual Report, these amounts take into account, in line with accounting FRS27, the reclassifi cation in the United Kingdom of some with-profi ts technical reserves to allow for all future terminal bonuses payable to with-profi ts policyholders within the allocated policyholder reserves, previously held in the unallocated policyholder bonus reserve, without any impact on earnings.
(c) (i) The calculation of net income per share is based on the weighted average number of outstanding shares for each period presented, and (ii) shareholders’ equity per share is calculated based on the actual number of outstanding shares at each period-end presented. The calculations deduct shares held by AXA and its subsidiaries (i.e. treasury shares) in the calculation of weighted average number of outstanding shares (for net income per share) and outstanding shares (for shareholders’ equity per share). The calculation of basic and diluted net income per share at ended December 31, 2010 is presented in Note 27 “Net Income per Ordinary Share” to AXA’s Consolidated Financial Statements.
(d) (i) Revised net income EPS takes into account interest payments related to undated subordinated debts classifi ed in equity, excluding foreign exchange impacts. Previously disclosed EPS included foreign exchange adjustments. Basic net income EPS amounted to €1.51 and €0.43 and fully diluted net income EPS to €1.51 and €0.43 at 2009 and at 2008 respectively. Excluding foreign exchange refl ects implemented hedges which would qualify as net investment hedges with related changes in fair value recognised through translation reserves. (ii) Following AXA’s rights issue in 4Q2009, the average number of shares has been restated to take into account an adjustment factor of 1.023. In the average number of shares calculation, the adjustment factor has been applied on outstanding shares prior to the date of the capital increase leading to an adjustment on average number of shares of 48.4 million shares in 2009, 47.7 million in 2008. As of December 31, 2009, total net outstanding number of shares was 2,264 million and average fully diluted number of shares was 2,133 million.
The Company pays dividends in Euro. Future dividends will depend on AXA’s earnings, fi nancial condition and various other factors. 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’ Meeting.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on undated debt, and, in each of the past several years, with the exception of 2009, AXA
A dividend of €0.69 per share for the 2010 fi scal year will be proposed to the Shareholders’ Meeting to be held on April 27, 2011.
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 27, 2011.
(d) 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.
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.22 per share for fi scal year 2009.
Dividends not claimed within fi ve years afterthe payout date become the property of the French Treasury Department.
For further information on AXA’s dividend policy, see Part 4 – “Consolidated Financial Statement” and Part 5 – “Certain Additional
Les Mutuelles Unies took control of Groupe Drouot and following this transaction, the new Group began operating under the name of AXA.
AXA acquired a majority interest in National Mutual Holdings following its demutualization. National Mutual Holdings, based in Australia, subsequently changed its name to AXA Asia
AXA (i) acquired a majority interest in a Japanese life insurance company, “Nippon Dantaï Life Insurance Company”, through a new Japanese holding company, “AXA Nichidan”, (ii) increased its interest in SLPH from 56.3% to 100%, (iii) sold its interest in Donaldson Lufkin & Jenrette (“DLJ”) to Credit Suisse Group,
AXA also continued to streamline its portfolio of businesses, selling its Health business in Australia and insurance operations in Austria and Hungary, and reorganizing its reinsurance business.
United Kingdom, and (iii) MLC Hong Kong and Indonesia via its subsidiary AXA Asia Pacifi c Holdings. In addition, in
and subsequently acquired (together with UkrSibbank) 99% of the share capital of Vesko, Ukraine’s 6th largest P&C insurer,
(iii) completed the sale of its principal Dutch operations, comprising 100% of AXA Netherlands, Winterthur Netherlands and DBV Netherlands, and (iv) fi nalized a long-term partnership agreement with the Italian bank BMPS for the distribution of life, non-life and pension business in Italy.
AXA strengthened its position in Central and Eastern Europe with the acquisition of minority interests held by the European
Directors). In September, AXA UK sold to Resolution Ltd its traditional life and pensions businesses, its IFA protection and corporate pension businesses, and its annuity businesses for consideration of £2.75 billion. In October, AXA announced plans to restructure its existing Chinese joint venture with
Minmetals by partnering with China’s largest bank, Industrial and Commercial Bank of China Co. Ltd (ICBC) to create a leading brand in China life insurance market. According to the agreement, ICBC will hold a majority stake of 60%, AXA
Completion of this transaction is subject to regulatory approval and is expected to close in the fi rst half of 2011. Finally, in
– “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”, Section 1.3
The Company is the holding company for the AXA Group, a worldwide leader in fi nancial protection. Based on available information at December 31, 2010, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €91 billion for the year ended December 31, 2010. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at
The diversifi cation of the AXA Group – both by geography and by business – is designed to mutualize the different types of risks to which the Group is exposed. For example, mortality risks are partly offset by longevity risks, and Life & Savings risks by Property & Casualty risks. In addition, geographic diversifi cation helps reduce the concentration of risk and volatility of claims experience.
Set forth below is a simplifi ed organization chart of AXA as of December 31, 2010. For additional information, please see Note 2 “Scope of consolidation” included in Part 4 –
(h) Holding company that owns AXA France Vie, AXA France IARD, AVENSSUR, Juridica, AXA Epargne Entreprise and Natio.
(j) Holding company that owns AXA Assicurazioni SpA and AXA Interlife SpA.
(r) Holding company that owns Hilo Direct de Seguros y Reaseguros, AXA Seguros Generales, SA de Seguros y Reaseguros, AXA Vida, SA de Seguros y Reaseguros, AXA MedLa IT & Local Support Services SA, AXA Winterthur Salud SA de Seguros, AXA Aurora Vida, SA de Seguros y Reaseguros and AXA Pensiones, SA E.G.F.P.
(u) Holding company that owns directly AXA Sun Life Direct Limited, Sun Life Corporation plc, AXA Portfolio Services Limited, Winterthur UK Financial Services Group Limited, Guardian Royal Exchange plc, AXA Insurance plc, Bluefi n Advisory Services Limited and AXA PPP healthcare Limited.
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 STOXX and DJSI World (based on SAM research); ■ FTSE4GOOD (based on EIRIS (1) research); ■ ASPI Eurozone (based on Vigeo research).
(a) Annual Premium Equivalent (APE): Measure of new business volume which represents 100% of regular premiums +10% of single premiums, in line with EEV methodology. APE is Group share.
(d) Adjusted earnings represent the net income (Group share) before the impact of: (i) Exceptional operations (primarily change in scope and discontinued operations); (ii) Integration and restructuring costs related to material newly acquired companies as well as restructuring and associated costs related to productivity improvement plans; (iii) Goodwill and other related intangibles; and
(a) Revised net income EPS takes into account interest payments related to undated subordinated debts classifi ed in equity, excluding FOREX impacts. Previously disclosed EPS included FOREX adjustments. Basic net income EPS amounted to €1.51 and fully diluted net income EPS to €1.51 at 2009. Excluding FOREX refl ects implemented hedges which would qualify as net investment hedges with related changes in fair value recognised through translation reserves.
The table below sets forth the total assets managed by AXA’s subsidiaries, including assets managed on behalf of third parties: AXA’S TOTAL ASSETS UNDER MANAGEMENT
(b) In order to improve the Consolidated Financial Statements presentation consistency across segments, balances of receivables arising from banking operations disclosed so far in the “Other assets and receivables” aggregate have been reclassifi ed to the “Investments from non- insurance activities” aggregate. Published fi gures in 2009 before reclassifi cation for “General account assets” were €441.928 millon.
(a) As described in Note 1.10 of “Part 4 - Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
For additional information on AXA’s revenues by segments, see Note 21 “Revenues by segment and net revenues from banking activities” included in “Part 4 – Consolidated Financial
(a) For the United Kingdom, refl ects retained business only in 2010.
Mediterranean & Latin American Region (c) 553 497 91 79 of which Australia and New Zealand 283 269 44 38 of which Hong Kong 159 123 114 78 of which Central & Eastern Europe 274 168 56 34
■ Changes in regulations that may affect the policy charge structure relating to commission and administrative charges.
The table below presents the main Life & Savings insurance markets in which AXA operates ranked by worldwide gross revenues in 2009, along with AXA’s estimated ranking (by market share): INSURANCE MARKET - LIFE & SAVINGS
(a) Source: Swiss Re, Sigma report 2010 “World Insurance in 2009”.
(d) AXA’s ranking and market share are based on updated September 2010 fi gures.
(f) AXA’s ranking and market share are based on updated December 2009 fi gures.
(h) Based on new business Annual Premium Equivalent (APE). Represents 100% of regular premiums+10% of single premiums, in line with EEV methodology.
AXA’s Life & Savings products include a broad range of investment and savings products as well as life and health products marketed to individual and commercial clients. The
Life & Savings products offered by AXA include term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. The health products offered include critical illness and permanent health insurance products. The types and specifi cities of the products offered by AXA vary from market to market.
■ Pure savings products, which generally provide investment return through a crediting rate to policyholders, while AXA
Life products include: ■ Term assurance, which provides a death benefi t for a defi ned period of time; ■ Whole life products, which provide a death benefi t over a person’s entire lifetime or up to a certain age, such as age 95 or 100, as long as the required premiums are paid; ■ Universal life products, which are bundled products that include a signifi cant death benefi t component. Funds can be invested in unit-linked and / or general accounts; ■ Endowment products, which pay a level death benefi t for a limited period of time or to age 65. An endowment benefi t is paid at the end of that period if the insured is still alive; ■ Disability products, which pay a benefi t in case of disability.
• Health products (1) generally offer reimbursement of medical expenses or provide medical services,
To attract and retain clients, especially in the segments identifi ed as strategic, AXA has developed solutions designed to meet the needs of the targeted customer groups. In addition, new products have been designed to support AXA’s cross-selling strategy and thus improve client retention and enhance value for the clients. AXA also aims to reuse across markets successful products and experiences developed for individual country markets.
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: LIFE & SAVINGS SEGMENT
Fees and charges relating to investment contracts with no participating features 518 547 25,726
Exclusive agents are individuals or fi rms commissioned by a single insurance company to sell its products exclusively on its behalf. Tied agents are exclusive agents.
Salaried sales forces are salespeople employed by a single insurance company (or an affi liated company) to sell the company’s products on an exclusive basis.
Brokers are independent fi rms that negotiate with insurance companies on behalf of customers seeking coverage. As opposed to exclusive agents, brokers usually work with different insurance companies.
Independent Financial Advisors (IFAs) are individuals or fi rms that provide fi nancial advice to customers and negotiate related policies with insurance companies on behalf of customers.
Aligned distributors are independent individuals or fi rms who have chosen AXA to provide them with a full range of dealership services. They negotiate, on behalf of customers, policies of various insurance companies among a range of products selected by AXA.
For most Life & Savings products, fees and revenues accrue over time, while costs to the issuing company in the fi rst year are generally higher than costs in subsequent years due to fi rst year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate”, plays an important role in profi tability. The majority of individual Life
Total surrenders and lapses for 2010, and the ratio of surrenders and lapses to gross surrenderable insurance reserves at the beginning of the periods indicated are presented below: SURRENDERS AND LAPSES
(a) Amounts and percentages reported for the United States operations exclude surrenders and lapses for corporate separate accounts.
(c) Surrenders & Lapses in Japan were impacted in 2009 by the bankruptcy of one large independent agent and by the decrease in the guaranteed rate of group pension contracts.
Life & Savings Global Business line, as part of its role to defi ne a common strategy has set the following priorities: ■ accelerate diversifi cation into Protection and Health; ■ enhance profi tability in Savings business; ■ prioritize investments for growth; ■ foster business effi ciency.
(1) Some countries classify health activity in the Property & Casualty segment, while other countries classify it in the Life & Savings segment.
(a) Mediterranean and Latin American Region includes Spain, Italy, Portugal, Greece, Morocco, Turkey, Mexico and the Gulf Region.
Germany, the United Kingdom, Belgium, Switzerland and the Mediterranean Region. AXA also offers personal and commercial Property & Casualty insurance products in other countries in Central and Eastern Europe as well as in Canada,
The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross revenues in 2009, along with AXA’s ranking (by market share).
(d) Gulf Region: includes Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Oman. Rankings are calculated with the agregation of these 5 countries.
(f) AXA’s ranking and market share based on updated November 2010 fi gures.
(h) AXA’s ranking and market share based on updated December 2009 fi gures.
AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, brokers, salaried sales forces, direct sales and banks and other partnerships, including car dealers. In Continental Europe, the same distribution channels are used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the “Distribution channels” section in the Life &
Casualty operations, based on gross revenues for the year ended December 31, 2010 and 2009, is presented below: Based on gross revenues in 2010
AXA’s Property & Casualty operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks, in order to protect Group solvency and reduce volatility on key fi nancial indicators. A growing portion of AXA’s Property & Casualty insurance exposures are ceded internally to AXA Global Property & Casualty (formerly AXA
PartnerRE, with Colisée Re, however, retaining the risk of any deviation (positive or negative) as compared to the reserves constituted as at January 1, 2006 in respect of occurrence years 2005 and prior.
The businesses of the International Insurance activities are described below. The International Insurance segment accounted for €2.8 billion, or 3% of AXA’s consolidated gross revenues for the year ended December 31, 2010 (2009: €2.9 billion or 3%).
AXA Global Life and AXA Global P&C (ex AXA Cessions) are two intra-group reinsurance companies in charge of analysis, structure and placement of reinsurance treaties on behalf of
AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in run-off, notably managing a book of reinsurance contracts of Variable Annuities with guaranteed minimum death and income benefi ts.
AXA Global Life and Global P&C (a) 50 2% 58 2% 327 of which
AXA’s subsidiary dedicated to worldwide Property & Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance, is amongst the top fi ve players in Europe.
AXA Assistance is one of the three leading worldwide assistance companies, in a market where traditional assistance companies are developing their activities outside their home markets, while new players are focusing on a limited product line.
AXA Assistance mainly operates as a business-to-business company although it also uses direct sales and marketing to sell its products. In countries in which AXA offers Property &
Also, in 2010, approximately €937 million of premiums were placed externally by AXA Global Life and AXA Global Property
& Casualty (ex AXA Cessions) on behalf of AXA’s insurance subsidiaries (2009: €981 million), mainly for Property & Casualty business but also for Life & Savings business.
Assets backing contracts with fi nancial risk borne by policyholders 53,657 72,935
(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 €1,079.5 billion and €1,033.8 billion, as of December 31, 2010 and 2009 respectively.
■ Research portfolio analysis and brokerage-related services for institutional investors and equity capital markets services for issuers of publicly traded securities.
At December 31, 2010, AllianceBernstein had €362.1 billion of assets under management, including €284.0 billion of assets managed on behalf of third party clients (2009: €339.8 billion and €270.4 billion, respectively).
It offers a complete range of banking products and services: daily banking, mortgage loans, short-term savings for retail customers. AXA Bank products and services in Belgium are mainly distributed by a network of 911 tied but independent bank agents. AXA Bank Europe is ranked sixth on the Belgian banking market where the four major banks represent approximately 75% of the market. Bank products and offers are linked with insurance business.
AXA Bank targets private customers in retail banking and is an important element of pension and asset management business of AXA Germany. The Bank had approximately 74,000 clients at year-end 2010. The major activities of AXA Bank are deposits and mutual funds. These products are mainly sold through the tied agent network of AXA Germany.
AXA Bank Hungary (formerly Ella Bank) became a branch of AXA Bank Europe in January 2009. AXA Bank Hungary, acquired in July 2007, works in collaboration with AXA’s insurance operations in Hungary. Products such as mortgages loans and saving accounts are offered to clients and are distributed through over 450 insurance agents and internet.
The commercial activity of AXA Bank in Czech Republic was launched in February 2010. The bank’s product offer consisted of a savings account to which a loyalty bonus may be added.
This product is distributed by existing AXA sales networks and over the internet through an internet site that offers customers a unique entry point to AXA’s banking and insurance products in the Czech Republic.
Given that the AXA Group is headquartered in Paris, France, this supervision is based to a signifi cant extent on European
Autorité de contrôle des assurances et des mutuelles (“ACAM”), which was the principal French insurance regulator.
The fi nancial crisis of 2008-2009 gave rise to numerous legislative and regulatory initiatives across various jurisdictions where the Group does business. The fi rst phase of these initiatives was generally designed to stabilize fi nancial markets and fi nancial institutions around the world in the wake of the
Although the full scope of the regulatory changes imposed by the Dodd-Frank Wall Street Reform and Consumer Protection
Dodd-Frank has had a signifi cant impact on the US fi nancial regulatory landscape. While the focus of the Dodd-Frank Act is on US fi nancial institutions, many of its provisions could signifi cantly affect non-US companies with fi nancial operations in the United States, such as AXA. Certain changes that could potentially have a meaningful impact on non-US institutions such as AXA include, but are by no means limited to: ■ the newly established Financial Stability Oversight Council
(the “FSOC”) may, among other powers: • designate non-US non-bank fi nancial companies, including possibly AXA, as “systemically important” and therefore subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as enhanced prudential standards, which may include stress testing, and
■ additional levels of regulation over broker-dealers and investment advisers, including harmonizing broker-dealer and investment adviser regulation, and possibly appointing a self-regulatory organization to oversee investment advisers, much as FINRA does for broker-dealers.
States and involves only foreign investors, as well as conducts occurring outside the United States that have a foreseeable substantial effect within the United States.
(Autorité de contrôle prudentiel), which, in addition to prudential supervision, has broad competence for implementing, examining and enforcing compliance with numerous aspects of consumer fi nancial laws; ■ additional prudential requirements on fi nancial institutions with respect to capital, liquidity, leverage and business activities; ■ increased restrictions on securitization transactions, in particular retention of risk by originators/sponsors; ■ enhanced regulation of, or recommendations with respect to, incentive-based compensation structures at certain fi nancial regulated entities; ■ increased restrictions as to counterparts of certain fi nancial institutions; ■ enhanced customer protection via higher thresholds of guaranty funds in the event of insolvent fi nancial institutions; ■ supervision and regulation of rating agencies; ■ the enactment of the French Banking and Financial
Regulation Law of October 22, 2010, which provides, among other measures: • the creation of a fi nancial regulation and systemic risk council, chaired by the Minister of the Economy,
Potential Areas of Reform In Other Jurisdictions Where the Group Operates
Management believes that ongoing reforms in other jurisdictions where the Group operates are likely to involve regulatory and legislative changes that will revolve around areas and themes similar to those that have already been addressed the Dodd-Frank Act (where extensive rulemaking is expected with respect to many provisions), French law and regulation (including in the French Financial and Banking
• proposals to create new or additional consumer protection bodies designed to ensure that retail fi nancial services products are suitable for their target markets, understandable by consumers and marketed appropriately,
Committees to specifi cally identify and address fi nancial incentives that may lead to “excessive” risk taking by an institution with broad potential implications for fi duciary duties and liabilities of directors,
• attempts to legislate corporate governance standards and principles; ■ potential fi nancial market regulation reforms: • potential regulation of CDSs as “credit insurance” requiring licensing of institutions offering these instruments,
The massive injection of government funds into a number of major fi nancial institutions during 2008 and 2009 has broad potential implications, the full extent of which is not clear yet, for those institutions (and for the fi nancial services sector more generally) in terms of the extent and nature of continuing government infl uence and control. The Group will continue to monitor the evolution of these initiatives and their potential impact on its business closely over the coming months.
Since 2008 there have been a variety of proposals with respect to executive compensation practices at fi nancial institutions including from the Financial Stability Board (FSB)
– including our ability to attract and retain top-rate talent –
because certain of our direct and indirect competitors, which do not apply these principles or do not apply them to the same extent as the Group, compete directly with us for talent in key markets where we operate.
While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s insurance subsidiaries operate have laws and regulations governing sales practices, standards of solvency, levels of capital and reserves, permitted types and concentrations of investments, business conduct, agent licensing, approval of policy forms and, for certain lines of insurance, approval or fi ling of rates. In certain jurisdictions, regulations limit sales commissions and certain other marketing expenses that may be incurred by the insurer. In general, insurers are required to fi le detailed annual fi nancial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or targeted examinations of the insurers’
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. 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 may also result in the Company having 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.
(“UK”) and Belgium through free-standing subsidiaries that are subject to a comprehensive regulatory regime based on the EU insurance directives on life insurance and insurance other than life insurance. These directives have been implemented in France, Germany, the UK and other
European jurisdictions and are founded on the “home country control” principle, according to which the ongoing regulation of insurance companies, including their non-home country insurance operations (whether direct or through branches), is the responsibility of the home country insurance regulatory authority. The home country insurance regulator monitors compliance with applicable regulations, including regulations governing solvency, actuarial reserves, investment of assets, statutory accounting principles, internal governance and periodic reporting requirements. In France, ACP monitors compliance with applicable regulations, the insurer’s capital base and actuarial reserves, as well as the assets of the insurer that support such reserves. Selling activities of non-home country insurance operations are generally supervised by the regulator in the country in which the sale of the insurance product takes place. As a result of the implementation of these directives, an insurance company that has been licensed to conduct insurance business in one jurisdiction of the EU
may do business directly or through branches in all other jurisdictions of the EU without being subject to additional licensing requirements in the other jurisdictions.
must establish appropriate internal controls to ensure suffi cient solvency to cover all of the Group’s insurance liabilities, inform the French insurance regulatory authorities annually of certain intra-group transactions, and calculate on a consolidated basis the capital needed to meet the respective solvency requirements of the Group’s insurance subsidiaries. Similar solvency requirements must be fulfi lled by intermediate holding companies that own AXA Group insurance subsidiaries in different EU jurisdictions.
■ A 2002 EU directive, implemented into French law in 2005, concerns the regulation and supervision of fi nancial conglomerates and provides for the assessment of fi nancial conglomerates capital requirements at the consolidated Group level, the supervision of risk concentration and intra-group transactions, and the prevention of double-leveraging of the capital of a parent holding company, i.e. once at the holding parent level and a second time at the subsidiary level
Due to the lack of uniform interpretation of this legislation by local insurance regulators throughout the various EU
Specifi cally, Pillar 1 covers the quantitative requirements around own funds, valuation rules for assets and liabilities and capital requirements. Pillar 2 provides the qualitative requirements for risk management, governance and controls, 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. Pillar 3 deals with the enhanced requirements for reporting to supervisors and public disclosures.
A key aspect of Solvency II is that the assessment of risks and capital requirements will be aligned more closely with economic capital methodologies, and may allow the Group to make use of its internal economic capital models, if approved by AXA lead supervisor ACP, to enable a better understanding of risks and an appropriate risk management.
In 2007, the Commission adopted a draft Directive setting forth various policy principles and guidelines that would act as a framework for the development of the Solvency II
Solvency II Directive regarding the “taking-up and pursuit of the business of insurance and reinsurance” was adopted by the European Council in November 2009 and includes rules regarding, among other things, valuations, own funds, capital requirements and investments.
since January 1, 2011) published a number of consultation papers in 2009 and 2010 covering advice to the European
Forums, the Pan-European Insurance Forum (PEIF), together with the Association of French Insurers (FFSA) and the Comité Européen des Assurances (CEA).
The Commission is expected to publish the Level 2 measures in the second quarter of 2011 for an adoption in
discussions with ACP are on-going and, consequently, there is a risk that ACP may not approve these models on a timely basis (or otherwise) and/or may impose conditions or require modifi cations which would have multiple adverse consequences for the Group including increasing the levels of required capital.
■ In 2008, the Swiss fi nancial Market supervisory authority issued a new directive concerning solvency margin requirements for insurers and insurance groups operating in Switzerland pursuant to the new Insurance Supervision
• over the past several years a number of European jurisdictions, including France, Belgium, Spain and other jurisdictions have enacted legislation that permits corporate entities to be charged with criminal offenses.
■ In 2010, the UK enacted the Bribery Act 2010 (the Act)
Act creates a new strict liability offence for corporations and partnerships of failing to prevent bribery occurring within the organisation. The only defence is if the corporate has put in place adequate “procedures” designed to stop incidences of corruption, although the meaning of “adequate procedures” is not defi ned. The “failure to prevent bribery”
offence applies to any corporate or partnership (wherever it is registered, incorporated or conducts its main activities)
companies that may be in fi nancial diffi culty. For example, in Germany, a 2009 law gave the German supervisory authority (“BaFin”) power to (i) forbid adverse payments between affi liated companies even prior to any identifi ed fi nancial diffi culties or other crisis situations and (ii) the ability to make such payments contingent on certain conditions.
■ Finally, there are numerous other legislative and regulatory initiatives within various European jurisdictions relating to a variety of matters, including such matters as distribution practices and changes to tax laws that may affect the attractiveness of certain of our products, which currently have favorable tax treatment.
In the United States, the insurance business regulation remains principally at the state level, with AXA’s insurance operations being subject to regulation and supervision by various states and territories. Within the US, the methods of regulation vary between the different states but generally has its source in statutes that delegate regulatory and supervisory powers to a state insurance commissioner. While the extent of regulation varies by jurisdiction, most jurisdictions have laws and regulations governing approval of policy forms and rates, sales practices and business conduct, the standards
While the Dodd-Frank Act does not remove primary responsibility for the supervision and regulation of insurance from the states, Title V of the Act establishes a Federal
may reasonably require. In addition, the FIO‘s approval will be required to subject an insurer or a company whose largest US
Institutions Regulatory Authority (“FINRA”) may institute administrative or judicial proceedings which may result in censures, fi nes, the issuance of cease-and-desist orders, the suspension or expulsion of a broker-dealer or member, its offi cers or employees or other similar sanctions. Over time, AXA Financial’s broker-dealer subsidiaries and its other subsidiaries have provided and, in certain cases continue to provide information and documents to the SEC, FINRA, state attorneys general and other regulators on a wide range of issues. Ongoing or future regulatory investigations could result in fi nes, other sanctions and/or other costs. Dodd-Frank also permits the SEC to promulgate rulemaking to limit or prohibit the use of mandatory arbitration clauses in standard broker-dealer customer agreements, which, if enacted could potentially lead to an increased number of customer complaints going into litigation rather than arbitration.
AXA’s other US life insurance subsidiaries expect that the statutory surplus will continue to be in excess of the minimum
AXA Equitable’s actual tax expense and expected amount determined using the federal statutory tax rate of 35%. A
change in the DRD, including the possible retroactive or prospective elimination of this deduction through regulations or legislation, could increase AXA Equitable’s actual tax expense and reduce its consolidated net income.
Proposals” (the “Green Book”). The Green Book included proposals, which if enacted, would affect the taxation of life insurance companies and certain life insurance products.
Annuity contracts that is eligible for the DRD. The proposal is similar to a proposal included in last year’s Green Book, which was not enacted. If proposals of this type were enacted,
Corporate Owned Life Insurance. This year’s Green Book also contained a proposal, similar to last year’s which was not enacted that would affect the treatment of certain corporate owned life insurance policies (“COLIs”). The proposal will limit a portion of a business entity’s interest deductions unless the insured person was a 20% or more owner of the business. If a proposal of this type were enacted, AXA Equitable’s sale of new COLIs could be adversely affected. In its current form, the proposal would generally not affect in-force previously purchase COLI policies.
In general, non-publicly traded debt and equity interests in investment vehicles (such as some of those managed by the Group) would be treated as accounts and subject to the reporting requirements. In addition, the IRS has stated that certain insurance policies and annuities will be considered accounts for these purposes, and therefore information would be required to be reported in respect of certain U.S.
Holocaust victims between 1920 and 1945 and settled thousands of claims fi led with the ICHEIC with respect to policies issued by the European insurers participating in
ICHEIC concluded its work in March 2007. As a result of its participation in the ICHEIC process, AXA benefi ts from a statement of interest issued by the US federal government which provides that ICHEIC should be recognized as the exclusive remedy for all Holocaust era insurance claims.
with a certain level of protection against future lawsuits of this type in the US, it does not offer complete protection and, consequently, AXA could still be subject to litigation in the US
Management cannot predict with any certainty at this time which of the legislative and regulatory initiatives described above will ultimately become law and their potential impact on the Group.
In certain jurisdictions, regulations governing constitution of technical reserves and similar regulations may prevent payment of dividends to shareholders and/or repatriation of assets.
AXA’s life insurance products’ advantageous tax treatment may be eliminated or adversely impacted for certain products by changes in tax laws that are considered from time to time in various jurisdictions in which AXA operates including in the Asia-Pacifi c. For example, the Japanese legislature adopted a change in inheritance tax treatment that reduced the advantages and attractiveness of certain life insurance products. As in other regions of the world, regulators in the
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 to ensure 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 also generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations.
In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specifi c periods, the revocation of the registration as an investment adviser, censures and fi nes.
Advisers Act”). Each of AllianceBernstein’s US Mutual funds is registered with the SEC under the US Investment Company
funds offered only to residents of a particular state. Certain subsidiaries of Alliance Bernstein and AXA Financial, Inc. are also registered with the SEC as transfer agents and broker-dealers that are subject to minimum net capital requirements. Asset management services rendered by AllianceBernstein and/
(iii) auditors’ independence requirements, and (iv) numerous corporate governance requirements. Management devotes substantial resources to ensure compliance with both the letter and spirit of these laws and anticipates that considerable resources will continue to be devoted to this area in the future.
Group would not have used the earlier adoption option of the standard neither in 2009 nor 2010. As a consequence, AXA
IASB concerning possible modifi cations to the Standards and certain of these modifi cations may have potentially signifi cant
AXA, that prepare their consolidated accounts in accordance with the Standards. These modifi cations include, among others, the following: ■ Financial assets and liabilities held by the AXA Group are recognised and measured under IAS 39 which is currently the subject of major potential amendments. Mandatory adoption dates range from 2013 to 2015. Optional adoption by issuers may be applicable in 2011 (depending on endorsement by the EU). These amendments, which relate primarily to classifi cation of fi nancial assets and liabilities, impairment and hedge accounting principles, may have potentially signifi cant impacts on the Company’s future fi nancial statement presentation, shareholders equity and earnings and may also affect prior year comparatives depending on the adoption date; ■ Policyholders liabilities and related assets are currently accounted for according to IFRS 4 – Phase I which generally allows the continuation of accounting policies applied prior to the conversion to IFRS. The IASB issued a Discussion
This amendment which is scheduled to be fi nalized in 2011 may signifi cantly affect policyholders’ liabilities and related assets such as Deferred Acquisition Costs at the date of adoption by 2014 or 2015; ■ Consolidation, Derecognition and Lease are other areas of potential signifi cant amendments which may impact the
France (1). The Life & Savings market increased by 4% in 2010, and proved resilient in the context of low interest rates, driven by 4% growth of general account participating contracts representing 87% of the market. Unit-linked contracts grew by 7%, representing only 13% of the market. The 2010 growth was driven by bancassurance channels (+8%), whereas sales from traditional insurers decreased by 1%. The market growth was +4% for Health and Accident. Overall, AXA ranked 3rd with a market share of 9.8%.
United States (2). After a diffi cult sales environment for Life
in 2010. Variable Annuity industry sales increased by 8% as guaranteed living benefi ts continue to drive sales. Although some companies continue to enhance product features, a number of insurers have withdrawn from the marketplace or have reduced benefi ts or increased charges. Fixed Annuity sales declined by 29% as some companies lowered their production given the low interest rate environment and concerns on new business capital strain.
United Kingdom & Ireland. The United Kingdom insurance market increased by 6% (3) on an Annual Premium Equivalent
(APE) basis (4) recovering partially after the sharp fall in 2009. The
(IFAs) increasing by 15% (3). Following the partial sale of its Life
& Savings business, AXA’s retained business consists mainly in: ■ Sun Life Direct Protection business, which had a 3% (3)
market share in terms of total protection APE and 41% (3) in terms of the Direct Protection market only; ■ Elevate Wrap Platform, which grew its funds under management and reputation strongly in its second year of operation and reached 1.4% (6) market share based of funds under management; ■ AXA Wealth Management’s IFA business, which had a market share of 10.3% (3) in terms of APE.
(2) Please note that the numbers quoted for market data (life and annuity) are for nine months ended September 30, 2010 vs. 9 months 2009.
Source: LIMRA (annualized fi rst year premiums excluding drop-in premiums) and MARC annuity sales (fi rst year and renewal premiums excluding replacements).
(3) Source: ABI/MSE ©2010 Association of British Insurers, 9 months to Q3 2010 versus 9 months to Q3 2009.
(6) Platform report Q3 2010 with AXA estimate of advised market (excluding direct and institutional assets).
Germany (1). The market increased by 7.3% in 2010 with a 32%
Invest” and ranked second in Individual Life with a market share of 15%.
Belgium. In 2010, the market recovered from the aftermath of the economic and fi nancial crisis. As a result, market (7)
Life & Savings products was more pronounced on unit-linked products (+50%) with customers seeking higher returns in a low interest rates environment and willing to take on more risk.
Mediterranean and Latin American Region. In Spain, the market decreased by 11% (9), mainly explained by the movement from insurance products to banking savings products fostered by bank distribution channels. In Italy, spectacular growth at 23% (10) was boosted by the tax amnesty law applicable during the fi rst half of 2010, mainly in saving products. In Portugal, strong growth at 29% (11), mainly came from capitalization products. This market is dominated by bancassurance companies which form the top 5 providers. In Greece, the economic crisis deeply affected the private insurance market, producing a decrease of 4% (12) with many surrenders and lower new business. In Turkey, the market grew by 16% (13) mainly driven by protection, in particular Term products. In Morocco, limited growth at 2% (14) has been driven by the fi nancial crisis.
Greece 8th (12), in Turkey 10th (13), in Morocco 4th (14) and in Mexico 6th (15).
(6) Source: SIA (Swiss Insurance Association) publication “Jahresmedienkonferenz 2011” as per January 28, 2011.
(14) Source: Moroccan Association of Insurance Companies as of December 2009.
Hong Kong. The market demonstrated solid growth in 2010, fuelled by a buoyant economy which grew by 7.1% which was the highest since 2007. Inforce premiums increased by 16% (7).
The Life insurance market remained concentrated with the top 10 players, accounting for about 80% market share (7). AXA
Indonesia (9). The market was up by 22% in new business premiums, of which over 50% came from unit-linked products.
Thailand (10). The market recorded a growth of 8% for new business, of which short-term traditional saving products with guarantees were most popular due to the stable interest rate policy. AXA recorded strong growth of 26% in new business and was ranked 5th compared to 6th in 2009, with market share increased to 9.2% compared to 8.1% in 2009. Singapore (11).
increase over last year. Due to improved market sentiment, product mix has shifted from regular premium to single premium unit-linked products. AXA grew by 22% and ranked 8th by APE, with a stable market share at 3%. India (12). The Life insurance market grew by 35% in APE. As a result of new regulation, insurance players are moving their product mix towards traditional products or unit-linked products bundled with life protection. AXA grew by 36%, with market share increased from 1.0% in December 2009 to 1.3% in November 2010 and ranked 15th amongst private players. China (13). Life insurance market continued to grow by 31% in premiums, driven by strong growth of bancassurance business mainly participating products sales. AXA outperformed the market growing by 44%
Slovakia. AXA’s market share in the region increased by 0.4 pt to 3.3%. AXA ranked 10th in Hungary, 9th in Czech Republic and 12th in Poland. The Pension Funds market increased by 6% in Czech Republic, by 17% in Hungary, by 23% in Slovakia and by 24% in Poland. AXA’s position was stable with a market share of 8% in the region. AXA ranked 2nd in Czech Republic and Slovakia, and 5th in Poland and Hungary. The mandatory
Pension Funds in Hungary (Pillar II) have been nationalized by law voted on December 13rd, 2010.
(3) Ambition 2 measure (cumulative NFF since December 2007 and Plan for Life September 2010).
(11) Source: LIA statistics report as of September 30, 2010. New business represented annualized regular premium plus 10% single premium
(14) Source: estimate based on September 2010 data from Czech association of insurance companies, “Report of the Association of Hungarian
Construction declined by 4.5% and Liability by 1%. AXA ranked 2nd with a market share of 14.6%.
Kingdom, and market share increased by 0.4 pt to 5.4% (2)
driven by substantial growth in the Direct Personal lines business, especially Motor with strong increases in rates and policy count. The United Kingdom Personal lines market started to harden, led by Private Motor, with signifi cant rate increases throughout 2010. AXA improved its ranking to 4th in Personal lines with a market share of 7% (2). In Commercial lines, the market has contracted each year since 2004, due to soft pricing and a lack of economic growth. The United Kingdom recession further delayed the insurance market recovery, particularly in the SME segment. However, AXA ranked 5th, with an estimated market share of 6% (2). The United Kingdom Private Medical insurance market continued to be adversely impacted by the recession. AXA’s Healthcare revenues declined marginally
Corporate revenues. AXA remained 2nd in the Healthcare market, with its share further strengthened at 26% (3). In Ireland,
Germany (5). In 2010, the market increased by 0.7% (6). Personal and Commercial Motor increased by 0.5%, which was the fi rst increase in six years (6). Personal and Commercial Liability decreased by 1.0% due to lower sum insured in Commercial business following last years fi nancial crisis (6). In Personal Non-
Motor the situation was positive: with a 2% rise in Property and
Third Party Liability tariffs in July 2008. In the Gulf Region (15), the market grew in Saudi Arabia driven by mandatory Health insurance, (50% of the whole market with 52% growth), while the insurance market grew by 10% in United Arab Emirates driven by a few players. In Morocco (16), the market grew by 8%, mainly driven by Motor (+10%). In Mexico (17), the market increased by 7%, excluding one large outsourcing insurance contract.
(2) Source: Based on publicly reported competitor accounts and 2009 FSA Returns, excluding MAT, Home-Foreign Business and Lloyds premiums.
(3) Source: Laing & Buisson Health Care & Cover Report 2010.
(7) Source: SIA (Swiss Insurance Association) publication “Jahresmedienkonferenz 2011” as per January 28, 2011.
(9) Source: AXA Belgium estimates based on Assuralia market fi gures.
(15) Sources: KSA Tadawul website, Dubai stock exchange (Abu Dhabi stock exchange), as of December 2009.
(16) Source: Moroccan Association of Insurance Companies as of December 2009.
(17) Source: AMIS: Asociacion Mexicana de Instituciones de Seguros as of September 2010.
Greece 11th (4), in Turkey 1st (5), in Morocco 2nd (7) in Mexico 1st (8),
In Spain, AXA’s market share is 8% (1), in Italy 4% (2), in Portugal 9% (3), in Greece 3% (4), in Turkey 13% (5), in Morocco 18% (7)
in Mexico 15% (8), Saudia Arabia 3% (6) and in United Arab
while the Motor market grew by 9% mainly due to economic recovery and tariff increases. AXA ranked 1st in the direct Motor insurance market or 7th in the total Motor market with a market share of 4%. Japan (10). The market declined by 2.5% (11) while
Motor and Medical. AXA ranked 7th with a 5% market share.
Throughout 2010, the Asset Management industry continued the recovery path begun in 2009 largely due to the expansionary monetary policies characterized by large scale quantitative easing by central banks.
The most signifi cant infl ows went into fi xed income and equity products investing in emerging or global markets, corporate high yield bonds and absolute return products. On the other hand, investors fl ew out of money markets, and a growing fear of infl ation combined with the on-going concern on public debt sustainability in Europe has reduced demand for sovereign bonds.
(5) Source: Turkish Association of Insurance Companies as of September 2010.
(7) Source: Moroccan Association of Insurance Companies as of December 2009.
(17) AXA assets managers ranking based on company reports as of September 30, 2010.
GDP growth for 2010 will most likely turn out to have been much stronger than was expected at the beginning at the year, boosted by Emerging Markets, the US and Germany.
Second, industrialised countries, in particular the US, reaccelerated after an inventory-induced GDP growth at the beginning of the year. Whilst housing as well as the labour market remained lacklustre, the biggest surprise for US growth was consumption, which came in higher than expected.
The combination of growth gaining traction with ample and even rising liquidity as well as appealing valuation levels, was positive for equities. While not all regions were equal, most of the mature markets had a positive performance, with a signifi cant infl exion in the second half of the year.
Overall, the Dow Jones in New York increased by 11% in 2010, as did the FTSE in London (+9%) and the S&P 500 (+13%), whereas the Nikkei in Japan and the CAC 40 both depreciated by 3%. The MSCI World Index increased by 8% as well as emerging indices gained 12% and MSCI G7 increased by 9%
before a signifi cant rebound in the 4th quarter supported by better than anticipated economic expansion, rise in infl ation expectations following the announcement of a second round of quantitative easing measures by the Fed.
In Europe, the iTRAXX Main spreads widened by 31 bps and moved from 74 bps to 105 bps, while the iTRAXX Crossover slightly increased by 4 bps to 437 bps. In the United States, the
Against market turbulence in Europe, the Euro decreased against the main currencies during the year.
against the Euro (closing exchange rate moved from $1.43 at the end of 2009 to $1.34 at the end of 2010). The Yen gained 17% against the Euro (closing exchange rate moved from Yen 131.3 at the end of 2009 to Yen 108.8 at the end of 2010). The Pound Sterling gained 3% against the Euro
(closing exchange rate moved from £0.888 at the end of 2009 to £0.857 at the end of 2010). The Swiss Franc gained 16%
Euro (from $1.39 over 2009 to $1.34 over 2010). The Yen gained 6% against the Euro (from Yen 129.6 for the twelve months ending September 2009 to Yen 121.6 for the twelve months ending September 2010). The Pound Sterling increased by 3%
(from £0.891 over 2009 to £0.861 over 2010) and the Swiss
Life insurance market, in line with its objective of accelerating the development of its activities in the emerging countries, notably in Central and Eastern Europe. Created in 1997, Omniasig Life sells protection products, representing premiums of €5 million in 2010 (1), through a network of 1.437 agents (2). Omniasig Life ranked 11th (3) in the Romanian Life market and holds a 1.1%
AXA MPS joint-venture extended its current reach from 2,000 to 3,000 branches in total, providing access to an additional 1.6 million potential customers.
On June 9, 2010, AXA Investment Managers, Barr Rosenberg and Kenneth Reid (AXA Rosenberg co-founders) announced they had reached an agreement whereby AXA Investment
This joint offer would result in AMP acquiring AXA APH’s outstanding shares for AU$ 13.3 billion, of which AXA’ shares in
AXA APH would be paid for AU$ 7.2 billion in cash, while AXA
would acquire from AMP 100% of AXA APH’s Asian operations for AU$ 9.8 billion in cash. AXA APH’s Australia & New Zealand businesses price would be AU$ 3.5 billion.
shares, as well as AXA APH’s 2010 fi nal dividend of up to 9.25 cents per share.
The independent directors of AXA APH have unanimously recommended the transaction to their shareholders who are expected to vote on the transaction by the end of March 2011.
This transaction is subject to shareholder approval, court approvals and regulatory approvals from the Australian Federal
Treasurer & the New Zealand Overseas Investments Offi ce as well as other regulators notably in Asia. AMP has already received approval for the acquisition from both the Australian
On September 7, 2010, AXA fi nalized the acquisition of the insurance business of Crédit Agricole in Serbia. The new entity, which will operate under the name AXA zivotno osiguranje a.d.o is about to launch its activities. It will also benefi t from a distribution agreement with Crédit Agricole’s network in Serbia.
With a penetration rate of around 0.5% of the GDP, Azerbaidjan insurance market offers strong potential for growth, leveraging the footprint and market knowledge of its partner MBSK, as
(4) Based on AMP’s 10 day VWAP of AU$ 5.32, as of the close of trading on Friday, November 12, 2010.
(5) Calculated as the arithmetic average of the daily volume weighted average prices of AMP ordinary shares traded on ASX in the ordinary course of trading during the period of 10 consecutive trading days immediately prior to the relevant day.
(6) Pre any AXA APH 2010 fi nal dividend of up to AU$ 9.25 cents per share.
On October 28, 2010, Industrial and Commercial Bank of China Co. Ltd (ICBC), AXA, and China Minmetals
According to the agreement, ICBC will assume the majority stake of 60%, AXA will hold 27.5% and Minmetals will hold the remaining 12.5%. The fi nal completion of the transaction is subject to the relevant regulators’ approvals. After the completion of the transaction, AXA-Minmetals Assurance will be renamed ICBC-AXA Life Insurance Co. Ltd.
APH’s outstanding shares for AU$ 11.0 billion, of which AXA’s shares in AXA APH would be paid for AU$ 6.0 billion in cash, while AXA would acquire from AMP 100% of AXA APH’s Asian operations for AU$ 7.7 billion in cash. Compared to the closing price of AXA APH share price on November 5, 2009, this offer provided a 31% premium to AXA APH’s shareholders.
On December 13, 2009, AXA announced that a revised joint offer, their best and fi nal, was communicated by AXA and
AMP would buy AXA’s shares in AXA APH for AU$ 6.9 billion in cash and AXA would acquire from AMP AXA APH’s Asian operations for AU$ 9.1 billion in cash. As a result, net cash consideration paid by AXA would be AU$ 2.2 billion (or €1.4 billion). Compared to the closing price of AXA APH share price on November 5, 2009, this offer provided a 53% premium and represented a 16% improvement on the original proposal of November 8, 2009.
(NAB), which was recommended by the AXA APH Committee of independent directors. Under terms publicly disclosed by NAB, the offer subject to AXA’s approval, made by NAB provided a 58% premium to AXA APH’s shareholders compared the closing price of AXA APH share price on November 5, 2009 and the impact for AXA would be comparable to those of the
On June 24, 2010, AXA announced that it had agreed to sell to Resolution Ltd part of its UK Life operations including UKbased traditional life and pensions businesses, its IFA protection and corporate pension businesses, and its annuity businesses for a consideration of £2.8 billion (or ca. €3.3 billion).
AXA Winterthur Wealth Management specialist pensions and investments operations, as well as its AXA Direct Protection business. The Group also remains committed to all its other
This transaction underlines AXA’s focus in Life & Savings on further optimizing capital allocation throughout the Group,
(1) Based on foreign exchange rate as of December 5, 2009.
towards identifi ed business lines (including Health, Protection and unit-linked) and geographies (including high growth markets).
The consideration of £2.8 billion (or ca. €3.3 billion) consists of £2.3 billion (or ca. €2.7 billion) in cash and £0.5 billion (or ca.
P&C with €275 million of collateralized, 3 years protection against European windstorms in Belgium, France (excluding
NYSE became effective on March 26, 2010. AXA fi led its
(i) AXA’s ADS trade in the United States on the OTCQX
Commission settling charges against three AXA Rosenberg units and requiring payment of client compensation and penalty amounts, leading to € 66 million net provision already refl ected in AXA’s half year 2010 accounts.
New Zealand businesses with AMP and the sale of AXA APH’s
(ii) on March 2, 2011, the AXA APH shareholders approved all resolutions in relations to the proposed merger of AXA APH’s
Australian and New Zealand businesses with AMP and the sale of AXA APH’s Asian businesses to AXA,
(iii) on March 7, 2011, the Suprerme Court made orders approving the schemes of arrangement between AXA APH and its shareholders in relation to the proposed transaction,
has issued its approvalin connection with the proposed transfer by AXA’s wholly-owned Swiss subsidiary, AXA Life Ltd., of its entire 15.6% interest in Taikang Life, China’s 4th largest life insurer, to a consortium of new and existing shareholders. The consideration for this transaction amounts to USD 1.2 billion (or ca. Euro 0.9 billion). This corresponds to implied 2009 multiples of 21x net earnings(1) and 6x book value(1).
This transaction is expected to generate a positive impact of ca. Euro 0.8 billion in net income and reduce debt gearing by 1 point in the fi rst half of 2011.
This section includes certain terms that are used by AXA in analyzing its business operations and, therefore, may not be comparable with terms used by other companies; these terms are defi ned in the glossary provided at the end of this section.
As a consequence of the partial sale of the United Kingdom
Life & Savings operations, 2010 APE (1) is based on retained business only.
The restatements to a comparable basis were mainly driven by the evolution of Euro against other currencies (€-2,605 million or -3 points) and the impact of partial UK Life & Savings operations disposal (€+801 million or +1 point). On a comparable basis, gross consolidated revenues were down 1%.
Total Life & Savings New Business APE amounted to €5,780 million, down 7% compared to 2009. On a comparable basis, APE decreased by 2%, mainly driven by France, Japan and Belgium partly offset by Mediterranean & Latin American
The United States APE decreased by €48 million (-5%) to €986 million driven by (i) Variable Annuities APE down 22%
Universal Life guaranteed features in the fi rst quarter of 2009, and (iii) mutual funds increased by 26% refl ecting higher sales under improved market conditions.
Excluding the Cancer product discontinuation impact (€85 million), APE decreased by €11 million (-3%). This was mainly driven by a €13 million decrease (-8%) in Health following lower
Mediterranean & Latin American Region APE increased by €49 million (+10%) to €553 million mainly due to (i) higher contribution of general account savings products (€+26 million or +9%) mainly in AXA MPS in Italy (€+22 million or +13%) in a favorable environment, (ii) higher sales of Group Life business
(€+5 million) mainly driven by Pension funds partly offset by (iii)
Hong Kong APE increased by €30 million (+25%) to €159 million due to higher sales of Protection products driven by the launch of new products and improved productivity in the agents channel.
Property & Casualty gross revenues were up 5% to €27,413 million, or up 1% on a comparable basis mainly driven by Personal lines (+4%) mainly driven by the United Kingdom &
Ireland and France, partly offset by Germany. Commercial lines decreased by 3% especially in Non-Motor (-4%) mainly driven by the United Kingdom & Ireland, the Mediterranean & Latin
and Non-Motor (+3%), refl ecting the strength of the AXA brand as well as the ability of AXA proprietary networks to retain their customers in a rising pricing environment.
Motor revenues grew by 5% mainly driven by (i) the United
Property notably benefi ting from the rebound on bank mortgage loan activity in Italy and tariff increases in Spain, (ii) France
(iii) Belgium (+3%) mainly due to Property mainly due to tariff increases, partly offset by (iv) Germany (-3%) following restructuring of Medical Liability leading to cancellations.
Commercial lines (38% of P&C gross revenues) decreased by 3% on a comparable basis with Non-Motor down 3%
Kingdom & Ireland down 11% in a soft market environment and the strategy to exit from unprofi table schemes, (ii) the
(ii) France (+2%) mainly as a result of tariff increases in a context of focus on profi tability, partly offset by (iii) the Mediterranean &
on a comparable basis to €3,328 million mainly driven by management fees (+5%) due to higher average assets under management (AUM) up 3% and higher average fees up
AUM increased by €16 billion from year-end 2009 to €362 billion at December 31, 2010 driven by market appreciation of €31 billion, positive exchange rate impact of €24 billion, partly offset by net outfl ows of €44 billion (€37 billion from Institutional clients, €6 billion from Retail and €1 billion from Private Clients).
(+1%) to €1,219 million. Excluding distribution fees (retroceded to distributors), net revenues increased by €13 million (+1%)
AUM increased by €17 billion from year-end 2009 to €516 billion at the end of December 31, 2010 mainly as a result of €18 billion positive exchange rate impact and a €22 billion positive market effect partly offset by €20 billion net outfl ows, mostly driven by net outfl ows at AXA Rosenberg (€29 billion) partly offset by €9 billion net infl ows mainly on AXA Fixed Income and AXA
Net banking revenues were up 16% both on reported and comparable basis to €459 million, mainly driven by Belgium
Fees and revenues from investment contracts with no participating feature 518 547
Amortization of value of purchased life business in force (250) (365)
Net income from investments in affi liates and associates 71 20
Net realized capital gains or losses attributable to shareholders 437 (386)
Region (€+26 million), a lower investment income allocated to policyholders, notably in the United States
(€+221 million); (ii) Higher fees & revenues (€205 million or up 3%) mainly driven by: a. Unit-linked management fees up €161 million (+9%), mainly driven by the United States (€+149 million)
States (€+42 million) following financial market improvement impact on mutual funds assets under management and Australia & New Zealand (€+17 million), c. Loadings on premiums and mutual funds was down €9 million mainly driven by France (€+68 million) with higher loadings on premiums on Group Protection in line with higher gross revenues, offset by the United
(down €9 million) mainly driven by lower pre-tax underlying earnings partly offset by lower positive tax one-offs
(€6 million in Belgium and €7 million in Germany compared to €61 million in 2009).
(i) improved combined ratio following lower attritional claims charge mainly as a result of a more selective underwriting at
Group reinsurance operations, partly offset by (iii) less favorable results in run-off Property & Casualty activities.
(+12%) mainly due to (i) higher revenues (€148 million or +5%)
following higher average AUM and higher distribution fees (€49 million) mainly driven by higher Retail AUM at
(ii) AXA IM (€-22 million), notably refl ecting external fees related to AXA Rosenberg coding error.
Banking segment’s underlying earnings amounted to €9 million. On a constant exchange rate basis, banking underlying earnings increased by €13 million, mainly driven by Belgium (€+40 million) benefi ting from a €22 million nonrecurring tax benefi t, partly offset by Hungary (€-17 million) and
Holdings and other companies’ underlying earnings amounted to €-836 million. On a constant exchange rate basis, holdings underlying earnings decreased by €36 million (-5%)
mainly due to higher taxes on higher dividends upstream to the parent company and lower positive tax one-offs notably in
Group net capital gains attributable to shareholders amounted to €437 million. On a constant exchange rate basis,
Group net capital gains and losses attributable to shareholders were up €819 million mainly due to: (i) €+662 million lower impairments, to €-379 million in 2010 mainly driven by lower impairments on equity and fi xed income; (ii) €+177 million higher realized capital gains, to €+920 million in 2010, mainly driven by €+247 million higher realized gains on equities, €+190 million following the change in French tax regulation on the “réserve de capitalisation” partly offset by lower realized gains on fi xed income €-274 million; (iii) €-104 million related to an unfavorable impact of equity derivatives hedging programs.
Switzerland and the United States, d. €+35 million in the United Kingdom refl ecting an undiscounted tax adjustment on lower unrealized gains attributable to policyholders in unit-linked life funds; (iii) Higher other exceptional operations results for €+236 million, from €-202 million in 2009 to €+34 million.
December 31, 2009 are presented in the table below: (in Euro million)
Weighted average number of shares 2,266.3 2,274.6 2,127.0 2,133.3 2,127.0 2,133.3
Net income (Euro per Ordinary Share) 1.08 1.08 1.56 1.56 1.51 1.51 -31% -31%
Adjusted earnings (Euro per Ordinary Share) 1.77 1.77 1.50 1.49 1.50 1.49 19% 18%
Underlying earnings (Euro per Ordinary Share) 1.58 1.57 1.68 1.67 1.68 1.67 -6% -6%
(b) Revised net income EPS takes into account interest payments related to undated subordinated debts classifi ed in equity, excluding foreign exchange impacts. Previously disclosed EPS included foreign exchange adjustments and, as at December 31, 2009, basic net income EPS amounted to €1.51 and fully diluted net income EPS to €1.51. Excluding foreign exchange impact refl ects implemented hedges which would qualify as net investment hedges with related changes in fair values recognised through translation reserves.
(b) For the periods ended December 31, 2010 and December 31, 2009 the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectively €+13,788 million and €+23,861 million, and benefi ts and claims by the offsetting amounts respectively.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 347 (52)
Gross revenues decreased by €1,704 million (-10%) to €14,650 million (1). On a comparable basis, gross revenues decreased by €1,717 million (-11%) mainly due to: ■ Group Retirement decreasing by €1,103 million (–54%), due to much lower sales of large contracts compared to 2009; ■ Individual Savings decreasing by €783 million (-9%) explained by a lower volume of large contracts notably on corporate clients as well as on banking partnerships, resulting from selective underwriting in the context of fi erce competition; ■ partly offset by a rise in both Individual and Group Protection business (€+170 million or +3%).
Group Protection in line with higher gross revenues, and higher management fees on unit-linked products.
(ii) €-125 million from a charge reclassifi ed from technical margin to commissions, refl ecting somecontractual changes in
Expenses decreased by €21 million (-1%) to €-2,296 million driven by (i) €+49 million lower volume of commissions as the positive impact of the reclassifi cation between technical margin and commissions partly offset by the effect of a change in product mix towards Protection business, and (ii) €-27 million higher general expenses mainly due to higher salaried sales force costs.
to €-13 million due to the non-repeat of a 2009 actuarial assumptions update.
Adjusted earnings increased by €292 million (+52%) to €854 million mainly driven by higher underlying earnings, lower impairments (€+92 million) and the change in the French tax regulation on the “réserve de capitalisation” balance
Net income increased by €74 million (+9%) to €917 million refl ecting higher adjusted earnings,€+16 million higher foreign exchange impact partly offset by a less favorable change in fair value of mutual funds.
Net capital gains or losses attributable to shareholders net of income tax (138) (16)
decreased by 13% refl ecting repricing and redesign actions in 2009 of Variable Annuity products, partially offset by the impact of the progressive launch of Retirement Cornerstone and Structured Capital Strategies products in 2010.
Retirement Cornerstone was introduced in proprietary channels in January, and was released within third-party channels beginning of March, 2010; ■ Life premiums (29% of gross revenues) increased by 6%
increased by 20% driven by improved equity market conditions compared to last year.
APE decreased by €8 million (-1%) to €986 million. On a comparable basis, APE decreased by €48 million (-5%): ■ Variable Annuity APE decreased by 22% primarily in the
Net technical margin decreased by €925 million from €500 million to €-426 million. On a constant exchange rate basis, net technical margin decreased by €908 million, primarily due to lower Variable Annuity GMxB margins, refl ecting additional
Life products, partly offset by the impact of a change in general account investment return assumption (€-70 million).
Income tax expenses decreased by €109 million (-59%) to €-75 million. On a constant exchange rate basis, income tax expenses decreased by €112 million (-61%). The tax expense decrease refl ects the impact of favorable tax settlements in 2010 (€76 million) and lower pre-tax underlying earnings.
Adjusted earnings decreased by €188 million (-36%) to €340 million. On a constant exchange rate basis, adjusted earnings decreased by €202 million (-38%) mainly refl ecting the decrease in underlying earnings and €117 million higher impairments on CMBS portfolio.
Net income increased by €438 million to €410 million. On a constant exchange rate basis, net income increased by €421 million. Net income improved due to an increase in the fair value of interest rate derivatives (€+178 million) and alternative investments (€+90 million) as well as a favorable change in the fair value of equity derivatives related to a statutory liability hedge (€+358 million) mostly expired in March 2010, partly offset by the decrease in adjusted earnings (€-202 million).
Net capital gains or losses attributable to shareholders net of income tax (6) (38)
Profi t or loss on fi nancial assets (under FV option) & derivatives 59 (165)
As a consequence of the partial disposal of the Life & Savings business, 2010 gross revenues, underlying earnings, adjusted earnings and net income only include 8 months of the sold business. For consistency, 2010 fi gures have been compared to the same scope for 2009, i.e. 8 months for sold business and 12 months for retained business; this is referred to as a
APE decreased by €381 million (-41%) to €545 million. On a constant exchange rate basis and for the retained business only, APE increased by €140 million (+36%), driven by Mutual funds sales through the Elevate platform (€+71 million) and
Investment margin decreased by €11 million (-8%) to €122 million. On a constant exchange rate and comparable scope basis, the investment margin increased by €26 million
On a constant exchange rate and comparable scope basis, income tax expenses decreased by €70 million largely driven by lower pre-tax underlying earnings and lower tax rate.
Underlying earnings decreased by €52 million (-28%) to €134 million. On a constant exchange rate and comparable scope basis, underlying earnings decreased by €37 million
Net capital gains or losses attributable to shareholders net of income tax 5 20
Profi t or loss on fi nancial assets (under FV option) & derivatives 46 191
On a constant exchange rate basis, expenses decreased by €117 million (-14%) mainly driven by (i) €83 million lower DAC
As a result, the underlying cost income ratio improved by 16 points to 60.6%.
Underlying earnings increased by €124 million (+59%) to €335 million or increased by €103 million (+49%) on a constant exchange rate basis.
Adjusted earnings increased by €109 million (+47%) to €340 million or increased by €88 million (+38%) on a constant exchange rate basis, driven by €103 million higher underlying earnings and €56 million lower impairment, partly offset by €71 million lower realized capital gains.
Net income decreased by €44 million to €377 million. As a reminder, AXA Japan closes its full year accounts at the end of September. According to IFRS principles, full year 2008 accounts were adjusted with a €106 million provisional loss refl ecting the increase in credit spreads from October to
December 2008. This adjustment was reversed in 2009. The 2010 full year accounts were not adjusted.
Net capital gains or losses attributable to shareholders net of income tax 11 (145)
Profi t or loss on fi nancial assets (under FV option) & derivatives 29 25
driven by higher single premiums from co-insured Pension business, general account and unit-linked Annuities partly offset by lower single premiums from general account short term investment products and lower Protection with savings components in regular premiums; ■ Health (33% of gross revenues) increased by €84 million
APE decreased by €5 million (-1%) to €464 million due to: ■ Life increased by €2 million (+1%) driven by higher new business from annuities partly offset by declining single premiums from general account short term investment products and lower Variable Annuities with secondary guarantee (“Twinstar”); ■ Health decreased by €8 million (-6%) due to an insolvency of a major broker at the end of 2009 partly compensated by the launch of long term care products.
Adjusted earnings increased by €173 million to €185 million due to lower impairments (€+145 million) mainly on fi xed income assets, higher underlying earnings and higher capital gains (€+13 million).
Net income increased by €264 million to €214 million mainly driven by higher adjusted earnings and the non-recurring policyholder bonus allocation related to the share transfer of the Health company from the Life company to the German holdingin 2009.
Gross revenues increased by €649 million (+15%) to €5,090 million (1). On a comparable basis, gross revenues increased by €246 million (+6%): ■ Group Life increased by €192 million (+5%) to €4,318 million mainly due to higher single premiums (€+122 million) and higher regular premiums (€+70 million) following low level of cancellations in 2009; ■ Individual Life increased by €57 million (+9%) to €773 million as a consequence of higher single premiums (€+49 million)
APE increased by €28 million (+11%) to €283 million. On a comparable basis, APE increased by €6 million (+2%) mainly due to Group Life (€+9 million) driven by higher demand for fullprotection insurance schemes.
Investment margin increased by €21 million (+23%) to €113 million. On a constant exchange rate basis, investment margin increased by €12 million (+13%) due to lower investment income more than offset by lower allocation to policyholders.
Net technical margin rose by €6 million (+4%) to €169 million.
On a constant exchange rate basis, net technical margin decreased by €7 million (-4%) mainly due to higher bonus allocated to policyholders.
On a constant exchange rate basis, expenses remained fl at resulting from acquisition expenses up €8 million (+19%)
refl ecting volume increase and higher amortization of deferred acquisition costs due to higher profi ts, fully offset by administrative expenses down €8 million (-6%) refl ecting a tight expense management.
As a result, the underlying cost income ratio increased by 1.7 points to 46.4%.
Underlying earnings decreased by €14 million (-6%) to €212 million. On a constant exchange rate basis, underlying earnings decreased by €31 million (-14%).
Adjusted earnings increased by €21 million (+10%) to €247 million. On a constant exchange rate basis, adjusted earnings increased by €2 million (+1%) mainly driven by lower impairments mainly on alternative investments, partly offset by lower underlying earnings.
On a constant exchange rate basis, net income increased by €148 million (+80%) mainly due to favorable changes in fair value of interest rate derivatives as well as positive one-off tax impact in 2010 (€54 million).
Net capital gains or losses attributable to shareholders net of income tax 69 24
Profi t or loss on fi nancial assets (under FV option) & derivatives 33 188
Gross revenues decreased by €14 million (-1%) to €2,506 million (1): ■ Individual Life & Savings revenues increased by 3% (or €+50 million) mainly driven by the strong increase in unitlinked investment and savings products by €61 million
Life & Savings APE decreased by 18% (or €-41 million) mainly driven by Crest products following the lowering of guaranteed rates in the second half of 2010 and an increasing competition from banks. Group Life & Savings APE decreased by 15% (or €-4 million).
Net technical margin decreased by €28 million (-29%) to €67 million mainly explained by the 2009 non-recurring positive prior year reserve developments in individual Life (€-47 million)
partly offset by a more favorable mortality and disability experience (€+14 million).
Expenses decreased by €6 million (-2%) to €-250 million mainly driven by lower deferred acquisition cost amortization
(€-18 million) partly offset by higher investments to further improve the quality of service.
Income tax expenses increased by €64 million to €-57 million explained by the 2009 non-recurring impact of the favorable court decision for insurance companies on RDT (Revenus
Gross revenues increased by €472 million (+7%) to €6,955 million. On a comparable basis, gross revenues increased by €454 million (+7%) mainly driven by a strong growth in general account savings products (€+432 million or
+10%) mainly in Italy (€+479 million or +13%, of which AXA
sales of Group Life business (€+11 million or +27%) mainly in Mexico, and (iii) Variable Annuity products (€+6 million or
Net technical margin rose by €10 million (+10%) to €108 million. On a constant exchange rate basis, net technical margin increased by €8 million (+8%) mainly due to a higher mortality margin partly offset by the release of a risk reserve in
On a constant exchange rate basis, expenses increased by €37 million (+9%) mainly to support business development in
Amortization of VBI decreased by €8 million (-28%) to €-21 million. On a constant exchange rate basis, amortization of VBI decreased by €9 million (-29%) mainly due to the natural decline of VBI balance in AXA MPS.
Underlying earnings increased by €2 million (+2%) to €117 million. On a constant exchange rate basis, underlying earnings increased by €1 million (+1%).
Adjusted earnings increased by €33 million (+28%) to €152 million. On a constant exchange rate basis, adjusted earnings increased by €32 million (+27%) mainly due to higher realized capital gains on fi xed income and equities as well as higher underlying earnings.
The following tables present the operating results for the other Life & Savings operations of AXA: CONSOLIDATED GROSS REVENUES
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (0) (17)
APE increased by €13 million (+5%) to €283 million. On a comparable basis, APE decreased by €38 million (-14%)
Underlying earnings increased by €36 million (+77%) to €82 million. On a constant exchange rate basis, underlying earnings increased by €21 million (+46%). On a 100% share basis, the evolution of underlying earnings was as follows: ■ Investment margin increased by €41 million to €32 million.
On a constant exchange rate basis, net technical margin decreased by €18 million due to unfavorable claims experience in Individual Protection products (€-5 million) and the subsequent non-recurring strengthening of Individual
On a constant exchange rate basis, expenses increased by €21 million (+4%) following evolution of fees and higher staff costs; ■ Amortization of VBI increased by €10 million (+93%)
to €-22 million. On a constant exchange rate basis, amortization of VBI increased by €7 million (+58%) due to a strong recovery in fi nancial markets in second half of 2009 which signifi cantly reduced the 2009 amortization; (1) AXA interest in AXA Asia Pacifi c Group is 54.03% broken down into 53.93% direct interest holding and an additional 0.10% owned by the AAPH
■ As a consequence, the underlying cost income ratio decreased by 3.0 points to 83.9%; ■ Income tax benefi ts increased by €13 million to €15 million.
(€13 million) partly offset by an increase in pre-tax underlying earnings.
On a constant exchange rate basis, net income increased by €36 million (+132%), broadly in line with adjusted earnings.
Gross revenues increased by €118 million (+10%) to €1,321 million. On a comparable basis, gross revenues increased by €149 million (+13%) mainly due to higher revenues from both Protection & Savings (€+86 million) and Investment &
Underlying earnings increased by €8 million (+6%) to €142 million. On a constant exchange rate basis, underlying earnings increased by €2 million (+1%). On a 100% share basis, the evolution of underlying earnings was as follows: ■ Investment margin increased by €3 million (+16%) to €24 million. On a constant exchange rate basis, investment margin increased by €2 million (+11%) mainly due to higher average investment spread; ■ Fees & revenues increased by €53 million (+19%) to €332 million. On a constant exchange rate basis, fees & revenues increased by €40 million (+14%) mainly as a result of higher gross revenues; ■ Net technical margin increased by €5 million (+10%) to €53 million. On a constant exchange rate basis, net technical margin increased by €3 million (+5%) mainly due to favorable claims experience partially offset by lower surrender margin due to improved persistency; ■ Expenses increased by €15 million (+13%) to €-128 million.
On a constant exchange rate basis, expenses increased by €10 million (+8%) mainly due to increased investments in distribution channels; ■ Amortization of VBI increased by €26 million to €-8 million.
increased by €26 million mainly due to a one-off adjustment on VBI amortization in 2009; ■ As a consequence, the underlying cost income ratio increased by 6.0 points to 33.3%; ■ Income tax expenses increased by €8 million to €-14 million.
On a constant exchange rate basis, income tax expenses increased by €7 million mainly driven by higher pre-tax underlying earnings.
As a result, the underlying cost income ratio increased by 6.6 points to 91.8%.
Net income decreased by €8 million to €6 million. On a constant exchange rate basis, net income decreased by €8 million mainly driven by lower adjusted earnings.
Underlying earnings increased by €5 million to €10 million. On a constant exchange rate basis, underlying earnings increased by €4 million (+86%) as result of improved morbidity experience in 2010.
Adjusted earnings increased by €6 million (+83%) to €13 million. On a constant exchange rate basis, adjusted earnings increased by €4 million (+60%) driven by higher underlying earnings.
Gross revenues increased by €80 million (+48%) to €244 million. On a comparable basis, gross revenues increased by €50 million (+30%) mainly due to overall higher level of new business sales (mainly in unit-linked products) resulting from the improved market conditions in Indonesia and Singapore.
APE increased by €78 million (+88%) to €166 million. On a comparable basis, APE increased by €52 million (+58%)
Mandiri Bank (€+19 million), and in Thailand (€+10 million) with strong growth in the bancassurance channel (€+7 million) and
Underlying earnings as well as adjusted earnings and net income decreased by €13 million to €-22 million due to the build-up of the infrastructure due to geographic expansion in
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income attributable to AXA’s Property & Casualty segment for the periods indicated.
(1) Mainly current year loss ratios in Germany, Belgium, Switzerland and Mediterranean & Latin American Region.
Change in unearned premium reserves net of unearned revenues and fees (209) (103)
Amortization of value of purchased life business in force - -
Profi t or loss on fi nancial assets (under fair value option) & derivatives 27 187
(a) Mediterranean & Latin American Region includes Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region and Mexico.
to €2,233 million mainly as a result of tariff increases in all lines of business in a context of focus on profi tability with a limited negative portfolio development except in Construction negatively impacted by the economic context.
Net technical result increased by €51 million (+3%) to €1,524 million: ■ Current accident year loss ratio decreased by 5.0 points to 76.5% refl ecting lower impact of Nat Cat charge (-1.4 points, Klaus storm in 2009 and Xynthia in 2010) and mainly a positive impact of tariff increases notably in Motor; ■ All accident year loss ratio decreased by 0.2 point to 74.0% as a result of the decrease in current accident year loss ratio mostly offset by lower positive prior year reserve developments.
Expense ratio rose by 0.2 point to 25.1% as a consequence of higher IT investments in order to improve operational effi ciency.
Net investment result increased by €9 million (+2%) to €609 million mainly explained by a higher income from infl ation linked securities.
Income tax expenses decreased by €17 million (-7%) to €-229 million mainly explained by higher level of non taxable revenues.
Net income increased by €17 million (+4%) to €462 million driven by the increase in adjusted earnings partly offset by less favorable change in fair value of mutual funds and derivatives
Profi t or loss on fi nancial assets (under FV option) & derivatives 5 7
Gross revenues increased by €254 million (+6%) to €4,229 million (1). On a comparable basis, gross revenues increased by €119 million (+3%): ■ Personal lines (61% of gross revenues) were up 12% to €2,547 million. Motor was up 34% to €1,061 million due to the combination of tariff increases in a hardening market and an increase in volumes on both UK Direct and intermediaries channels, together with a strong performance in Ireland.
Health was up 1% to €565 million. Other Personal lines were down 9% to €302 million mainly refl ecting selective underwriting within Travel and Warranty lines; ■ Commercial lines (39% of gross revenues) were down 8% to €1,606 million. Motor was up 10% to €276 million refl ecting new business and tariff increases within the United Kingdom and Ireland. Non-Motor was down 11% to €1,330 million following the strategy to exit unprofi table schemes and the continuing impact of the soft market conditions. Health was down 3% to €636 million refl ecting the focus on margins in a competitive environment on large corporate schemes partially offset by growth in the SME business.
refl ecting the deterioration in current year loss ratio combined with lower positive prior year reserve developments.
As a result, the combined ratio was up 1.6 points to 103.9%.
Net investment result increased by €1 million (+1%) to €218 million. On a constant exchange rate basis, net investment result decreased by €4 million (-2%) mainly resulting from lower cash yields.
Underlying earnings decreased by €50 million (-50%) to €50 million. On a constant exchange rate basis, underlying earnings decreased by €49 million (-49%).
Adjusted earnings decreased by €1 million (-1%) to €42 million. On a constant exchange rate basis, adjusted earnings were stable. The decrease in underlying earnings, combined with €7 million lower realized capital gains, was offset by €57 million lower impairment charges mainly due to fi xed income (€22 million) and equities (€19 million).
On a constant exchange rate basis, net income decreased by €10 million (-23%) refl ecting stable adjusted earnings combined with higher restructuring costs (€-10 million).
Net income from investments in affi liates and associates 2 (0)
Net capital gains or losses attributable to shareholders net of income tax 8 (105)
Profi t or loss on fi nancial assets (under FV option) & derivatives 7 23
Gross revenues decreased by €38 million (-1%) to €3,489 million (1): ■ Personal lines (64% of gross revenues) decreased by 2% to €2,221 million due to a negative price impact in Motor as a result of market price pressure and cancellations in Medical
Liability, partly offset by higher new business in Property, supported by the bundled product Box Plus; ■ Commercial lines (29% of gross revenues) decreased by 0.3% resulting from cancellations and lower sum insured in
Industrial Liability and Marine insurance; ■ Other lines (7% of gross revenues) increased by 3% to €249 million mainly due to a higher quota share in assumed
(+0.6 point); ■ All accident year loss ratio increased by 6.0 points to 73.3%
due to higher current accident year loss ratio and lower positive prior year reserve developments.
Income tax expenses decreased by €74 million (-66%) to €-38 million due to lower pre-tax underlying earnings and lower positive tax one-offs (€7 million in 2010 compared to €13 million in 2009).
Adjusted earnings increased by €6 million (+4%) to €185 million mainly due to lower underlying earnings, more than offset by lower level of impairments on fi xed income assets and higher realized capital gains on equities.
Profi t or loss on fi nancial assets (under FV option) & derivatives 20 62
with Motor down 1% and Non-Motor down 7% negatively impacted by the economic context and the focus on profi tability most notably in Workers’ compensation and
Net technical result increased by €44 million (+7%) to €696 million: ■ Current accident year loss ratio decreased by 1.2 point to 77.2%, mainly due to fewer losses (-2.6 points or €-57 million), price increases (-0.7 point) partly offset by a
Défi nitivement Taxés: €39 million) and higher pre-tax underlying earnings partly offset by a non-recurring tax benefi t in 2010
Net income decreased by €35 million (-19%) to €151 million mainly driven by an unfavorable change in fair value on infl ation derivatives and by a less favorable change in fair value on fi xed income mutual funds mainly due to credit spreads.
and from tariff increases in Spain and (iii) Motor (up 1% or €+37 million) refl ecting strong performance in Turkey due to the competitive Third Party Liability products partly offset by
Liability and Construction, as well as lower new business in Property mainly due to selective underwriting in Mexico.
Motor decreased by 7% refl ecting the focus on profi table business.
Net technical result increased by €128 million (+7%) to €1,924 million. On a constant exchange rate basis, net technical result increased by €80 million (+4%): ■ Current accident year loss ratio decreased by 2.5 points to 75.2%, mainly driven by (i) the focus on profi tability through pricing actions notably on Personal lines and selective underwriting on Commercial lines combined with (ii) lower
driven by the decrease of current accident year loss partly offset by lower prior year reserve developments mainly on
Income tax expenses increased by €38 million (+31%) to €-162 million. On a constant exchange rate basis, income tax expenses increased by €36 million (+29%) refl ecting higher pre-tax underlying earnings and a negative country mix.
Profi t or loss on fi nancial assets (under FV option) & derivatives (12) 5
Net technical result increased by €166 million (+23%) to €892 million. On a constant exchange rate basis, net technical result increased by €96 million (+13%): ■ Current accident year loss ratio decreased by 4.7 points to 68.5% mainly driven by lower Nat Cat charge (-1.8 point) and improvements in Commercial lines (-2.6 points) refl ecting a selective underwriting policy; ■ All accident year loss ratio decreased by 4.4 points to 61.9%
Expense ratio decreased by 0.7 point to 26.9% mainly driven by acquisition cost decrease mainly as a result of a change in agents’ commission structure.
to €195 million. On a constant exchange rate basis, net investment result decreased by €6 million (-3%) mainly due to lower interest rates partly offset by a change in asset allocation towards fi xed income.
On a constant exchange rate basis, net income increased by €114 million (+50%) mainly driven by higher adjusted earnings.
(in Euro million) 2010 2009 o/w Central and Eastern Europe (b) (8) (10)
Gross revenues increased by €262 million (+22%) to €1,436 million (1). On a comparable basis, gross revenues increased by €75 million (+6%) as a result of higher volumes and tariffs increases in both Motor and Property lines.
On a constant exchange rate basis, net income increased by €41 million (+47%) mainly due to higher adjusted earnings.
As a result, the combined ratio was up by 4.0 points to 103.6%.
On a constant exchange rate basis, income tax expenses decreased by €4 million mainly due to lower pre-tax underlying earnings.
On a constant exchange rate basis, underlying earnings decreased by €32 million.
Adjusted earnings decreased by €25 million to €-1 million. On a constant exchange rate basis, adjusted earnings decreased by €24 million mainly due to lower underlying earnings partly offset by €8 million higher realized capital gains.
Net income decreased by €24 million to €-4 million. On a constant exchange rate basis, net income decreased by €23 million mainly due to lower adjusted earnings.
Gross revenues increased by €78 million to €109 million. On a comparable basis, gross revenues increased by €9 million driven by Poland (+26% or €+8 million) with signifi cant net new infl ows in Personal Motor (+45,000) and Ukraine (+2% or €+1 million) mainly in Commercial Health.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 32 20
Net capital gains or losses attributable to shareholders net of income tax 5 12
Profi t or loss on fi nancial assets (under FV option) & derivatives 26 16
Net technical result increased by €53 million (+17%) to €364 million. On a constant exchange rate basis, net technical result increased by €52 million (+17%): ■ Current accident year loss ratio decreased by 1.6 points to 85.6% explained by a lower level of attritional claims charge, refl ecting the impact of portfolio selection focused on profi tability and tariff increases; ■ Prior year technical result increased by €19 million (from €72 million to €91 million) as a result of positive prior year reserve and premium developments.
Expense ratio increased by 0.4 point to 15.4% mainly due to higher staff costs related to the development of new foreign branches and a negative exchange rate impact (0.1 point).
to €184 million. On a constant exchange rate basis, net investment result decreased by €3 million (-2%).
Income tax expenses increased by €11 million (+15%) to €-81 million. On a constant exchange rate basis, income tax increased by €10 million (+15%) mainly due to higher pre-tax underlying earnings partly offset by €5 million non-recurring tax benefi t.
Underlying earnings increased by €29 million (+22%) to €161 million. On a constant exchange rate basis, underlying earnings increased by €28 million (+21%).
Adjusted earnings increased by €22 million (+15%) to €166 million on a constant exchange rate basis, driven by the increase in underlying earnings partly offset by €7 million lower realized capital gains net of impairments notably in equities.
Underlying earnings increased by €20 million to €17 million as a result of improved technical results in AXA Motor Liability cover and lower Nat Cat charge impacting AXA Property pool results.
Net income increased by €19 million to €22 million refl ecting higher adjusted earnings, positive impact of unrealized capital gains mainly on equities partly offset by negative impact of foreign exchange rates.
Gross revenues increased by €46 million (+5%) to €929 million (2). On a comparable basis, gross revenues decreased by €15 million (-2%) mainly due to the end of a jointventure in Japan and portfolio selection in Legal Protection partly offset by Travel business development.
Underlying earnings increased by €1 million (+3%) to €16 million mainly driven by Travel activity development.
Net income increased by €8 million to €20 million mainly refl ecting higher adjusted earnings and capital gain following the end of a joint-venture in Japan.
On a constant exchange basis, net income decreased by €9 million (-6%), mainly as a result of lower adjusted earnings.
Net realized capital gains or losses attributable to shareholders (5) -
Net capital gains or losses attributable to shareholders net of income tax - -
General expenses increased by €157 million (+9%) to €1,821 million. On a constant exchange rate basis, general expenses increased by €81 million (+5%) mainly due to
As a result, the underlying cost income ratio improved by 1.0 point to 80.6%.
On a constant exchange rate basis, income tax expenses increased by €63 million due to the non-repeated 2009 onetime tax benefi t of €62 million primarily due to the release of reserves relating to the tax treatment of compensation plans.
(-22%) to €143 million. On a constant exchange rate basis, underlying earnings decreased by €47 million (-25%).
AXA ownership of AllianceBernstein as of December 31, 2010 was 61.4%, down by 0.7% largely due to the issuance of 13 million restricted units to fund deferred compensation awards mostly offset by repurchases of AllianceBernstein units in 2010.
Net capital gains or losses attributable to shareholders net of income tax (5) -
Assets under management (“AUM”) increased by €17 billion from year-end 2009 to €516 billion at the end of 2010 mainly as a result of €22 billion favorable market impact and €18 billion favorable foreign exchange impact, partly offset by €20 billion negative net outfl ows, of which €29 billion net outfl ows at AXA
Rosenberg, partly offset by €9 billion net infl ows mainly on AXA
Gross revenues increased by €36 million (+2%) to €1,482 million (1). On a comparable basis and excluding distribution fees (retroceded to distributors), net revenues increased by €13 million (+1%) to €1,090 million mainly due to higher performance fees (€+11 million) while management fees remained fl at.
On a constant exchange rate basis, net investment result increased by €19 million mainly driven by higher realized carried interests and lower interests paid.
General expenses increased by €218 million (+19%) to €1,375 million. On a constant exchange rate basis and excluding distribution fees, general expenses increased by €190 million
AXA Rosenberg coding error (2), general expenses increased by €22 million (+3%) mainly driven by non-recurring €17 million external fees at AXA Rosenberg and higher IT costs.
As a result, the underlying cost income ratio increased by 15.6 points to 88.8%. Excluding the provision related to the
Income tax expenses decreased by €49 million (-56%) to €-38 million or by €48 million (-55%) on a constant exchange rate basis. Excluding the €49 million net tax credit arising from the provision related to the AXA Rosenberg coding error (1), income tax expenses would have increased by €1 million.
AXA Rosenberg coding error (1), minority interests decreased by €11 million mainly as a result of a lower contribution from
as the higher underlying earnings were partly offset by a €-5 million impairment charge.
(1) The provision related to AXA Rosenberg coding error was reported in AXA SA underlying earnings in half year 2010.
(a) Of which AXA Bank Europe and its branches: €365 million.
(a) Of which AXA Bank Europe and its branches: €14 million.
Net banking revenues increased by €11 million (+4%) to €311 million. On a comparable basis (1), net banking revenues increased by €34 million (+15%) mainly due to higher interest margin driven by mortgage and consumer loans portfolio growth and an increase in fee income following higher volumes.
Underlying earnings increased by €40 million (+170%) to €64 million. On a comparable basis (2), underlying earnings increased by €50 million to €64 million mainly due to a 2010 non-recurring tax benefi t (€22 million), lower distribution commissions (€+10 million mainly following lower net new money), a higher interest and commission margin (€+16 million), and a decrease in provision on loan losses (€+3 million) partly offset by higher administrative expenses (€-7 million) mostly resulting from a new deposits protection scheme.
Adjusted earnings increased by €42 million to €61 million mainly due to the increase in underlying earnings and lower impairments on fi xed income (€+2 million).
Net banking revenues increased by €3 million (+3%) to €116 million. On a comparable basis (3), net banking revenues increased by €12 million (+13%) to €103 million mainly led by interest margin improvement and higher fees on current account activity.
Underlying and adjusted earnings increased by €1 million to €1 million, revenue growth being partly offset by higher expenses (€-6 million) following an investment program to support growth.
(1) In Banking segment, for net banking revenues, “on a comparable basis” means after intercompany eliminations.
(2) In Banking segment, for underlying earnings, “on a comparable basis” means after allocation of central treasury results to the various branches of
Net banking revenues increased by €14 million (+32%) to €59 million. On a comparable basis (1), net banking revenues increased by €14 million (+25%) due to loans and deposits portfolio growth.
Underlying earnings and adjusted earnings decreased by €17 million to €-19 million. On a comparable basis (2), underlying earnings and adjusted earnings decreased by €27 million to €-19 million mainly due to higher provision for loan losses following depressed real estate market and unfavorable macro-economic environment as well as a new tax on the fi nancial sector (€6 million).
Net banking revenues remained stable at €15 million. On a comparable basis (1), net banking revenues increased by €6 million (+78%) driven by the increase of the interest margin due to lower interest paid as well as higher fees on mutual funds activities.
Underlying earnings as well as adjusted earnings and net income increased by €4 million to €0 million driven by lower expenses due to lower mortgage new business.
Underlying earnings as well as adjusted earnings and net income decreased by €10 million to €-13 million on a constant exchange rate basis mainly driven by higher expenses following the launch of the banking activity in 2009.
(2) In Banking segment, for underlying earnings, “on a comparable basis” means after allocation of central treasury results in 2009.
Assurance, AXA Financial, AXA Asia Pacifi c Holdings, AXA United Kingdom Holdings, AXA Germany Holdings, AXA Belgium
Underlying earnings (2) increased by €49 million to €-553 million mainly due to a decrease of fi nancial charges by €102 million mainly driven by lower interest rates partly offset by higher €-38 million tax expenses resulting from higher dividends received from consolidated foreign subsidiaries.
Australia & New Zealand business, compared to €141 million allowance in 2009.
Underlying earnings decreased by €50 million (-43%) to €-165 million. On a constant exchange rate basis, underlying earnings decreased by €43 million (-37%) primarily due to a €53 million increase in fi nancial charges related to internal debt restructuring at the end of 2009 and a €11 million increase in equity based compensation refl ecting an increase in performance unit expense.
On a constant exchange rate basis, adjusted earnings decreased by €12 million mainly due to the decrease in underlying earnings.
Adjusted earnings decreased by €10 million (-43%) to €-34 million. On a constant exchange rate basis, adjusted earnings decreased by €9 million in line with underlying earnings.
Underlying earnings increased by €7 million to €16 million mainly due to non-recurring provision releases (€+21 million)
Underlying earnings decreased by €3 million (-70%) to €1 million mainly due to the lower net investment result following the anticipated reimbursement of a subordinated loan granted to AXA Belgium partly compensated by lower fi nancial charges.
Adjusted earnings decreased by €2 million (-66%) to €1 million following the underlying earnings evolution.
On a comparable exchange rate basis, adjusted earnings increased by €9 million in line with underlying earnings.
Net income increased by €6 million to €-65 million. On a comparable exchange rate basis, underlying earnings increased by €6 million following adjusted earnings partly offset by litigation fees related to the acquisition in Mexico.
Western countries and Japan, it should continue at a fast pace in high growth countries.
In Life & Savings, the fi nancial markets should be slightly more favourable for both volumes and margins on new business, as well as for the overall value of our inforce portfolio.
In Asset Management, improved recent investment performance and increased risk appetite should lead to lower outfl ows and our cost income ratio should come down.
Our operational agility should deliver productivity gains across business lines which, combined with a continued strong focus on capital management, should support value creation and the improvement of the Group operating free cash fl ows.
■ 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; ■ exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy; ■ and also exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’
The calculation is prepared with the following principles: ■ for net income ROE: Calculation is based on consolidated fi nancial statements, i.e. shareholders’ equity including perpetual debt (“Super Subordinated Debts” TSS / “Perpetual
Income “OCI”, and net income not refl ecting any interest charges on TSS / TSDI; ■ for adjusted and underlying ROE: • all perpetual debts (TSS / TSDI) are treated as fi nancing debt, thus excluded from shareholders’ equity,
• interest charges on TSS / TSDI are deducted from earnings,
Even though the presentation of Margin Analysis is not the same as the Statement of Income (underlying basis), it is based on the same GAAP measures as used to prepare the
fi nancial risk borne by policyholders, which are included in “Fees and Revenues”; (iv) change in URR (Unearned Revenue Reserve –
■ For investment contracts without DPF: (i) deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines “Fees & Revenues” and “Net Technical margin”; (ii) change in UFR (Unearned Fees Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
/ deposits received on all general account product lines; (iv) deferral income such as capitalization net of amortization of URR (Unearned Revenue Reserve) and UFR (Unearned
Fee Reserve); (v) other fee revenues, e.g., fees received on fi nancial planning or sales of third party products.
Underlying net technical result is the sum of the following components: (i) earned premiums, gross of reinsurance; (ii) claims charges, gross of reinsurance; (iii) change in claims reserves, including claims handling costs reserves, gross of reinsurance, less the recurring interests credited to insurance annuity reserves; (iv) claims handling costs; (v) net result of ceded reinsurance.
+ claims-handling costs + result of reinsurance ceded on all accident years excluding the recurring interests credited to the insurance annuity reserves; to
Liquidity management is a core part of the Group fi nancial planning including our debt profi le schedule and, more broadly, our capital allocation process. Liquidity resources result principally from the operations of our Life & Savings, Property
Company’s statutory (parent only) results may be signifi cantly impacted by unrealized gains and losses on derivatives used to hedge currency or other risks. 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.
The liquidity of the Group’s insurance operations is affected by, among other things, the overall quality of AXA’s investments and the Group’s ability to liquidate its investment assets to meet policyholder benefi ts and insurance claims as they fall due. The Group regularly reviews the quality of its assets to ensure adequate liquidity in stress scenarios.
At year end 2010, AXA consolidated its liquidity position with: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
AXA has a robust liquidity risk management framework, including (i) a regular monitoring of the liquidity position in terms of resources (monthly monitoring of liquidity resources including government bonds and a part of the equity and corporate bond portfolio) and requirement (monthly monitoring of surrender rates for each local entity and consolidated view at
Group level), (ii) committed undrawn credit lines for €11 billion at year-end 2010, up €2.3 billion from year-end 2009, and (iii) a liquidity emergency plan in place designed to deal with liquidity crises that may arise, which can provide short term liquidity of approximately €30 billion of assets eligible for European Central
On a consolidated basis, dated subordinated debt (including derivative instruments) totaled €7,066 million at December 31, 2010 after taking into account all intra-group eliminations and excluding undated subordinated debts (TSS / TSDI, which are included in shareholders’ equity, as described in Note 1.12.2 of Part 4 – Consolidated Financial Statements), compared to €6,352 million at December 31, 2009.
Since January 2007, AXA’s only convertible debt outstanding is AXA’s 2017 convertible bonds, (6.6 million bonds at December 31, 2010) representing a carrying value of €1,360 million for its debts component in Note 17 of Part 4
At December 31, 2010, 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 €2,500 million at December 31, 2010, a decrease of €436 million from €2,937 million at the end of 2009. On a constant exchange rate basis, the decrease was €467 million, mainly due to two issues of senior notes by
At December 31, 2010, other debt instruments issued totaled €3,688million, up from €805 million at the end of 2009.
The increase of €2,883 million resulted mainly from an increase in commercial paper at AXA (€2,573 million) which primarily ensure the fi nancing of margin calls under collateral agreements and at AXA Financial (€424 million).
(€295 million in 2009), including a €1,334 million exceptional distribution representing part of the cash proceeds from the partial disposal of the UK Life & Savings business to Resolution
(€1,292 million in 2009) or €1,271 million after the impact of hedging derivative instruments (€1,180 million in 2009), of which undated subordinated debt of €457 million (€443 million in 2009).
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, 2010.
(€14 billion at December 31, 2009); (iii) admitted subordinated debt: €11.7 billion (€11.0 billion 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 Group holds more than 20% in the mentioned entities.
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 following which interest is payable on the reduced principal amount until such time as it is reinstated (following the Company’s return to fi nancial health as defi ned in the TSS).
In particular, this subordinated note provides for a cumulative mandatory interest deferral if it is required under the future
Solvency II Tier 2 capital eligibility criteria. In addition, the maturity of this subordinated note would be postponed from the scheduled redemption date, upon the occurrence of either a supervisory demand not to redeem in view of the Group fi nancial condition or in a situation where the Group capital is not suffi cient to cover its capital requirement. Under such circumstances, the redemption would only occur as soon as both the Group capital is suffi cient to cover its capital requirement and there is no ongoing supervisory demand not to redeem the subordinated note.
In addition, for most of the Company’s TSS, upon the occurrence of certain events relating to the Company’s consolidated net earnings and shareholders’ equity, the
Company is required to defer payment of interest. In such events, the Company may satisfy mandatory deferred interest by way of alternative settlement mechanisms (such as, subject to applicable limits, issuance of new shares or other securities including TSS or preference shares, sale of treasury shares, or an increase in the principal amount of the relevant notes)
within fi ve years, failing which the interest is forfeited. However, the settlement of deferred interest becomes due, on a best efforts basis, in certain circumstances including redemption of the notes, liquidation, payment of a dividend or interest on any other TSS, any share buy back outside the Company’s buyback program, or any redemption or repurchase of other TSS.
In accordance with the methods of calculation implemented by AXA in line with existing regulations, AXA’s consolidated solvency ratio was estimated at 182% at December 31, 2010 compared to 171% at the end of 2009. This change resulted mainly from the 2010 Underlying Earnings and from the dividend proposed to the next Shareholder’s Meeting.
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. 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 having to inject signifi cant amounts of new capital into its insurance subsidiaries, which could adversely affect the Company’s liquidity position.
Claims paying and credit strength ratings have become increasingly important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. In
March 2010, (i) Standard & Poor’s lowered ratings on the core operating entities of AXA Group to AA- stable outlook from
Please refer to Note 32 of Part 4 – “Consolidated Financial
Transactions involving Company securities completed in 2010 by Management Board and Supervisory Board members until April 29, 2010 and then by the members of the Board of Directors as from this date 174
Employee shareholders 178 2.3 DESCRIPTION OF THE COMPANY’S SHARE REPURCHASE PROGRAM 179 2.4 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 181
Special report of Statutory Auditors on regulated agreements and commitments 186 2.5 THE OFFER AND LISTING 190
AXA adopted, in 2008, the AFEP/MEDEF Code (defi ned below) as its Corporate Governance Code of reference. The
On April 29, 2010, AXA’s shareholders approved the change of 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 order to preserve a well balanced governance structures and debates, the Board of Directors’ By-Laws require that a majority of the Board be composed of independent directors, that certain board committees (including Audit and
Compensation & Human Resources) be composed entirely of independent directors and that the Board have an independent
Director has a number of specifi c powers including the capacity to convene meetings of the non-executive directors without the attendance of the Chairman & Chief Executive Offi cer and the
Company’s governance structures remain well balanced and robust at all times when the positions of Chairman and Chief
Offi cers; ■ reviews and approves the Company’s half-year and annual results; ■ approves the report of its Chairman on the composition, the conditions of preparation and organization of the
■ grants stock options or performance shares to employees and corporate offi cers of the Group within the framework of the authorizations it receives from the Extraordinary
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 all means by the Chief Executive
Training sessions are offered to the new members of the Board of Directors in order to familiarize them with the main issues related to the Group and its activities. These sessions are also available for any other member of the Board who would like to participate. The subjects studied during these sessions are in particular related to the outlines of the Life and Non Life businesses, fi nancial issues or the regions and main entities of the Group.
Directors, were also organized in 2010 in order to inform the directors of the future regulatory changes in the insurance industry resulting from the “Solvency II” Directive.
Pursuant to Article 10 of the Company’s Charter, the members of the Board of Directors are appointed by the General
Mr. François Martineau; three years for Mrs. Dominique Reiniche and Messrs. Jacques de Chateauvieux, Anthony Hamilton,
On December 31, 2010, the Board of Directors was comprised of fi fteen members appointed by the shareholders.
In accordance with French law, one member of the Board of Directors (currently Ms. Wendy Cooper) is the employee shareholders’ representative who is appointed by shareholders every four years from a list of candidates selected by the
The Company’s Charter and By-Laws provide for the mandatory appointment of a Vice-Chairman acting as Lead Independent
Director in all cases where the positions of Chairman & Chief
Member of the Board of Directors Chairman of the Board of Directors of BOURBON (1)
Member of the Board of Directors Chief Executive Offi cer of Lyonnaise des Eaux
Lyonnaise des Eaux Tour CB 21 16, place de l’Iris 92040 La Défense Cedex – France
Member of the Board of Directors Chairman of the Board of Banca Monte dei Paschi di Siena S.p.A. (Italy)
Member of the Board of Directors Managing Director of ROC Partners (United States)
Member of the Board of Directors Professor of Political Sciences at the University of Princeton – IBM Chair (United States)
Board and eight times as Board of Directors) and the average attendance rate was 86.93%. The Board reviewed the strategy of the Group during a full day dedicated session. Within the framework of its principal missions such as described above, the Board focused, in particular, on the following matters during 2010: ■ Review of the Group strategy; ■ Examination of the 2009 fi nancial statements and the 2010 half year fi nancial statements; ■ Review of the reports of the Board Committees; ■ Change in the Group governance structure; ■ Appointment of the Chairman & Chief Executive Offi cer, the
(1) It should be noted that the Group governance structure consisted of a Management Board and a Supervisory Board from January 1st, 2010 to April 29, 2010 and a Board of Directors as from April 29, 2010. The term “Board” therefore refers to the Supervisory Board or the Board of
Mr. Norbert Dentressangle has also been, since its creation in 1988, Chairman of Financière Norbert Dentressangle, the family-owned holding company which, in addition to a majority stake in Norbert Dentressangle S.A. (formerly
Groupe Norbert Dentressangle), also holds equity interests in real estate, industrial and business services fi rms. From
Aériens as a management auditor. From 1977 to 1979, he worked as a consultant for the Boston Consulting Group
(BCG). From 1979 to 2010, Mr. Jacques de Chateauvieux was Chairman and Chief Executive Offi cer of BOURBON
and since January 1st, 2011, he has been Chairman of the
Board of Directors of BOURBON. From 1989 to 2001, he developed BOURBON into an international conglomerate and then listed the Company on the Paris Stock Exchange in 1998. Since 2001, he has refocused BOURBON’s strategy on making it a world leader in offshore oil and marine services.
From April 2008 until April 2010, Mr. Jacques de Chateauvieux chaired the AXA Supervisory Board. Since April 2010,
Mr. Jacques de Chateauvieux has been member of the Board of Directors of AXA.
Member of the AXA Board of Directors, representing the employee shareholders 60, American nationality.
Cuomo. From August 1987 to March 1995, she was the First
AXA Equitable’s legislative and regulatory interests in front of the U.S. Congress, state legislatures, state insurance departments, state and national trade associations and other external audiences. As of April 2008, Ms. Wendy Cooper was elected the employee shareholder member of the AXA
Mr. Jean-Martin Folz is a graduate of the École Polytechnique et ingénieur des Mines. Between 1975 and 1978, he has held various French government cabinet positions, his last position being head of cabinet of the Secretary of State for Industry.
Director or member of the Supervisory Board: ■ AXA (Supervisory Board)
Mr. Anthony Hamilton is a graduate of Oxford University. His early career was spent in London and New York working for the investment banks Schroders, Morgan Grenfell, and
Mines. From 1997 to 1999, she was in charge of budget of
Lyonnaise des Eaux. Since 2009, Mrs. Isabelle Kocher has been Chief Executive Offi cer of Lyonnaise des Eaux, Head of
Singapore Bar in 1982. She is President of the Inter-Pacifi c
Mr. Giuseppe Mussari is a graduate in Law of the University of Siena (Barrister registered in the Rolls of the Court of
Mr. de Oliveira spent 24 years at JP Morgan & Co. From 1996 to 2001, Mr. de Oliveira was Chairman and Chief Executive
JP Morgan & Co. asked to join the Executive Committee of
Director of the consulting fi rm ROC Partners, based in New
Crédit Commercial de France. In 1987, he was in charge of its privatization before becoming Chairman and Chief Executive
International Capital Markets Advisory Committee of theFederal Reserve Bank of New York, member
These agreements or dealings are generally fully negotiated and performed on arm’s length terms and conditions.
To the best of the Company’s knowledge, there are no arrangements or understandings that have been entered into with major shareholders, customers, suppliers or others pursuant to which a member of the Board of Directors was selected, except for Mr. Giuseppe Mussari who was proposed for appointment to the AXA Supervisory Board during the
Shareholders’ Meeting dated May 14, 2007 pursuant to the terms of a bancassurance partnership agreement entered into in March 2007 between AXA and Banca Monte dei Paschi di
Interviews were conducted at the end of 2010 and the beginning of 2011 by the Chairman of the Ethics and
Governance Committee with each member of the Board of Directors on the basis of a simplifi ed questionnaire. The conclusions of this assessment and the principal areas identifi ed for improvement were discussed at the Board of
Directors’ meeting on February 16, 2011. During this meeting, the members of the Board expressed their very favorable opinion regarding its membership and functioning, the quality of the provided documents as well as the training and information sessions set up for the directors. The transparency and level of discussions on key issues were also appreciated.
The main areas for improvement relate to the diversifi cation of the Board members’ expertise, the priority being the reinforcement of skills in certain areas such as insurance, fi nance or risk analysis, the interaction between the Board and its Committees and the importance of informing the directors on a regular basis in-between the Board meetings.
The Board of Directors has four special committees that review specifi c matters and report to the board: (1) the Audit
Committee are set forth in the Board of Directors’ Bylaws and in a dedicated Charter for the Audit Committee.
As of December 31, 2010, the Audit Committee had four members: Messrs. Anthony Hamilton (Chairman),
The Audit Committee Charter is reviewed on a regular basis and updates are submitted to the Board of Directors for approval.
The Audit Committee met nine times in 2010 (four times as
Audit Committee of the Supervisory Board). The average attendance rate was 100%. Within the framework of its principal missions such as described above, the Committee focused, in particular, on the following issues: ■ 2009 annual fi nancial statements and 2010 half-year fi nancial statements; ■ Group Audit strategy; ■ 2010 Group Strategic Audit Plan; ■ Internal fraud and anti-money laundering report; ■ Internal fi nancial control programme (IFC); ■ 2010 Group Internal Audit Plan; ■ Statutory Auditors fees and actions plan; ■ Signifi cant litigation and regulatory matters; ■ Risk management issues, including IT risk management issues; ■ The Group’s Annual Report (Document de Référence); ■ Whistle-blower and employee’s complaints report; ■ Review of the insurance policies of the Group Managers
(D&O); ■ Review of the Audit Committee Charter and Group Audit
The review of fi nancial statements by the Audit Committee is accompanied by a presentation from the Company’s Statutory
As of December 31, 2010, the Finance Committee had seven members: Mr. Ramon de Oliviera (Chairman),
It has the following principal missions: ■ To examine and issue an opinion on any plan to sell ownership interests or on any acquisition or strategic partnership, whatever form they may take, when their value
Executive Offi cer by the Board of Directors; ■ To examine and issue an opinion on any plan to set up sureties or grant guarantees, endorsements and warrantees in favor of third parties, when their value exceeds the authorizations granted to the Chairman & Chief Executive
Offi cer by the Board of Directors; ■ To examine and issue an opinion on any of the following plans: • to issue securities giving a claim, whether directly or indirectly, to the Company’s share capital,
• to set the dates of payment of the dividend and, if any, of interim dividends; ■ To examine any plan to perform a fi nancial operation of signifi cant size for the AXA Group presented by the Chairman
Management policy which are submitted to the Committee as well as any signifi cant implications these orientations and limits may have on AXA’s principal subsidiaries; and
■ To examine and measure the “risk appetite” as regards fi nancial matters.
Finance Committee of the Supervisory Board). The average attendance rate was 83.87% and focused, in particular, on the following issues: ■ Financial risk management; ■ Capital and solvency; ■ Share price volatility; ■ Liquidity and fi nancing; ■ Risk appetite and asset allocation; ■ Review of the fi nancial resolutions proposed to the AXA
Shareholders’ Meeting; ■ Proposal for payments of dividends; ■ Acquisitions, restructurings and disposals; ■ Review of the project of capital increase reserved for the employees of the AXA Group (“SharePlan 2010”).
It has the following principal missions: ■ To formulate proposals to the Board of Directors, for the appointment of: • members of the Board of Directors, its Chairman and its
Directors; ■ To examine in more depth certain governance matters related to the operation and organization of the Board of Directors (Board assessment, communication with shareholders…); ■ To review the AXA Group Compliance and Ethics Guide; ■ To examine the Group’s strategy on corporate responsibility and related issues; ■ To examine every year the Company’s policy with respect to professional equality as well as equal pay.
The Ethics and Governance Committee met fi ve times in 2010
and the Committee focused, in particular, on the following matters: ■ Evolution of the Group governance (examination of the changes in the Company Charter and the project of Bylaws of the Board of Directors); ■ Process of selection of the future directors as well as the internal selection process of candidates for the position of director representing the employee shareholders;
Human Resources Committee had fi ve members: Mr. Norbert Dentressangle (Chairman), Mrs. Isabelle Kocher,
The Compensation and Human Resources Committee meets at least once a year.
• the number of Company’s stock options and performance shares to be granted to the Chairman & Chief Executive
Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee; ■ To formulate an opinion on the proposals of the Chairman &
Committee and the Executive Committee. The Committee examines the provisions considered by the Chief Executive
The Compensation and Human Resources Committee met eight times in 2010 (four times as Compensation and Human
Executive Offi cer, the Deputy Chief Executive Offi cer and the members of the Management Committee and the Executive
Chief Executive Offi cer and a Deputy Chief Executive Offi cer.
A Management Committee and an Executive Committee also support the operational management of the Group.
This combination of the posts of Chairman and CEO is the result of an analysis of the specifi c circumstances of the Group at this stage in its development, the unique experience and abilities of Mr. Henri de Castries and the desire to optimize the Group’s decision making processes and reactivity going forward.
Management Committee reviews aspects of the Group strategy and operations during an entire day.
The biographies of Mr. Henri de Castries and Mr. Denis Duverne are included in Section “Information on current members of the
Board of Directors” of Part 2.1 “Directors, Senior Management and employees”.
Company, now Mellon Private Asset Management. In 1993, he was appointed Executive Vice-President of Mellon and, in 1994, became Vice-Chairman. In 1999, Mr. Condron became President & Chief Operating Offi cer of Mellon Financial
Corporation. Since May 2001, Mr. Christopher Condron has been President and Chief Executive Offi cer of AXA
Mr. Peter Kraus earned a BA from Trinity College and an
MBA from New York University. Mr. Kraus has more than thirty years of experience in accounting and fi nancial markets, including investment banking, asset management, and private wealth management. He was an audit partner at Peat
(FIG). He worked in FIG Tokyo from 1990 to 1991. He was named a partner at Goldman Sachs in 1994 and managing director in 1996. Mr. Kraus was co-head of Goldman Sachs’
Investment Management Division for more than seven years and in addition to this role, he was a member of the fi rm’s
(1) Except otherwise stated, the following information concerning the members of the Management Committee is updated as of
Actuarielles. From 1988 to 1991, he was an auditor with Arthur
Andersen in Paris. In 1991, he joined AXA as Vice-President of the Finance Department and was appointed Senior Vice-
In 1997, Mr. Nicolas Moreau joined AXA Investment Managers and became Chief Executive Offi cer of AXA Rosenberg in 1999.
In March 2000, he became Chief Operating Offi cer of AXA
AXA Rosenberg in January 2001. Mr. Moreau also coordinated the private equity business as well as the relationship between
AXA Group. In April 2002, Mr. Nicolas Moreau was promoted as Chief Executive Offi cer of AXA Investment Managers and, following his appointment as Group Chief Executive Offi cer of
AXA UK, he became Chairman of the Board of AXA Investment
Chief Executive of AXA UK. Since 2003, he has been a member of the AXA Executive Committee and since April 2010, a member of the AXA Management Committee. On October 2010, he was appointed Chief Executive Offi cer of AXA France.
Director or member of the Supervisory Board or member of the Management Committee: ■ AXA Assurances Vie Mutuelle
Executive Offi cer of AXA France and responsible of the Group’s
Committee. Since October 1st, 2010, Mr. Pierson is fully dedicated to his role of Global Head of AXA’s Property &
Casualty insurance operations, while keeping direct management responsibility of AXA Assistance, AXA Corporate
Mr. Jacques de Vaucleroy has a bachelor degree in law from the Université Catholique de Louvain and a master’s degree in business law from the Vrije Universiteit Brussel. Mr. de Vaucleroy has 24 years of experience in banking, insurance and asset management. From January 2001 to June 2002, he was
Head of Distribution and from January 2004 to April 2006, he was Group President of ING Insurance in the United States, responsible for the Annuity, Life, Mutual funds and Broker-
Europe. From June 2009 to October 2009, Mr. de Vaucleroy was Chief Executive Offi cer of ING Investment Management and member of the ING Insurance Management Board and the
ING Group Executive Committee. Mr. Jacques de Vaucleroy joined the AXA Group on February 1, 2010 and was appointed
AXA Bank Europe. Since April 2010, he has been a member of the AXA Management Committee. As of January 1st, 2011, he took global responsibility for the Group’s Life & Savings and Health businesses in addition to his functions of Chief
Executive Offi cer for the Northern, Central and Eastern Europe business unit.
Chairman of the Board of Directors: ■ AXA Assurances Luxembourg SA (Luxembourg)
Chairman of the Supervisory Board: ■ AXA Art Versicherung AG (Germany)
Member of the Management Board: ■ ING Insurance Management Board (The Netherlands)
Jacques de Vaucleroy Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings and Health
AXA’s principal subsidiaries, whether publicly traded or not, are generally governed by: ■ A board of directors or a supervisory board whose membership includes independent or non-executive directors; and
Committees (including the requirements for participation of independent directors) are specifi ed in a detailed Audit
Committee to be composed entirely of independent directors and the Audit Committee’s of Group subsidiaries to have a signifi cant component of independent directors in order to ensure that this Committee is strongly independent towards the management given its critical role in reviewing fi nancial results and other fi nancial information prepared by management, fi nancial reporting and control processes, critical accounting policies, particular accounting issues, key risks and systems of internal control, fraud and similar issues. In addition, the
Compensation Committee have a minimum of one independent director to ensure a level of independent review and judgment on all senior executive compensation matters.
(a) A portion of the employees of AXA’s French affi liates are included in GIEs. In addition, the employees included in insurance and fi nancial services activities in France are included in the “cadre de convention” of four not consolidated “mutuelles”.
(c) In the United Kingdom, Life activity records -2,480 salaried employees in 2010 mainly due to the staff transfered to Resolution Ltd following the sale of part of the Life business, and Property & Casualty activity take on +696 salaried employees primarily relating to the continued growth within Direct business and the inclusion of an entity.
(d) In Germany the main driver for the decrease of FTE in 2010 is the synergies coming from the “W2G-Integration”.
COMPENSATION OF THE MANAGEMENT COMMITTEE (OR PREVIOUSLY MANAGEMENT BOARD) MEMBERS (1)
AXA’s executive compensation policy is designed to: ■ Attract, retain and motivate the best talents; ■ Drive superior performance; ■ Align compensation levels with the Company’s business performance.
It follows three guiding principles: ■ Compensation competitiveness; ■ Internal equity, based on individual and collective performance; ■ The fi nancial results and capacity of the Company.
Executive compensation is therefore structured so as to foster and reward performance: ■ At individual level and collective level (local business entity and AXA Group); ■ With a short-term, medium-term and long-term focus.
(1) Following the change in the governance approved by the Shareholders’ Meeting dated April 29, 2010, Messrs. Henri de Castries, Christopher
AXA’s Management Committee, as well as Messrs. Peter Kraus, Nicolas Moreau and Jacques de Vaucleroy. Mr. Alfred Bouckaert, member of the
Executive compensation includes a fi xed and a variable component. The fi xed component is targeted to beat the median of the market. The variable component is linked, with different weightings according to the level of responsibility, to
AXA’s global performance, local entity performance, and the attainment of the executive’s individual objectives. The variable portion is designed to represent the principal component of the executive’s annual global compensation such that, in cases where an executive attains or exceeds the objectives, the compensation levels of AXA executives will be between median and the third or beyond the third quartile of the benchmark market rate. The variable part of compensation that is effectively paid shall not exceed 150% of the target variable compensation.
Executive Offi cer is €950,000 as from May 1st, 2010 (i.e.
The variable component of his compensation is determined on the basis of a predefi ned target amount (€2,700,000 until
April 30, 2010 and €2,350,000 as from May 1st, 2010, reduced on a prorata temporis basis, i.e. a predefi ned target amount of €2,466,667 in 2010) and includes two components: ■ Group performance, as measured by underlying Earnings per Share, Return on Equity, New Business Value in Life &
and the proportion linked to the individual performance for 40% of the variable compensation.
Chairman of the Management Board demonstrate the demanding objectives and the genuine variability of this compensation component: Target Actual % Target
Variable compensation for the year 2001 paid en 2002 €1,750,000 €719,967 41%
Variable compensation for the year 2004 paid en 2005 €2,000,000 €2,304,277 115%
Variable compensation for the year 2005 paid en 2006 €2,000,000 €2,671,626 134%
Variable compensation for the year 2006 paid en 2007 €2,500,000 €3,045,987 122%
Variable compensation for the year 2008 paid en 2009 €2,700,000 €1,846,304 68%
Variable compensation for the year 2010 paid en 2011 €2,466,667 €2,061,087 84%
Nicolas Moreau, François Pierson 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 for 40% and the proportion linked to their individual performance for 30%.
The performance of operational entities is determined on the basis of a grid made of the following performance indicators: ■ Underlying earnings; ■ Technical operating cash fl ows (Life net infl ow); ■ P&C revenues; ■ Life & Savings New Business Value; ■ Combined ratio; ■ Customer scope index.
The individual performance is assessed both on the achievement of results for each predetermined strategic objective (the “what”), but also on the demonstrated leadership behaviors (the “how”).
The variable compensations paid to Executive Offi cers have been: Executive Offi cers Country
The Committee and the Board also considered the level of individual performance of Messrs. de Castries and Duverne on the basis of predefi ned strategic objectives set at the beginning of 2010, as well as the level of performance of Mr. Duverne with respect to the performance of those areas for which he is responsible.
The variable compensations paid to other members of the Management Committee (or previously the Management Board) have been: Other members of the Management Committee (or previously the Management Board) Country
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit Belgium €1,000,000 €750,000 €1,000,000 €1,000,000 - -
“President” and Chief Executive Offi cer of AXA Financial Inc. (United States) and Global Head of Life & Savings and Health USA $4,750,000 $0 $4,750,000 $4,750,000 $4,750,000 $4,370,000
Peter Kraus Chairman & Chief Executive Offi cer of AllianceBernstein USA - - - $6,000,000 - -
SUMMARY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES/UNITS GRANTED TO MANAGEMENT COMMITTEE (OR PREVIOUSLY MANAGEMENT BOARD) MEMBERS
Deputy CEO in charge of Finance, Strategy and Operations France 2,006,420 683,722 850,988 - 3,541,130
CEO for the Northern, Central & Eastern Europe business unit Belgium 2,151,464 894,098 - 595,695 3,641,257
Peter Kraus Chairman & CEO of AllianceBernstein (United States) USA 4,664,794 - - - 4,664,794
Global Head of Property & Casualty France 1,653,812 587,816 731,856 - 2,973,484
At each date of grant, the fair value of stock options and performance shares/units is determined in accordance with
IFRS standards. This is an historical value at the date of grant, calculated for accounting purposes as described in
Note 26.3.1 of the 2010 consolidated fi nancial statements included in 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 June 10, 2009, the fair value of one option was €3.43 for options without performance conditions, €3.02 for options with performance conditions, and the fair value of one performance share/unit was €9.23.
Chairman & Chief Executive Offi cer France 833,333 2,061,087 0 82,054 4,150 2,980,624
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 660,000 1,265,910 0 36,015 4,150 1,966,075
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit Belgium 216,667 - 0 246,370 1,162 464,198
“President” and Chief Executive Offi cer of AXA Financial Inc. (United States) and Global Head of Life & Savings and Health USA 745,950 3,268,579 0 0 262,150 4,276,679
Chief Executive Offi cer of AXA France France 519,997 749,511 0 0 147,477 1,416,985
SUMMARY OF THE MANAGEMENT COMMITTEE (OR PREVIOUSLY MANAGEMENT BOARD) MEMBERS’ COMPENSATION FOR THE YEAR 2009
Henri de Castries Chairman & Chief Executive Offi cer France 600,000 2,599,327 0 80,887 4,150 3,284,364
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit Belgium 650,000 1,000,000 0 499,263 2,201 2,151,464
“President” and Chief Executive Offi cer of AXA Financial Inc. (United States) and Global Head of Life & Savings and Health USA 705,569 3,406,298 0 0 345,673 4,457,540
Peter Kraus Chairman & Chief Executive Offi cer of AllianceBernstein USA 197,207 4,302,693 0 0 164,894 4,664,794
François Pierson Global Head of Property & Casualty France 430,000 1,188,967 0 17,769 17,076 1,653,812
The only “Benefi ts in kind” for Messrs. Henri de Castries, Alfred
Bouckaert, Denis Duverne, and Jacques de Vaucleroy are a company car.
François Pierson benefi ts from airplane tickets between Paris and his domicile in Marseille.
(1) It should be noted that the Group governance structure consisted of a Management Board and a Supervisory Board from January 1st, 2010 to
April 29, 2010 and a Board of Directors as from April 29, 2010. The term “Board” therefore refers to the Supervisory Board or the Board of Directors depending on the date.
Directors as from this date, except for its Chairman and the
The total annual amount of directors’ fees to be allocated to the members of the Supervisory Board was set by the
For the 2010 fi scal year and until April 29, 2010, it was decided to distribute among the members of the Supervisory Board a total amount of €366,666 (representing the total amount indicated above prorata temporis).
Directors a total amount of €800,000 (representing the total amount indicated above prorata temporis).
The total amount of directors’ fees is determined by the General
Vice-Chairman receiving a double fee; ■ a second half of the remaining amount is allocated by the
Members of the Board of Directors who are not members of a
Board Committee but who nevertheless attend a Committee meeting receive one-half of a normal fee for a Committee member and the Vice-Chairman – Lead Independent Director receives a full fee.
January 1st to April 29, 2010, an annual gross compensation of €76,666.68.
Ms. Wendy Cooper, member of the Board of Directors representing the employee shareholders of the AXA
Benefi ciaries are identifi ed among the Group and business units executive population, technical experts and employees holding key positions within the organization. Selection criteria and individual option grants take into account: ■ Importance of the position ➮ role
Since 2006, options granted to Executive Offi cers (members of the Management Board) and Executive Committee members, and since 2007 with respect to any benefi ciary receiving a minimum of 5,000 options, are subject to a performance condition: the last tranche, i.e. 1/3 of the options granted, will be exercisable only if the AXA share performs at least as well as the EuroStoxx Insurance index.
each year may not exceed 10% of the aggregate number of options granted to all benefi ciaries during the same year.
As of December 31, 2010, more than 10,400 AXA employees owned 81,486,814 outstanding options, representing 3.51%
of the share capital on the same date (disregarding the dilution related to the exercise of these options), and 1,280 employees in the United States owned 10,032,274 outstanding purchase options on ADSs, representing 0.43% of the share capital.
On the basis of the AXA share price on December 31, 2010, i.e. €12.45, only 10,272,247 subscription options are in the money, i.e. 12.61% of the outstanding stock options.
Grant date (Board of Directors or Management Board) 05/07/2000 05/07/2000 (b) 12/07/2000 13/11/2000
Subscription or purchase price of options (a) 38.96 41.28 39.06 36.84
(d) Mr. Alfred Bouckaert decided to retire as from April 29, 2010.
Grant date (Board of Directors or Management Board) 31/03/2006 25/09/2006 25/09/2006 13/11/2006
Subscription or purchase price of options (a) 27.93 28.03 28.03 29.59
(d) Mr. Christopher Condron decided to retire as from January 1st, 2011.
20/04/2005 20/04/2005 20/04/2005 20/04/2005 20/04/2005 20/04/2005 10/05/2007 10/05/2007 10/05/2007 24/09/2007 24/09/2007 19/11/2007 10/05/2009 10/05/2009 10/05/2011 24/09/2009 24/09/2011 19/11/2009 10/05/2017 10/05/2017 10/05/2017 24/09/2017 24/09/2017 19/11/2017
Executive Directors: The fi rst 10 employees benefi ciaries (b) 84,309 20,317 615,165 47,753
Subscription or purchase price of options (a) 9.76 13.03 15.47 15.88
Grant date (Board of Directors or Management Board) 13/10/2010 13/10/2010 22/12/2010
Total number (a) of shares to be subscribed or purchased, from which to be subscribed or purchased by: 4,274 27,772 12,758
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
Deputy CEO in charge of Finance, Strategy and Operations 19/03/2010 subscription or purchase 19/03/2020 100% of options: EuroStoxx Insurance index
«President» & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health 19/03/2010 subscription or purchase 19/03/2020 100% of options: EuroStoxx Insurance index
Global Head of Property & Casualty 19/03/2010 subscription or purchase 19/03/2010 100% of options: EuroStoxx Insurance index
STOCK OPTIONS GRANTED AND/OR EXERCISED BY THE TOP 10 BENEFICIARIES (OUTSIDE THE EXECUTIVE OFFICERS) DURING 2010
Stock options on AXA or any eligible AXA Group’s subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who exercised the highest number of stock options (aggregate information) 27,596 10.47
Peter Kraus Chairman & CEO of AllianceBernstein (United States) - -
From 2005 onwards, as a result of the new French law related to the grant of free shares, Performance Units have been replaced in France by Performance Shares. Performance
Shares are free shares whose fi nal acquisition is subject to performance conditions.
Performance Units/Shares aim at: ■ Rewarding and retaining the best talents by associating them to the intrinsic performance of the AXA Group and of their operational business unit as well as to the performance of the AXA share in the medium-term (3 to 4 years); ■ Reducing shareholder dilution by granting less subscription options.
Performance Shares are usually granted to benefi ciaries domiciled in France while Performance Units are granted to benefi ciaries domiciled outside of France.
The principle of Performance Units/Shares is as follows: ■ Each benefi ciary receives an initial grant of Performance
As far as Performance Units are concerned: ■ Since 2004, Units acquired at the end of the 2-year acquisition 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
Each year, the Board of Directors, acting on the recommendation of its Compensation & Human Resources
Shares and Performance Units are made by the business units Chief Executive Offi cers and by the Group functional department heads. These recommendations are reviewed by the Executive Management to ensure coherence and fairness.
Units are then decided by the Board of Directors, provided that individual grants grants to the Chairman & Chief Executive
Following the governance change in 2010, the Board of Directors, acting upon recommendation of its
Performance Shares granted to all benefi ciaries during the same year.
April 1, 2010. At that date, a total of 1,639,604 units had been acquired by 2,438 employees. The settlement of these units was made partly in cash (€21.8 million) and partly in
The acquisition period of the Performance Unit plan launched on April 2, 2009 with 160,025 Performance Units initially granted to 216 benefi ciaries in Japan will end on April 2, 2011.
The acquisition period of the Performance Unit plan launched on June 10, 2009 with 350,792 Performance Units initially granted to 28 benefi ciaries outside France will end on
April 1, 2010. At that date, a total of 1,087,393 shares had been acquired by 1,450 employees. These shares are subject to a 2-year restriction period until April 1, 2012.
The acquisition period of the Performance Shares plan launched on April 28, 2008 with 51,223 Performance Shares granted to 13 benefi ciaries, ended on April 28, 2010 for 28,172 Performance Shares granted to 7 employees in France
Shares granted to 1,740 benefi ciaries in France will end on
The acquisition period of the Performance Shares plan launched on June 10, 2009 with a total of 433,231 Performance Shares granted to 8 benefi ciaries in France will end on June 10, 2011.
The shares acquired will be subject to a 2-year restriction period until June 10, 2013.
(a) The 1,365,787 units acquired by 1,838 benefi ciaries of the March 31, 2006 plan have been settled as €24.3 million and 238,019 shares restricted until March 31, 2010.
(c) The 1,639,604 units acquired (from which 5,722 units acquired by anticipation related to deceased benefi ciaries) by 2,438 benefi ciaries of the April 1st, 2008 plan have been settled as €21.8 million and 276,786 shares restricted until April 1st, 2012.
(d) 21,366 units of the March 20, 2009 plan, acquired by anticipation related to deceased benefi ciaries or related to the selling of a business.
(f) The settlement of 50% of the units actually granted will be deferred and subject to the benefi ciary being an employee of the AXA Group.
Chairman & Chief Executive Offi cer earnings - net income per share
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2010 consolidated fi nancial statements included in Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these performance shares or the actual proceeds if and when the Performance Shares are acquired.
Under the AXA Group Compliance and Ethics Guide, all employees (including all Executive Offi cers) are prohibited from engaging in any transaction designed to hedge the value of equity based compensation awards (including stock options, performance units, restricted shares, or similar awards)
PERFORMANCE SHARES ACQUIRED BY EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
Denis Duverne Deputy CEO in charge of Finance, Strategy and Operations 31/03/2006 32,915 31/03/2010
Alfred Bouckaert (a) CEO for the Northern, Central & Eastern Europe business unit
Christopher Condron (b) “President” & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health
Wendy Cooper Representative of employee shareholders at the Board of Directors
PERFORMANCE UNITS GRANTED TO EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
“President” & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health earnings - net income per share
CEO of AXA France 19/03/2010 36,000 379,080 19/03/2012 19/03/2013 - net income earnings - net income per share
Member of the Board of Directors Plan date Performance units granted
Representative of employee shareholders at the Board of Directors earnings - net income per share
PERFORMANCE UNITS ACQUIRED BY EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
Board had decided to implement, as from January 1, 2007, a shareholding policy applicable to all members of the
Management Board and the Executive Committee. Following the governance change in 2010, the Board of Directors reviewed the shareholding requirements for the Chairman &
Requirement, all stock options and performance shares granted to him/her after January 1, 2007 will be subject to the following restrictions: ■ Upon each exercise of these stock options granted after
On December 31, 2010, based on the AXA share value (€12.45) and the AllianceBernstein share value (€17.46) at that date, the
prior to the earnings releases. These blackout periods generally commence about 30 days before its annual and semi-annual earnings releases. Depending on the circumstances, these blackout periods may be declared at other times or may be changed in length.
The main features of this mandate are the following: ■ The mandate is signed for an indefi nite term; ■ Each year, an annual instruction shall be agreed to between the executive and the bank. This instruction shall remain in force for one year and may not be terminated in anticipation by the executive (except in case of gross misconduct from the bank); ■ The mandate and the annual instruction shall be signed when the executive is not in possession of any inside information and outside blackout periods. During a 3-month abstention period following the signing of each annual instruction, the bank shall be prohibited from engaging in any transaction on behalf of the executive; ■ The executive may not intervene in management by the bank who exercises discretion in application of the annual instruction. The executive generally commits to proscribe all communications with the bank and not to exercise any infl uence on it.
Financial Code (Code monétaire et financier). The notifi cations of such transactions will state that they have been engaged by an investment services provider, on behalf of the executives, in application of a discretionary management mandate.
To the best knowledge of the Company and based on information reported to it, each of the Board of Directors member held, as at
Norbert Dentressangle – Vice-Chairman – Lead Independent Director 13,117 (a) -
TRANSACTIONS INVOLVING COMPANY SECURITIES COMPLETED IN 2010 BY THE MANAGEMENT BOARD MEMBERS
To the best of the Company’s knowledge based on information reported to it, no transaction was made by members of the
Management Board during the period January 1st, 2010 to April 29, 2010.
TRANSACTIONS INVOLVING COMPANY SECURITIES COMPLETED IN 2010 BY MEMBERS OF THE SUPERVISORY BOARD UNTIL APRIL 29, 2010 AND THEN BY MEMBERS OF THE BOARD OF DIRECTORS AS FROM THIS DATE
April 29, 2010 and members of the Board of Directors as from this date made the following disclosures in the course of 2010 concerning their transactions involving Company securities. Detailed information about all of these transactions, as well as individual disclosures fi led in accordance with Articles 223-22 and 223-25 of the AMF (Autorité des marchés financiers) General Regulations, are published on the Company’s website (www.axa.com) and on the AMF website (www.amf-france.org).
This scheme, which has existed since January 1st, 1992, has been modifi ed twice with effect from January 1st, 2005 and
Supervisory Board on October 7, 2009, after having been presented for advice to all work councils and central work councils in France during the third quarter of 2009.
The Company and its subsidiaries’ global commitments as regard to pension or retirement to the aforementioned executives was €26,167,219 million as at December 31, 2010.
(1) For information, the annual Social Security ceiling for 2011 is equal to €35,352.
Henri de Castries Chairman & CEO Beginning of current mandate: 04/29/2010 Term of offi ce: 2014 – X X – X – – X
(health insurance, life insurance, disability insurance, retirement, etc.) to which Messrs. de Castries and Duverne were entitled as employees of AXA. In this context, the Supervisory Board
In this context, on February 17, 2010, the Supervisory Board took the following decisions: ■ The Supervisory Board authorized that, following the termination of their employment contracts, Messrs. Henri de Castries and Denis Duverne will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement, etc.) on terms equivalent to those of all other director-level employees of the AXA Group in France; ■ The Supervisory Board authorized a contractual severance benefi t for Messrs. de Castries and Duverne designed to replicate the benefi ts to which they were entitled as AXA
No severance benefi t will be paid if the benefi ciary is entitled to an additional pension scheme within the 6 months following his termination.
These commitments took effect upon the effective renunciation by Messrs. Henri de Castries and Denis Duverne of their respective employment contracts and will continue so long as they remain executive offi cers of AXA (including under renewed mandates); ■ Messrs. Henri de Castries and Denis Duverne also renounced the indemnities to which they were entitled, pursuant to the collective agreement dated 1993, as employees (i) at the time of their retirement (indemnités de départ en retraite)
Meeting of April 29, 2010, the Board of Directors increased the
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2010 program.
In countries that met the legal, regulatory and tax requirements for participation in SharePlan, two investment options were offered to the Group employees in 2010: ■ The traditional plan, offered in 39 countries; ■ The leveraged plan, offered in 38 countries.
The leveraged plan allowed employees to subscribe, on the basis of 10 times their personal investment, to AXA shares
The SharePlan 2010 program was carried out through a capital increase that took place in December 2010 and was open to almost all Group employees through voluntary contributions: ■ 26,480 employees took part in SharePlan 2010, representing 21.6% of eligible employees; ■ The total amount invested was €330.4 million, as follows: • €20.8 million in the traditional plan, and
• €309.6 million in the leveraged plan; ■ A total of 30.1 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on January 1st, 2010.
As at December 31, 2010, AXA employees and agents held 6.50% of the share capital and 7.56% of the voting rights.
Pursuant to Article 241-2 of the AMF General Regulations, this section constitutes the description of the Company’s share repurchase program that will be submitted to the shareholders for approval at AXA’s General Meeting on April 27, 2011.
(a) Percentage calculated on the basis of the number of AXA’s outstanding ordinary shares as of January 31, 2011 (Source: Euronext Notice of February 3, 2011).
Number of treasury shares held directly by the Company 1,950,000 5,273,723 –
December 22, 2003 and in accordance with market practices permitted by the AMF, the objectives of the Company’s share repurchase program that will be submitted to the shareholders’
Group in connection with the implementation of any employee savings plan complying with the applicable laws and regulations, notably the Articles L.3332-1 et seq of the French Labor Code, or all other employee savings plans, as well as carrying out any hedging transaction related to the employee savings plans referred to in (iv); c) holding shares for the purpose of subsequent payment or exchange in respect of potential external growth acquisitions, in compliance with the market practice accepted by the AMF; d) delivering shares upon exercise of convertible, exchangeable or other securities giving a claim to the Company’s share capital by way of repayment, conversion, exchange, presentation of a warrant or in any other manner; e) cancelling some or all of the repurchased shares, provided that the Board of Directors is duly authorized by the shareholders, under an extraordinary resolution, to reduce the capital through the cancellation of the shares acquired pursuant to a share repurchase program; or f) in general, performing all admissible operations, or to be subsequently admitted, by the applicable laws and regulations.
Share repurchase program submitted to shareholders approval on April 27, 2011
(a) This number represents the theoretical maximum number of shares that may be purchased by the Company, calculated on the basis of the Company’s registered share capital as of February 3, 2011, i.e. €5,313,040,992.73 divided into 2,320,105,237 shares. Based on the number of treasury shares already held directly by the Company on that date, AXA may purchase up to 224,786,800 of its own shares.
Meeting held on April 30, 2009 (10th resolution) and at their
18,621,599 shares were purchased under this liquidity contract (1) for an average weighted gross unit price of €13.80 and 18,511,599 shares were sold for an average weighted gross unit price of €13.90. Related transaction fees incurred over the same period amounted to €275,000.
French Commercial Code (liquidity contracts being excluded), between January 1, 2010 and December 31, 2010, AXA
repurchased (i) 820,492 of its own shares (settlement of a futures contracts) for an average weighted gross per share of €18.02, and (ii) 597 of its own shares (exercises of call options in consideration of securities’ cancellation) for an average weighted gross unit price of €49.31.
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and related voting rights as of December 31, 2010: Number of shares
Treasury shares held directly by the Company 8,273,983 0.36% [0.29%] (c)
Treasury shares held by Company subsidiaries (directly or indirectly) (d) 17,372,038 0.75% [1.08%] (c)
Certain of the Company’s shares are entitled to double voting rights as described in Part 5 – “Certain additional information”
December 31, 2010, 522,714,335 shares entitled their holders to double voting rights as of that date.
Treasury shares held directly by the Company 8,273,983 0.36% [8,273,983] (c) [0.29%] (c)
(d) Treasury shares as indicated in Note 13 to “consolidated fi nancial statements” included in Part 4 of this Annual Report.
As of December 31, 2010, to the best of the Company’s knowledge based on the information available to it, the Company had approximately 10,914 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
(b) As a result of certain fi nancing transactions (capital increases with preferential subscription rights, reserves distribution), the conversion conditions of AXA 2017 convertible bonds were adjusted on several occasions since their issue in 2000. The conversion ratio was increased to 4.41 AXA shares with a par value of €2.29 for one convertible bond (see Euronext notice n° PAR_20091109_05426 published on November 9, 2009 and Euronext notice n° PAR_20091209_05954 published on December 9, 2009).
Since 1993, the AXA Group has promoted employee shareholding by offering each year to its employees an opportunity to become shareholders through a special equity issue reserved exclusively for them (“SharePlan”).
December 2010, AXA issued a total of more than 30 million new ordinary shares each with a par value of €2.29, all of which were entitled to dividends for 2010.
“Ambition 2012” project, AXA has implemented a worldwide program of granting free shares to all its employees, called
Management Board granted on July 1st, 2007, 50 AXA shares to each employee of the AXA Group, with the exception of
Schneider stock and the Schneider Group undertakes to hold at least 8,816,681 AXA ordinary shares. The number of shares held under this cross-shareholding agreement will be adjusted as needed to refl ect the impact of certain capital transactions, including, but not limited to: free allotments of stock or of exchange of stocks of the same company (stock splits, stock grouping, etc.). In addition, the agreement includes an option for each party to repurchase its shares in the event of a hostile change of control of the other party.
I Special report of Statutory Auditors on regulated agreements and commitments (For the year ended December 31, 2010)
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.
In accordance with Article L.225-40 of the French Commercial Code, we were advised of the following agreement which was previously authorized by your Board of Directors.
With the BNP Paribas Group - concerned director: Mr. Michel Pébereau
■ This agreement, entered into on August 5, 2010, came into force on the signing date and replaces the one in force since
■ 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 months notice prior to the next renewal date.
Agreements and commitments approved during prior fi scal years that remained in force in 2010
The agreement signed on August 5, 2010 and previously described in section “Agreement authorized during the fi scal year 2010”
On May 15, 2006, and after authorization by the AXA Supervisory Board on December 21, 2005, the AXA Group (the AXA Mutuals,
In force for a period of one year as of the date of its signature, this agreement is renewable automatically for successive periods of one year thereafter, unless one of the parties decides to terminate beforehand, in which case it is required to give three months notice prior to the next renewal date.
We were also advised of the performance, during the fi scal year ended December 31, 2010, of the following agreements and commitments which were previously approved by the General Meeting on April 29, 2010 after review of the Statutory Auditors’ report dated March 16, 2010.
Reduced rates shall apply for an executive seniority of less than 20 years. As an example, with 10 years of executive seniority, the supplementary pension allows to reach a global pension equivalent to 34% instead of 40%. This rate is reduced to 20% for an executive seniority of 5 years, and no supplementary pension is paid for an executive seniority of less than 5 years.
Management Board until April 29, 2010) and then to Messrs. Henri de Castries and Denis Duverne (respectively Chairman & Chief
Executive Offi cer and Deputy Chief Executive Offi cer as of April 29, 2010).
Nature, purpose, terms and conditions: On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Henri de Castries of his employment contract as of the General Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Henri de Castries holds the position of
The Supervisory Board was concerned that the decision of Mr. Henri de Castries to renounce his employment contract, in accordance with the AFEP/MEDEF recommendations, would not jeopardize the continuity of his accrued and future social benefi ts. Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group’s director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized that Mr. Henri de Castries would be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the AFEP/
MEDEF recommendations and the applicable laws and regulations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to
These commitments are in force upon the effective renunciation by Mr. Henri de Castries 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).
Nature, purpose, terms and conditions: On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Denis Duverne of his employment contract as of the General Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Denis Duverne holds the position Deputy
Company’s ordinary shares are also included in Euronext 100, the index representing Euronext’s blue chip companies based on market capitalization. The Company’s ordinary shares are also included in the STOXX Europe 50 and EURO STOXX 50, blue chip indices comprised of the 50 most highly capitalized and most actively traded equities throughout Europe and within the Eurozone, respectively. In addition, the Company’s ordinary shares are also included in the EURO STOXX Insurance, the insurance related index for companies within the Eurozone.
RISK FACTORS Certain disclosures about market risk and related matters 3.1 RISK FACTORS 192 3.2 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND RISK FACTORS 214
You should carefully consider the following risks. These risks could materially affect our business, results of operations or fi nancial condition, cause the trading price of our ordinary shares and/or ADSs to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the
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 3.2 of this Annual Report and this Section 3.1 should be read in conjunction with Section 3.2. In those cases where the risks described in this Section 3.1 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 3.1, management has prioritized the four categories of risks presented and the individual risks within each of these categories in a manner that corresponds to management’s current view as to the potential impact
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 during each of our last three fi scal years. A wide variety of factors including concerns over sovereign debt issued, in particular, by certain European countries, the consequences on the Euro, the availability and cost of credit, the stability and solvency of fi nancial institutions and other companies, future infl ation, volatile energy costs, and geopolitical issues have contributed to increased volatility and diminished expectations for the economy in general and the markets going forward.
become more pronounced over the past months following the European Stability Fund fi nanced bail-outs of Greece and
Ireland. This has also raised questions about the continued viability of the Euro as a common currency and whether certain
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, 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.”
Factors such as consumer spending, business investment, government spending, regulation, the volatility and strength of the capital markets, and infl ation all affect the business and economic environment and, ultimately, the amount and profi tability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of lapses or surrenders of policies, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could have a material adverse effect on our business, results of operations and fi nancial condition.
The capital and credit markets have continued to experience volatility and disruption, signifi cantly limiting the availability of additional liquidity in the markets and credit capacity for most issuers including AXA.
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, medium and long-term debt, junior subordinated debt securities, capital securities and shareholders’ equity.
December 31, 2008 (127%). 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. Adverse fi nancial market conditions would further negatively impact the Company’s consolidated solvency margin. The 2010 solvency margin calculation will be reviewed by the ACP (Autorité de Contrôle Prudentiel).
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. Insurance regulators have broad discretion in interpreting, applying and enforcing their rules and regulations with respect to solvency and regulatory capital requirements and, during periods of extreme fi nancial market turmoil of the type we have experienced over the past three years, regulators may become more conservative in the interpretation, application and enforcement of these rules which may involve them, for example, imposing increased reserving requirements for certain types of risks, greater liquidity requirements, higher discounts/“haircuts” on certain assets or asset classes, more
conservative calculation methodologies or taking other similar measures which may signifi cantly increase regulatory capital requirements. For example, in 2010, the Irish Central
ACAM’s review raised various issues including with respect to certain aspects of AXA France’s statutory reserving methodology for its Variable Annuity business. The control of the ACP (1) ended with a letter of consequences (lettre de suites) containing a certain number of recommendations which are under way of implementation. 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/
Financial Inc. that was used to enhance the capitalization of AXA Financial’s insurance subsidiaries. The Company’s ability to effi ciently deploy its capital resources and to inject capital, as needed from time to time, in its operating insurance subsidiaries is critical to ensuring that these subsidiaries remain appropriately capitalized at all times. Regulatory restrictions that inhibit the Company’s ability to freely move excess capital among its subsidiaries or which otherwise restrict fungibility of the Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the solvency position of the Company’s operating insurance subsidiaries which may have a consequent negative impact on the Company’s reputation and the perception of its fi nancial strength.
A key aspect of Solvency II is that the assessment of risks and capital requirements will be aligned more closely with economic capital methodologies. Under the Solvency II Regime, the
Group may be permitted to make use of its internal economic capital models as a basis for calculation of its capital needs and solvency position if these models are approved by ACP.
(the Level I Framework Directive) setting forth various policy principles and guidelines that acted as a framework for the development of the Solvency II regime. The fi nal text of the
Level I Framework Directive regarding the “taking-up and pursuit of the business of insurance and reinsurance” was
adopted by the European Council in November 2009 and includes rules regarding, among other things, own funds, capital requirements and investments. Following adoption of this Level 1 Framework Directive, the European Commission has initiated the development of detailed rules following the
Commission is expected to publish the Level 2 implementing measures in the second quarter of 2011 (for an adoption by the end of 2011) and implementation of Solvency II by the EU
Solvency II to international groups is still unclear and there is a risk of inconsistent application throughout Europe, which may place AXA at a competitive disadvantage with regards to other
AA negative outlook, and the counterparty credit ratings on the holding company AXA to A from A+; the stable outlook refl ects Standard & Poor’s opinion that the Group’s business fundamentals, earnings, management, and strategy are likely to counterbalance the pressure on the ratings due to capital adequacy level; and (ii) Moodys’ Investors Services reaffi rmed the Aa3 counterparty credit and fi nancial strength ratings on
A downgrade or the potential for a downgrade of our ratings, particularly below the AA range, could have a variety of negative impacts on us including (i) damaging our competitive position,
Our accounting principles and policies with respect to intangibles (including goodwill) are set forth in Note 1.6
US life insurance business), we may be required to signifi cantly impair our goodwill, accelerate our amortization of DAC and
VBI and/or derecognise our deferred tax assets and deferred policyholders’ participation assets which, individually or in the aggregate, could have a material adverse effect on our consolidated results of operations and fi nancial condition.
In the normal course of business, AXA seeks to reduce losses that may arise from catastrophes or other events that cause unfavorable underwriting results through reinsurance. Under the reinsurance arrangements, other insurers assume a portion of the losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, ceded reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. We evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound
Our mitigation efforts with respect to interest rate risk are primarily focused on maintaining an investment portfolio with diversifi ed maturities that has a weighted average duration that is approximately equal to the duration of our estimated liability cash fl ow profi le. However, our estimate of the liability cash fl ow profi le may be inaccurate and we may be forced to liquidate investments prior to maturity at a loss in order to cover the liability. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities.
Our exposure to credit spreads primarily relates to market price and cash fl ow variability associated with changes in credit spreads. A widening of credit spreads will generally reduce the value of fi xed income securities we hold (including credit derivatives where we assume credit exposure) and increase our investment income associated with purchases of new fi xed income securities in our investment portfolios.
Conversely, credit spread tightening will generally increase the value of fi xed income securities we hold and reduce our investment income associated with new purchases of fi xed income securities in our investment portfolios.
Ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors such as lack of pricing transparency, market illiquidity, declines in equity prices and the strengthening or weakening of foreign currencies against the Euro, could have a material adverse effect on our consolidated results of operations, fi nancial position or cash fl ows through realized losses, impairments, and changes in unrealized gains and loss positions.
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations and cash fl ows. For example, a strengthening of the Euro against the US Dollar and/or certain other currencies in 2011 and future periods may adversely affect AXA’s results of operations and the price of its securities. In addition, the currency hedges used by AXA to manage foreign exchange rate risk may signifi cantly impact the statutory results (parent only) of the Company, cash position and amounts available for distribution as dividends to its shareholders because unrealized exchange rate gains and losses under these derivatives are recognized in the Company’s statutory and tax income statement (unlike in the Group’s consolidated accounts where hedge accounting is applied to net investments in subsidiaries such that these exchange rate movements have no income statement impact at the consolidated Group level).
In certain of our principal markets, infl ation, as measured by consumer price indices or other means, is a continuing risk. A
the value of certain fi xed income securities we hold in our investment portfolios resulting in reduced levels of unrealized capital gains available to us which could negatively impact our solvency margin position and net income, (ii) result in increased surrenders of certain Life & Savings products, particularly, those with fi xed rates below market rates, and
(iii) require us, as an issuer of securities, to pay higher interest rates on debt securities we issue in the fi nancial markets from time to time to fi nance our operations which would increase our interest expenses and reduce our results of operations. 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 investments are often allocated to equity funds, and (iii) negatively impact the ability of our asset management subsidiaries to retain and attract assets under management, as well as the value of assets they do manage, which may negatively impact their results of operations. In addition, in the context of certain Property