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 8 1.3 Activity Report 41 1.4 Liquidity and capital resources 94
Executive compensation, major shareholders and related matters 2.1 Directors, senior management and employees 102 2.2 Full disclosure on executive compensation and share ownership 121 2.3 Description of the Company’s share repurchase program 161 2.4 Major shareholders and related party transactions 164 2.5 The Offer and listing 174
Certain disclosures about market risk and related matters 3.1 Risk factors 178 3.2 Quantitative and qualitative disclosures about market risk and risk factors 193 3.3 Certain fi nancial information 211
CONSOLIDATED FINANCIAL STATEMENTS 213 4.1 Consolidated statement of fi nancial position 214 4.2 Consolidated statement of income 217 4.3 Consolidated statement of comprehensive income 218 4.4 Consolidated statement of changes in equity 220 4.5 Consolidated statement of cash fl ows 224 4.6 Notes to the consolidated fi nancial statements 226 4.7 Report of the Statutory Auditors 404
CERTAIN ADDITIONAL INFORMATION 407 5.2 Description of AXA’s share capital 410
(iii) all information required under Article R.225-83 of the French Commercial Code.
This Annual Report serves as AXA’s Document de Référence within the meaning of Article 212-13 of the Autorité des marchés financiers (AMF) General Regulation.
Group”, the “Group” and/or “we” refer to AXA SA together with its direct and indirect subsidiaries. The Company’s ordinary shares are referred to in this Annual Report as “shares”, “ordinary shares” or “AXA ordinary shares”. The principal trading market for the Company’s ordinary shares is the Compartment A
Report as “ADSs” and “ADRs”, respectively. The ADSs and ADRs are listed on the New York Stock Exchange (referred to in this
Annual Report as “NYSE”). Each ADR evidences one ADS which, in turn, represents one AXA ordinary share.
Statements” 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 International Financial Reporting Interpretations
The Group does not, however, use the “carve out” option to avoid applying all the hedge accounting principles required by
IFRS 9, including its different phases and its mode of enforcement are currently being reviewed within the Group.
Various amounts in this document are shown in million for presentation purposes. Such amounts have been rounded.
For a discussion of the impact of foreign currency fl uctuations on AXA’s fi nancial condition and results of operations, please see Part 1 – “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”, Section 1.3
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 Section 1.3 in
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 weather-related catastrophic events or terrorist related incidents. Please refer to Part 3 – “Risk factors, certain disclosures about market risks and related matters” of this Annual Report for a description of certain important factors, risks and uncertainties that may affect
AXA’s business and/or results of operations. AXA undertakes no obligation to publicly update or revise any of these forwardlooking statements, whether to refl ect new information, future events or circumstances or otherwise.
The selected historical consolidated fi nancial data presented below have been derived from AXA’s consolidated fi nancial statements and related notes for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, in accordance with IFRS.
You should read it in conjunction with the consolidated fi nancial statements and related notes for the years ended December 31, 2009, 2008 and 2007 included in Part 4 –“c onsolidated fi nancial s tatements” of this Annual Report.
Board (IASB). The adoption date of IFRS 9, including its different phases and its mode of enforcement are currently being reviewed within the Group.
(in Euro million, except per share data) 2009 2008 2007 2006 2005
Income Statement Data: In accordance with IFRS (a): Net investment result excluding fi nancing expenses (b) 36,157 (36,068) 25,891 32,555 32,693
Result from discontinued operations, net of tax - - 480 123 97
(a) As described in Notes 1.10, 1.12.2 and 1.13.2 of Part 4 – c onsolidated fi nancial s tatements of this Annual Report, these amounts take into account: (i) following clarifi cation of IFRIC agenda Committee following IASB decision, AXA reclassifi ed TSDI instruments (perpetual subordinated debts) into shareholders’ equity in 2006 with retrospective application in 2005 with impact on net income, (ii) in line with accounting FRS27, the reclassifi cation in the United Kingdom of some with-profi t technical reserves to allow for all future terminal bonuses payable to with-profi t policyholders within the allocated policyholder reserves, previously held in the unallocated policyholder bonus reserve, without any impact on earnings, and (iii) the restatement of The Netherlands’ activities as discontinued businesses.
(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 for the three years ended December 31, 2009, 2008 and 2007 is presented in Note 26 “Net Income per Ordinary Share” to AXA’s consolidated fi nancial statements. Since 2008, the net income per share takes into account interest charges and foreign exchange impacts related to perpetual debts classifi ed in shareholders’ equity, with retroactive impact on prior years.
(d) Following AXA’s rights issue in 4Q09, 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, 47.9 million in 2007, 45.2 million in 2006 and 44.1 million in 2005. 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.
(f) In accordance with IFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items impacting the allocation of the Seguros ING (Mexico) purchase price, resulting in a €33 million increase in the goodwill to €512 million. Most of this increase in goodwill was due to adjustments to provisions for liabilities and claims reserves.
The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate of one Euro to US dollars in New York City for cable transfers as certifi ed for customs purposes by the Federal Reserve Bank of New
Buying Rate”. The Euro Noon Buying Rates presented below are for your convenience and were not used by AXA to prepare
AXA’s consolidated fi nancial statements included in Part 4 of this
The Euro Noon Buying Rate on December 31, 2009 was € 1.00 = 1.4332 $.
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 29, 2010.
A dividend of €0.55 for the fi scal year 2009 will be proposed to
The following table sets forth information on the dividends declared and paid in the most recent fi ve years.
Dividends not claimed within fi ve years of the payout date become the property of the French Treasury Department.
For information on AXA’s dividend policy, see Part 4 – “Consolidated Financial Statement” and Part 5 – “Certain Additional Information”,
Offer and Listing” included in this Annual Report. AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059. The
Company’s number in the Paris Trade Registry is 572 093 920.
Holdings following its demutualization. National Mutual Holdings, based in Australia, subsequently changed its name to AXA Asia
UAP. This transaction enabled AXA to signifi cantly increase its size and reinforce its strategic position in a number of important markets, particularly in Europe.
In 2000, 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, (iv) acquired Sanford C. Bernstein through its US asset management subsidiary Alliance Capital (which subsequently changed its name to AllianceBernstein), and (v) acquired the minority interest in AXA Financial, which is now a 100% owned subsidiary of AXA.
Banque Directe. 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.
In 2004, AXA acquired the American insurance group MONY, which allowed the expantion of its life insurance distribution capacity in the United States by approximately 25%. In addition,
(iii) its Dutch health insurance operations, and (iv) its mortgage lending activities in Germany (AXA Bausparkasse AG).
In 2005, FINAXA, a listed holding company that was AXA’s principal shareholder, was merged into AXA. Prior to the merger,
In 2006, AXA acquired the Winterthur Group, which was then active in 17 countries and served approximately 13 million clients worldwide. This operation gave AXA the opportunity to strengthen its leading position in several European markets and to increase its presence in a number of high growth markets including in Central and Eastern Europe and Asia. During 2006,
(iii) MLC Hong Kong and Indonesia via its subsidiary AXA Asia
Pacifi c Holdings. In addition, in December AXA completed the sale of AXA RE’s (now called “Colisée Re”) reinsurance business.
“Kyobo AXA General Insurance Company”) which has a leading position in the South Korean motor direct insurance market,
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, (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, and (v) signed an agreement to acquire a 36.7% interest in Reso Garantia (“RESO”)
In addition, AXA announced that it (i) intends to submit to the
General Shareholders’ Meeting on April 29, 2010 a proposed change in its corporate governance structure from a dual board structure (Supervisory Board and Management Boad) to an unitary board structure (Board of Directors) and (ii) will implement a new organization to support a new stage in its development with M. François Pierson, Chairman and Chief Executive Offi cer of AXA France and member of AXA’s Management Board, and M. Christopher Condron, Chief Executive Offi cer of AXA
Board, assuming Group-wide responsibility on an international level for Property & Casualty insurance, and Life & Savings and Health businesses, respectively, in addition to their current operational responsibilities.
The Company is the holding company for the AXA Group, a worldwide leader in fi nancial protection. Based on available information at December 31, 2009, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €90.1 billion for the year ended December 31, 2009. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at
Region and, to a lesser extent, in other regions including the
Property & Casualty risks. In addition, geographic diversifi cation helps reduce the concentration of risk and volatility of claims experience.
(1) Source: Pensions & Investments, Watson Wyatt Global 500 survey. 2008.
Set forth below is a simplifi ed organization chart of AXA as of
Note 2 “Scope of consolidation” included in Part 4 – “consolidated fi nancial statements ” of this Annual Report.
(b) AXA also holds indirectly 100% of the general partner of AllianceBernstein.
AXA MPS Assicurazioni Vita SpA (l) 50% 50% + 1 voting right
AXA MPS Assicurazioni Danni SpA (m) 50% 50% + 1 voting right
(h) Holding company that owns AXA France Vie, AXA France IARD, AVENSSUR, AXA Corporate Solutions Assurance, Juridica, AXA Epargne Entreprise and Natio.
(p) Holding company that owns DBV-Winterthur Lebensversicherung AG, AXA Krankenversicherung AG and DBV-Winterthur Versicherung AG.
(s) 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 (formerly Winterthur Service, SA), AXA Winterthur Salud SA de Seguros, AXA Aurora Vida, SA de Seguros y Reaseguros and AXA Pensiones, SA E.G.F.P.
(t) Holding company that owns 66.66% of AXA-ARAG Rechtsschutz AG (formerly Winterthur-ARAG).
Insurance AXA Asia Pacifi c Holdings Limited (w) 54.07% 54.08 %
(w) Holding company that owns The National Mutual Life Association of Australasia Limited, National Mutual Funds Management (Global) Limited and National Mutual International Pty Limited. AXA’s ownership interest and voting power in AXA Asia Pacifi c Group is divided between a direct holding of 44.65% and an additional 9.43% owned by AXA Sun Life PLC.
(y) Holding company that owns AXA Life Insurance Co. Ltd, AXA Non-Life Insurance Co. Ltd.
The table below summarizes certain key fi nancial data by segment for the last three years.
Net income from operating segments 4,309 100% 942 100% 5,953 100%
(b) Following AXA’s rights issue in 4Q09, 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 and 47.9 million in 2007. 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 table below sets forth AXA’s consolidated gross revenues by segment for each of its major geographic markets for the years indicated: BREAKDOWN OF AXA’S GROSS REVENUES
(a) Includes business fronted by Colisée Re (ex AXA RE) and fully reinsured by Paris RE (fronting arrangement set in place in the context of the sale of Colisée Re’s (ex AXA RE) business to Paris RE).
included in “Part 4 – consolidated fi nancial statements ” of this
(a) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales).
(b) Mediterranean & Latin American Region included Spain, Italy, Portugal, Turkey, Greece and Morocco in 2007. Starting from July 2008 it also included Mexico.
of which Australia and New Zealand 269 378 545 38 35 51
(c) For APE and NBV: Mediterranean & Latin American Region included Spain, Italy, Portugal, Turkey and Greece in 2007. Starting from July 2008 it also included Mexico.
States and Japan. In addition, AXA offers investment and saving products as well as life and Health products in a number of other jurisdictions including Australia and New Zealand, Asia (notably
The principal competitive factors affecting the Life & Savings business include: ■ Size, strength and quality of the distribution channels, in particular the quality of advisors; ■ Range of product lines and product quality, feature functionality and innovation; ■ Price; ■ Quality of service; ■ Investment management performance; ■ Historical levels of bonuses with respect to participating contracts; ■ Crediting rates on general account products; ■ Reputation, visibility and recognition of brand; ■ Quality of management; ■ Ratings for fi nancial strength and claims-paying ability; and
AXA competes with insurance companies and also with banks, asset management companies, investment advisers and other fi nancial institutions for sales of savings-related investment products and, to a lesser extent, life insurance products.
(d) Based on new business Annual Premium Equivalent (APE). Represents 100% of regular premiums + 10% of single premiums, in line with EEV methodology.
(h) AXA’s ranking and market share are based on updated September 2009 fi gures.
AXA’s Life & Savings products include a broad range of investment and savings products as well as L ife and h ealth 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.
Investment and savings products include: ■ Deferred annuities, which may be purchased with either a single premium or regular premiums. A deferred annuity has two distinct periods: an accumulation period and an annuity payment period. Typically, more fl exibility is permitted in premium payments for longer deferred periods. The premium generally can be invested either in the general account of the insurer, or in a choice of unit-linked funds. Also known as individual variable annuities in the United States, these products often include optional guarantees (for a fee) such as Guaranteed Minimum Income Benefi t (GMIB), Guaranteed
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.
The benefi t can be a lump sum, or a percentage of the income paid over a specifi ed period of time; ■ Immediate annuity products, which are usually single premium products with no previous accumulation period, which promise regular payments for a fi xed period of time or over a benefi ciaries’ lifetime; • health products (1) generally offer reimbursement of medical expenses or provide medical services; • mutual funds offered by insurance companies are generally open-ended funds operated by an investment management company, in accordance with a stated set of objectives.
AXA’s Life & Savings products may be distinguished between: ■ Participating contracts, in which the policyholders participate in the excess assets over liabilities (the surplus) of – and therefore in the investment return and/or in part of the operating profi ts earned by – the insurance company issuing the contract by way of the payment of an interest or bonus payment; ■ Contracts with the financial risk borne by the policyholders
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.
Life contracts (including endowment contracts) 17,676 32% 18,661 33% 18,095 31% 143,418
Fees and charges relating to investment contracts with no participating features 547 662 740 47,666
(a) UK with-profi t business: A participating contract, specifi c to the United Kingdom and known as the with-profi t contract, was offered by AXA Sun Life until 2002. Under with-profi ts contracts, the policyholders are entitled to receive a share of the profi ts arising from the invested policyholders’ premiums which includes regular bonuses and terminal bonuses. The regular bonuses are designed to provide a return to the policyholder through a periodic increase in benefi ts and are credited to the policyholder. Once credited, regular bonuses are guaranteed to be paid at maturity, death or as otherwise specifi ed in the policy. Terminal bonuses, which are not guaranteed in advance of payment are designed to provide policyholders with their share of total investment performance and other experience of the fund (including expenses, mortality experience and income taxes) over several periods. Terminal bonuses can represent a signifi cant portion of the total amount paid at maturity or upon surrender prior to maturity and are at the discretion of the Board of Directors. Following policyholder and court approvals, in 2001 AXA Equity & Law underwent a fi nancial reorganization whereby the life insurance funds were transferred to AXA Sun Life and fundamentally restructured. A portion of the assets that accumulated over the years (which we refer to in this Annual Report as the “inherited estate”) were attributed to AXA as the shareholder, less a portion allocated to the with-profi ts policyholders in the form of a reorganization bonus, based on the number of eligible policyholders that elected in favor of this plan.
(b) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales).
Brokers are independent fi rms who negotiate with insurance companies on behalf of customers. As opposed to exclusive agents, brokers can work with different insurance companies.
Independent fi nancial advisors are individuals or fi rms that provide fi nancial advice to customers and negotiate related policies with insurance companies on behalf of customers.
company from the fi nancial services industry, especially banks, or from another industry, such as car dealers. This may take the form of a joint venture between the insurance company and its partner or a pure contractual distribution arrangement.
AXA’s distribution strategy focuses on strengthening traditional channels and developing new ones, such as direct selling and partnerships. Staff hiring, retention of veteran staff, professionalism and commercial performance are the main initiatives to strengthen traditional distribution channels. To serve increasingly sophisticated and demanding customers, AXA
(a) Amounts and percentages reported for the United States operations exclude lapses and corporate separate accounts surrenders.
(d) 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.
The principal competitive factors are as follows: ■ P rice; ■ Q uality of service; ■ D istribution network; ■ B rand recognition; ■ R atings for fi nancial strength and claims-paying ability (mainly group business) ; and
■ C hanges in regulations, which may affect premium rates charged or claims settlement costs paid.
The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross revenues in 2008, along with AXA’s ranking (by market share).
(e) AXA’s ranking and market share based on updated September 2009 fi gures.
“Distribution channels” section in the Life & Savings segment of this Part 1.2.
Re (ex AXA RE)) principally focus on property damage, third party liability, marine and aviation property, and third-party liability reinsurance. The reserves corresponding to the ceded business are fully reinsured by Paris Ré, with Colisée Re (ex AXA RE)
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 €2.9 billion, or 3% of AXA’s consolidated gross revenues for the year ended December 31, 2009 (2008: €2.8 billion or 3%).
Activities” segment. In connection with the disposal of AXA’s reinsurance activities, AXA Liabilities Managers also manages the run-off of AXA RE as noted above.
Colisée Re (ex AXA RE) (a) 23 1% (6) 0% 896 25% 1,623
After several years of soft underwriting conditions, corporate risks insurance showed the fi rst signs of an upturn in the pricing cycle during 2009. AXA Corporate Solutions Assurance is among the top fi ve largest corporate risks insurers in Europe (1).
Assurance underwrites large insurance risks such as property damage, liability, construction risks, motor fl eet, marine and aviation. AXA also offers loss-prevention and risk management services.
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 & Casualty insurance products such as France, Switzerland, Mediterranean and Latin American Region, Belgium, the United Kingdom and
AXA Corporate Solutions Assurance reviews annually its exposure to ensure that the risks underwritten are diversifi ed geographically and by lines of business in order to manage concentration risk. In 2009, AXA Corporate Solutions Assurance ceded €844 million of premiums (2008: €849 million) to thirdparty reinsurers.
Asset Management is important to AXA, from both a strategic and a profi tability perspective. The development of Asset
Management activities is a key part of AXA’s fi nancial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the belief that its asset management expertise will enable AXA to benefi t in the future from the expected growth in savings-related products in the markets in which it operates. The Asset Management segment accounted for €3.1 billion, or 3% of AXA’s consolidated gross revenues for the year-ended December 31, 2009 (2008: €3.9 billion or 4%).
AllianceBernstein and AXA Investment Managers, including assets managed on behalf of third parties, and the fees earned by such companies on these assets for the indicated dates and periods.
(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 €1,015,1 billion and €981.5 billion, as of December 31, 2009 and 2008 respectively.
AllianceBernstein, a 62.15% subsidiary, is a leading global investment management fi rm based in the United States.
AllianceBernstein provides diversifi ed investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA and its insurance company subsidiaries (which collectively are AllianceBernstein’s largest client). AllianceBernstein Holding L.P. is listed on the New
At December 31, 2009, AllianceBernstein had €345.8 billion of assets under management, including €270.4 billion of assets managed on behalf of third party clients (2008: €331.1 billion and €263.8 billion, respectively).
At December 31, 2009, AXA IM had €498.9 billion of assets under management, including €145.5 billion of assets managed on behalf of third party clients (2008: €484.9 billion and €151.2 billion, respectively).
The operations in the Banking segment are conducted primarily in Belgium, France, Germany and Eastern Europe. For the years ended December 31, 2009 and 2008, the Banking segment accounted for €0.4 billion each year, or less than 1% of AXA’s consolidated gross revenues.
Based in Paris, AXA Banque had more than 705,000 registered customers at the end of 2009, with a retail banking product offer (innovative current accounts with advantages on insurance premiums, saving and credit). Directly linked with the Group’s insurance business, banking products are offered to AXA
Germany. The Bank had approximately 72,000 clients at yearend 2009. The major activities of AXA Bank are deposits, mutual funds and mortgage loans. These products are mainly sold through the tied agent network of AXA Germany.
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 300 insurance agents and by internet.
On December 10, 2009 AXA announced that it will implement a new organization to support a new stage in its development. In addition to their current operational responsibilities, (1) François
Pierson, Chief Executive Offi cer of AXA France and member of
SA, the ultimate parent holding company of the AXA Group, is also subject to extensive regulation as a result of its listing on
Euronext Paris and on the New York Stock Exchange and its interest in numerous regulated insurance and asset management subsidiaries. Given that the AXA Group is headquartered in
(“ACAM” ) (1) , which is 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 Lehman Brothers bankruptcy and the bail-out of American International Group in September 2008. These initiatives included government programs in France, the United States and most of the other principal markets where the Group does business.
In 2009, as many emergency government programs slowed or wound down, global regulatory and legislative focus generally moved to a second phase of broader reform and a restructuring of the way in which fi nancial institutions are regulated. While the fi nal nature, scope and extent of this second phase of initiatives are still evolving, many of the principal jurisdictions where the
“systemically signifi cant” global fi nancial institutions including: • proposals to impose new/additional prudential requirements/restrictions on these institutions with respect to capital, liquidity, leverage and/or business activities,
European supervisory framework, including adjusting the current insurance regime to include a European
• Proposals to establish new regulatory or judicial “resolution authorities” designed to stabilize, merge, wind-up/liquidate or take other appropriate actions with respect to systemically signifi cant fi nancial institutions that become insolvent or otherwise unable to meet their obligations.
• Proposals to impose new taxes and/or fees on (1) fi nancial institutions (including, for example, the “fi nancial crisis responsibility” tax proposed by the US administration that would be levied on the largest fi nancial institutions, which may include certain of AXA’s US subsidiaries), (2) on fi nancial transactions (e.g. the “Tobin tax”), and/or (3) bonuses or other executive compensation in excess of defi ned limits.
“guaranty funds” (funded with new taxes or fees similar to those described above) to stabilize insolvent fi nancial institutions, protect customers and ensure stability of the overall fi nancial system.
• 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 (including the proposed C onsumer F inancial P roducts S afety C ommission in the US).
• Similar proposals aimed at ensuring the continued stability of the overall fi nancial system and addressing the risk of
“regulatory arbitrage” arising from fractured and inconsistent regulation of fi nancial institutions both nationally and internationally.
■ Potential l egislative i nitiatives designed to “cure” perceived excessive risk taking and misaligned fi nancial incentives
• Increased taxes, restrictions and/or disclosure requirements with respect to executive and employee compensation, including disclosure requirements and restrictions on compensation determined to encourage excessive risktaking.
• Increased restrictions on, and new disclosure requirements with respect to, related party transactions including payment of dividends, transfers of assets and/or liabilities and other transactions between related parties.
• Increased restrictions on, and new disclosure requirements with respect to, securitization transactions – in particular retention of risk by originators/sponsors.
• Potential regulation of CDSs as “credit insurance” requiring licensing of institutions offering these instruments.
In this context, management is concerned about potentially abusive uncompetitive practices by its government supported or controlled competitors, for example, in attempting to use their government backing as a marketing advantage with consumers and/or taking advantage of government injected funds to aggressively “buy” revenues and market share by underwriting risks on an unprofi table basis – in both cases to the detriment of pure private sector players such as AXA. Management is monitoring this situation closely and will act to protect its interests where warranted.
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’ operations and accounts and make requests for information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. This holding company legislation typically requires periodic disclosure concerning the corporation that controls the licensed insurer and other affi liated companies, including prior approval of transactions between the insurer and other affi liates such as inter-Group transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory regimes are designed to protect the interests of policyholders rather than shareholders.
The Company’s insurance subsidiaries are subject to regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specifi c regulatory capital requirements
(including defi nition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly signifi cantly, during periods of declining equity markets and/or lower interest rates such as those experienced during 2008 and parts of 2009.
At the consolidated Group level, the Company is required to calculate, in accordance with applicable French “Solvency I ”
Company’s consolidated solvency margin was 171% (taking into account the proposed 2009 dividend payment of €0.55 per share proposed to the General Shareholders’ Meeting to be held on
Germany, the United Kingdom (“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
Group’s hedging platforms and processes used to hedge certain risks associated with its Variable Annuity business. ACAM’s review raised various issues including with respect to compliance of the
ACAM on this review and actions to be undertaken by the Group in response are on-going. 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.
The EU has also adopted various directives concerning solvency margin requirements for insurers and insurance groups: ■ A 1998 EU directive, implemented into French law in 2002, requires insurance groups to calculate a consolidated solvency margin. In accordance with this directive, AXA must establish appropriate internal controls to ensure solvency suffi cient 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
States, has undertaken a fundamental review of the regulatory capital regime of the insurance industry (the “Solvency II ”
interests as effectively as possible and in accordance with common principles across the EU. The Solvency II project was conceived around three pillars: minimum capital requirements, supervisory review of fi rms’ assessments of risk and enhanced disclosure requirements. Under Solvency II , companies will be encouraged to improve their risk management processes and will be permitted to make use of internal economic capital models to enable a better understanding of risks and appropriate adaptation of the model to each insurer’s specifi c business mix and risks. 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 regime. In 2009, the Commission, the
CEIOPS propose tighter calculation measures for solvency margin requirements and for assets admitted to hedge this margin including a proposed reclassifi cation of certain existing subordinated debt that may no longer qualify as regulatory capital following an initial grandfathering period. The
Commission should publish the Level 2 measures in autumn 2010 for an adoption by the end of 2011. At the same time, a quantitative impact study among UE insurers will be carried out as of summer 2010. Implementation of Solvency II by the
basis and that a representative body with no interest in the proceedings would be able to bring a claim; ■ Over the past several months, a number of European jurisdictions, including Germany, have also been considering legislation or regulations designed to better “ring fence”
Ongoing or future regulatory investigations could result in fi nes, other sanctions and/or other costs.
Several US states, including the state of New York, regulate transactions between an insurer and its affi liates under insurance holding company acts that establish certain reporting requirements and place restrictions on provision of services and on intercompany transactions. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, the issuing insurer is not maintaining adequate statutory surplus or capital. Life insurers in the United
Equitable and AXA’s other US life insurance subsidiaries expect that the statutory surplus will continue to be in excess of the minimum RBC levels required to avoid regulatory action.
(or a separate division in existing agencies) which might have the authority to regulate certain products provided by AXA,
Insurance Offi ce (“FIO”) within the US Treasury Department. If adopted into law, the FIO would have the power, among other things, to (1) monitor the insurance industry to gain expertise and advise on International Insurance policy issues; (2) identify issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the US fi nancial system; (3) monitor the extent to which traditionally underserved communities and consumers, minorities and low- and moderateincome persons have access to affordable insurance products, other than health; (4) recommend to the newly created Financial
Federal policy on prudential aspects of i nternational i nsurance matters, including assisting the Secretary of the Treasury in negotiating “covered agreements” with foreign governments and determining whether such agreements preempt state insurance measures; and (7) consult with the states regarding insurance matters of national importance and prudential insurance matters of international importance. The Group will continue to monitor closely the evolution of this and related initiatives, and their potential impact on its business over the coming months.
In addition, many federal laws currently affect the insurance business in a variety of ways, including the Federal Fair Credit
There are a number of existing, expiring, newly enacted and previously or currently proposed US federal legislative initiatives, including US federal tax initiatives, that may signifi cantly affect
AXA’s US life insurance subsidiaries including, among others, the following: Estate and Related Taxes. Under federal tax legislation passed in 2001, exemption amounts had been increasing and rates had been decreasing for estate and generation skipping transfer taxes. These taxes have been repealed for 2010 but are scheduled to return to their 2001 levels as of January 1, 2011.
It is anticipated that Congress will consider legislation in 2010 that would reinstate estate and generation-skipping transfer taxes for 2010. Such legislation may be made retroactive to
Dividends Received Deduction. The US Treasury Department and the Internal Revenue Service have indicated that they intend to address through regulations the methodology to be followed in determining the dividends received deduction (“DRD”) related to variable life insurance and annuity contracts. The DRD reduces the amount of dividend income subject to tax and is a signifi cant component of the difference between 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”). Although the Administration has not released proposed statutory language, the Green
Annuity contracts that is eligible for the DRD. If proposals of this type were enacted, AXA Equitable’s actual tax expense could increase, reducing earnings.
Corporate Owned Life Insurance. The Green Book also contained proposals that would affect the treatment of corporate owned life insurance policies (“COLIs”) by limiting the availability of certain interest deductions for companies that purchase those policies.
One possible change includes the creation of new tax-favoured savings accounts that would replace many existing qualifi ed plan arrangements. Others would eliminate or limit certain tax benefi ts currently available to cash value life insurance and deferred annuity products. Enactment of these changes or similar alternatives would likely adversely affect new sales, and possibly funding and persistency of existing cash value life insurance and deferred annuity products. Finally, current legislative proposals may introduce signifi cant increases on the taxation of fi nancial institutions, including, taxes on certain fi nancial institutions to compensate for the funds dispersed during the fi nancial crisis, taxes on fi nancial transactions, and taxes on executive compensation, including bonuses. The current, rapidly changing economic environment may increase the likelihood of substantial changes to federal tax law.
European insurers signed a Memorandum of Understanding with certain US insurance regulators and non-governmental Jewish organizations agreeing to the establishment of the International
ICHEIC conducted an investigatory process to determine the status of life insurance policies issued to 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. After having completed its archival researches and audit processes as well as the payment of all valid claims submitted by Holocaust victims and their heirs, the 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. This statement of interest is intended to protect AXA against future civil litigation in the US by Holocaust claimants and to encourage judges handing this type of litigation to dismiss these claims. While this statement of interest provides AXA 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 brought by Holocaust claimants. Legislation has recently been introduced in the US House of Representatives that is designed to validate the constitutionality of various state laws which impose (1) substantial reporting requirements with respect to insurance policies that were in effect during the World
War II era to residents of countries occupied or controlled by Nazi
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 jurisdictions in which AXA operates. For example, the Japanese legislature adopted a change in inheritance tax treatment that reduced the advantages and attractiveness of certain life insurance products.
Region have broad discretion in their application of regulation and to investigate licensed insurers, on an individual or sector basis, to examine specifi c issues. For example, in Japan, the FSA
ordered an extensive examination of claims payment practices in the life insurance sector during 2007. As part of this investigation,
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.
As a publicly-traded company with its securities listed on both Euronext Paris and the New York Stock Exchange (1), the
Company must comply with the relevant rules for listing and trading on each of these exchanges and with a number of other laws and regulations including French and US securities laws administered and enforced by, respectively, the AMF in France and the SEC in the US. These listing rules, other laws and regulations govern a wide variety of matters including (1) timely and accurate disclosure of information to investors, (2) presentation of fi nancial information in accordance with IFRS requirements (as well as in accordance with certain SEC requirements), (3) restrictions on presentation of non-GAAP measures in the US, (4) auditors’
“Standards”). The Company does not use the “carve out” option to avoid applying all the hedge accounting principles required by
IAS 39 and, consequently, its consolidated fi nancial statements also comply with IFRS as issued by the International Accounting
In addition to these matters, a number of recent legislative and regulatory initiatives in France, at the EU level or in other jurisdictions where AXA operates have potential implications for AXA and its subsidiaries. Certain of these initiatives may help create more uniform practices across the EU and facilitate the development of more open and accessible European market for international companies like AXA. For instance, the
However, others initiatives may increase the compliance burden, associated expense and regulatory risk for AXA and other market participants, including the following: ■ Anti-money laundering and anti-terrorism legislations have been enacted and continue to evolve in the many jurisdictions in which AXA and its subsidiaries operate. These laws and regulations impose increasingly complex compliance requirements on international groups such as AXA and prohibit the Group from doing business with certain countries, individuals or organizations; ■ Certain European jurisdictions have enacted legislation that impacts investment of the Group’s proprietary assets and may also affect the Group’s asset management activities for third-party clients in those jurisdictions, including by restricting investment in fi nancial instruments issued by companies engaged in certain activities. These types of legislation, which often vary from one jurisdiction to another, increase compliance costs and risks for the Group in the various
France (1). Life & Savings market increased by 11% in 2009. This positive market evolution was due to a very competitive position of French Life and Savings insurance contracts (+12% vs. +16%
for AXA) in a context of low interest rates and steep yield curve.
United Kingdom & Ireland. The UK Life insurance market decreased by 26% (3) on an Annual Premium Equivalent (APE)
basis (4), mainly as a result of recessionary pressures and a fall in consumer confi dence, particularly in the long term savings market. The UK Protection products market decreased by 2% (5) mainly as a result of depressed mortgage related sales.
Proposition has outperformed the market, with volumes down 27% (3) with market share (5) up to 8.6% (versus 8.3% in 2008).
(3) APE volumes quoted compared 12 months to Q4 2009 against 12 months to Q4 2008 excluding mutual funds.
(5) Source: ABI/MSE ©2009 Association of British Insurers, 12 months to Q3 2009 versus 12 months to Q3 2008 (excluding mutual funds).
(6) Sources: Insurance Research Institute (excluding Kampo Life and Yamato Life) and fi nancial statements of the companies. Data are for the twelve months ended September 30, 2009.
(7) Market share and ranking information based on data as of March 2009 (fi scal year 2008 in Japan).
economic crisis, with premiums falling by 3% (1). In Group Life, premiums fell by 4% (2) driven by absence of salary increases and by the standstill in the market resulting from less new business opportunities. Switch for small and medium entreprises clients to a fully fi nanced Group life foundation set up by Life insurers was very diffi cult given underfunding of pension institutions. AXA held the leading position in Group Life with a market share remaining above 30% (3). Individual Life market growth was slightly positive at 0.3% (4) despite a low interest rate level environment. The trend towards unit-linked products especially those with secondary guarantees continued, while traditional products were on a low level of interest and attention. AXA ranked 2nd in Individual Life with a market share of 13% (5).
Mediterranean and Latin American Region. Italy (8). The market growth was +40% (9) fuelled by the increase in general account products (+164%) while index-linked products decreased (-62%).
The increase in new business (+68%) was driven by a signifi cant contribution from the bancassurance channel (+66%), fi nancial advisers (+252%) and agents (+6%). Spain. The market growth was +5% (10), driven by the performance of sales through large bankassurance joint-ventures. Mexico. Life insurance market continued to grow at a strong pace (11% (11)) despite adverse economic conditions, driven by traditional insurance companies.
Australia/New Zealand. In 2009, the total managed funds market increased 10% (16) to AU$ 1.3 trillion, driven by superannuation funds and life insurance offi ces’ assets. AXA ranked 5th for funds under management (17) and 7th for net funds fl ows (18) (19).The
Australian fi nancial protection market was relatively resilient with in-force annual premium increasing by 13,4% (20). In Australia,
AXA’s position in the New Zealand fi nancial protection market remained strong ranking 3rd for in-force annual premium in a market that grew 9.3% from the previous year (22).
South East Asia. AXA continued to strengthen its market position in growing markets with a relatively low insurance penetration.
Indonesia. The market was up by 12% (24) in new business premium and AXA ranked 8th (25) with a 71% growth in APE.
(6) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2009 fi gures.
(7) Source: AXA Belgium estimates based on Assuralia market fi gures.
(11) Source: AMIS Asociación Mexicana de instituciones de Seguros as of September 2009.
(12) Source: Turkish Association of Insurance Companies as of Sept 2009.
(23) Source: Offi ce of the Commissioner of Insurance, in-force business 2008Q3YTD and 2009Q3YTD.
AXA grew by 7% and ranked 9th (6) for new business. India. The pace of growth slowed down, driven by private players declining by 6% (7) in terms of new business. AXA grew by 39% and ranked 15th amongst private players (16th amongst all players). China.
AXA ranked 10th in Hungary, 10th in Czech Republic and 13th in
Poland and Hungary, with a market share of 10% in the region
United Kingdom & Ireland. The UK insurance market has been relatively soft in 2009, although lately there have been signs that the Motor market was starting to harden. AXA ranked 5th in the
UK Personal lines market, with a market share of 5% (12) (up 0.5 pt). This has been driven by signifi cant growth in the D irect business, especially in M otor. In Commercial lines, AXA ranked 4th and have maintained its share of business in a challenging market at 8%. The UK private medical insurance market has been adversely impacted by the recession. AXA’s Healthcare revenues grew by 4%, mostly driven by international markets.
Irish market reached the bottom of its pricing cycle in 2008 with average prices 40% lower than in 2002. In 2009, tariff increases started to be applied in the market.
(+1%) (16), Property increased considerably (+3%), mainly driven by price indexation (16). Industrial commercial and agricultural property premiums increased by 1%, and Engineering was up 2%. AXA ranked 3rd in the Property & Casualty market in 2008 with a market share of 5.8%.
Switzerland. The Property & Casualty market grew by 1% (17). The
AXA was the market leader in Property & Casualty with a market share of 14% (18).
(compared to 3% in 2008). In Motor, growth reached 1%, still impacted by the high competition in this market. Property grew by 4% versus 2% in 2008 partly due to indexation. Liability grew by 3% while Workers Compensation decreased by 1% (compared to 3% growth in 2008). As in 2008, tariff increases continued to fuel the market growth in Health (+7%). In Property & Casualty, AXA
remained the leader with a stable market share above 22% (20).
(12) Source: Datamonitor analysis of 2008 FSA Returns. Data excludes MAT, Home-foreign business and Lloyd’s Premiums.
(18) Source: FINMA (Swiss Financial Market Supervisory Authority, Market share 2008).
Mediterranean and Latin American Region. In Italy Motor business was still under pressure (-4%), whereas Non-Motor business remained stable (+0.1% as of September 2009) (1).
GDP contraction, the market increased by 2% (5) following the liberalization of tariffs for Motor Third Party Liability. In Portugal, the market decreased by 5% (6), refl ecting of the economic slowdown and the increasing in price competition, mainly driven by Motor (-8%). In Greece, the market increased by 8% (7)
Motor market, with a market share of 5%. Japan (11). The market declined by 4% in the year ending March 2009. Motor insurance recorded a modest drop in the second half of 2009, while Motor
ranked 2nd in the D irect insurance market, with a market share of around 18% and AXA ranked 13th among all insurers for Motor insurance. Singapore. (12) The insurance market grew by 10%
in gross written premium. AXA ranked 3rd in Motor and 1st in
AXA ranked 15th with a 3% of market share. Hong Kong. The insurance market grew by 3% driven by Workers’ Compensation.
AXA ranked 11th with a 3% of market share in 2008.
Canada. In 2009, overall premiums grew by 2% (14) and AXA
outperformed the market with a 4% growth. The market continued to be very fragmented and competitive with AXA ranking 7th (15)
Solutions Assurance, AXA Group 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. After several years of soft underwriting conditions, corporate risks insurance showed in 2009 fi rst signs of upturn in pricing cycle. In aviation, tariff increased signifi cantly in 2009.
The early part of 2009 was characterized by signifi cant economic and market uncertainties as the global fi nancial system struggled with illiquid markets, impaired and over leveraged banks, and losses from structured securities. The crisis began to settle in
(1) Istituto per la vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP) as of September 2009.
(2) Source: Spanish Association of Insurance Companies. ICEA as of Sept 2009.
(7) Source: Moroccan Association of Insurance Companies as of Dec 2008.
(9) Italy, Morocco and Gulf Region as of December 2008, all other entities as of September 2009.
qoq in the United Kingdom and in the Euro Zone, and by 3% qoq in Japan. Actions taken to stabilize banking systems, monetary policies from central banks combined with budget stimulus from governments drive positive effects for both markets and the real economy. The large emerging countries confi rmed their resilience in the face of this crisis, with industrial production back on track and up for China (GDP growth of +7.9% year over year), India and Brazil. The third quarter of 2009 marked the offi cial exit from recession for the United States, the Euro Zone and Japan but the
The annual rate of infl ation moved back into positive territory –
both in the Euro Zone (0.5%) and the United States (1.9%) year over year.
In the Euro Zone and in the United Kingdom, budgetary stimulus were more modest, with plans calling for the injection of amounts equal to 1.1% and 1.5% of GDP announced in late 2008 and early 2009, respectively. What all of these plans shared was their strong support for the automotive and real estate sectors and are executed against a global interest-rate backdrop of close to zero.
Mae and Freddie Mac securities), as well as the TALF (Term
Bank (ECB) kept its main rate at 1% and eased access to its bank refi nancing operations. The eligibility criteria for admissible collateral were eased, maturities were extended to twelve months, and auctions offered unlimited supply at fi xed rates.
Nevertheless, the Central Banks are beginning to talk about their exit strategies, at least for the quantitative part of their monetary policy.
Compared to December 31, 2008, the US Dollar lost 2% against the Euro (closing exchange rate moved from $1.40 at the end of 2008 to $1.43 at the end of 2009). The Yen lost 4% against the
CHF 1.49 at the end of 2008 to CHF 1.48 at the end of 2009).
September 2009) and the Pound Sterling lost 12% (from £0.797 over 2008 to £0.891 over 2009). The Swiss Franc gained 5% against the Euro (from CHF 1.59 over 2008 to CHF 1.51 over 2009).
C. Bernstein. This resulted in an increase in AXA’s ownership which was mainly offset by the issuance of 8.3 million restricted units in
Australia & New Zealand businesses under an exclusive arrangement. This joint offer would result in AMP acquiring AXA
On December 17, 2009 this new revised proposal was rejected by the same independent Committee. At the same time, AXA
OYAK’s 50% share in AXA OYAK (in addition, according to the same agreement, AXA OYAK Holding bought, for $15 million
(€9 million), the 1.5% interest that Mais Motors, an OYAK jointventure company, holds in AXA OYAK’s non-life subsidiary).
The transaction was closed on August 12, 2008. Following this transaction, AXA now operates in Turkey under the brand “AXA
On February 12, 2008, AXA announced it had reached an agreement with ING for the acquisition of 100% of the share capital of its Mexican insurance subsidiary Seguros ING, for a price of $1.5 billion (€959 million). In 2007, Seguros ING was the third largest Mexican insurer (12% total market share, 5.5 million clients), with leading positions in key markets, such as Motor (2nd largest player with a 17% market share) and Health (2nd largest player with a 19% market share). AXA intends to accelerate and complete the initiated turnaround of Seguros ING by dedicating seasoned management capabilities and leveraging the Group’s global platforms and expertise, notably in IT and reinsurance.
Upon completion of the transaction, Seguros ING was integrated to AXA’s Mediterranean and Latin American Region and will
Kingdom advisory and broking capability, bringing a number of strengths to the Group, including increased scale, a wider national presence and access to new market areas. SBJ, with its strong management team and high quality staff, will represent signifi cant progress towards AXA’s stated strategic aim of building a leading presence in the advisory and broking markets. The businesses will continue to operate independently from AXA’s insurance company interests.
On June 17, 2008, AXA completed the acquisition of 36.7% of the share capital of RESO GARANTIA, Russia’s 2nd largest P&C
As part of the agreement, AXA will have the option to buy out the remaining stake through calls exercisable in 2010 and 2011. Founded in 1991, RESO has built one of the leading
P&C insurance franchises in Russia (7% market share), notably focused on retail Motor, and supported by a network of 18,000 agents, the 2nd largest in Russia. Under the terms of the agreement, RESO’s current management team will continue to run the company and roll-out its successful strategy. With this acquisition, AXA will further increase its exposure to emerging insurance markets. As part of the agreement, AXA granted a 6-year $1 billion credit facility to RESO’s main shareholder, fully secured by his shareholding in the company.
Insurance Group Ltd from December 31, 2008), which already owned 38.9% of Layton Blackham Holdings Ltd. The total cash consideration paid for 61.1% of Layton Blackham Holdings
Ltd and 100% of Stuart Alexander Group Ltd amounted to £58.5 million.
United Kingdom’s only 100% online insurer, Swiftcover, jointly owned by international insurer Primary Group and Swiftcover’s management. The upfront cash consideration for Swiftcover amounted to £75 million, with an additional potential earn-out of £195 million maximum over the next 4 years, based on policy volume and combined ratio level.
As of the end of 2006, AXA Financial, either directly or indirectly through wholly owned subsidiaries, had acquired a total of 24.5 million AllianceBernstein Units for an aggregate price of approximately $885.4 million through several purchases made pursuant to the Put. AXA Financial completed the purchase of another tranche of 8.16 million AllianceBernstein Units pursuant to the Put on February 23, 2007 for a total price of approximately $746 million. This purchase increased the consolidated economic interest of AXA Financial, Inc. and its subsidiaries in
Royalton Capital Investors to acquire 100% of the Hungarian retail bank ELLA and its affi liates. The transaction closed on
July 27, 2007 and the purchase price amounted to €123 million.
On March 23, 2007, AXA and Banca Monte dei Paschi di Siena
(BMPS) reached an agreement for the establishment of a longterm strategic partnership in Life and non-Life bancassurance as well as pensions business. On October 19, 2007, AXA acquired 50% of MPS Vita (Life and S avings) and MPS Danni (P&C), as well as 50% of BMPS open pension funds business. total cash consideration paid by AXA in this transaction was €1,165 million and was fi nanced with internal resources.
On June 8, 2007, AXA and BNP Paribas announced they had reached an agreement for the establishment of a partnership on the Ukrainian Property & Casualty insurance market. On
July 20 and July 21, 2006, respectively. Following the completion of these settlements, the squeeze-out resolutions have been registered in the commercial register of AXA Konzern AG and
Kölnische Verwaltungs-AG für Versicherungswerte on July 5, 2007. Thus, these squeeze-out resolutions are now effective and AXA holds 100% of the shares of these two subsidiaries.
On November 9, 2007, in the context of its strategic partnership with BMPS, AXA announced that it held a strategic interest equal to 2.052% of BMPS’s total outstanding share capital.
The acquisition of this interest was designed to reinforce the long-term relationship between the two companies and to demonstrate AXA’s full support for BMPS’s proposed acquisition of Banca Antonveneta. AXA would subscribe to its full allocation of BMPS shares as part of the rights issue contemplated by BMPS in connection with this acquisition. In line with the agreement between AXA and BMPS announced in March 2007, the bancassurance agreement between BMPS
Italian insurance market. The legal and fi nancial conditions for this extension of the bancassurance agreement are subject to the closing of the acquisition of Banca Antonveneta by BMPS.
US$1,156 million (€920 million taking into account hedges put in place by AXA for this transaction at 1 Euro = 1.26 US$), and successfully completed the sale on May 31, 2007. In addition,
Dutch operations concerned by this proposed transaction were treated as discontinued operations (held for sale) in AXA’s 2007 consolidated fi nancial statements. As a consequence, their earnings until closing were accounted for in net income for all reported years. Their contribution in 2007 amounted to €480 million (of which €406 million gains on disposal and €74 million result up to the closing date), which was accounted in net income. The transaction closed on September 5, 2007.
Branch (WLTB). In 2006, WLTB had a premium volume of circa €100 million (US GAAP) and a 0.35% market share. The transaction closed on October 31, 2007.
total demand for this capital increase amounted to approximately €5.6 billion, i.e. a subscription rate of 272%. The settlement and listing of the new shares on Euronext Paris took place on
(including agents) shareholders represented 5.8% of the outstanding share capital as of December 11, 2009.
As of December 31, 2009, AXA total share capital amounted to 2.289.965.124 shares.
Given improved market conditions, AXA issued in June 2009 a €1.0 billion senior debt (maturity 2015, 4.5% annual coupon, allin issuance spread of 146 bps over Euribor).
During the fi rst half 2009, AXA continued to actively manage its hedging program on its direct equity exposure in Property
In July 2009, AXA unwound all its residual 2008 equity macro hedging position, resulting in a €34 million profi t.
These positions were implemented to mitigate the impact of a decline in equity markets on AXA Equitable’s statutory liabilities.
The estimated fi nancial impact for AXA of the Xynthia storm in
Europe in early 2010 is ranging between €-0.2 billion to €-03 billion before tax, with largest impacts in France, Germany,
Of which Fees and revenues from investment contracts with no participating feature 547 662 740 -17.4%
(b) Excluding net realized capital gains and change in fair value of assets under fair value option and derivatives, net banking revenues and total consolidated revenues would respectively amount to €392 million and €90,128 million for the period ending December 31, 2009, €473 million and €91,285 million for the period ending December 31, 2008, and €320 million and €93,617 million for the period ending December 31, 2007.
The restatements to a comparable basis were mainly driven by the evolution of Euro against other currencies (€851 million or -1 point). On a comparable basis, gross consolidated revenues were down 3%.
Total Life & Savings New Business APE (1) amounted to €6,188 million, down 9% compared to 2008. On a comparable basis, APE decreased by 11%, mainly due to the United States, the United Kingdom, Japan and Australia/New Zealand, partly offset by France and Mediterranean & Latin American Region.
The United States APE decreased by €597 million (-39%) to €994 million driven by (i) Variable Annuities APE down 45%, primarily in the Wholesale channel, refl ecting uncertain market conditions as well as management repricing and redesign actions,
Excluding the impact of the bankruptcy of a large independent agent (LINA) (€-38 million sales in Life and Medical), APE
& Savings to €91 million following lower sales of Variable Annuity products. This was partly offset by a €4 million increase (+2%)
to €269 million mainly due to a drop in mutual fund sales following negative market conditions. These negative impacts were partly offset by Variable Annuity product sales.
Property & Casualty gross revenues were up 1% to €26,174 million, or +1% on a comparable basis mainly driven by Personal lines (+2%) especially in France, Belgium, the United
Motor revenues grew by 2% mainly driven by (i) the United Kingdom
(+13%) due to higher volumes and increased average premium, partly offset by (iv) the Mediterranean & Latin American Region
(-3%) driven by diffi cult market conditions in Spain, Portugal, and the Gulf Region, partly offset by a strong performance in Mexico, and (v) Germany (-3%) as a result of declining average premium in the context of market price pressure.
& Ireland (-9%) due to continued focus on profi tability with tariff
Kingdom & Ireland down 6% in a soft market environment and (ii) Belgium down 2% due to a decrease of Workers’
Compensation negatively impacted by the economic slowdown while (iii) Switzerland increased by 2% mainly due to new large
driven by portfolio increase in Liability (+11%) and Marine (+8%), and (ii) AXA Assistance up 4% to €765 million.
AllianceBernstein revenues were down 29% to €1,887 million due to management fees down 33% in line with 31% lower average assets under management, distribution fees down 27%
Assets under Management increased by €15 billion from yearend 2008 to €346 billion at December 31, 2009 driven by market appreciation of €77 billion, partly offset by net outfl ows of €-53 billion (€-41 billion from Institutional clients, €-6 billion from
Net banking revenues were down 4%, or down 2% on a comparable basis to €395 million, mainly attributable to
Fees and revenues from investment contracts with no participating feature 547 662 740
Change in unearned premium reserves net of unearned revenues and fees (238) (208) (609)
Net investment result excluding fi nancing expenses (a) 34,964 (27,620) 24,572
Net realized capital gains or losses attributable to shareholders (386) (345) 1,175
(a) For the periods ended December 31, 2009, December 31, 2008 and December 31, 2007, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectively €+23,861 million, €-43,687 million and €+7,476 million, and benefi ts and claims by the offsetting amounts respectively.
On a constant exchange rate basis, Life & Savings underlying earnings were up €765 million (+51%) mainly attributable to the United States (€+741 million), Germany (€+114 million) and
Investment margin was impacted by €-12 million reclassifi cation to fees & revenues in the United Kingdom. Excluding this impact, investment margin was down €349 million (-14%)
with Investment income down €202 million (-2%) mainly driven by lower bond and dividend yields while Policyholders’
participation was up €160 million (+1%) mainly due to higher policyholder allocation in France, Switzerland and Belgium.
mainly driven by: a. L oadings on premiums and Mutual Funds were down €6 million (+0%), mainly driven by France (€-32 million mainly due to lower URR amortization, partly offset by lower
Annuity products (higher URR amortization which was fully offset by higher DAC amortization), b. U nit-linked management fees down €155 million (-8%), mainly driven by lower average asset levels in the United
■ Higher net technical margin, up €2,043 million. Excluding the reclassifi cation from net technical margin to commissions in 2009 refl ecting contractual changes in Group Protection contracts in France (€190 million), net technical margin was up €1,853 million mainly driven by (i) €1,411 million improvement in Variable Annuity hedging margin, mostly in the United
(+9%) mainly driven by DAC amortization (up €173 million in the United States) notably refl ecting higher GMxB margins, while administrative expenses increased by €84 million (+2%), mainly driven by higher social taxes in France.
Switzerland and €12 million in Germany in 2009 compared to €71 million in the United Kingdom and €17 million in the United
Property & Casualty underlying earnings amounted to €1,670 million. On a constant exchange rate basis, Property
(€18 million, consolidated under equity method), as well as from the buyout of non-controlling interests in Turkey (€8 million), and on a constant exchange rate basis, Property & Casualty underlying earnings decreased by €769 million (-32%) mainly due to: ■ Lower net technical result (including expenses) down €913 million (or down €905 million excluding Mexico) due to: a. an all year loss ratio increasing by 3.8 points to 70.9%.
Partly offset by: b. an expense ratio decreasing by 0.2 point to 28.1%.
(-9%) excluding the contribution of Mexico, mainly driven by lower asset yi elds in the United Kingdom and Germany, partly offset by France.
United Kingdom in 2008), tax expenses and non-controlling interests decreased by €370 million in line with lower pre-tax earnings.
(iii) lower general expenses (€252 million, mainly from lower staff costs), (iv) lower tax expenses (including a one-time tax benefi t of €62 million at AllianceBernstein due primarily to the release of reserves relating to the tax treatment of compensation plans in 2009 versus €63 million in 2008), and (v) lower non-controlling interests expenses at AllianceBernstein.
On a constant exchange rate basis, banking underlying earnings decreased by €34 million (-104%), mainly due to (i) AXA Bank
Europe down €45 million (or -66%) due to an increase in expenses, notably to fi nance expansion in new countries, and lower capital gains, partly offset by (ii) AXA Banque up €12 million to break even in 2009 refl ecting improved margins and expenses tightly managed.
Group net capital gains and losses attributable to shareholders were down €55 million mainly due to: ■ €-92 million lower net realized gains excluding impairments, to €725 million in 2009, mainly driven by €400 million lower realized gains on equities, partly offset by €341 million higher realized gains on debt securities; ■ €1,755 million lower net impairments, to €-1,028 million in 2009 mainly driven by lower impairments on equity securities; ■ €-1,719 million decrease in impact of equity derivatives mainly driven by the non-recurrence of an exceptional equity hedging profi t in 2008.
As a result, adjusted earnings amounted to €3,468 million. On a constant exchange rate basis, adjusted earnings were down
■ Higher result on change in fair value of financial assets and derivatives including foreign exchange impacts: €+2,984 million to €+485 million. These €+485 million can be analyzed as follows: a. €+1,116 million net positive impact from credit spread tightening (€+738 million from fi xed income fund valuation, and €+377 million related to positive impact from credit derivatives, also including the €+106 million reversal of provisional loss for Japan fi rst quarter 2009 which was included in 2008 net income), b. €-381 million net change in fair value of equity derivatives related to a statutory liability hedge program in the United
c. €-256 million net negative impact from private equity funds valuation, mainly in the United States, France and Germany, d. €-88 million in the United Kingdom refl ecting an undiscounted tax adjustment on unrealized gains attributable to policyholders in unit-linked life fund.
■ Lower exceptional operations result including discontinued operations: €-152 million to €-202 million. These €-202 million negative impact are mainly driven by: a. recognition of a €-141 million deferred tax liability related to the probable sale of the Australia & New Zealand business, b . policyholder bonus related to the share transfer of the Health company to the Holding entity in Germany (€-84 million).
As of December 31, 2009, consolidated shareholders’ equity amounted to €46.2 billion. The movements in shareholders’ equity since
December 31, 2008 are presented in the table below: (in Euro million)
Underlying earnings (Euro per ordinary share) 1.68 1.67 1.80 1.79 1.84 1.83 2.24 2.22 2.29 2.27 -6.7% -6.6%
(b) Following AXA’s rights issue in 4Q09, 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 and 47.9 million in 2007.
Fees and revenues from investment contracts without participating feature 547 662 740
Net investment result excluding fi nancing expenses (b) 33,058 (30,578) 21,857
INCOME FROM OPERATING ACTIVITIES, GROSS OF TAX EXPENSE 3,295 2,058 3,855
Net realized capital gains or losses attributable to shareholders (73) (784) 567
Profi t or loss on fi nancial assets (under fair value option) & derivatives (52) (1,079) (237)
(b) For the periods ended December 31, 2009, December 31, 2008, and December 31, 2007, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectively €+23,861 million, €-43,687 million and €+7,476 million, and benefi ts and claims by the offsetting amounts respectively.
(a) Mediterranean & Latin American Region includes Italy, Spain, Portugal, Greece, Turkey, Morocco and Mexico.
Profi t or loss on fi nancial assets (under FV option) & derivatives 281 (561) (91)
Protection & Health; ■ Individual Lines (59% of gross revenues) increased by 9%
Fees & revenues decreased by €86 million (-6%) to €1,430 million mainly driven by lower revenues on unit-linked contracts with lower average asset base impacted by the adverse fi nancial market evolution.
Expenses increased by €218 million (+10%) to €-2,318 million driven by (i) €190 million increased commissions following the reclassifi cation from technical margin to commissions and (ii) €34 million increase in social taxes on Health business fi nanced through increased premiums.
As a result, the underlying cost income ratio increased by 6.3 points to 77.9%.
(€-205 million), (ii) €-308 million lower net realized capital gains net of hedging derivatives, partly offset by (iii) €+88 million lower charge of impairments mostly on equities.
Net capital gains or losses attributable to shareholders net of income tax (16) (153) (32)
decreased by 12% driven by lower average separate account balances resulting from stock market declines in the latter part of 2008 and the fi rst quarter of 2009.
APE decreased by €546 million (-35%) to €994 million. On a comparable basis, APE decreased by €597 million (-39%): ■ Variable Annuity APE decreased by 45% primarily in the
Wholesale channel, refl ecting uncertain market conditions as well as repricing and redesign actions; ■ Life APE decreased by 31% following product modifi cations in 2008 and the elimination of certain Universal Life guaranteed features in the fi rst quarter of 2009; ■ Mutual Funds APE decreased by 26% refl ecting lower sales under uncertain fi nancial market conditions.
Investment margin decreased by €37 million (-8%) to €450 million. On a constant exchange rate basis, investment margin decreased by €61 million (-12%). Investment income decreased by €126 million primarily refl ecting lower returns on alternative investments. Interest and bonus credited decreased by €65 million primarily refl ecting the favorable reserve adjustment for predemutualization participating annuity business.
On a constant exchange rate basis, fees & revenues decreased by €121 million (-8%) primarily due to lower fees earned on lower average separate account balances resulting from stock market decline in the latter part of 2008 and the fi rst quarter of 2009.
On a constant exchange rate basis, expenses increased by €212 million (+15%) due to: ■ E xpenses, net of capitalization (including commissions and
DAC capitalization) increased by €39 million primarily due to higher pension plan expenses partially offset by lower commissions and other expense reductions from management initiatives, including headcount reductions;
As a result, the underlying cost income ratio decreased by 65.6 points to 70.9%.
On a constant exchange rate basis, underlying earnings increased by €741 million.
On a constant exchange rate basis, net income increased by €270 million (+91%). Net income improved due to the increase in adjusted earnings, partially offset by a decline in the fair value of interest rate hedges (€-224 million, net), and a decline in the fair value of equity derivatives related to the statutory liability hedge
reduced by 12%, mainly driven by adverse stock market conditions; ■ Life Insurance Premiums (19% of gross revenues) reduced by 4%, mainly due to the lower volume of single premium Creditor
mainly due to the impact of the economic downturn on mortgage markets, partially offset by increasing mutual fund revenues.
Onshore and Offshore Bond volumes; ■ D ecrease in Individual and Executive Pensions of €87 million
(-26%) as economic conditions have reduced the UK pensions market; ■ D ecrease in Group Pension volumes of €62 million (-15%)
predominantly due to the impact of economic conditions on incremental contributions from existing company schemes; ■ I ncrease in Life products of €8 million (+10%) refl ecting the strengthening of the AXA Protection brand in the market, in particular with the IFA community.
Amortization of VBI decreased by €92 million (-95%) to €-5 million. On a constant exchange rate basis, amortization of
Income tax expenses increased by €104 million (-160%) to €-39 million. On a constant exchange rate basis, income tax expenses increased by €108 million (-167%) largely driven by higher pre-tax earnings, along with non-recurrence of one-off tax benefi ts in 2008.
Underlying earnings increased by €64 million (+53%) to €186 million. On a constant exchange rate basis, underlying earnings increased by €86 million (+71%).
(1) Undiscounted deferred tax provided on unit-linked assets while the unit-linked liability refl ects the expected timing of the payment of future tax therefore using a discounted basis.
Net capital gains or losses attributable to shareholders net of income tax 20 92 65
APE increased by €50 million (+10%) to €532 million. On a comparable basis and excluding the impact of LINA (€-38 million sales in Life and Medical), APE decreased by €41 million
Life (9 months reported in 2008) and the €+14 million higher
LINA’s shock lapses of Medical Rider and Medical Whole life products (€+21 million) and model refi nement (€-8 million); ■ GMxB margin up €+4 million to €-13 million, with lower hedging costs on Variable Annuity guarantees; ■ C hange in assumptions (€-103 million) refl ecting, in particular, the impact of new investment assumptions on the legacy book of business to better align with Asset Liability Management policy.
(+10%) driven by (i) €56 million higher DAC amortization mainly driven by the assumption change impact (€-15 million), higher amortization of Variable Annuity products (€-14 million), higher surrenders and model changes (€-26 million), and (ii) €52 million lower DAC capitalization partly offset by €46 million lower commissions. Excluding DAC and commissions, operating expenses remained fl at.
VBI Amortization increased by €79 million (+79%) to €-178 million. On a constant exchange rate basis, VBI
Underlying earnings decreased by €27 million (-11%) to €211 million or declined by €69 million (-29%) on a constant exchange rate basis.
Net income increased by €572 million to €420 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.
Profi t or loss on fi nancial assets (under FV option) & derivatives 25 (59) 3
Net technical margin rose by €61 million to €37 million driven by lower hedging costs on Variable Annuity products (€+78 million), better disability result and lower longevity reserve strengthening partly offset by higher policyholder bonus allocation.
Income tax expenses decreased by €2 million (-3%) to €-61 million, mainly due to the improvement of the Variable
Annuity result taxable in Ireland and some positive non-recurring items, partly offset by a better pre-tax underlying result.
Adjusted earnings increased by €9 million (+400%) to €12 million due to higher underlying earnings partly offset by increase in net impairments on fi xed income investments.
On a comparable basis, gross revenues decreased by €260 million (-6%): ■ Group Life decreased by €176 million (-5%) to €3,787 million mainly due to lower single premiums (-11%), partly offset by higher regular premiums (+2%) mainly attributable to salary increases on our targeted population; ■ Individual Life decreased by €94 million (-13%) to €655 million: • I nsurance premiums decreased by 14% or €102 million as a result of the shift from insurance products to Variable
Annuity products (pure investment contracts where only fees are considered as gross revenues). Considering cash infl ows of Twinstar Income, Individual Life revenues would have increased by 9% or €68 million,
Investment margin decreased by €17 million (-16%) to €92 million. On a constant exchange rate basis, investment
On a constant exchange rate basis, fees & revenues increased by €7 million (+4%) due to lower fees and revenues allocated to policyholders.
Life notably due to the non-recurrence of a 2008 reserve strengthening.
(+11%). Excluding the 2008 one-time positive impact of the change in own pension scheme, expenses remained stable.
Amortization of VBI increased by €17 million (+162%) to €-28 million. On a constant exchange rate basis, amortization of VBI increased by €16 million (+149%) due to both negative unlocking effect and higher net amortization.
Underlying earnings increased by €8 million (+4%) to €226 million. On a constant exchange rate basis, underlying earnings decreased by €3 million (-1%).
Net capital gains or losses attributable to shareholders net of income tax 24 (474) 206
Crest products); ■ Group Life & Savings revenues increased by 8% to €653 million mainly due to an exceptional premium on a large existing contract.
Investment margin increased by €36 million (+19%) to €228 million mainly due to the transfer of assets from the
Property & Casualty segment (€+16 million) and non-recurring interest arrears received on income tax benefi t (€+14 million).
Income tax benefits increased by €37 million to €6 million mainly resulting from the favorable court decision for insurance companies on RDT (Revenus Défi nitivement Taxés: tax exemption on 95% of dividends on equities) (€+66 million) partly offset by higher pre-tax underlying earnings.
Adjusted earnings increased by €593 million (+176%) to €256 million mainly driven by higher underlying earnings
Net capital gains or losses attributable to shareholders net of income tax 4 (40) 19
Profi t or loss on fi nancial assets (under FV option) & derivatives 20 (12) (0)
The Mediterranean and Latin American Region includes the following changes in scope: ■ Mexico consolidated from 01 /07 /2008; ■ Turkey buyout of non-controlling interests on 01 /07 /2008; ■ Quadrifoglio Vita consolidated from 31 /12 /2008.
Gross revenues increased by €1,662 million (+34%) to €6,483 million. On a comparable basis, gross revenues increased by €1,553 million (+31%) mainly driven by a strong growth in general account savings products (€2,048 million or
+86%) mainly in AXA MPS (Italian bancassurance joint-venture, €2,011 million or +160%) reinforced by Antonveneta, partly offset by lower sales of index-linked and unit-linked products in Italy
APE increased by €91 million (+22%) to €497 million. On a comparable basis, APE increased by €83 million (+20%)
Vita. On a constant exchange rate basis and excluding Mexico and Quadrifoglio Vita, investment margin decreased by €52 million (-21%) to €194 million mainly due to lower yields on bonds.
Fees & revenues increased by €36 million (+14%) to €303 million, of which €38 million from Mexico and Quadrifoglio
(-33%) to €-25 million mainly due to the natural decline of VBI
Underlying earnings increased by €6 million (+6%) to €115 million, of which €8 million from Mexico, Quadrifoglio Vita and the buyout of non-controlling interests in Turkey. On a constant exchange rate basis and excluding Mexico, Quadrifoglio Vita and the buyout of non-controlling interests in Turkey, underlying earnings decreased by €5 million (-5%) to €106 million.
Adjusted earnings increased by €51 million (+74%) to €119 million, of which €9 million from Mexico, Quadrifoglio
Vita and the buyout of non-controlling interests in Turkey, adjusted earnings increased by €39 million (+55%) to €110 million due to higher net capital gains on fi xed income and lower impairments on equities.
Net income increased by €86 million (+166%) to €139 million, of which €18 million from Mexico, Quadrifoglio Vita and the buyout of non-controlling interests in Turkey. On a constant exchange rate basis and excluding Mexico, Quadrifoglio Vita and the buyout of non-controlling interests in Turkey, net income increased by €76 million (+168%) to €120 million due to adjusted earnings and a positive change in fair value of mutual funds.
(a) South East Asia earnings include Indonesia, Thailand, Philippines, Singapore and India.
decreased by €160 million (-12%) to €1,173 million, mainly driven by single premiums in wealth management guaranteed savings products sold through wholesale channel refl ecting the recent investors’ trend to seek more conservative investments given fi nancial market volatility; ■ R evenues from mutual fund and advice business (23% of gross revenues) decreased by €45 million (-14%) to €359 million due to a decline in funds under management levels resulting from fi nancial market volatility, and lower mutual fund net sales, driven by lower infl ows partly offset by lower outfl ows.
APE decreased by €109 million (-29%) to €269 million. On a comparable basis, APE decreased by €123 million (-32%) driven by a drop in mutual fund sales and AllianceBernstein joint-venture sales given the market downturn, slightly offset by sales increase in the Variable Annuity product North.
Underlying earnings increased by €16 million (+51%) to €46 million. On a constant exchange rate basis, underlying earnings increased by €16 million (+54%). The evolution would have been fl at excluding non-recurring items. On a 100%
ownership basis, the evolution of underlying earnings was as follows: ■ I nvestment margin decreased by €22 million (-173%) to €-9 million. On a constant exchange rate basis, investment margin decreased by €22 million (-174%) due to a lower asset base and lower returns; ■ F ees & revenues decreased by €46 million (-7%) to €652 million. On a constant exchange rate basis, fees
On a constant exchange rate basis, expenses decreased by €30 million (-5%). Excluding Genesys, expenses decreased by €50 million (-9%) including cost saving initiatives across the business; ■ A mortization of VBI decreased by €26 million (-70%) to €-11 million. On a constant exchange rate basis, amortization of VBI decreased by €26 million (-69%) mainly due to revision of unit costs in 2009 driven by lower costs and higher asset base; ■ A s a consequence, the underlying cost income ratio decreased by 4.1 points to 86.9%; ■ I ncome tax expenses decreased by €6 million (-146%) to €2 million. On a constant exchange rate basis, income tax expenses decreased by €6 million (-147%) driven by nonrecurring positive impacts in 2009, partly offset by higher pretax underlying earnings.
On a constant exchange rate basis, net income increased by €98 million (139%) in line with adjusted earnings.
Underlying earnings increased by €1 million (+1%) to €135 million. On a constant exchange rate basis, underlying earnings decreased by €6 million (-5%). Excluding non-recurring items (mainly positive impact on change in assumption on DAC
and VBI amortization), underlying earnings were broadly in line with 2008.
Adjusted earnings increased by €47 million (+53%) to €137 million. On a constant exchange rate basis, adjusted earnings increased by €39 million (+44%), with higher capital gains and lower impairments partly offset by lower underlying earnings and higher hedging costs.
On a constant exchange rate basis, net income increased by €27 million (+28%), mainly driven by €39 million higher adjusted earnings partially offset by €-15 million higher unrealized loss due to hedging strategies on credit exposures.
& Savings (€-10 million, -12%), impacted by lower sales of short term Tax Wrapper products in Poland (€-24 million, -90%).
(€+12 million, +67%), and to a lower extend Poland (€+4 million)
As a result, the underlying cost income ratio decreased by 7.3 points to 85.2%.
Adjusted earnings increased by €22 million to €16 million. On a constant exchange rate basis, adjusted earnings increased by €23 million, mainly due to higher underlying earnings and €12 million lower realized capital losses and impairments on equities and fi xed income securities.
APE increased by €22 million (+34%) to €88 million. On a comparable basis, APE increased by €13 million (+18%), mainly driven by the growth in bancassurance channel in
Adjusted earnings decreased by €9 million to €1 million. On a constant exchange rate basis, adjusted earnings decreased by €9 million mainly driven by the decrease in underlying earnings, partly offset by higher net capital gains in Indonesia.
Net income decreased by €19 million to €-13 million. On a constant exchange rate basis, net income decreased by €20 million, mainly driven by adjusted earnings and India’s entry in the scope of consolidation (one-time recognition of past losses of €-13 million).
Fees and revenues from investment contracts without participating feature - - -
Amortization of value of purchased life business in force - - -
INCOME FROM OPERATING ACTIVITIES, GROSS OF TAX EXPENSE 2,334 3,415 2,647
Net realized capital gains or losses attributable to shareholders (264) (665) 562
Gross revenues increased by €90 million (+2%) to €5,724 million (1): ■ P ersonal lines (61% of gross revenues) increased by 3% to €3,476 million resulting from positive net infl ows in Motor
(+68,000 net new contracts mainly stemming from Direct channel and agents’ network) in a competitive market, and positive net new infl ows in Household (+58,000) combined with an increase in average premium; ■ C ommercial lines (39% of gross revenues) were stable at €2,208 million. The increase in Property (+5%) and in Liability
Expense ratio rose by 0.4 point to 24.9% as a consequence of an increase in commissions.
Profi t or loss on fi nancial assets (under FV option) & derivatives 7 7 (5)
Gross revenues decreased by €495 million (-11%) to €3,976 million (1). On a comparable basis, gross revenues decreased by €80 million (-2%): ■ P ersonal lines (56% of the P&C premiums) were up 3%
to €2,201 million. Motor was up 19% to €775 million both from further growth in direct business written through the internet platform Swiftcover (up 43% to €286 million) and in the intermediated business refl ecting the successful launch of the AXA Car product, in hardening market conditions.
This was partly offset by Property up 10% to €565 million, resulting from a strong growth with specifi c intermediaries, the launch of AXA Home Insurance product sold directly to client and new deals with corporate partners; ■ C ommercial lines (43% of the P&C premiums) were down 6%
to €1,696 million. Motor was down 9% where the focus on profi tability continues with tariff increases affecting renewal retention. Non-Motor was down 6% refl ecting the strategy to exit from unprofi table schemes coupled with soft market conditions partially offset by growth in Health (up 9%) from international business.
Net technical result decreased by €441 million (-27%) to €1,202 million. On a constant exchange rate basis net technical result decreased by €311 million (-19%): ■ T he current accident year loss ratio increased by 4.6 points to 74.1% mainly due to (i) adverse weather events (3.5 points)
Administrative expense ratio decreased by 2.4 points refl ecting cost containment including a positive one-off impact on employee pension scheme (-0.9 point), operational cost savings
(-1.3 point), and a decrease in restructuring provisions refl ecting the non-recurrence of the Irish redundancy scheme costs in
Underlying earnings decreased by €206 million (-67%) to €100 million. On a constant exchange rate basis, underlying earnings decreased by €200 million (-65%.).
(€144 million) and increased realized gains (€+19 million) as fi nancial market conditions improved versus 2008.
On a constant exchange rate basis, net income decreased by €19 million (-31%) refl ecting adjusted earnings evolution and €17 million reduced amortization of intangible assets.
Net capital gains or losses attributable to shareholders net of income tax (105) (57) 92
Accident; ■ C ommercial lines (28% of gross revenues) were down 1% to €991 million due to cancellations and average premium decline in Liability and Marine; ■ O ther lines (7% of gross revenues) were up 7% to €242 million due to premium increase in pools, treaty business and the development of AXA Art.
Expense ratio improved by 0.7 point to 31.4%. The noncommission expense ratio improved due to productivity gains and the non-repeat of 2008 non-recurring costs.
Net investment result decreased by €42 million (-11%) to €352 million mainly as a result of lower income from fi xed income assets mainly due to short term investments and non-recurring 2008 interest arrears on income tax benefi ts (€+17 million) as well as lower dividends from equities.
Net income increased by €80 million (+64%) due to the favorable change in fair value of mutual funds and derivatives
(€+136 million) mainly due to credit spread tightening and nonrecurring gain on the sale of legal protection business, partly offset by lower adjusted earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives 62 (133) (29)
Motor down 4% and Non Motor down 2% mainly due to a decrease in Workers’ Compensation (-10%) impacted by the economic context and focus on profi tability partly offset by
Expense ratio increased by 0.3 point to 30.1% mainly driven by slightly higher administrative expenses.
Net investment result decreased by €39 million (-17%) to €196 million mainly due to lower yield on equities and bonds as well as impact of assets transferred to Life segment (€-16 million).
Income tax expenses decreased by €46 million (-62%) to €-29 million resulting from the favorable court decision for insurance companies on RDT (Revenus Définitivement Taxés: tax exemption on 95% of dividends on equities) (€+39 million), and lower pre-tax result.
Adjusted earnings increased by €3 million (+2%) to €143 million driven by lower impairments mainly on equities partly offset by lower realized capital gains on equities and lower underlying earnings.
Net income increased by €202 million to €186 million due to higher adjusted earnings and the favorable net change in fair value mainly on fi xed income mutual funds (€+161 million) as a result of 2009 credit spread tightening.
Gross revenues increased by €283 million (+4%) to €6,721 million (1). On a comparable basis, gross revenues decreased by €40 million (-1%) driven by the diffi cult economic context in the Southern European countries, partly offset by a positive performance in emerging markets: ■ P ersonal lines (63% of the gross revenues) were down 1% to €4,210 million mainly due to Motor, down 3%, driven by diffi cult market conditions in Spain, Portugal and in the Gulf Region, partly offset by positive performances in Mexico, Morocco and Greece. This negative growth in Motor was partly offset by Non-Motor, up 5%, with Health mainly driven by positive volumes effect in Mexico and in Italy, and Property developing positively in all countries; ■ C ommercial lines (37% of total revenues) were down 1% to €2,475 million, with stability in Motor and a decrease in Liability, directly correlated with the negative economic trend, especially
(decrease in the average premium combined with a higher claims frequency); ■ A ll accident year loss ratio increased by 4.9 points to 73.3%.
Net investment result increased by €1 million (+0%) to €415 million of which €18 million from Mexico. On a constant exchange rate basis and excluding Mexico, net investment result decreased by €8 million (-2%) to €363 million due to lower fi xed income yield.
Income tax expenses decreased by €112 million (-48%) to €-124 million of which €4 million from Mexico. On a constant exchange rate basis and excluding Mexico, income tax expenses decreased by €114 million (-48%) to €-123 million, in line with lower pre-tax earnings.
Underlying earnings decreased by €232 million (-42%) to €326 million of which €28 million from Mexico and the Turkey buyout of non-controlling interests. On a constant exchange rate basis and excluding Mexico and the Turkey buyout of non-controlling interests, underlying earnings decreased by €252 million (-46%) to €298 million.
Net income decreased by €170 million (-38%) to €277 million of which €31 million from Mexico and the Turkey buyout of noncontrolling interests. On a constant exchange rate basis, excluding
Net capital gains or losses attributable to shareholders net of income tax (13) (170) (6)
Profi t or loss on fi nancial assets (under FV option) & derivatives 5 (52) (10)
Gross revenues increased by €138 million (+7%) to €2,161 million (1). On a comparable basis, gross revenues increased by €32 million (+2%): ■ Personal lines (51% of gross revenues) were up 1% to €1,112 million mainly driven by Property refl ecting price indexation and Legal Protection business. Motor business was stable; ■ C ommercial lines (49% of gross revenues) were up 1% to €1,058 million mainly due to some new large Health contracts.
due to a negative adjustment on deferred acquisition costs amortization, expense ratio remained stable.
As a result, the combined ratio increased by 0.3 point to 94.0%.
Adjusted earnings increased by €179 million (+262%) to €247 million. On a constant exchange rate basis, adjusted earnings increased by €167 million (+244%) mainly due to higher capital gains on equity and lower impairments on equity.
(in Euro million) 2009 2008 2007 o/w Asia (including Japan) (a) 819 751 574 o/w Central and Eastern Europe 31 19 12
(in Euro million) 2009 2008 2007 o/w Asia (including Japan) (a) 20 27 20 o/w Central and Eastern Europe (10) (10) (10)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 3 (6) 1
Gross revenues increased by €99 million (+9%) to €1,174 million (1). On a comparable basis, gross revenues increased by €115 million (+11%) as a result of higher volume and increased average premium in both Motor and Property lines.
Underlying earnings decreased by €17 million (-16%) to €87 million. On a constant exchange rate basis, underlying earnings decreased by €15 million (-15%) refl ecting a deterioration of combined ratio by 1.8 points mainly as a result of lower positive prior year reserve developments, lower net investment income and higher effective income tax rate.
On a constant exchange rate basis, adjusted earnings increased by €31 million (+51%) due to €31 million lower impairments on equities and €15 million higher realized capital gains partly offset by €15 million lower underlying earnings.
On a constant exchange rate basis, net income increased by €34 million (+61%) to €89 million due to higher adjusted earnings.
South Korea and Singapore; ■ C ommercial lines were up 5% or €7 million due to (i) Motor
Net technical result increased by €6 million (+3%) to €208 million. On a constant exchange rate basis, net technical result decreased by €3 million (-2%): ■ C urrent accident year loss ratio increased by 2.1 points to 74.9% as a result of a deterioration in motor frequency in
South Korea and Singapore, partly offset by an improvement in Japan; ■ A ll accident year loss ratio increased by 2.8 points to 73.9%
Underlying earnings decreased by €7 million (-25%) to €20 million. On a constant exchange rate basis, underlying earnings decreased by €8 million (-31%).
On a constant exchange rate basis, adjusted earnings decreased by €8 million (-27%) as a result of lower underlying earnings.
On a constant exchange rate basis, net income decreased by €6 million (-25%) in line with developments of adjusted earnings, partly offset by lower amortization of acquired portfolio in South
Gross revenues increased by €12 million (+61% or 67% on a comparable basis) to €31 million refl ecting higher net new contracts in Motor (+72,000).
Net income increased by €4 million to €-7 million due to a positive impact on foreign exchange.
Net capital gains or losses attributable to shareholders net of income tax 12 (8) 27
Profi t or loss on fi nancial assets (under FV option) & derivatives 16 (77) 1
Net Technical Result increased by €84 million (+37%) to €311 million. On a constant exchange rate basis, net technical result increased by €87 million (+38%): ■ T he current accident year net technical result increased by €193 million to €239 million refl ecting a lower level of major losses in Property. Current year loss ratio improved by 10 points to 87.2% (or +8 points excluding reclassifi ed commissions from technical margin to expenses on Assumed business); ■ T he prior accident year net technical result decreased by €109 million to €72 million due to major losses on aviation line underwritten in 2008.
Expense ratio increased by 1.8 points to 15.0%. Excluding reclassifi ed commissions from technical margin to expenses on
As a result, the combined ratio improved by 2.4 points to 99.0%.
Net investment result decreased by €5 million (-2%) to €186 million mainly due to a decrease in asset base.
Adjusted earnings increased by €39 million (+38%) to €144 million refl ecting the increase in underlying earnings and €20 million lower impairment charge net of realized capital gains notably on equities.
Gross revenues increased by €13 million (+1%) to €883 million (1).
(+4%) mainly driven by new business on Travel and portfolio increase in Third Party Administration activity in Mexico.
Underlying earnings decreased by €4 million (-21%) to €16 million notably due to a lower investment income.
Adjusted earnings decreased by €2 million (-11%) to €14 million refl ecting the decrease in underlying earnings partly offset by €2 million lower impairment charge.
Net realized capital gains or losses attributable to shareholders - - 1
Net capital gains or losses attributable to shareholders net of income tax - - 1
Profi t or loss on fi nancial assets (under FV option) & derivatives 20 (45) -
Assets under Management (“AUM”) increased by €15 billion to €346 billion driven by market appreciation of €77 billion offset by net outfl ows of €53 billion (€41 billion from Institutional clients, €6 billion from Retail and €5 billion from Private Clients) and negative exchange rate impact of €9 billion.
related to lower average mutual fund assets, and institutional research services down 8% due to lower client trading activity and lower security valuations in European markets, partly offset by market share gains.
(i) lower compensation expenses (-9% or €91 million due to workforce reductions and lower commission expense refl ecting lower sales volumes) and (ii) lower promotion and servicing expenses (-22% or €85 million) due to lower distribution plan payments (from lower average AUM), lower amortization of deferred sales commission and lower travel and entertainment costs.
(-6%) and an unfavorable client and product mix (management fee bp down 7%). Performance fees were down €26 million, real estate transaction fees €19 million and other revenues €18 million, notably due to lower stocklending fees.
General expenses decreased by €217 million (-16%) to €-1,158 million. On a constant exchange rate basis, general expenses decreased by €199 million (-14%). Excluding distribution fees (commissions paid to third party distributors), general expenses decreased by €120 million (-13%) as a result of cost monitoring initiatives on staff and non-staff costs.
On a constant exchange rate basis, net income increased by €56 million (+37%), mainly driven by a positive change in fair value of “Libor plus” funds (€+8 million in 2009 versus €-74 million in 2008) and a positive variation in unrealized carried interest, more than offsetting the decrease in adjusted earnings.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and the net income attributable to
Net banking revenues increased by €77 million (+34%) to €301 million. On a comparable basis (1), net banking revenues decreased by €17 million (-7%) mainly due to a decrease of the net capital gains and lower net interest and fee income.
Adjusted earnings increased by €13 million (+206%) to €20 million mainly due to a decrease of underlying earnings more than offset by an increase in net realized capital gains
(1) In Banking segment “on a comparable basis” means after intercompany eliminations.
Net banking revenues decreased by €5 million (-5%) to €112 million. On a comparable basis (1), net banking revenues decreased by €10 million (-11%) to €91 million, driven by a €20 million increase in commercial margin net of cost of risk in a context of economic slowdown more than offset by a €31 million negative impact of the macro-hedge derivatives on interest rates.
Underlying and adjusted earnings increased by €12 million to €0 million mainly driven by a commercial margin increase combined with €1 million administrative expenses decrease following a cost control program.
Net banking revenues increased by €2 million (+16%) to €15 million. On a comparable basis (1 ), net banking revenues decreased by €3 million (-29%) driven by the decrease in interest margin due to higher interest paid for the “pump-in” strategy partly offset by the increase in commission margin.
Adjusted earnings and net income decreased by €1 million to €-5 million due to lower underlying earnings partly offset by lower bond impairment (€+2 million).
Underlying earnings decreased by €165 million to €-602 million mainly due to: ■ €-121 million higher fi nancial charges mainly due to mid year 2008 external growth fi nancing and internal refi nancing; ■ €-39 million lower result on hedging of earnings denominated in foreign currencies,
Adjusted earnings decreased by €1,401 million to €-632 million mainly driven by the lower impact of macro hedges equity derivatives from €+1,336 million to €-23 million consistent with stock market recovery and by the underlying earnings evolution.
Net income decreased by €990 million to €-542 million mainly driven by: ■ the adjusted earnings evolution €-1,401 million; ■ €-141 million deferred tax liability related to the probable sale of the Australia & New Zealand business as IFRS rules require to recognize a tax equal to the difference between the consolidation book value and the tax value of AAPH shares, when a transaction is considered more likely than not; ■ €+496 million change in the mark to market on interest rate and foreign exchange derivatives instruments which are not eligible to hedge accounting; ■ €+48 million related to the decrease in the time value of equity derivatives.
Underlying earnings, adjusted earnings and net income decreased by €12 million to €-23 million, mainly due to the increase in income tax (€8 million) resulting from higher dividends
Net income decreased by €44 million to €-15 million driven by adjusted earnings evolution partly offset by a favorable change in fair value of derivatives non eligible to hedge accounting
On a constant exchange rate basis, underlying earnings decreased by €21 million primarily due to a €46 million increase in net fi nancial charges partially offset by a higher income tax benefi t (€+24 million) refl ecting lower underlying earnings and a lower tax cost on stock based compensation.
Net income decreased by €29 million to €-123 million. On a constant exchange rate basis, net income decreased by €23 million due to lower adjusted earnings and unfavorable change in fair value of derivatives.
Net income increased by €49 million to €13 million. On a constant exchange rate basis, net income increased by €49 million, due to higher adjusted earnings combined with foreign exchange gains on USD group debt.
Net income increased by €283 million to €31 million. On a constant exchange rate basis, net income increased by €287 million refl ecting adjusted earnings evolution together with an increase of €247 million on exchange rate gains primarily arising from the revaluation of Euro-denominated inter-company loans.
Net income increased by €32 million to €-11 million due to higher adjusted earnings and capital gains on the sale of a stake in a sales organization company.
Underlying earnings increased by €20 million to €4 million due to €10 million lower tax expenses resulting from lower dividends
(eliminated in consolidation) received from operational entities as well as income from internal loans set up in 2009.
On a comparable exchange rate basis, underlying earnings increased by €10 million due to lower interest rates partly offset by ING Mexico higher fi nancial charges (acquired in the second half of 2008).
Adjusted earnings increased by €13 million to €-72 million. On a comparable exchange rate basis, adjusted earnings increased by €13 million in line with underlying earnings.
Net income increased by €13 million to €-72 million. On a comparable exchange rate basis, net income increased by €13 million in line with adjusted earnings.
On a comparable basis means that the data for the current period were restated using the prevailing foreign currency exchange rates for the same period of prior year (constant exchange rate basis).
Net capital gains or losses attributable to shareholders include the following elements net of tax: ■ Realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); ■ Cost at inception, intrinsic value and pay-off of derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds; ■ Related impact on policyholder participation (Life & Savings business); ■ DAC and VBI amortization or other reactivity to those elements if any (Life & Savings business) and net of hedging if any.
“OCI”, and net income not refl ecting any interest charges on
• interest charges on TSS/TSDI are deducted from earnings; • OCI is excluded from the average shareholders’ equity.
Discretionary Participation Features (DPF): (i) gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net
(ii) Policyholders’ interest in participating contracts is refl ected as a change in insurance benefi ts in the Statement of
Income. In the Margin Analysis, it is allocated to the related margin, i.e. primarily “Investment Margin” and “Net Technical
as well as changes in specifi c reserves linked to invested assets’ returns and to exclude the fees on (or contractual charges included in) contracts with the fi nancial risk borne by policyholders, which are included in “Fees and Revenues”,
Reserve); (v) other fee revenues, e.g., fees received on fi nancial planning or sales of third party products.
Management is the net result from GMxB lines corresponding to explicit charges related to these types of guarantees less cost of hedge. It also includes the unhedged business result; (iv) Policyholder bonuses if the policyholder participates in the risk margin; (v) Ceded reinsurance result; (vi) other changes in insurance reserves are all the reserves strengthening or release coming from changes in valuation assumptions, additional reserves for mortality risk and other technical impacts such as premium defi ciency.
Underlying Expenses are: (i) acquisition expenses, including commissions and general expenses allocated to new business, related to insurance products as well as to other activities (e.g., mutual fund sales); (ii) capitalization of acquisition expenses linked to new business: Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF; (iii) amortization of acquisition expenses on current year and prior year new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition
Life & Savings underlying cost income ratio: Underlying expenses plus underlying VBI amortization divided by “underlying”
(i) dividends received from operating subsidiaries, (ii) proceeds from the issuance of subordinated convertible debt instruments , other subordinated debt instruments and borrowings (including debt issued by subsidiaries), (iii) the issuance of ordinary shares, and (iv) proceeds from the sale of non-core businesses and assets.
Holdings and AXA UK Plc. are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating entities to the Company
Life & Savings and Property & Casualty insurance contracts are disclosed in Note 14.9.1 of Part 4 – consolidated fi nancial statements .
Liquidity needs can be affected by fl uctuations in the level of surrenders, withdrawals, maturities and guarantees to policyholders including guarantees in the form of minimum income benefi ts or death benefi ts, particularly on variable annuity business (see Part 1.2 – “Information on the Company” Segment
Insurance cash fl ows are generally positive but can be negative in the case of exceptional events. A portion of these cash fl ows is invested in liquid, short-term bonds and other listed securities in order to manage the liquidity risk that may arise from such events.
These subsidiaries’ principal sources of liquidity are operating cash fl ows, proceeds from the issuance of ordinary shares (where applicable), drawings on credit facilities, repurchase agreement and other borrowings from credit institutions or others (including the Company).
Despite highly volatile fi nancial markets in 2009, AXA continued to manage its liquidity risk carefully and conservatively, proving its resilience in terms of liquidity position.
At year end 2009, AXA’s liquidity position remained strong with: ■ A large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
AXA’s 2017 convertible bonds, (6.6 million bonds at December 31, 2009). To neutralize the dilutive impact of the 2017 convertible bonds, AXA has purchased from a banking counterparty call options on the AXA ordinary share with an automatic exercise feature. This feature is such that one call option is automatically exercised upon each conversion of a convertible bond.
Consequently, each issuance of a new ordinary share resulting from the conversion of a bond will be offset by the delivery to AXA
of an ordinary share under the call option (which ordinary share
At December 31, 2009, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
Note 16.3 of Part 4 – “consolidated fi nancial statements ”.
(1) (Net fi nancing debt + undated subordinated debt) (Shareholders’ equity, excluded fair value recorded in shareholders’ equity + net fi nancing debt).
On December 4, 2009, the Company issued ordinary shares for a net aggregate purchase price of €2,041 million through preferential subscription rights. The proceeds from this rights issue will be used to seize future acquisition opportunities, primarily in high growth markets, including the buyout of minority interests in Central and Eastern Europe and the transaction proposed to AXA Asia Pacifi c Holdings’ board, while maintaining a strong balance sheet.
For several years, the AXA Group has been offering to its employees, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2009, employees invested a total of €393 million leading to a total of 26.4 million newly issued shares. Employee (including agent)
Holding Belgium as no dividends were paid in 2009 (as opposed to €1,053 million in dividends in 2008 arising from the capital gains on the sale of the Netherlands activities in 2007).
Interest paid by the Company in 2009 totaled €1,292 million (2008: €1,275 million 2007: €938 million) or €1,180 million after the impact of hedging derivative instruments (2008: €1,134 million, 2007: €646 million); of which undated debt of €443 million (2008: €468 million, 2007: €421 million). On a consolidated basis, total interest paid in 2009 was €425 million (2008: €653 million, 2007: €554 million).
The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries monitor compliance with these requirements on a continuous basis and are in compliance with the applicable solvency requirements as of December 31, 2009.
A European Directive dated October 27, 1998 requires a consolidated solvency margin calculation effective for periods ending on or after December 31, 2001. France transposed this directive under an ordinance dated August 29, 2001, decreed on March 14, 2002 and applicable from 2002. Additional supervision of credit institutions, investment companies and insurance companies belonging to “fi nancial conglomerates”
( €10.6 billion at December 31, 2008 and €13.0 billion at
December 31, 2008 and €10.1 billion at December 31, 2007); (iv) locally admitted assets: €3.4 billion (€2.6 billion at
December 31, 2008 and €2.9 billion at December 31, 2007); (v) less intangible assets (excluding goodwill on
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.
Dated and undated subordinated notes issued by the Company qualify for favorable capital treatment from the French insurance regulator, which oversees the Company’s consolidated solvency position, and rating agencies.
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 the context of the 2008-2009 fi nancial market crisis and the associated deterioration in the credit and equity markets, certain rating agencies lowered their outlook on the life insurance sector to negative from stable and have downgraded a growing number of companies. In February 2009, (i) Standard & Poor’s affi rmed its AA counterparty credit and fi nancial strength ratings on
AXA’s principal insurance subsidiaries and its A+ counterparty credit ratings on the Company, but revised its outlook on these ratings to negative from stable and indicated that they “believe that AXA’s fundamentals are sound and are highly likely to help the Group withstand market conditions and keep ratings in the
F1 (one notch). Fitch Ratings also revised its outlook on these ratings to negative from stable.
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 event, 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 buy-back program, or any redemption or repurchase of other TSS.
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.
A dividend per share of €0.55 will be proposed at AXA’s Annual
Please refer to Note 31 of Part 4 – “consolidated fi nancial statements ” for other subsequent events.
These developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition by, for example, increasing our need for cash in order to meet increased surrender requests and/or collateral calls, causing us to liquidate assets at unattractive prices or to borrow at unattractive rates to raise necessary cash, and/or negatively impacting our ability to sell new insurance policies or other products due to negative publicity associated with a downgrade and the associated impact on public confi dence in us.
Employees 120 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 121
Transactions involving Company securities completed in 2009 by Management Board and Supervisory Board members 156
Employee shareholders 160 2.3 DESCRIPTION OF THE COMPANY’S SHARE REPURCHASE PROGRAM 161 2.4 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 164
Markets 174 2 CORPORATE GOVERNANCE Executive compensation, major shareholders and related matters
Implementing sound corporate governance principles has been a priority at AXA for many years. AXA’s shares are publicly listed on Euronext Paris and its ADRs and ADSs are publicly listed on the New York Stock Exchange (1). Consequently, AXA is subject to prevailing corporate governance requirements and practices in
France and the United States including the Sarbanes-Oxley Act and the French Commercial Code.
Supervisory Board also decided to recommend the adoption of a structure with a Board of Directors in which Mr. Henri de Castries would exercise the roles of Chairman and CEO (Président
Directeur Général or PDG). This proposal to combine the posts of Chairman and CEO does not represent a decision of AXA to institutionalize the combination of these posts on a permanent or structural basis going forward. Rather, the Supervisory Board’s decision to recommend this change 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 board’s desire to optimize the Group’s decisionmaking processes and reactivity going forward.
A detailed description of the proposed governance structure appears in the Management Board’s Report to the General
Shareholders’ Meeting to be held on April 29, 2010 (pages 472 and 473 of this Annual Report).
The Supervisory Board supervises the Company’s activities and reports to the shareholders. It is responsible for appointing members of the Company’s Management Board and supervises the management of AXA. Members of the Management Board may also be dismissed directly by the AXA Supervisory Board and the AXA’s shareholders pursuant to a resolution duly adopted at a General Shareholders’ Meeting.
Article 12 of the Company’s Charter specifi es that the following types of transactions or decisions require the prior approval of the Supervisory Board: ■ I ssuance of securities that give direct or indirect access to the
■ S trategic partnership agreements; ■ E stablishment of stock option plans or granting free shares for employees of the Company or related parties, as well as the granting of stock options or free shares (e .g . performance shares) to members of the Company’s Management Board; ■ P roposals for amending the Charter submitted to the General
Shareholders’ Meeting; ■ P roposals for income allocation and dividend payments for the fi scal year; ■ P roposals for the date of dividend distribution and possible advances for dividend payment.
Supervisory Board members may meet among themselves without the attendance of Management Board members.
Board to own a minimum of 100 AXA shares. In addition, to ensure that their interests and those of the Company are appropriately aligned, the Board’s Bylaws provide that each member of the
On December 31, 2009, the Supervisory Board was comprised of 14 members appointed by the shareholders. Currently, 5 members of the Supervisory Board are nationals of countries other than France. In accordance with French law, one member of the Supervisory Board is the employee- shareholders’
Chairman of the Supervisory Board Chairman of the AXA Supervisory Board Chairman and CEO of BOURBON
Member of the Supervisory Board CEO of SAP AG SAP AG
Wendy Cooper (59) Member of the Supervisory Board, representing the employee shareholders
Member of the Supervisory Board Non-executive Chairman of AXA UK plc (United Kingdom) and AXA Equity and Law plc (United Kingdom)
GDF SUEZ 22, rue du Docteur Lancereaux 75008 Paris – France
Member of the Supervisory Board Managing director of ROC Partners (United States)
ROC Partner s 580 Park Avenue New York, NY 10065 United States
The Coca-Cola Company Groupe Europe 27, rue Camille Desmoulins 92784 Issy-les-Moulineaux Cedex 9 – France
Member of the Supervisory Board Professor of Political Sciences at the University of Princeton – IBM Chair (United States)
EPS/PIIRS Aaron Burr Hall Princeton University Princeton, N.J. 08544 United States
Company with the adoption of an unitary board structure (Board of Directors). In this context, the Supervisory Board approved on February 17, 2010 the required amendments of AXA’s
Oliveira (independent) and Ezra Suleiman (independent). Their biographies are presented below in this Section 2.1; and
■ Mmes. Isabelle Kocher and Suet-Fern Lee whose statuses have been reviewed by the Supervisory Board on the basis of the AFEP/MEDEF Code. The Supervisory Board concluded that Mmes. Isabelle Kocher and Suet-Fern Lee shall be considered as independent.
Kocher has been CEO of Lyonnaise des Eaux, Head of Water
Board of Directors would therefore be comprised of 15 members including 11 members considered independent by the
In 2009, the Supervisory Board met eleven times and the average attendance rate was 83.77%. Within the framework of its principal missions such as described above the Supervisory
Mr. Jacques de Chateauvieux is a graduate of the Institut Supérieur de Gestion (Paris) and of Columbia University (New York). In 1975, he joined l’Union des Transports Aériens as a management auditor. From 1977 to 1979, he worked as a consultant for the
Chairman of the Supervisory Board. 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 Groupe Norbert
Dentressangle, also holds equity interests in real estate, industrial and business services fi rms. Mr. Norbert Dentressangle has been
SAP AG – Building Capital 8 – 32, rue de Monceau – 75008 Paris,
Solutions & Operations. From April 2008 to May 2009, Mr. Léo
Apotheker was co-CEO of SAP AG. Since June 2009, he has been CEO of SAP AG. In February 2010, SAP Group announced that it has accepted the resignation of Mr. Léo Apotheker.
Department and from January 1990 to June 1990, she held the position of Superintendent of Insurance of the New York
Insurance Department. In May 1995, she joined The Equitable, which became AXA Equitable, as Vice- President & Associate
U.S. Congress, state legislatures, state insurance departments, state and national trade associations and other external audiences. In April 2008, Ms. Wendy Cooper was elected as the employee- shareholder member of the AXA Supervisory Board.
Executive Vice- President and then Chief Executive Offi cer of Jeumont-
Béghin-Say and Chairman of Béghin- Say. Mr. Jean-Martin Folz joined PSA Peugeot Citroën in 1995 and became Chairman of the
June 2007 to March 2010, he was Chairman of the AFEP.
In 1963, he joined Bossard & Michel as a consultant. In 1972, he became Chief Operating Offi cer of Bossard Consultants and
Chairman and Chief Executive Offi cer of the Bossard Group in 1977. In 1986, he was appointed Chairman and Chief Executive
Impetus Group created in September 2005. In July 2002, he became Chairman and Chief Executive Offi cer of Vivendi Universal and in 2005 Chairman of the Supervisory Board of Vivendi.
Director or member of the Supervisory Board: ■ AXA Financial, Inc. (1) (United States)
Conférence ”. In 1985, he was a lecturer at the University Paris I
School (EFB), and since 1998, he is Honorary Professor at the
Law and Political Sciences School of Lima (Peru). In 1996, he became an Expert at the Council of Europe and fulfi lled various missions in Eastern Europe countries regarding the reform of the Code of the Judicial Organization, the reform of the magistrates’ and lawyers’ training and the revision of the Code of Civil Procedure. Since 1987, Mr. François Martineau has been a Partner of the law fi rm SCP Lussan & Associés, and Managing
GDF SUEZ – 22, rue du Docteur Lancereaux – 75008 Paris,
Mr. Gérard Mestrallet is a graduate of the École Polytechnique and the École Nationale d’Administration (ENA). He joined the
Compagnie de Suez in 1984 as Vice-President in charge of Special
Executive Director and Chairman of the Management Committee of Société Générale de Belgique. In 1995, he became Chairman and Chief Executive Offi cer of Compagnie de Suez and in
Banca Monte dei Paschi di Siena S.p.A, Chairman of the Board
Upon the merger with Chase Manhattan Bank in 2001, Mr. de
Adjunct Professor of Finance at Columbia University. Mr. Ramon de Oliveira is the Managing Director of the consulting fi rm ROC
“Compte-clé” Manager. In 1998, she was appointed Chairman and Chief Executive Offi cer of Coca-Cola Entreprise and Vice-
CIAA (Confederation of the Food and Drink Industries of the EU), member of the Executive Committee and member of the B oard
SERVICE CONTRACTS BETWEEN THE AXA GROUP AND MEMBERS OF THE SUPERVISORY BOARD
Members’ views regarding the functioning of the Supervisory Board and areas for improvement. Early 2010, a new questionnaire has been completed by each member of the Supervisory Board. The conclusions of this assessment and the principal areas identifi ed for improvement were discussed at the Supervisory Board meeting on March 10, 2010: almost all members of the Supervisory Board underlined the high quality of corporate governance rules and appreciated the transparency and level of discussions on key issues. The main areas for improvement relate to the diversifi cation of its membership by appointing women and at least one member from Asia, the addition of risk-understanding skills and the stronger involvement in discussing strategic priorities for AXA.
Committee issues opinions, proposals or recommendations to the Supervisory Board on matters within the scope of its responsibilities and is empowered to undertake or commission specifi c studies or reviews within the scope of its responsibilities.
The Audit Committee Charter is reviewed on a regular basis and updates are submitted to the Supervisory Board for approval.
■ 2009 Group Strategic Audit Plan; ■ I nternal fraud and anti-laundering report; ■ L ocal internal audit plans summary; ■ Statutory Auditors fees and actions plan; ■ A ppointment and renewal of the mandate of the Statutory
Auditors; ■ S ignifi cant litigation and regulatory matters; ■ R isk management issues, including IT risk management issues; ■ T he Group’s Annual Reports (Document de Référence and
Form 20-F); ■ Sarbanes Sections 404 and 302 issues; ■ W histleblower and Employees complaints report; ■ R eview of the Audit Committee Charter and Group Audit
Statutory Auditors on the Group’s consolidated fi nancial position and results of operations which includes the Auditors’ views on the accounting choices adopted by management. The Committee also receives a presentation from the Group Chief Financial
Offi cer describing the Company’s principal risks exposures and its material off-balance-sheet commitments.
As of December 31, 2009, the Finance Committee had fi ve members, four of whom were determined by the Supervisory
Board; ■ T o 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 delegations of power granted to the Management Board by the Supervisory Board; ■ T o examine and issue an opinion on any of the following plans presented by the Management Board: • issue of securities granting a claim, whether directly or indirectly, to the Company’s capital,
• acquisitions, in any form whatsoever, when their value exceeds €500 million each,
• proposal of distribution of annual profi t and the setting of the dividend for the year elpased to the Ordinary Shareholders’
The Finance Committee met six times in 2009. The average attendance rate was 81.48% and focused, in particular, on the following issues: ■ F inancial risk management; ■ C apital and solvency; ■ L iquidity and fi nancing; ■ R isk appetite and asset allocation; ■ R eview of the fi nancial resolutions proposed to the AXA
The Ethics and Governance Committee has the following principal missions: ■ T o formulate proposals to the Supervisory Board, for the appointment of: • members of the Supervisory Board, its Chairman and its
Resources Committee had three members all of whom were determined to be independent by the Supervisory Board in accordance with the criteria set forth in the AFEP/MEDEF Code.
Board; ■ T o formulate an opinion on the proposals of the Management
Board concerning: • the principles and procedures concerning the setting of the compensation of the managers of the AXA Group,
• overall allocation of Company’s stock options or free allotments of shares to employees of the AXA Group; ■ T o issue proposals on the appointments of the members of the Management Board and its Chairman. The Committee is also informed of the appointments of the main executives of the Group, and in particular of the members of the Executive
The Compensation and Human Resources Committee met six times in 2009. The average attendance rate was 72.22% and the
The AXA Management Board is currently composed of fi ve members, each of whom serves for a three-year term expiring on
The Management Board generally holds weekly meetings to discuss Group strategy and operations. It operates in accordance with the Company’s Charter and the Management
Life & Savings and Health businesses, respectively, in addition to their current operational responsibilities.
(1) On October 7, 2009, AXA announced that it intends to submit to the General Shareholders’ Meeting on April 29, 2010 a proposed change in its corporate governance structure from a dual board structure (Supervisory Board and Management Boad) to an unitary Board structure (Board of
Alfred Bouckaert (b) (63) Member of the Management Board, Chief Executive Offi cer for Northern, Central and Eastern Europe
Christopher Condron (62) Member of the Management Board, President and CEO of AXA Financial, Inc. (United States) and global business line head for the Group’s Life & Savings and Health businesses
Denis Duverne (56) Member of the Management Board, in charge of Finance, Strategy and Operations
AXA France Terrasse 1 313 Terrasses de l’Arche 92727 Nanterre Cedex – France
After graduating from ENA, Mr. de Castries began his career with the French Finance Ministry Inspection Offi ce. Mr. de Castries joined AXA’s Corporate Finance Department on September 1, 1989. He was appointed Corporate Secretary in 1991 and Senior
Executive Vice-President for the Group’s asset management, fi nancial and real-estate businesses in 1993. In 1997, Mr. de
Since October 2006, Mr. Bouckaert has been a member of the
April 2007, he has been Chairman of the Board of Directors of AXA
Belgium SA (Belgium) and since December 2007, he has been permanent representative of AXA to the Supervisory Board of AXA
Management from the University of Scranton. In 1989, he became head of the Private Client Group of The Boston Company, now
CEO of AXA Financial, Inc. and Chairman of the Board, President
(since May 2002) and Chief Executive Offi cer of AXA Equitable
Life Insurance Company. Mr. Condron has been a member of the AXA Management Board since July 2001. In January 2010,
Director and Chairman: ■ U.S. Financial Life Insurance Company (United States)
Strategy. Since January 2010, Mr. Duverne assumes broader responsibilities within the Management Board as member in charge of Finance, Stragegy and Operations.
SERVICE CONTRACTS BETWEEN THE AXA GROUP AND MEMBERS OF THE MANAGEMENT BOARD
Holdings Belgium. For a description of termination provisions of those contracts, please refer to Section 2.2 below.
OTHER INFORMATION ON MEMBERS OF THE MANAGEMENT BOARD AND OF THE SUPERVISORY BOARD
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 Management Board or the Supervisory
Mr. Giuseppe Mussari was nominated for election consistent with the terms of this agreement and was appointed to the AXA’s
Absence of any conviction in relation to fraudulent offences, any offi cial public incrimination and/or sanctions, or any responsibility in a bankruptcy for the last 5 years
Supervisory Board has been, during the last 5 years (i) subject to any conviction in relation to fraudulent offences or to any offi cial public incrimination and/or sanction by statutory or regulatory authorities, (ii) disqualifi ed by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer, or (iii) associated as a member of the administrative, management or supervisory bodies with any company that has declared bankruptcy or been put into receivership or liquidation, provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated affi liated companies in connection with these or similar transactions and certain members of AXA’s
(QBRs), during which the performance of the AXA Group is assessed. These QBRs were introduced in 2000 to provide a clear and consistent framework for: ■ R eviewing operational performance and monitoring the progress of key projects using quantifi able standards of measurement defi ned in collaboration with the Management Board; ■ A ssessing the status of Group transversal projects; and
As an internal management Committee, the Executive Committee has no formal decision making authority. The Executive Committee is advisory in nature and serves as an important sounding board for the AXA Management Board in formulating Group strategy and considering key business issues or strategic initiatives. As a team, the members of the Executive Committee also contribute to shape and disseminate AXA’s management culture.
Alfred Bouckaert (a) Member of the Management Board, Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit
Jean-Laurent Granier Chief Executive Offi cer of the Mediterranean and Latin America Region business unit
Frank Keuper Chief Executive Offi cer of AXA Konzern AG (Germany)
Peter Kraus Chairman and Chief Executive Offi cer of AllianceBernstein (United States)
Nicolas Moreau Chief Executive Offi cer of AXA UK and Ireland and Chairman of the Board of Directors of AXA Investment Managers
Andrew Penn Chief Executive Offi cer of AXA Asia Pacifi c Holdings (Australia)
François Pierson Member of the Management Board, Chairman and Chief Executive Offi cer of AXA France, responsible for Large Risks, Assistance and AXA Canada and Global Head of Property & Casualty
(a) Mr. Alfred Bouckaert will retire at the time of the AXA General Shareholders’ Meeting to be held on April 29, 2010. As announced on January 28, 2010, Mr. Jacques de Vaucleroy has been appo inted CEO of the Northern, Central and Eastern Europe Region (NORCEE) of AXA as of March 15, 2010 in replacement of Mr. Alfred Bouckaert.
AXA’s principal subsidiaries, whether publicly traded or not, are generally governed by: ■ A board of directors whose membership includes independent or non-executive directors; and
Over the past years, AXA initiated a process designed to harmonize corporate governance standards throughout the Group. This effort is focused, among other matters, on standardizing, to the extent practicable, principles relating to a number of corporate governance matters including board composition and size, directors’ independence criteria, Board Committees’ and their roles, and directors’ fees.
The Group Governance Standards require the Boards of AXA’s principal subsidiaries to establish an Audit Committee and a Compensation Committee in addition to any other Board
Committees that they consider necessary or appropriate for their specifi c businesses. The role, duties, and composition of these Committees (including the requirements for participation of independent directors) are specifi ed in a detailed Audit
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: Salaried employees (Full Time Equivalent)
AXA Technology, AXA Consulting, AXA Group Solutions, AXA Business Services and e-business 6,572 7,149 6,469
(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”.
(b) Employees of AXA Bank Belgium provide services in common for both the insurance activities and the bank activities. Consequently, split is not available.
It follows 3 guiding principles: ■ C ompensation competitiveness on international markets; ■ I nternal equity, based on individual and collective performance; ■ F inancial capacity of the Company.
Executive compensation is therefore structured so as to foster and reward performance: ■ A t individual level and collective level (local business entity and
Executive compensation includes a fi xed and a variable component. The fi xed component is targeted to fall within the lower quartile 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 the case of successful attainment of the objectives, the compensation levels of AXA executives will be in the top two quartiles of the benchmark market rate. The variable part of compensation that is effectively paid shall not exceed 150% of the target variable compensation.
The variable component of his compensation is determined on the basis of a predefi ned target amount (€2,700,000 in 2009)
The proportion linked to the Group results accounts for 60% and the proportion linked to the individual performance for 40% of the variable compensation.
The variable compensation amounts awarded to the Chairman of the Management Board since he was appointed demonstrate the demanding targets and the genuine variability of this compensation component: Henri de Castries Actual Target % Target
Variable compensation for the year 2000 paid in 2001 €1,381,373 €1,750,000 79%
Variable compensation for the year 2001 paid in 2002 €719,967 €1,750,000 41%
Variable compensation for the year 2003 paid in 2004 €1,824,728 €2,000,000 91%
Variable compensation for the year 2004 paid in 2005 €2,304,277 €2,000,000 115%
Variable compensation for the year 2007 paid in 2008 €2,644,366 €2,500,000 106%
Variable compensation for the year 2009 paid in 2010 €2,599,327 €2,700,000 96%
(A. Bouckaert, C. Condron and F. Pierson), 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%.
For each performance indicator that measures both the Group and the operational entities’ performance, targets, fl oors and caps are defi ned at the beginning of the year: ■ A target, aligned with the strategic plan, the attainment of which will deliver 100% of the variable component linked to the indicator; ■ A fl oor, below which no variable component linked to the indicator will be paid; ■ A cap, from which the variable component linked to the indicator is capped at 150%.
The variable compensation paid to other Management Board members has been: Country
Chief Operating Offi cer France €918,473 €900,000 102% €793,789 €940,000 84% €925,112 €980,000 94%
President & CEO of AXA Financial, Inc. USA $4,566,372 $4,500,000 101% $0 $4,750,000 0% $4,750,000 $4,750,000 100%
“% Target” corresponds to the achievement of performance objectives related to the given year.
Board took into account, in particular, the following four measures that were included among the 2009 objectives of all
revenues (+1% from 2008), (ii) the growth of 5% in New Business
Value (NBV) of Life & Savings business written during 2009, (iii)
For the other members of the Executive Committee, the variable component of compensation is also determined based on a predefi ned individual target amount and depends on the Group performance, the performance of their business unit or area of responsibility and their individual performance.
For Executive Committee members who have an operational responsibility, the proportion of their variable compensation linked to the Group results accounts for 20%, the proportion linked to their operational entity’s results for 40% and the proportion linked to their individual performance for 40%.
For Executive Committee members who have a functional responsibility, the proportion of their variable compensation linked to the Group results accounts for 30%, the proportion linked to the results of their area of responsibility for 30% and the proportion linked to their individual performance for 40%.
For the sake of transparency and to carry on the practice developed for several years, the compensation data for each member of the AXA Executive Committee are also reported under the same format.
SUMMARY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES/UNITS GRANTED TO MANAGEMENT BOARD MEMBERS
At each date of grant, the fair value of stock options and performance shares/units is determined in accordance with IFRS
Annual Report. This value does not represent a current market value or other 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 April 1, 2008, the fair value of one option was €3.39 for options without performance condition and €2.89 for options with performance condition, and the fair value of one performance share/unit was €16.98.
On June 10, 2009, the fair value of one option was €3.43 for options without performance condition, €3.02 for options with performance condition, and the fair value of one performance share/unit was €9.23.
(d) P. Kraus has been appointed as a member of the Executive Committee on June 22, 2009.
Annual Report. This value not represent a current market value or other current valuation of these options and performance shares or the actual proceeds of and when if and when the options are exercised or ther performance shares are acquired.
Board fees paid for board membership in AXA Group companies or in external companies when representing AXA, are deducted by 70% from the variable compensation of the same year.
The only “Benefi ts in kind” for H. de Castries, A. Bouckaert,
(b) Compensation and benefi ts in kind paid to N. Moreau include benefi ts paid in respect of his expatriate status in the UK.
(a) Appointed by the General Shareholders’ Meeting of April 30, 2009 replacing Mr . Henri Lachmann whose term of offi ce had expired.
Ms. Wendy Cooper, member of the Supervisory Board representing the employee shareholders of the AXA Group, received in 2009 an annual gross compensation of USD 402,494 paid by AXA Equitable in the US in connection with her position as Senior Vice- President and Associate General Counsel of this company. This compensation consists of USD 257,494 of fi xed compensation and USD 145,000 of variable compensation .
To date, AXA has opted to grant subscription options, with the exception of options granted until 2005 to certain employees of
Stock options are valid for a period of 10 years. They are granted at market value, with no discount, and become exercisable by tranches generally in thirds between 2 and 4 years following the grant date.
Management Board and Executive Committee members, the strike price has been set at €15.85, representing a 110%
Board to approve the grant of a global option pool. The pool of options allocated to each business unit is essentially determined on the basis of their contribution to the Group fi nancial results during the previous year.
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: ■ I mportance of the position ➮ role
■ I mportance of the individual in the future ➮ potential
The recommendations for individual grants of options are made by the CEOs of the business units and by the Group functional department heads. These recommendations are reviewed by the
1/3 of the options granted, will be exercisable only if the AXA
December 18, 2008 that: ■ A ll options granted to Management Board members from 2009 onwards will be subject to this performance condition measured either since the initial grant date or over the last three-year period; ■ T he total number of options granted to the Management Board members each year from 2009 onwards may not exceed 20%
of the aggregate number of options granted to all benefi ciaries during the same year.
In 2009, AXA stock options were granted as follows: ■ 7,629,874 subscription or purchase options at a weighted average price of €11.43 granted to 5.491 employees, representing 0.33% of the share capital as at December 31, 2009; ■ 28,829 purchase options on ADRs granted by AXA Financial,
Management Board represents 19.6% of the total number of options granted.
€16.54, only 13,271,194 subscription options are in the money, i.e. 16.3% of the outstanding stock options.
Total number (a) of shares to be subscribed, from which to be subscribed by : 7, 926, 121 813, 515 289, 532 306, 981
The fi rst 10 employees benefi ciaries 968,927 - 812,127 646,371
(a) Numbers of options and exercise prices have been adjusted, pursuant to applicable regulation, as a result of operations on the AXA stock.
Chairman of the Management Board 06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
CEO North, Central & Eastern Europe Business Unit 06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
Chief Operating Offi cer 06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
Chairman & CEO AXA France 06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
The fair value of stock options 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 25.3.1 to the 2009 consolidated fi nancial statements included in Part 4 of this Annual Report. This value does not represent a current market value or other current valuation of these options or the actual proceeds if and when the options are exercised.
(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) granted under any plan or arrangement maintained by AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance units, restricted shares or similar events.
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) 156,010 10.81
Christopher Condron President & CEO of AXA Financial, Inc. 2,396,119 1,544,743
STOCK OPTIONS HELD BY EXECUTIVE COMMITTEE MEMBERS (OPTIONS GRANTED BUT NOT EXERCISED AS AT DECEMBER 31, 2009)
Jean Laurent Granier CEO Mediterranean and Latin America Region 341,964 -
(a) Also owns 838,967 stock options on AXA Asia Pacifi c Holdings.
(b) Also owns 3,041,501 stock options on AXA Asia Pacifi c Holdings.
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: ■ R ewarding 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 (2 to 4 years); ■ R educing shareholder dilution by granting less subscription options.
The principle of Performance Units/Shares is as follows: ■ E ach benefi ciary receives an initial grant of Performance
• for the AXA Group performance: underlying earnings and adjusted earnings per share; ■ In 2006 and 2007, the performance indicators determined by the Management Board have been for both the AXA Group and the operational business units: underlying earnings, P&C
share during the last 20 trading days of the acquisition period; ■ I f 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 him/her to pay social contributions and income taxes calculated on 100% of that value, and 30% of these units are reinvested into AXA shares which are restricted from sale during a 2-year period, in order to develop employees’ share ownership and align employees and shareholders’ interests.
As far as Performance Shares are concerned: ■ S hares acquired at the end of the 2-year acquisition period are restricted from sale during a 2-year period.
Performance Shares, even if shares ultimately delivered to benefi ciaries are newly issued shares (until now, AXA has always delivered existing shares), represent less shareholder dilution than stock options, due to smaller volume of the grant.
Shares and Performance Units are made by the business units CEOs and by the Group functional department heads.
Performance Shares and Performance Units are then decided by the Management Board, provided that grants to members of the Management Board shall receive the prior approval of the Supervisory Board, acting on the recommendation of its
April 1, 2008 with 2,441,070 Performance Units initially granted to 2,752 benefi ciaries outside France will end on April 1, 2010.
A new Performance Unit plan was launched on March 20, 2009 and 2,957,911 Performance Units were initially granted to 3,608 benefi ciaries outside France. These shares are defi nitively acquired after a 2-year acquisition period which ends on
A second Performance Unit plan was launched on April 2, 2009 and 160,025 Performance Units were initially granted to 216 benefi ciaries in Japan. These shares are defi nitively acquired after a 2-year acquisition period which ends on April 2, 2011.
A third Performance Unit plan was launched on June 10, 2009 and 350,792 Performance Units were initially granted to 28 benefi ciaries outside France. These shares are defi nitively acquired after a 2-year acquisition period which ends on June 10, 2011.
The acquisition period of the Performance Shares plan launched on April 28, 2008 with 51,223 Performance Shares granted to 13 benefi ciaries, will end on April 28, 2010 for 28,172
until April 28, 2012), and will end on April 28, 2012 for 23,051
(a) The 1,440 Performance Units of the 2008 Plan, acquired by anticipation, related to one deceased benefi ciary.
(c) The 960,520 units acquired by 1,532 benefi ciaries of the March 29, 2005 plan have been settled as €25.3 million and 152,379 shares restricted until March 29, 2009.
(d) 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.
(e) The 902,288 units acquired by 2,046 benefi ciaries of the May 10, 2007 plan have been settled as €9.3 million and 152,364 shares restricted until May 10, 2011.
Performance units/shares initially granted to the top 10 benefi ciaries (outside corporate bodies’ members) during 2009
Performance Units granted during the year by AXA or any eligible AXA Group’s subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of Performance Units (aggregate information) 202,054
Performance Shares granted during the year by AXA or any eligible AXA Group’s subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of Performance Shares (aggregate information) 237,057
Chairman of the Management Board 06/10/2009 110,638 0.005% 1,021,189 06/10 /2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
Chief Operating Offi cer 05/10/2007 16,800 05/10/2009 12,576 75% 05/10 /2011
PERFORMANCE SHARES BECOMING UNRESTRICTED DURING 2009 FOR EACH CORPORATE BODIES’ MEMBERS
Number shares becoming unrestricted during the year End of restriction period
Chairman of the Management Board - - - - - -
CEO North, Central & Eastern Europe Business Unit 06/10/2009 64,539 595,695 10/06/2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
Claude Brunet (a) Chief Operating Offi cer - - - - - -
Representative of employee shareholders at the Supervisory Board share - P&C revenue - new business value Life
To the best knowledge of the Company, each of the Management Board members held, as at December 31, 2009, the number of AXA
shares or ADR, and units of mutual funds invested in AXA shares indicated in the table below.
AXA shares AXA ADR Units of mutual fund invested in AXA shares
This policy requires each member of the Management Board and the Executive Committee to hold, during the entire duration of his/her functions, a minimum number of AXA shares (the
“Minimum Shareholding Requirement”) representing a multiple of his/her annual total cash compensation (fi xed salary plus annual variable compensation) received for the previous fi scal year.
■ The Chairman of the Management Board is required to hold the equivalent of his total cash compensation multiplied by 3.
■ Other Management Board members are required to hold the equivalent of their total cash compensation multiplied by 2.
■ Executive Committee members are required to hold the equivalent of their total cash compensation multiplied by 1.5.
January 1, 2007, the Management Board member must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France this equals approximately 50% of the post-tax capital gain). These shares will have to be held during the whole term of offi ce of the Management Board’s member; ■ F or performance shares granted after January 1, 2007, the
Management Board member must, at every share acquisition date, hold in registered form at least 25% of the performance shares acquired during the whole term of offi ce of the
The following table summarizes the current status of each Management Board m ember in relation to his Minimum Shareholding
December 31, 2009, the number of AXA shares or ADR indicated in the table below.
(a) Over-the-counter sale of 61,948 AXA shares through the exercise of put options and sale of 1,188 put options.
To the best of the Company’s knowledge based on information reported to it, several members of the Supervisory Board made the following disclosures in the course of 2009 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).
Subscription to units of AXA Group mutual funds invested in AXA shares (Number) Subscription to AXA ADR (Number)
Subscription to units of AXA Group mutual funds invested in AXA shares (Number) Sub scription to AXA ADR
Castries, Denis Duverne and François Pierson) participate, as all other executive employees (directeurs) of AXA Group entities in France, in a supplementary pension scheme pursuant to
Company after the age of 55, under the condition that they do not resume any professional activity before retiring.
Security, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
The amount of the supplementary pension aims, for a minimum executive seniority of 20 years, at achieving a global pension equivalent to: ■ 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual Social Security ceilings(1); ■ 50% of the average gross compensation of the past 5 years preceding the retirement date, if this average is inferior to 8 annual Social Security ceilings; ■ 2.4 Social Security ceilings +20% of the average gross compensation of the past 5 years preceding the retirement date, if this average is between 8 and 12 annual Social Security ceilings.
Christopher Condron, member of the Management Board and employee of AXA Equitable in the United States, benefi ts from a contractual supplementary pension arrangement with this company providing for a payment at the age of 65 of an annual pension equivalent to 2% of his annual gross compensation per year of service within the AXA Group.
The annual gross compensation is defi ned as the average of the 36 highest monthly compensations received during the past 60 months preceding retirement.
The fi nancing of this scheme is ensured by an employee contribution of 4% of fi xed salary, and a contribution by AXA
Holdings Belgium in order to guarantee the capital due at the age of 65.
As at the date of this Annual Report, the French members of the AXA Management Board (Henri de Castries, Denis Duverne and François Pierson) benefi t, as employees and as all other director-level employees of AXA Group companies in France, from the regulations provided for by the Collective Agreement of March 3, 1993 signed by the Fédération Française des
Capitalisation (SDAC). The calculation terms of the indemnities due in case of termination are determined according to a formula that takes into account the age of the employee, his/her seniority within the Group and the amount of his/her compensation.
(1) For information, the annual Social Security ceiling for 2010 is equal to 34,620€.
$1.0 million) for a period of two years after his termination. In addition, Mr. Condron would receive a prorated bonus for the year of termination based on his target bonus amount (currently, $4.75 million) and additional payments equal to two annual bonuses at the target bonus amount. In the event Mr. Condron was to start a competitive professional activity during the 2-year period following his termination, the payments based on his fi xed salary would cease and the amount of the additional payments would be reduced based on the number of days elapsed from his termination date.
Alfred Bouckaert, member of the AXA Management Board, benefi ts from a contractual clause with AXA Holdings Belgium stating that in case of termination of his position within AXA
Henri de Castries Chairman of the Management Board Beginning of current mandate: 10/12 /2009 Term of offi ce: 10/11 /2012 (a) X (b) – X – – X (c) – X
(a) On October 7, 2009, AXA announced that it intends to submit to the General Shareholders’ Meeting on April 29, 2010 a change in its corporate governance structure from a dual board structure (Supervisory Board and Management Boad) to a unitary board structure (Board of Directors). In the event the General Shareholders’ Meeting approves this change, the functions of the standing members of the Management Board would end on April 29, 2010.
(b) Mr. Henri de Castries, Chairman of the Company’s Management Board, has been employed by AXA under an employment contract since he joined the Group in 1989. The Supervisory Board acknowledged on February 17, 2010 that Mr. de Castries has decided to renounce his employment contract in compliance with the AFEP/MEDEF recommendations. This renunciation will be effective following the General Shareholders’ Meeting on April 29, 2010.
(c) To date, Mr. de Castries, like all other executive employees of AXA Group companies in France, is covered by the sole scheme of indemnities due in case of termination provided for in the Collective Agreement of March 3, 1993 described above, without any other provisions. As of the renunciation to his employment contract following the General Shareholders’ Meeting on April 29, 2010, Mr. de Castries would be entitled to the contractual commitments described in the following section “Status of Messrs. Henri de Castries and Denis Duverne – Compliance with the AFEP/MEDEF recommendations”.
April 29, 2010 which will consider AXA’s proposed change in the Company’s corporate governance structure in view of the adoption of a unitary board structure (Board of Directors). Within this new structure, Mr. de Castries would hold the positions of Chairman and Chief Executive Offi cer (Président Directeur
(with no special benefi ts or arrangement designed specifi cally for them), and (ii) was concerned that the decision of Messrs. de
AFEP/MEDEF recommendations. A severance benefi t would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal, non-renewal or resignation within 12 months following a change in the C ompany’s control or strategy that has not been initiated by the benefi ciary. The payment of the severance benefi t would also be subject to the three following performance conditions: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set
for the benefi ciary’s variable compensation and corresponding to the payment of at least 65% of his variable compensation target; (2) evolution of the AXA share price at least equal to the
DowJones Eurostoxx Insurance index (in percentage) over a 3-year period preceding the termination of the term of offi ce; (3)
fi nancial strength ratings of the AXA Group’s principal insurance subsidiaries above or equal to the minimum ratings set by the Supervisory Board with regard to the insurance industry and the ratings of AXA’s principal competitors. The amount of severance benefi t to be paid to the benefi ciary would be adjusted in accordance with the level of achievement against these performance conditions: (1) 100% of the severance benefi t will be paid if at least 2 of the 3 performance conditions are met; (2) 40% of the severance benefi t will be paid if only 1 performance condition is met; and (3) no severance benefi t shall be paid if none of the performance conditions are met.
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2009 program. The shareholders waived their preferential subscription rights so that this offering could be made to employees.
In countries that met the legal, regulatory and tax requirements for participation in SharePlan, two investment options were offered in 40 countries in 2009: ■ T he traditional plan, offered in 39 countries; ■ T he leveraged plan, offered in 38 countries.
The shares are held within the Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable laws). Employees are subject to the share price appreciation, up or down, as compared to the subscription price.
At the end of the 5 year holding period, the employees can, depending on their residence country, do any one of the following: (1) receive the cash value of their assets; (2) receive the value of their assets in the form of AXA shares; or (3) transfer their assets invested in the leveraged plan into the traditional sub-fund.
The leveraged plan allowed employees to subscribe, on the basis of 10 times their personal investment, to AXA shares (either through mutual funds (FCPE) or through direct share ownership)
with a 20% discount in 2009. The shares are held within the
New mutual funds (FCPE) with direct voting rights have been created since 2005 to allow benefi ciaries, in most cases, to directly exercise their voting rights.
• €367 million in the leveraged plan; ■ A total of 26.4 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on
Pursuant to Article 241-2 of the AMF General Regulation, 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 29, 2010.
TREASURY SHARES (HELD DIRECTLY BY THE COMPANY OR OWNED BY COMPANY SUBSIDIARIES) AS OF JANUARY 31, 2010
(a) Percentage calculated on the basis of the number of AXA’s outstanding ordinary shares as of January 31, 2010 (Source: Euronext Notice of January 26, 2010).
ANALYSIS OF TREASURY SHARES IN TERMS OF OBJECTIVES AS OF JANUARY 31, 2010
Number of treasury shares held directly by the Company 4,545,000 5,726,123 –
AMF, the objectives of the Company’s share repurchase program that will be submitted to the shareholders’ approval on April 29, 2010 are the following: a) optimizing the liquidity of AXA ordinary shares, and notably to foster regular and liquid trading through a liquidity contract that complies with the AMAFI (Association Française des
L.225-180 of the French Commercial Code, (ii) granting free shares (actions gratuites), in accordance with legal provisions, to some or all present or former employees, corporate offi cers and general insurance agents pursuant to the discount and/or contribution (abondement) within an employee savings plan sponsored by the Company or the AXA Group, (iii) granting free shares (actions gratuites)
to some or all employees or corporate offi cers of the
French Commercial Code, in connection with the provisions of Articles L.225-197-1 et seq of the French Commercial
Code, and (iv) assigning shares to some or all present or
Type of securities Maximum % of share capital Maximum number of shares (a)
(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 at February 1, 2010, i.e. €5,244,020,030.91 divided into 2,289,965,079 shares. Based on the number of treasury shares already held directly by the Company on that date, AXA may purchase up to 218,725,429 of its own securities.
18 months, subject to the approval of the program by the Ordinary Shareholders’ Meeting of April 29, 2010.
Number of shares sold since the beginning of the program 9,130,964
General Meeting held on April 30, 2009 (10th resolution), AXA, in accordance with the provisions of Article L.225-209 of the
Conduct approved by AMF. This contract has an initial duration of one year, it is automatically renewed unless terminated by one of the parties and appoints Crédit Agricole Cheuvreux to execute transactions pursuant to the terms of the contract.
shares were purchased under this liquidity contract for an average weighted gross unit price of €15.17, and 8,350,964 shares were sold for an average weighted gross unit price of
€15.13. Related transaction fees incurred over the same period amounted to approximately €185,000.
January 1, 2009 and April 30, 2009, AXA repurchased 6,899,477 of its own shares (settlement of futures contracts) for an average weighted gross per share of €15.32, and between May 1, 2009 and December 31, 2009, AXA repurchased 1,500,000 of its own shares on one hand (hedging of the grant of free shares to employees of the Group) and 101,617 of its own shares on the other hand (exercises of call options in consideration of securities’
As a result, on December 31, 2009 the number of treasury shares held under the liquidity contract was 2,890,000 and the number of treasury shares, allocated for hedging purposes, was 5,726,128, i.e. a total of 8,616,128 shares held directly by the
As of December 31, 2009, AXA’s fully paid up and issued share capital amounted to €5,244,020,133.96 divided into 2,289,965,124 shares, each with a par value of €2.29 and eligible for dividends as of January 1, 2009.
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and voting rights as of December 31, 2009: Number of shares
Treasury shares held by Company subsidiaries (directly or indirectly) (d) 17,766,863 0.78% [1.12%] (c)
(a) In this table, voting rights’ percentages are calculated on the basis that all outstanding ordinary shares are entitled to voting rights, notwithstanding the fact that certain of these shares may be deprived of voting rights by law or otherwise (for example, treasury shares held by AXA or its subsidiaries are deprived of voting rights under French law).
(d) Treasury shares as indicated in Note 13 to “consolidated fi nancial statements ” included in Part 4 of this Annual Report.
AXA have also established a strategy committee (comité de coordination stratégique) composed of various members appointed by the Boards of Directors of the Mutuelles AXA. The strategy committee elects a chairman from among its members who, at present, is Claude Bébéar, who is the former Chairman of AXA’s Supervisory Board. The strategy committee is generally consulted on all signifi cant matters relating to AXA.
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights as of December 31, 2009 except as indicated in the table above.
Certain of the Company’s shares are entitled to double voting rights as described in Part 5 – “Certain additional information” –
“Voting rights” Section of this Annual Report. Of the Company’s 2,289,965,124 outstanding ordinary shares as of December 31, 2009, 510,990,432 shares entitled their holders to double voting rights as of that date.
Treasury shares held directly by the Company 8,616,128 0.38% [8,616,128] (c) [0.31%] (c)
Treasury shares held by Company subsidiaries (directly and indirectly) (d) 17,766,863 0.78% [31,246,043] (c) [1.12%] (c)
Stock subscription warrants related to the SharePlan operation in Germany 4,992,114
As of December 31, 2008 (a) As of December 31, 2007 (a)
I AXA subordinated convertible bonds as of December 31, 2009 (a)
Part 4 – “consolidated fi nancial statements ” – Note 27 “Related
Management Board increased the Company’s share capital in one offering, through the issue of shares to Group employees under the SharePlan 2009 program. The shareholders waived their preferential subscription rights to facilitate this offering to employees. In the countries that met the legal and tax requirements for participation in SharePlan, two investment options were offered in 2009: ■ T he traditional plan, offered in 39 countries; ■ T he leveraged plan, offered in 38 countries.
AXA issued a total of 26.4 million new ordinary shares each with a par value of €2.29, all of which were entitled to dividends for 2009.
As of December 31, 2009, AXA employees and agents held 5.92% of the Company’s share capital and 6.84% of the voting rights. These shares are owned through mutual funds or directly, in the form of shares or ADRs in the framework of the Group employee stock purchase plans.
– At the option of the issuer, in cash, from January 1, 2007 at a price with a gross 6% actuarial yield, if the Company’s share average over 10 consecutive days is above 125% of the anticipated repayment price,
– At any time, at the option of the issuer, at €269.16 if the number of bonds in circulation is below 10% of the number of bonds issued.
“Ambition 2012” project, AXA has implemented a worldwide program of granting free shares to all its employees, called “AXA
This broad-based grant to all employees having at least 3 months of service as of July 1, 2007, regardless of their position or compensation level, was designed to underline the important role that all Group employees have in helping the Group to reach its
shares to 111,738 employees in 54 countries. While the vesting conditions and compulsory holding periods applicable to these shares vary depending on local regulations, these shares generally are not fully vested and available to employees before the fourth anniversary of the grant date.
Pursuant to the agreement, the AXA Group undertakes to hold at least 43,412,598 shares of BNP Paribas and the BNP Paribas
The agreement was made public by the AMF on December 21, 2005.
ordinary shares. The number of shares held under this crossshareholding agreement will be adjusted as needed to refl ect the impact of certain capital transactions, including, but not limited to: capital increases, free allotments of stock, stock splits or similar transactions. 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.
For the period from January 1, 2009 to February 17, 2010
Article R.225-58 of the French Commercial Code, you are asked to form an opinion on the relevance of such agreements for the purpose of approving them.
With the following corporate executives offi cers: Messrs. Henri de Castries, Denis Duverne and François Pierson, members of the Company’s Management Board.
This new scheme was approved by the 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.
Under this scheme, a supplementary pension is paid to Executives who retire immediately upon leaving the AXA Group, at age of 60 or older, and who have a minimum length of service of 10 years, of which at least 5 years as an executive. May also benefi t from the scheme Executives whose employment is terminated by the Company after the age of 55, under the condition that they do not resume any professional activity before retiring.
The amount of the supplementary pension is calculated at the time of retirement and is in addition to the total amount of retirement pensions paid under mandatory schemes (Social Security, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
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The amount of the supplementary pension aims, for a minimum executive seniority of 20 years, at achieving a global pension equivalent to: • 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual
Social Security ceilings; • 2.4 Social Security ceilings +20% of the average gross compensation of the past 5 years preceding the retirement date, if this average is between 8 and 12 annual Social Security ceilings.
The Supervisory Board was concerned that the decision of Mr. de Castries to renounce his employment contract in accordance with the AFEP/MEDEF recommendations do not jeopardize the continuity of his accrued and future social benefi ts. In this context, the
A severance benefi t would be applicable, except in the case of gross or wilful misconduct, solely in the event of dismissal, nonrenewal or resignation within 12 months following a change in the company’s control or strategy that has not been initiated by the benefi ciary.
Nature, purpose and conditions: On February 17, 2010, the Supervisory Board acknowledged that Mr. Denis Duverne has decided to renounce his employment contract.
The grant conditions for severance benefi t and its calculation would be identical to those described for Mr. Henri de Castries except on the initial amount of compensation that would be equal for Mr. Denis Duverne to 12 months of his average compensation (fi xed and variable) paid during the 24-months period preceding the termination of his duties.
The new agreement contains provisions in terms of minimal and stable cross-shareholdings (the AXA Group undertakes initially to hold at least 43,412,598 shares of BNP Paribas stock; the BNP Paribas Group undertakes initially to hold at least 61,587,465 shares of AXA
stock; these amounts will be adjusted thereafter in order to refl ect the impact of capital transactions, including but not limited to free allotments of stock or share tenders involving the same company (stock splits or regrouping, etc.), and capital increases involving either
In force for a period of fi ve years as from December 16, 2005, this agreement is renewable automatically for an initial period of two years and for successive periods of one year thereafter, 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.
The agreement was made public by the AMF (Autorité des marchés financiers) on May 31, 2006.
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 Dow Jones STOXX 50 and Dow Jones 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 Dow Jones EURO STOXX Insurance, the insurance related index for companies within the Eurozone.
No guarantee of the market price of the Company’s ordinary shares or ADSs can be given and past price is no indication of future performance. You are urged to obtain current market quotations for these securities.
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 ongoing basis. These risk management processes, procedures and controls are described in detail in Section 3.2 of this Annual
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 c onsolidated fi nancial statements in accordance with applicable
While there are some signs of a recovery in some countries, management believes we are in a period of slow growth and it is not yet certain whether the recovery is sustainable.
In particular, protracted or steep declines in the stock or bond markets typically reduce the popularity of unit-linked products.
Also, the account value of these products will be affected by a downturn in fi nancial markets and decreased account values will decrease the fees generated by these products. In our Asset
Factors such as consumer spending, business investment, government spending, 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.
We need liquidity to pay our operating expenses (including claims and surrenders), interest on our debt, dividends on our capital stock and to refi nance certain maturing debts and other liabilities. In addition, we need liquidity in connection with certain derivatives transactions to which we are party which require us to post cash collateral and/or subject us to margin calls in certain circumstances. A lack of suffi cient liquidity and/or access to fi nancing over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position. The principal sources of our liquidity are insurance premiums, annuity considerations, deposit funds, asset management fees, cash fl ows from our investment assets and cash/cash-equivalents on our balance sheet. Sources of liquidity in normal markets also include a variety of short-and longterm instruments, including repurchase agreements, commercial paper, medium and long-term debt, junior subordinated debt securities, capital securities and share holders’ equity.
In the event our current resources do not satisfy our needs, we may have to seek additional fi nancing. The availability of additional fi nancing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. While management has in place a liquidity risk management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, if our internal sources of liquidity prove to be insuffi cient or if our liquidity requirements change so as to require additional funding, we may not be able to successfully obtain additional fi nancing on favorable terms, or at all.
Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse e ffect on our business, liquidity, credit ratings, results of operations and fi nancial position
or its insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse affect on our business, liquidity, credit ratings, results of operations and fi nancial position.
the current fi nancial market crisis and the deterioration in the credit and equity markets over the past months, certain rating agencies have lowered their outlook on the life insurance sector to negative from stable and have downgraded a growing number of companies. In February 2009, (i) Standard & Poor’s affi rmed its AA counterparty credit and fi nancial strength ratings on
F1 (one notch). Fitch Ratings also revised its outlook on these ratings to negative from stable. A downgrade or the potential for a downgrade of our ratings, particularly below the AA
Losses due to defaults by fi nancial institution counterparties and other third parties, impairment of our investment assets and unrealized losses could all negatively affect the value of our investments and reduce our profi tability
Asset Management businesses (including policy administration, claims related services, securities pricing and other services)
which expose us to operational, fi nancial and reputational risk in the event of a default of our counterparty service providers.
major reinsurance providers. The inability of any reinsurer to meet its fi nancial obligations to us could negatively impact our results of operations. In addition, the availability, amount and cost of reinsurance depend on general market conditions and may fl uctuate signifi cantly. Reinsurance may not be available to us in the future at commercially reasonable rates and any decrease in the amount of our reinsurance will increase our risk of loss.
In certain cases, the price of reinsurance for business already insured may also increase, adversely affecting our results of operations.