THE AXA GROUP 3 1.1 Selected consolidated fi nancial data 4 1.2 Information on the Company 7 1.3 Activity Report 32 1.4 Liquidity and capital resources 96
REGULATION, RISK FACTORS 171 Certain disclosures about market risk and related matters 3.2 Risk factors 185 3.3 Quantitative and qualitative disclosures about market risk and risk factors 205 3.4 Certain fi nancial information 226
CONSOLIDATED FINANCIAL STATEMENTS/FULL YEAR 2011 227 4.1 Consolidated statement of fi nancial position 228 4.2 Consolidated statement of income 231 4.3 Consolidated statement of comprehensive income 232 4.4 Consolidated statement of changes in equity 234 4.5 Consolidated statement of cash fl ows 238 4.6 Notes to the consolidated fi nancial statements 240 4.7 Report of the Statutory Auditors 403
APPENDICES 411 Appendix I Chairman of the Board of Directors’ report 412
Appendix IV Statement of the person responsible for the Annual Report 429
Anonyme organized under the laws of France, which is the publicly traded parent company of the AXA Group, and
(ii) “AXA Group”, the “Group” and/or “we” refer to AXA SA
The principal trading market for the Company’s ordinary shares is the Compartment A of NYSE Euronext Paris, which we refer to in this Annual Report as “Euronext Paris”. The Company’s
New York Stock Exchange on March 26, 2010, AXA’s ADS are traded on the U.S. over-the-counter market and are quoted on the OTCQX platform under the ticker symbol AXAHY. Each
Statements for the year ended December 31, 2011, as well as, by reference, AXA’s Consolidated Financial Statements for the years ended December 31, 2010 and 2009(1). AXA’s
Consolidated Financial Statements, including the notes there to, are included in Part 4 – “Consolidated Financial Statements”
(referred to in this Annual Report as “IFRIC”) that were defi nitive and effective on December 31, 2011, as adopted by the
Unless otherwise specifi ed, various amounts in this document are shown in million for presentation purposes. Such amounts have been rounded. Rounding differences may also exist for percentages.
(1) For further details on the Consolidated Financial Statements for the years ended December 31, 2010 and December 31, 2009, please refer to the 2010 Annual Report (Registration Document), the French version of which was fi led with the AMF on March 18, 2011 under reference n° D11-0147, and to the 2009 Annual Report (Registration Document), the French version of which was fi led with the AMF on March 17, 2010 under reference n° D10-0117.
dollars” or “USD” or “U.S.$” or “$”. For historical exchange rate information, please refer to Part 1 – “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”, Section 1.1 “Exchange Rate Information”
of this Annual Report. 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 “Activity Report” of this Annual Report.
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, 2011 and 2010 in accordance with IFRS.
(c) Includes investment income net of investment management costs, impairment, net realized investment gains and losses and net unrealized investment gains and losses on assets with fi nancial risk borne by the policyholders and on assets designated as at fair value through profi t & loss, including assets backing the UK with-profi ts business.
Balance sheet data in accordance with IFRS: Shareholders’ equity - Group share 48,562 49,698
The average and closing exchange rates used in the preparation of the consolidated fi nancial statements, to translate into Euro the results of operations of the principal subsidiaries that are not denominated in Euro, are set out in the table below: Year End Exchange Rate Average Exchange Rate
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 25, 2012.
(d) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.22 per share for fi scal year 2009.
AXA (i) acquired a majority interest in a Japanese life insurance company, Nippon Dantaï Life Insurance Company, through a new Japanese holding company, AXA Nichidan, (ii) increased its interest in SLPH from 56.3% to 100%, (iii) sold its interest in Donaldson Lufkin & Jenrette (“DLJ”) to Credit Suisse Group,
AXA acquired the American insurance group MONY, which increased its life insurance distribution capacity in the United
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,
Canadian operations in Property & Casualty and Life & Savings insurance to Intact Financial Corporation for a total cash consideration of CAD 2.6 billion (or ca. Euro 1.9 billion).
The diversifi cation of the AXA Group – both by geography and by business – is designed to mutualize the different types of risks to which the Group is exposed. For example, mortality risks are partly offset by longevity risks, and Life & Savings risks by Property & Casualty risks. In addition, geographic diversifi cation helps reducing the concentration of risk and volatility of claims experience.
(1) Source: Tower Watson, “The world’s 500 largest asset managers ranking”, 2010.
I Table of principal subsidiaries with Group share of interests and voting rights percentages
Part 4 – “C onsolidated F inancial S tatements” of this Annual Report.
(“Group share of interests”) represent the economic interest and the percentages shown in the fourth column (“Voting rights percentage”) represent the percentage of the Company’s total voting rights held by AXA.
(k) Holding company that owns AXA Ireland Limited and AXA Insurance Limited.
(p) Holding company that owns 100% of AXA ve Emeklilik A.S. and 72.59% of AXA Sigorta A.S.
(r) Holding company that owns AXA Life Insurance Co. Ltd, AXA Non-Life Insurance Co. Ltd.
(s) Holding company that owns AXA Life Insurance Singapore Pte Ltd.
(d) Adjusted earnings represent the net income (Group share) before the impact of: (i) Exceptional operations (primarily change in scope and discontinued operations)
(b) Restated: the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the income statement to present a comparable basis.
Assets backing contracts with fi nancial risk borne by policyholders (Unit-linked) 134,230 149,066
(c) Restated: the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the income statement to present a comparable basis.
For additional information on AXA’s revenues by segments, see Note 21 “Segmental information” included in Part 4 –
Individual and Group savings products, as well as life and Health products for both individual and commercial clients. The Life
& Savings segment accounted for €52.4 billion or 61% of AXA’s consolidated gross revenues for the year ended December 31,
Restated (f) Published of which Australia and New Zealand (b) 355 1% 1.551 3% 1.551 0 of which Central & Eastern Europe (c) 513 1% 512 1% 512 5.640
(b) Following the disposal of the Australia & New Zealand operations on April 1, 2011 , Australia & New Zealand only contribute to the fi rst quarter of 2011
(f) Restated: the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the net income to present a comparable basis.
Mediterranean & Latin American Region (d) 432 553 73 91 of which Australia and New Zealand (e) 0 283 0 44 of which Hong Kong 330 159 208 114 of which Central & Eastern Europe 213 274 41 56 of which mature countries 4,808 5,114 1,059 1,035 of which high growth countries 925 667 386 254
(e) Following the disposal of the Australia & New Zealand operations on April 1, 2011, APE and NBV have not been calculated for Australia & New Zealand at year end 2011.
Kong, Indonesia, Thailand, China and Singapore), Central and Eastern Europe, Middle East and Latin America (Mexico).
The products in these markets are offered through various distribution channels, including exclusive agents, salaried sales forces, brokers, independent fi nancial advisers, and bank networks. See the “Distribution channels” Section below.
(a) Source: Swiss Re, Sigma report 2011 «World Insurance in 2010». Percentages of revenues are based on the total of life premium volume.
AXA’s Life & Savings products include a broad range of investment and savings products as well as protection and
■ pure savings products, which generally provide investment return through a crediting rate to policyholders, while AXA
bears the investment risk; ■ universal savings products, which is the same as universal life but has no signifi cant death benefi t component. See below for a description of universal life products.
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.
(1) Health products are classifi ed either in Life & Savings or Property & Casualty, depending on the features of the products but also market practice specifi c to each country. For example Health product providing savings features or rider options are classifi ed in the Life & Savings segment.
Fees and charges relating to investment contracts with no participating features 350 518 518 26,716
Of which: Contracts with fi nancial risk borne by policyholders (unit-linked) 12,051 24% 12,285 22% 12,285 134,599
AXA distributes its products through exclusive and nonexclusive channels that vary from country to country.
■ Exclusive agents are individuals or fi rms commissioned by a single insurance company to sell its products exclusively on its behalf. Tied agents are exclusive agents; ■ Salaried sales forces are salespeople employed by a single insurance company (or an affi liated company) to sell the
& Savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual Life & Savings products issued by AXA have front-end charges to the policyholder (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges
Total surrenders and lapses for 2011 amounted to €24,717 million and the ratio of surrenders and lapses to 6.2%. Total surrenders and lapses for 2011 and the ratio of surrenders and lapses to gross surrenderable insurance reserves at the beginning of the periods indicated are presented below for the main countries: SURRENDERS AND LAPSES
AXA’s Property & Casualty segment offers a broad range of products including Motor, household property and general liability insurance for both personal and commercial customers, targeting mainly small to medium sized companies. In certain countries, Health products are classifi ed as Property & Casualty products (1). The Property & Casualty segment accounted for €27.0 billion, or 31% of AXA’s consolidated gross revenues for the year ended December 31, 2011 (2010: €26.0 billion or 29%).
Gross revenues - Years ended December 31, Gross insurance liabilities at December 31, 20112011 (c)
(b) Direct businesses have been excluded and presented on a specifi c line.
(d) Restated: the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the net income to present a comparable basis.
The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross revenues in 2010, along with AXA’s ranking (by market share).
(a) Source: Swiss Re, Sigma report 2011 «World insurance in 2010».
(g) AXA’s ranking and market share based on December 2009 fi gures.
(b) Restated: the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the net income to present a comparable basis.
AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, brokers, salaried sales forces, direct sales and banks and other partnerships, including car dealers. In Continental Europe, the same distribution channels are used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the “Distribution channels” Section in the Life
AXA’s Property & Casualty operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks, in order to protect Group solvency and reduce volatility on key fi nancial indicators. The majority of AXA’s
Global P&C is responsible for managing activities that have been identifi ed as being critical to the profi tability and growth of the Group’s property-casualty business: cost control, optimized claims management, creation of a professional family made up of P&C professionals to build up the quality of technical expertise, dedicated offer to small and medium size entities, excellence in underwriting standards and pricing policy.
Group’s Property & Casualty run-off portfolios including risks underwritten by Colisée RE (ex AXA RE) for all periods prior to and including 2005 when Colisée RE’s business was sold. Reinsurance operations (Colisée 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
■ AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to worldwide Property & Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance; ■ AXA Global Life and AXA Global P&C (ex-AXA Cessions)
“Other International Activities” segment. In connection with the disposal of AXA’s reinsurance activities, AXA Liabilities
Managers also manages the run-off of Colisée RE as noted above; ■ AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in runoff, notably managing a book of reinsurance contracts of
Solutions 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.
United Kingdom and Germany, AXA distribution networks offer assistance services among their portfolio of insurance products. AXA Assistance aims at integrating service providers and developing capacities of distribution to fi nal customers.
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 2011, AXA Corporate Solutions Assurance ceded €855 million of premiums (2010: €842 million) to thirdparty reinsurers.
AllianceBernstein and AXA Investment Managers. These companies manage assets on behalf of institutional clients, retail investors and private clients, as well as on behalf of companies affi liated with AXA and operate in each of AXA’s major markets: Western Europe, the United States and the
AllianceBernstein provides diversifi ed Asset m anagement and related services globally to a broad range of clients including: ■ diversifi ed investment management services through separately managed accounts, hedge funds, Mutual funds, and other investment vehicles to private clients (such as high net worth individuals, trusts and estates and charitable foundations); ■ management of Mutual funds sponsored by AllianceBernstein, its subsidiaries and affi liates, for individual investors; ■ management of investments on behalf of institutional investors; and
■ research portfolio analysis and brokerage-related services for institutional investors and equity capital markets services for issuers of publicly traded securities.
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset m anagement business. AXA IM provides its clients with a wide range of global products and expertise via
(i) institutional investors, (ii) individual investors to whom Mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and unit-linked fund backing insurance products.
At December 31, 2011, AXA IM had €512.4 billion of assets under management, including €178.1 billion of assets managed on behalf of third party clients (2010: €515.9 billion and €176.0 billion, respectively).
Europe. For the years ended December 31, 2011 and 2010, the Banking segment accounted for €0.5 billion each year, or less than 1% of AXA’s consolidated gross revenues.
Bank Europe is ranked sixth on the Belgian banking market where the four major banks represent approximately 75% of the market.
AXA Bank targets private customers in retail banking and is an important element of pension and asset management business of AXA Germany. The Bank had approximately 62,000 clients at year-end 2011. The major activities of AXA Bank are deposits and Mutual funds. These products are mainly sold through the tied agent network of AXA Germany.
AXA Bank Hungary (formerly Ella Bank) became a branch of AXA
Bank Europe in January 2009. Acquired in July 2007, it works in collaboration with AXA’s insurance operations in Hungary.
Bank Hungary has stopped its lending activity and refocused solely on retail deposit business.
Insurance and Annuities in 2009 and 2010, industry sales fi gures in 2011 stabilized and showed improvements over 2010: ■ in the Life Insurance market, total sales grew by 5% in 2011.
Variable Life product sales increased by 16%, following a 4% growth in 2010. A good portion of the increase can be attributed to corporate-owned, bank-owned and private placement sales. Overall Universal Life Sales grew by 8%
from the previous year. This can be attributed to growth in products featuring long-term secondary guarantees and non-guaranteed products, as well as a notable infl ux of new carriers. Whole Life sales increased by 7% and remain an attractive offer during uncertainty in the fi nancial markets.
Term Insurance sales decreased by 7%, most notably due to price increases and withdrawals in product offerings; ■ in the Annuity market, total sales increased by 11% in 2011. Variable Annuity industry sales increased by 17% as guaranteed living benefi ts continue to drive sales. During 2011 a number of insurers have withdrawn from the marketplace or have reduced benefi ts or increased charges.
The top 3 Variable Annuity players continue to dominate the market, representing 44% market share, compared with 39% one year earlier. Fixed Annuity sales declined by 1%
after a 27% decline in 2010 as production remained muted given the low interest rate environment and concerns on new business capital strain.
(1) Sources: FFSA as of December 2010 for the ranking and FFSA as of December 2011 for the market share.
(2) Please note that numbers quoted for market data (Life and Annuity) are for nine months ended September 30, 2011 vs. nine months 2010.
Source: LIMRA (annualized fi rst year premiums excluding drop-in premiums) and MARC annuity sales (fi rst year and renewal premiums excluding replacements), Employer Sponsored sales only includes K-12 market.
■ Elevate Wrap Platform grew its distribution capability and reputation in its third year of operation, with funds under management increasing by 55% to reach 2.2% market share; ■ AXA Wealth Management’s IFA business had a market share of 11.3% (5) in terms of APE; ■ Sun Life Direct Protection business had a 3.4% (1) market share in terms of total protection APE and 41.0%(5) in terms of Direct Protection market only.
General account Savings products drove the market growth, especially in bancassurance, while Variable Annuity shrank, refl ecting stagnant Japanese stock market and uncertain global economic outlook. On the other hand, pure Protection segment continued to remain stable. Sum insured per household declined whereas Medical segment remained stable and competition intensifi ed. AXA had a market share of 2.3%
and ranked 11th based on premium income (8th in Medical segment).
Life gross revenues amounted to -0.8% refl ecting the reduction in unit-linked premium volume partly compensated by higher premiums from traditional products with guarantees.
Belgium (11). In 2011, the market suffered from the low guaranteed interest rates offer and the fi erce competition from short term banking products throughout the year. As a result,
Individual product market decreased by -5%, mainly due to lower volumes of general account individual products (-7%)
(+10%). Group Life market kept growing moderately, still limited by legal constraints on pension contracts. AXA maintained its third position with a market share of 13%.
in Poland and by 1% in Hungary (voluntary Pension Fund: Pillar
III only). AXA’s position was stable with a market share of 8%
Fund in Hungary (Pillar II) has been nationalized by law voted on December 13, 2010, and related existing assets under management were transferred to the State. Thus in 2011, only voluntary Pension Fund (Pillar III) remained. In Poland, 70% of the new employees’ contribution has been reallocated from mandatory Pension Funds (Pillar II) to State funds (Pillar I) by law voted in July 2011.
(10) Source: SIA (Swiss Insurance Association) publication “Jahresmedienkonferenz 2012” as per February 3, 2012. Market share is based on statutory gross written premiums.
+30.1% mainly explained by the shift from bank Savings products to insurance products; ■ In Morocco (6), driven by the fi nancial crisis the market experienced a limited growth of 2%; ■ In Mexico (7), the market grew by +11.1% driven by Individual lines (+13.7%).
(1) Source: Spanish Association of Insurance Companies. ICEA as of September, 30, 2011.
for in-force business. The Life insurance market remained concentrated with the top 10 players, accounting for 81%
ranked 6th with a market share of 8.4%; ■ Singapore (11). The Life Industry performed strongly with a 29% increase in terms of APE. The market is concentrated with the top four players, accounting for about 70% of market share. AXA ranked 13th with a market share of 2%.
■ India (1). The market has seen a dip of 16% in terms of APE
France (3). The market grew by 4% in 2011. Commercial and Personal Motor business increased by 3%, driven by tariff increases. Household market increased by 6.3%, driven by the rise of the construction index and tariff increases. In
Personal household; ■ C ommercial lines market increased by 2% (7), the fi rst year of growth since 2004. However, the UK market is still impacted by soft pricing and a lack of economic growth. AXA ranked 6th with a market share of 5%; ■ I n the UK Healthcare market AXA remained 2nd with a market share of 25.2% (8).
In Ireland, AXA maintained its position as the number 1 (9) Motor insurer and grew its premium and policy volumes despite a market contraction.
(9) Source: Irish Insurance Federation & Northern Ireland Driver & Vehicle Agency, June 30, 2011. No offi cial overall ranking published since 2009 where AXA ranked 3rd in Ireland.
(14) Source: Spanish Association of Insurance Companies. ICEA as of September, 30, 2011.
(2) Source: Hellenic Association of Insurance Companies as of June 30, 2011.
(3) Source: Turkish Association of Insurance Companies as of September30, 2011.
(5) Source: Moroccan Association of Insurance Companies as of December 31, 2010.
(10) Source: ISM – Insurance Services Malaysia Berhad as of December 30, 2011.
Belgium and South Korea, 2nd in Spain and Poland, 6th in the
■ Singapore (8) insurance market grew by 15% (9) in 2011. AXA
ranked 3rd in Motor, 2nd in Marine and 1st in Health. AXA’s market share stood at 9%; ■ Malaysia (10) insurance market grew by 7% driven by Medical.
AXA ranked 1st in Financial Guarantees, 3rd in Marine Cargo and overall ranked 7th with a 5% market share; ■ Hong Kong (11) insurance market grew by 9%. AXA ranked 9th with a 3% market share.
After a promising fi rst half of 2011, with positive infl ows into equities which were a sign of confi dence in the recovery of fi nancial markets, the Industry suffered from the development of the Euro crisis in the summer. Investors moved during the second half of 2011 from a “risk-on” to a “risk-off” mode with liquidity and capital protection remaining at the top of their agenda. As a consequence, strong outfl ows from money market funds in the fi rst half of 2011 reverted in positive during the last quarter while strong outfl ows from Emerging markets equities occurred despite structural attractiveness of Emerging markets.
Signifi cant geographic moves have been observed in the second half of 2011 with investors outside the Euro zone reducing their Euro zone allocation in favor of the rest of the world and Euro zone investors reallocating part of their Euro bonds portfolio to domestic government bonds.
In the asset management market, AXA Investment Managers ranked 15th (1) and AllianceBernstein 21st (1) based on assets under management. On a combined basis, AXA ranked 10th.
(1) Ranking based on company reports as of September 30, 2011.
After an economic rebound in the fi rst quarter of the year, the economic growth was hit by the earthquake in Japan and persistent sovereign worries in the Euro area. World GDP growth decreased from 4.9% in 2010 to 3.8%. In the industrialised countries, growth is expected at 1.6% while in the Emerging countries, growth is expected to reach 6.3% supported by
China (9.2%) and India (7.3%) despite a slowdown in the last quarter. Industrialised countries growth is mainly supported by the United States (1.6%) while GDP growth in the Euro zone is expected to reach 1.5%.
During the second half of the year, business climate indicators continued their downward spiral, although there was a notable improvement right at the end of the year in the United States.
The United States registered an improvement in the jobs market with a rise of 200,000 non-agricultural jobs created in December 2011, and higher growth than expected in the manufacturing sector. To support its economy, the Fed confi rmed its decision to maintain its key short-term rates close to zero until at least mid-2013.
Except in Germany, business activity indicators declined in the Euro area during the year with the intensifi cation of the sovereign debt crisis and the tightening of credit conditions.
Interest rates rose signifi cantly in an increasing number of countries, with Germany being one of the few countries in the zone to be almost spared by this trend.
August and November, notably to buy Spanish and Italian debt on the secondary market. To ease bank liquidity, the ECB
In Japan, after a marked decline in business activity during the fi rst half-year due to the consequences of March earthquake, the economy posted a strong recovery during the third quarter.
Due to decrease in exports, particularly to the European Union, major emerging market central banks started offering support to their economies by cutting offi cial rates in the second half of 2011, following the trend observed in the developed markets.
At the beginning of December, the People’s Bank of China eased its monetary policy by reducing its reserve requirement ratio in order to sustain growth.
The last quarter of 2011 was more favorable to equity markets arising from an improved business climate in the United States.
December 31, 2010. The FTSE in London fell 6% in 2011 while the CAC 40 in Paris decreased by 16.9% and the Nikkei in
The 10-year Belgium government bond ended the year at 4.09% (a 120 bps increase compared to December 31, 2010).
Regarding the evolution of 10-year government bonds on European peripheral countries: Italy ended the year at 7.02% (an increase of 221 bps compared to December 31, 2010), Spain ended the year at 5.09% (a decrease of 37 bps compared to December 31, 2010), Greece ended the year at 34.96% (an increase of 2,248 bps compared to December 31, 2010), Ireland ended the year at 8.2% (a decrease of 84 bps compared to December 31, 2010), Portugal ended the year at 13.36% (an increase of 675 bps compared to December 31, 2010).
Against market turbulences in Europe, the Euro decreased against main currencies during the year.
against the Euro (closing exchange rate moved from $1.34 at the end of 2010 to $1.30 at the end of 2011). The Yen gained 8% against the Euro (closing exchange rate moved from Yen 108.8 at the end of 2010 to Yen 99.88 at the end of 2011). The
against the Euro (from Yen 121.6 for the twelve months ending
APH transaction. This resulted in AMP acquiring AXA APH’s outstanding shares for AU$ 13.3 billion, of which AXA’ shares in AXA APH have been paid for AU$ 7.2 billion in cash, while
This transaction had an impact on AXA Group of €0.6 (1) billion realized capital gains recorded for in net income regarding the sale of its Australia and New Zealand operation, €2.5 billion reduction in shareholders’ equity mainly relative to the buy-out of minority interests in AXA APH Asian operations, leading to an increase of +4 points on debt gearing and a decrease of -1 point of Solvency I ratio.
On March 11, 2011, AXA announced the sale of 15.6% stake in
has issued its approval in connection with the proposed transfer by AXA of its entire 15.6% interest in Taikang Life, China’s 4th largest life insurer, to a consortium of new and existing shareholders. The consideration for this transaction amounted to USD 1.2 billion (or ca. €0.9 billion). This corresponds to implied 2009 multiples of 21x net earnings and 6x book value (1).
On May 31, 2011, AXA announced that it has agreed to sell its Canadian operations in Property & Casualty and Life
& Savings insurance to Intact Financial Corporation for a total cash consideration of CAD 2.6 billion (or ca. €1.9 billion).
AXA’s full year 2011 consolidated fi nancial statements. As a consequence, their earnings were accounted for in net income.
December 31, 2011; ■ ca. +6 points on Economic Capital ratio, which was 148% at
On December 20, 2011, AXA announced that it has signed and closed the sale of Denplan to Simply health Group Limited, for a price of £115 million (or ca. €137 million). Total cash proceeds to AXA were £151 million (or ca. €179 million). This operation had a positive impact of £46 million (or ca. €53 million) which was accounted for in net income.
Employee shareholders represented. 7.4% of the outstanding share capital as of December 9, 2011.
On October 20, 2011, AXA Global P&C announced the successful placement of €180 million catastrophe bonds due
January 2015 to institutional investors. This is the second issuance by Calypso Capital Limited, an Irish special purpose company, under a €1.5 billion catastrophe bond program set up in 2010. This structure provides AXA Global P&C with a fully collateralized and multi-year protection against windstorms mainly in Belgium, France (excluding French overseas territories), Germany, Ireland, Luxemburg and the United
In the fi rst half of 2011 a number of class action law suits were fi led against AXA Rosenberg on behalf of certain AXA
District of California approved a preliminary settlement order in relation to these class actions and, pursuant to this order, AXA
Rosenberg paid $65 million in December 2011. A court hearing to defi nitely approve the settlement is scheduled for the end of
long-term ratings on AXA Group, assigning a negative outlook, and removing the CreditWatch with negative implications under which AXA Group and other fi nancial institutions were placed on December 9, 2011 following the rating actions on the Euro zone sovereigns.
P&C bancassurance agreement with HSBC in these countries as well as in India, Indonesia and China.
This transaction will position AXA as the number one P&C player in Hong Kong, and strengthen its leading positions in Mexico and Singapore. The Hong Kong and Singapore businesses to be acquired benefi t from multi-channel distribution, including through HSBC Bank branches, as well as strong agent and broker networks.
(in E uro million) 2011 2010 published 2010 restated (d) 2011/2010 (e)
(d) Restated means the restatement following the sale of Canadian operations.
American Region, Central Eastern Europe, Belgium, France and Japan, partly offset by the United States, Switzerland,
High Growth markets grew by 2% in 2011 fuelled by strong growth in Hong Kong (€+48 million or +16%), South-East
Asia, India and China (€+42 million or €+15%), largely offset by Central Eastern Europe (€-62 million or -23%) negatively impacted by regulatory developments.
France APE decreased by €44 million (-3%) to €1,340 million mostly due to (i) a decrease of €103 million (-3%) in Individual
& Savings operations, full year 2010 APE is based on retained business only.
Consolidated gross revenues for full year 2011 reached €86,107 million, down 3.7% compared to 2010.
The restatements to a comparable basis were mainly driven by the impact of the partial sale of UK Life & Savings operations
(1) Annual Premium Equivalent (APE) is a new regular premiums plus are tenth of single premiums, in line with EEV methodology. APE is Group share.
Japan APE decreased by €35 million (-8%) to €463 million on a comparable basis, mainly due to (i) €6 million (-5%) decrease in Investment & Savings following the non-repeat of signifi cant sales of Variable Annuity products as a result of last year change in inheritance tax law, (ii) €24 million (-15%) decrease in Health as a result of the discontinuation of the former low margin Cancer product together with lower sales in Medical products partly offset by newly launched Cancer products.
Switzerland APE increased by €70 million (+25%) to €397 million driven by (i) €+62 million (+31%) in Group Life driven by higher demand for full insurance contracts and
(€+29 million) with strong sales of unit-linked products through the bancassurance channel, (ii) China (€+10 million)
(a) Restated means the restatement following the sale of Canadian operations.
Motor revenues grew by 5% mainly driven by: ■ the Mediterranean & Latin American Region (+7%), primarily driven by higher volumes in Turkey (+35%) and in Mexico
(-7%) due to a fi erce competitive environment; ■ Direct business (+6%) refl ecting a 8% increase in the UK as a result of tariff increases and successful marketing campaigns
Non-Motor revenues increased by 2% mainly due to: ■ Direct Business (+31%) refl ecting higher volumes in household in the UK; ■ Germany (+4%) mainly due to a positive net production in
Property; ■ Switzerland (+2%) driven by strong sales in household; ■ France (+1%) thanks to price increases.
Commercial lines (40% of P&C gross revenues) increased by 3% on a comparable basis with Motor and Non-Motor up by 7% and 3% respectively.
Motor revenues were up by 7%, mainly driven by: ■ the United Kingdom (+17%) as a result of improved retention and higher new business; ■ the Mediterranean & Latin American Region (+8%) notably in Mexico (+21%) fuelled by positive portfolio developments and tariff increases; ■ Belgium (+5%) and France (+3%) mainly due to tariff increases.
Asset management revenues decreased by 2% or remained stable on a comparable basis to €3,269 million mainly driven by (i) a decrease in management fees (€-71 million) partly offset by higher performance fees (€+23 million) and real estate transaction fees at AXA Investment Managers (€+23 million),
AllianceBernstein revenues were down 3% to €1,963 million due to lower management fees (-6%), primarily in Institutional clients, as a consequence of lower bps (-0.52 bp) and lower average assets under management (-5%).
following higher performance and Real Estate transaction fees while management fees remained stable.
AXA Rosenberg products (€-5 billion) and the voluntary exit from unprofi table employee shareholding schemes (€-2 billion), partly offset by infl ows mainly on AXA Private Equity, AXA Real
Net banking revenues were up 6% to €485 million or up 5%
on a comparable basis, mainly driven by France (+15%) due to higher revenues on growing retail loans and mortgages activities, while AXA Bank Belgium slightly decreased (-1%) to €328 million as higher income from retail banking activities was more than offset mainly by unfavorable changes in fair value of hedging derivatives (€-26 million) and higher funding cost
Fees and revenues from investment contracts without participating feature 350 518 518
Change in unearned premium reserves net of unearned revenues and fees (547) (510) (449)
Net investment result excluding fi nancing expenses (a) 15,114 30,576 30,473
Amortization of value of purchased life business in force (241) (250) (250)
Net realized capital gains or losses attributable to shareholders (312) 437 419
(a) For the periods ended December 31, 2011 and December 31, 2010, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectively €+4,977 million and €+13,788 million, and benefi ts and claims by the offsetting amounts respectively.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 114 210 212
(b) Restated means the restatement following classifi cation of Canadian operations as discontinued business.
Germany (€+29 million), (ii) higher average asset base and stable credited interests in Belgium (€+26 million) partly offset by (iii) Hong Kong (€-20 million) mainly due to a higher allocation to policyholders; (ii) higher fees & revenues (€+321 million or +5%) mainly driven by: a. unit-linked management fees were up €126 million, mainly driven by the United States (€+79 million)
Annuity hedging results in the United States as a result of higher impact of reserve adjustments following lower lapse assumption as well as higher volatility cost and basis losses (ii) France (€-111 million) mainly as a result of regulatory changes on “CMU” levy (€-61 million offset in expenses) and less favorable prior year reserve development in Group Retirement, (iii) Japan (€-64 million)
refl ecting higher commissions and in-force growth, and Belgium (€-45 million) mainly driven by a change in actuarial assumptions leading to higher DAC amortization in 2011, b. €140 million lower administrative expenses, refl ecting both positive one-offs impacts, notably the change in
(+16%) mainly driven by: (i) higher net technical result (including expenses) up €389 million (or +96%) driven by: a. current year loss ratio improving by 2.1 points driven by lower Nat Cat charge (-1.0 point) and lower current year claims experience (-1.1 points) benefi tting from tariff increases and lower frequency claims partly offset by higher large claims and infl ation, b. lower positive prior year reserve development by 1.5 points, c. lower expense ratio improving by 0.8 point to 27.0%, refl ecting (i) 0.5 point reduction in acquisition ratio mainly driven by renegotiation of commission rates and reduced exposure to highly commissioned business in the United Kingdom, and (ii) 0.3 point reduction in administrative expenses ratio benefi ting from both positive one-off impacts and various productivity programs net of infl ation, d. as a result, the combined ratio improved by 1.4 points to 97.9%; (ii) Investment results lightly decreased by 1% to €2,034 million; (iii) higher income tax expense and minority interests (up €122 million) mainly driven by higher pre-tax underlying earnings and while positive tax one-offs remained stable.
AXA Corporate Solutions Assurance down (€-11 million) with a slight deterioration of combined ratio (up 1.0 point) refl ecting lower prior year reserve developments.
Rosenberg coding error provision allowance (€+66 million) as well as (ii) higher revenues partly offset by AllianceBernstein
(-1%) to €-845 million driven by (i) Germany Holdings down 32 million mainly driven by less favorable tax-one offs, (ii) AXA
Group net capital gains and losses attributable to shareholders were down €732 million mainly due to: (i) €-460 million higher impairments to €-840 million in 2011 mainly driven by €-387 million net impairment on
Greece government bonds, and to a lesser extent higher impairments on equity; (ii) €-224 million lower realized capital gains, to €+682 million in 2011, mainly driven by (i) the non repeat of the change
As a result, adjusted earnings amounted to €3,589 million. On a constant exchange rate basis, adjusted earnings decreased by €641 million (-15%).
(+49%) mainly as a result of: (i) higher exceptional operations from €-1,456 million in 2010 – mainly related to the partial sale of UK Life
& Savings operations – to €2,069 million encompassing: a. €+902 million capital gain of the disposal of Canada operations, b. €+798 million following the sale of the stake in Taikang
General Insurance, e. €-144 million loan losses in Hungary (total impact on net income stood at €-230 million including goodwill and other intangible amortization); (ii) partly offset by: a. higher amortization and impairments of intangible assets from €-81 million in 2010 to €-1,167 million, mostly related to the goodwill reduction in the United
Adjusted earnings (Euro per Ordinary Share) 1.43 1.43 1.77 1.77 1.70 1.69 -16% -15%
Underlying earnings (Euro per Ordinary Share) 1.57 1.57 1.58 1.57 1.51 1.51 4% 4%
(a) Restated in 2010 means the restatement of the Canadian activities as discontinued operations.
AXA’s Life & Savings segment for the periods indicated: LIFE & SAVINGS SEGMENT (a)
Net capital gains or losses attributable to shareholders net of income tax (35) 279 276
South-East Asia, India and China (c) 50 3 3 of which High growth markets 295 174 174 of which Mature markets 1,973 2,281 2,271
(e) Other countries correspond to Australia/New Zealand, Canada, Luxembourg, AXA Golbal distributors, AXA Life Europe, Architas and Family Protect.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 273 347 347
Profi t or loss on fi nancial assets (under FV option) & derivatives (83) 63
Gross revenues decreased by €991 million (-7%) to €13,658 million. On a comparable basis, gross revenues decreased by €924 million (-6%) mainly due to: ■ Individual Savings revenues decreased by €1,010 million
(-13%) mainly refl ecting market uncertainties notably leading to lower large contracts at AXA Wealth Management driving lower general account revenues partly offset by higher unitlinked revenues (+3%); ■ Group Retirement decreased by €44 million (-5%) despite higher unit-linked revenues (+175% or €+139 million); ■ Protection and Health increased by €130 million (+3%)
driven by €+103 million in Group Protection and Health refl ecting positive portfolio development and €+27 million in
Investment margin remained stable (€+5 million) in an unfavorable interest rate environment.
Fees & revenues increased by €8 million (+0%) to €1,520 million mainly due to higher unit-linked fees.
Net technical margin decreased by €111 million (-20%) to €449 million mainly driven by (i) Group Protection (€-79 million)
Amortization of VBI increased by €56 million (+422%) to €-69 million refl ecting the accelerated amortization of the remaining stock of VBI.
As a result, the underlying cost income ratio increased by 0.7 point to 73.3%.
Adjusted earnings decreased by €29 million (-3%) to €825 million, mainly driven by higher impairments (€-165 million)
notably on fi xed income assets (€-142 million on Greek government bonds), €-112 million from last year change in the
Net income decreased by €175 million (-19%) to €741 million, due to an unfavorable change in fair value of Mutual funds and derivatives (€-145 million) mainly due to credit spread widening and lower adjusted earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives 330 73
Gross revenues increased by €197 million (+2%) to €9,657 million. On a comparable basis, gross revenues increased by €557 million (+6%): ■ Variable Annuity revenues (53% of gross revenues)
Cornerstone and Structured Capital Strategies products launched in 2010, which represented a combined 53% of the full year 2011 Variable Annuity sales; ■ Life revenues (27% of gross revenues) decreased by 1%
increased by 4% driven by higher average separate account balances refl ecting market performance in the fi rst half of the year; ■ Mutual funds revenues (1% of gross revenues) increased by 7%.
August 2010) primarily in third party channels; ■ Mutual funds decreased by 7% to €303 million.
Investment margin decreased by €31 million (-6%) to €474 million. On a constant exchange rate basis, investment margin decreased by €13 million (-3%) driven by a decrease in investment income of €40 million refl ecting lower yields on fi xed income assets, partly offset by a decrease in interest and bonus credited to policyholders of €27 million primarily refl ecting lower crediting rates.
Unearned Revenue Reserve amortization (€+95 million) notably driven by a revised projection of lower future projected loadings
On a constant exchange rate basis, expenses decreased by €336 million (-26%): ■ Expenses, net of capitalization (including commissions and DAC capitalization) decreased by €60 million (-5%)
As a result, the underlying cost income ratio increased by 4.7 points to 75.3%.
Profi t or loss on fi nancial assets (under FV option) & derivatives 3 59
APE decreased by €10 million (-2%) to €535 million. On a constant exchange rate and on retained business only, APE
decreased by €7 million (1%). Excluding the large corporate pension schemes, APE increased by €6 million (+1%) driven by Mutual funds sales through the Elevate wrap platform
(€+72 million or +75%) as more advisers signed up to using the platform, partly offset by lower sales of unit-linked products driven by a combination of lower volume in individual pensions due to signifi cant sales in 2010 following a change in legislation and lower sales of offshore bonds due to uncertain economic conditions.
Investment margin decreased by €108 million (-88%) to €15 million. On a constant exchange rate and on a comparable scope basis, the investment margin decreased by €4 million.
driven by €22 million increase in loadings on premiums refl ecting portfolio growth, together with €10 million increase in unit-linked management fees mostly driven by in force growth.
Amortization of VBI decreased by €1 million (-28%) to €-2 million (8%). On a constant exchange rate and on a comparable scope basis, amortization of VBI remained stable.
driven by a positive tax adjustment following a corporate tax rate decrease more than offset by higher pre-tax underlying earnings evolution. Retained business underlying earnings benefi ted from a favorable tax situation in 2010 and 2011
As a consequence, the underlying cost income ratio increased by 26.8 points to 110.5%. On a constant exchange rate and on a comparable scope basis, the underlying cost income ratio decreased by 13.1 points.
Profi t or loss on fi nancial assets (under FV option) & derivatives 19 46
Term Rider (€-52 million), Endowment (€-19 million) as well as lower sales of Group Life (€-18 million), partly offset by sales of new Whole Life products (€+19 million); ■ Investment & Savings revenues (30% of gross revenues)
APE decreased by €2 million (-1%) to €463 million. On a comparable basis, APE decreased by €35 million (-8%): ■ Health decreased by €24 million (-15%) to €148 million, as a result of a shift from lower margin to higher margin Medical products, partly offset by the new Cancer products; ■ Investment & Savings decreased by €6 million (-6%) to €103 million, due to non-repeat of signifi cant sales of Variable
Annuity products; ■ Protection decreased by €5 million (-3%) to €213 million, mainly driven by lower sales of Increasing Term and Term products (€-27 million), partly offset by an increase in new
Whole Life products (€+20 million) refl ecting a shift in product mix towards higher margin products.
On a constant exchange rate basis, net technical margin decreased by €64 million mainly driven by the unfavorable impact of the Great East Japan earthquake on the mortality margin and a lower surrender margin following improved retention combined with model and assumption changes.
amortization decreased by €14 million (-21%) mainly driven by the natural decline of VBI balance.
Income tax expenses decreased by €20 million to €-191 million. On a constant exchange rate basis, income tax expenses decreased by €33 million due to lower pre-tax underlying earnings and a positive tax one-off (€15 million).
Underlying earnings decreased by €12 million (-4%) to €323 million or decreased by €35 million (-10%) on a constant exchange rate basis.
Adjusted earnings decreased by €6 million (-2%) to €335 million or decreased by €29 million (-9%) on a constant exchange rate basis, due to lower underlying earnings partly offset by lower impairments.
Net income decreased by €23 million to €354 million. On a constant exchange rate basis, net income decreased by €48 million, mainly due to (i) €29 million lower adjusted earnings, (ii) less favorable mark-to-market changes of fi xed maturities and alternative assets, partly offset by (iii) a favorable foreign exchange impact driven by an accounting mismatch on derivatives hedging foreign denominated equities.
Fees & revenues increased by €18 million (+6%) to €325 million mainly due to higher loadings on Health business in line with portfolio growth and higher URR (Unearned Revenues
(€-18 million) mainly following updated interest rates and costs assumptions (€-18 million) as well as higher expenses in Health deriving from new business and portfolio growth.
Amortization of VBI increased by €18 million (+124%) to €-32 million due to change in interest rate assumptions (€12 million).
As a result, the underlying cost income ratio increased by 6.8 points to 55.8%.
Net capital gains or losses attributable to shareholders net of income tax (13) 34
Gross revenues increased by €1,067 million (+21%) to €6,158 million(1). On a comparable basis, gross revenues increased by €384 million (+8%): ■ Group Life revenues increased by €372 million (+9%)
■ Individual Life increased by €8 million (+9%) mainly attributable to the new Protect Plan product.
Investment margin increased by €5 million (+4%) to €118 million. On a constant exchange rate basis, investment margin decreased by €8 million (-7%) mainly due to a higher policyholder bonus allocation.
Amortization of VBI increased by €15 million (+35%) to €-59 million. On a constant exchange rate basis, amortization of VBI increased by €9 million (+20%) mainly impacted by the cancellation of the above mentioned internal co-insurance contract.
As a result, the underlying cost income ratio decreased by 6.4 points to 40.0%.
Income tax expenses increased by €36 million (+57%) to €-99 million. On a constant exchange rate basis, income tax expenses increased by €25 million (+40%) mainly due to dividends received from consolidated foreign subsidiaries and higher pre-tax underlying earnings.
Adjusted earnings increased by €33 million (+14%) to €280 million. On a constant exchange rate basis, adjusted earnings increased by €2 million (+1%) mainly driven by higher underlying earnings partly offset by lower realized capital gains net of impairments (€-44 million), mainly on equities.
Net capital gains or losses attributable to shareholders net of income tax (88) 69
Gross revenues decreased by €363 million (-15%) to €2,142 million (1): ■ Individual Life & Savings decreased by 18% (or €-353 million)
Investment margin increased by €26 million (+10%) to €288 million mainly driven by higher investment income
Fees & revenues increased by €10 million (+7%) to €163 million mainly due to higher Unearned Revenues Reserves amortization following an update of actuarial assumptions (€+18 million more than offset by higher DAC amortization), partly offset by lower fees and loadings (€-9 million).
Expenses increased by €28 million (+11%) to €-278 million due to higher net deferred acquisition cost amortization (€35 million), mainly due to an update of actuarial assumptions
Net income decreased by €274 million to €-9 million mainly driven by realized and unrealized capital losses on fi xed income
Net capital gains or losses attributable to shareholders net of income tax (0) 1
APE decreased by €61 million to €213 million. On a comparable basis, APE decreased by €62 million (-23%) to €213 million due to a progressive run-off of the Pension Funds business (€83 million or -52%) following regulatory changes in Poland and
Underlying earnings were stable at €9 million. On a constant exchange basis, despite the nationalization of the mandatory
As a result, the underlying cost income ratio was stable at 91.7%.
Adjusted earnings decreased by €1 million to €8 million. On a constant exchange rate basis, adjusted earnings decreased by €1 million driven by higher impairments on equities.
Net capital gains or losses attributable to shareholders net of income tax (80) 35
Profi t or loss on fi nancial assets (under FV option) & derivatives 14 (24)
■ high growth markets decreased by €15 million (-4%), mainly driven by lower Group Protection new business in Mexico.
(€-150 million) mostly at AXA MPS, partly offset by a better performance of unit-linked products (€42 million or +46%)
MPS (€-8 million); ■ high growth markets decreased by €5 million (-6%) mainly driven by Mexico (€-8 million) following lower volumes in
Net technical margin fell by €35 million (-33%) or €34 million
Spain (€-17 million) mainly in Protection, partly offset by a higher surrender margin at AXA MPS; ■ high growth Markets down €9 million (-29%) mainly driven by
on a comparable basis to €-445 million due to: ■ mature markets down €4 million (-1%) driven by lower commissions, refl ecting lower volumes, partly compensated by higher DAC amortization at AXA MPS in line with higher surrenders on general account saving products; ■ high growth markets down €3 million (-3%), driven by Mexico as a result of lower commissions on Group Protection.
Amortization of VBI decreased by €7 million (-33%) to €-14 million. On a constant exchange rate basis, amortization of VBI decreased by €7 million (-33%) mainly due to the natural decline of VBI balance at AXA MPS.
As a result, the underlying cost income ratio increased by 1.2 points to 69.9%.
Underlying earnings decreased by €13 million (-12%) or €12 million (-11%) on a comparable basis to €104 million.
Adjusted earnings decreased by €128 million (-84%) or €127 million (-84%) on a comparable basis to €24 million mainly due to higher impairment charges, notably on Greek government bonds (€-93 million) as well as lower realized capital gains.
(-80%) on a comparable basis to €24 million refl ecting lower adjusted earnings partly offset by a positive change in fair value of interest rate derivatives.
Net capital gains or losses attributable to shareholders net of income tax (12) 19
Gross revenues increased by €144 million (+11%) to €1,465 million. On a comparable basis, gross revenues increased by €202 million (+15%) mainly due to higher revenues from general account Protection & Health products
APE increased by €171 million (+107%) to €330 million. On a comparable basis, APE increased by €48 million (+16%) due to the successful launch of a new series of unit-linked products
(€+10 million) and higher general account Protection & Health products (€+20 million) notably driven by several large cases in
On a constant exchange rate basis, expenses increased by €48 million mainly due to higher investments in the business infrastructure and higher acquisition expenses driven by new business growth.
Amortization of VBI decreased by €18 million to €9 million. On a constant exchange rate basis, amortization of VBI decreased by €18 million mainly due to revision of future profi ts and update of assumptions (€+10 million) and the early termination of an internal co-insurance treaty.
Adjusted earnings increased by €50 million (+31%) to €211 million. On a constant exchange rate and scope basis, adjusted earnings decreased by €44 million (-17%) mainly refl ecting lower net realized capital gains.
Profi t or loss on fi nancial assets (under FV option) & derivatives 4 (0)
Savings and Whole Life products, partly offset by; ■ India (€-9 million) mainly from lower sales in unit-linked business following regulatory changes in September 2010, in line with the market.
Adjusted earnings increased by €46 million to €52 million. On a constant exchange rate and scope basis, adjusted earnings increased by €35 million primarily driven by underlying earnings growth.
Underlying earnings as well as adjusted earnings and net income decreased by €5 million (-19%) to €-26 million mainly due to higher expenses refl ecting business development in
Following the announced sale of Canadian operations in 2011, these operations were treated as discontinued operations in
Following the announcement of the sale of Canadian operations, 2010 earnings were restated to refl ect its reclassifi cation as discontinued business.
Profi t or loss on fi nancial assets (under FV option) & derivatives (90) 27 29
(a) Restated in full year 2010 means the fi gures as reported were modifi ed accordingly the Direct P&C operations reported as a separate reporting unit.
(b) Mediterranean & Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region and Mexico.
Mediterranean & Latin American Region (b) 353 358 368 of which High growth markets 178 147 147 of which Direct (33) (62) (62)
(a) Direct P&C operations are now reported as a separate business. Full year 2010 restated fi gures as reported were modifi ed accordingly. Restated means also the restatement following classifi cation of Canadian operations as discontinued business.
(b) Mediterranean & Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region, and Mexico.
Net realized capital gains or losses attributable to shareholders (62) 111 96
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (90) 27 29
Net capital gains or losses attributable to shareholders net of income tax (52) 34
Profi t or loss on fi nancial assets (under FV option) & derivatives (14) (7)
Xynthia in 2010) and lower attritional claims ratio refl ecting tariff increases and more favorable claims frequency; ■ all accident year loss ratio decreased by 2.5 points to 71.1%
Expense ratio decreased by 0.7 point to 24.6% mainly driven by a contained cost base, notably lower staff costs.
Net investment result decreased by €39 million (-7%) to €550 million mainly due to lower yields on fi xed income assets partly compensated by higher dividends on equities.
to €-294 million mainly refl ecting higher pre-tax underlying earnings, as well as a higher corporate tax rate (€-13 million).
Net capital gains or losses attributable to shareholders net of income tax (26) (9)
Gross revenues increased by €85 million (+2%) to €3,772 million (1). On a comparable basis, gross revenues increased by €83 million (+2%): ■ Personal lines (55% of the total premiums) were up 1% at €2,020 million. Motor was up 1% to €561 million due to tariff increases in the UK and Ireland partly offset by a change in business mix. Non-Motor was up 1% to €1,459 million.
Property up 8% to €568 million due to new schemes, increased volumes and improved retention in the UK. Health was stable at €561 million. Personal Other was down 6%
(i) acquisition expense ratio down 1.3 points to 21.7% mainly due to a decrease in commissions following lower delegated authority business and a change in mix in Commercial lines towards lower commissioned products and the administrative expense ratio down 0.5 point to 8.7% due to expense reduction as a result of effi ciency programs partly offset by the decommissioning of an IT platform.
On a constant exchange rate basis the net investment result increased by €30 million mainly refl ecting higher fi xed income following a higher allocation towards corporate bonds.
Net income from investments in affi liates and associates 2 2
Profi t or loss on fi nancial assets (under FV option) & derivatives 25 7
Motor (€+87 million or 9%) mainly driven by higher year-end renewals and higher new business from the improved price positioning in the market; ■ Commercial lines (36% of gross revenues) were up by 1% to €1,310 million mainly in Commercial Motor (€+11 million or 5%) driven by tariff increase and larger fl eets insured; ■ Other lines (7% of gross revenues) grew by 6% to €265 million mainly driven by higher assumed business in
Net technical result increased by €45 million to €975 million: ■ the current accident year loss ratio decreased by 0.9 point to 73.4% mainly driven by lower Nat Cat charge (-0.9 point); ■ the all accident year loss ratio decreased by 0.3 point to 73.0% mainly due to lower positive prior year reserve development.
Net investment result decreased by €5 million (-1%) to €369 million decline in income from equities and lower distributions from private equity funds partly offset by exceptional coupon distributions (€5 million).
Adjusted earnings decreased by €13 million (-7%) to €172 million mainly due to higher impairments in equities offsetting higher underlying earnings.
Net income decreased by €4 million (-2%) to €186 million mainly following lower adjusted earnings and a more favorable change in fair value of alternative investments.
Profi t or loss on fi nancial assets (under FV option) & derivatives 2 (12)
Gross revenues increased by €307 million (+13%) to €2,643 million (1). On a comparable basis, gross revenues increased by €17 million (+1%): ■ Personal lines (53% of gross revenues) increased by 2%
Property mainly as a result of positive net new contracts; ■ Commercial lines (47% of gross revenues) decreased by 1%
Expense ratio decreased by 0.8 point to 26.1% mainly driven by administrative expense ratio following the ongoing strict cost management.
As a result, the combined ratio was up by 0.4 point to 89.2%.
Income tax expenses increased by €7 million (+7%) to €-103 million. On a constant exchange rate basis, income tax expenses decreased by €4 million (-5%) driven by lower pretax underlying earnings.
Underlying earnings increased by €38 million (+11%) to €397 million. On a constant exchange rate basis, underlying earnings decreased by €6 million (-2%).
Net capital gains or losses attributable to shareholders net of income tax 98 (15)
Profi t or loss on fi nancial assets (under FV option) & derivatives 17 20
to €1,038 million following tariff increases, partly offset by negative net new contracts; ■ Commercial lines (51% of the gross revenues) were up 2% to €1,042 million with Motor up 5% refl ecting tariff increases and positive portfolio development while Workers Compensation remained stable.
and tariff increases partly offset by higher large claims; ■ all accident year loss ratio increased by 1.2 points to 68.5%
Expense ratio decreased by 1.0 point to 30.6%, refl ecting the decrease in commission rates in Commercial lines as a result of positive business mix impact, productivity programs offsetting infl ation as well as non recurring benefi ts (-0.2 point).
As a result, the combined ratio was up by 0.3 point to 99.1%.
Income tax expenses decreased by €5 million (-8%) to €-62 million mainly due to lower pre-tax underlying earnings while non recurring tax benefi t remained stable (€6 million).
Adjusted earnings increased by €103 million (+75%) to €240 million mainly driven by higher net realized capital gains on equities net of impairments.
Net realized capital gains or losses attributable to shareholders (19) 0 0
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 2 1 (0)
(a) Restated means the restatement following classifi cation of Canadian operations as discontinued business.
(b) Reso accounted for using the equity method. AXA's profi t is recognized in income statement.
Net income decreased by €14 million to €16 million on a constant exchange rate basis, mainly due to lower adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax (17) 23
Gross revenues increased by €188 million (+3%) to €6,848 million. On a comparable basis, gross revenues increased by €359 million (+5%) driven by an acceleration of the high growth markets (+18% or €+464 million), partly offset by the diffi cult economic environment in mature markets (-3%
or €-105 million) mainly in Spain (€-106 million), where tariff actions did not compensate negative net new contracts: ■ Personal lines (61% of gross revenues) were up 5% to €4,162 million owing to Motor lines (+7% or €+192 million)
mainly in high growth markets (€+193 million), notably driven by positive volume effects in Turkey (€+190 million) and
(€+1 million); ■ Commercial lines (39% of gross revenues) were up 7% to €2,662 million driven by an acceleration of both Non-Motor
On a constant exchange rate basis, net technical result increased by €32 million (+2%) driven by an increase in high growth markets (+16% or €+101 million) partly offset by a decrease in mature markets (-6% or €-69 million): ■ current accident year loss ratio decreased by 1.3 points to 73.4%, driven by a decrease in mature markets
refl ecting higher investments to support growth and a slight increase in mature markets (+0.1 point) due to lower volumes despite productivity actions.
As a result, the enlarged expense ratio was up by 0.3 point to 29.1%.
Net investment result decreased by €6 million (-2%) to €378 million. On a constant exchange rate basis, net investment result increased by €2 million.
Income tax expenses decreased by €3 million (-2%) to €-162 million. On a constant exchange rate basis, income tax expenses decreased by €3 million (-2%) refl ecting lower pretax underlying earnings and a negative country mix.
Adjusted earnings decreased by €56 million (-14%) to €336 million. On a constant exchange rate basis, adjusted earnings decreased by €54 million (-14%) refl ecting lower underlying earnings and higher impairments, notably on Greek government bonds (€-60 million), partly offset by a more favorable change in intrinsic value of equity hedging strategy.
On a constant exchange rate basis, net income decreased by €70 million (-19%) refl ecting lower adjusted earnings combined with 2011 restructuring costs (€-21 million).
Net capital gains or losses attributable to shareholders net of income tax (4) (0)
Gross revenues increased by €174 million (+9%) to €2,102 million (1). On a comparable basis, gross revenues increased by €158 million (+8%): ■ Personal Motor (89% of gross revenues) was up €105 million
(+6%) to €1,880 million driven by €+42 million in the UK as a result of tariff increases and higher volumes, €+61 million in continental Europe with strong growth in France, Italy and
Poland as well as €+15 million in Japan driven by higher volumes partly offset by €-12 million decrease in South
Korea as a result of diffi cult market environment despite tariff increases; ■ Personal Non-Motor (11% of gross revenues) was up €52 million (+31%) to €218 million mainly supported by
refl ecting the improvement incurrent accident year loss ratio partly offset by unfavorable prior year reserve developments on bodily injury claims in the UK.
Expense ratio decreased by 1.7 points to 21.2% (with acquisition ratio down 0.5 point and administrative expense ratio down 1.2 points) refl ecting operational leverage following portfolio growth.
On a constant exchange rate basis, income tax expenses increased by €23 million refl ecting higher pre-tax underlying earnings and negative tax adjustments following corporate tax rule changes in Japan (€-6 million) and in the UK (€-3 million).
On a constant exchange rate basis, underlying earnings increased by €29 million.
Adjusted earnings increased by €26 million to €-36 million. On a constant exchange rate basis, adjusted earnings increased by €26 million mainly due to higher underlying earnings, partly offset by lower net realized capital gains, mainly on equities.
Net realized capital gains or losses attributable to shareholders 2 28 13
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (0) (2) (0)
Gross revenues increased by €45 million (+12%) to €425 million (2). On a comparable basis, gross revenues increased by €8 million (+2%): ■ Personal lines (48% of the gross revenues) were up €16 million (+9%) due to Private Motor growth primarily in
Malaysia as well as growth in Health driven by new products launched across the region; ■ Commercial lines (52% of the gross revenues) were down €8 million (-4%) mainly due to more selective underwriting in Malaysia and Singapore, partly offset by positive portfolio development in Hong Kong.
Net technical result increased by €33 million (+35%) to €130 million. On a constant exchange rate, net technical result increased by €31 million (+33%).
as prior year reserve developments increased to a positive position from a negative position in 2010.
As a result, the combined ratio was down by 5.3 points to 97.2%.
On a constant exchange rate basis, income tax expenses increased by €4 million due to higher taxable pre-tax underlying earnings.
On a constant exchange rate basis, underlying earnings increased by €17 million.
Adjusted earnings increased by €6 million to €15 million. On a constant exchange rate basis, adjusted earnings increased by €6 million driven by increase in underlying earnings, partly offset by lower net realized capital gains.
Net capital gains or losses attributable to shareholders net of income tax 5 5
Marine (+9% mainly driven by portfolio developments), partly offset in Liability (-2% negative portfolio developments partly offset by +1% tariff increases).
As a consequence, the all accident year loss ratio increased by 0.6 point to 82.1%.
As a result, the combined ratio was up 1.0 point to 97.9%.
to €199 million. On a constant exchange rate basis, net investment result increased by €16 million (+8%) mainly due to higher income from fi xed income assets and real estate.
On both current and constant exchange rate basis, income tax expenses increased by €8 million (+10%) to €-90 million mainly due to €5 million 2010 non recurring tax effect and to a lesser extent, higher tax rate in France (€4 million).
On both current and constant exchange rate basis, adjusted earnings decreased by €11 million (-6%) to €155 million, driven by the decrease in underlying earnings.
Net income increased by €30 million to €52 million mainly due to higher adjusted earnings partly offset by a €6 million less favorable change in fair value of fi nancial assets and derivatives.
Underlying earnings increased by €4 million (+27%) to €21 million mainly driven by positive developments in Italy and Turkey partly offset by deterioration on Travel business following the end of a large contract.
Adjusted earnings increased by €3 million (+19%) to €21 million mainly driven by higher underlying earnings.
Net income decreased by €2 million (-9%) to €18 million, mainly due to €3 million higher adjusted earnings more than offset by €3 million exceptional capital gain recorded in 2010 following the end of a joint venture in Japan and €3 million restructuring costs.
Adjusted earnings decreased by €78 million (-55%) to €64 million. On a constant rate exchange rate basis, adjusted earnings decreased by €80 million (-56%) as a result of lower underlying earnings and €36 million lower realized capital gains refl ecting 2010 positive impact of a change in the French tax regulation on the “reserve de capitalisation” balance in French entities (€+45 million).
Net realized capital gains or losses attributable to shareholders (2) (5)
Net capital gains or losses attributable to shareholders net of income tax 0 -
Institutional clients including a €+16 billion infl ow from an AXA
advisory mandate, €-7 billion from Retail clients and €-5 billion from Private clients), €-7 billion market depreciation, and €-2 billion unfavorable change in scope, partly offset by a €+10 billion favorable foreign exchange rate impact.
Gross revenues decreased by €165 million (-8%) to €2,038 million (1). On a comparable basis, gross revenues decreased by €73 million (-3%) primarily due to lower investment management fees resulting from a 5% decrease in average AUM combined with lower average bps (-0.5 bp) partly offset by higher distribution fees following higher average Retail
On a constant exchange rate basis, net investment result decreased by €25 million due to higher unrealized losses related to deferred compensation obligations, offset in general expenses.
General expenses decreased by €83 million (-5%) to €-1,738 million. On a constant exchange rate basis, general expenses decreased by €18 million (-1%) mainly due to lower compensation expenses offset by higher promotion and servicing expenses.
Income tax expenses decreased by €25 million (-27%) to €-68 million. On a constant exchange rate basis, income tax expenses decreased by €22 million (-24%) driven by lower pretax underlying earnings, €+26 million positive tax one-off mainly due to audit settlements, partly offset by an increase in effective tax rate mainly due to unrecognized tax benefi ts on losses in foreign subsidiaries.
AXA ownership of AllianceBernstein at December 31, 2011 is 64.6%, up 3.2% due to repurchases of AllianceBernstein units during 2011 to fund deferred compensation plans.
UK Life & Savings operations and €1 billion net outfl ows, partly offset by €5 billion favorable foreign exchange impact. Net outfl ows of €-1 billion were mainly driven by outfl ows on AXA
Gross revenues increased by €81 million (+5%) to €1,563 million (1). On a comparable basis (2), and excluding distribution fees (retroceded to distributors), net revenues increased by €54 million (+5%) to €1,173 million mainly due to higher performance fees (€+23 million) driven by AXA Private
was more than compensated by an increase in management fees from other expertises (€+59 million).
On a comparable basis (1 ), net investment result decreased by €19 million mainly driven by higher interest charges.
General expenses decreased by €136 million to €-1,239 million. On a constant exchange rate basis and excluding distribution fees, general expenses decreased by related to AXA Rosenberg coding error in 2010, general expenses increased by €33 million (+4%) mainly driven by higher variable compensation triggered by higher profi ts, as well as higher staff costs, partly offset by the impact of downsizing at AXA Rosenberg and the non recurrence of 2010 external fees at AXA Rosenberg.
As a result, the underlying cost income ratio improved by 15.0 points to 73.7%. Excluding the compensation related to AXA Rosenberg coding error in 2010, the underlying cost income ratio remained fl at.
Excluding the €49 million net tax credit arising from the compensation related to AXA Rosenberg coding error in 2010 and the €12 million tax one offs in 2011, income tax expenses increased by €2 million (+2%).
Adjusted earnings increased by €92 million (+76%) to €212 million. On a constant exchange rate basis, adjusted earnings increased by €89 million (+74%). Excluding the €66 million net compensation related to AXA Rosenberg coding error in 2010, adjusted earnings increased by €23 million mainly following higher underlying earnings.
On constant exchange rate basis, net income increased by €50 million (+36%). Excluding the €66 million net compensation related to AXA Rosenberg coding error in 2010, net income decreased by €16 million, mainly driven by a less favorable mark-to-market of fi xed income funds (€-18 million) and lower unrealized carried interests (€-25 million) more than offsetting the increase in adjusted earnings.
(1) In 2011, realized carried interests are reported in revenues (performance fees) while they were reported in investment result in 2010. Comparable basis comparisons adjust in particular this change in presentation.
(a) Of which AXA Bank Europe and its branches: €383 million.
Net realized capital gains or losses attributable to shareholders (5) (3)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (13) 9
(a) Of which AXA Bank Europe and its branches: €32 million.
(b) Includes commercial activities in Belgium for €55 million and shared services of AXA Bank Europe (treasury and support functions) for €0 million.
Net banking revenues increased by €17 million (+5%) to €328 million. On a comparable basis (1), net banking revenues decreased by €3 million (-1%) mainly due to negative changes in fair value of hedging derivatives (€-26 million) and higher funding cost (€-9 million) partly offset by good results in retail banking activities (€+29 million) mainly driven by higher loans income.
Adjusted earnings decreased by €11 million to €50 million mainly due to lower underlying earnings.
Net banking revenues were stable at €116 million. On a comparable basis (1), net banking revenues increased by €+16 million (+15%), including (i) higher revenues on retail loans and mortgages, as a result of a strong increase in new credit production, (ii) higher fees received on current accounts activities and (iii) a €-12 million unfavorable impact from changes in fair value of interest rates hedging instruments (€10 million versus €+2 million in 2010).
Underlying and adjusted earnings were stable at €1 million, as operating revenues growth was mostly offset by higher expenses which included signifi cant investment costs in marketing & advertising to support growth.
December 31, 2011 as well as €-54 million additional provision for loan losses.
The discontinuation of lending activities led (i) to the impairment of the related goodwill and other intangibles (€-86 million)
together with (ii) the recognition of the 2011 credit activities results, including the earnings of the period, as exceptional operations in net income.
On a comparable basis (1), net banking revenues increased by €11 million mainly due to higher interest income (€+15 million)
Net income decreased by €208 million to €-230 million. On a constant exchange rate basis, net income decreased by €211 million.
Net income decreased by €2 million to €-15 million. On a constant exchange rate basis net income remained stable and included €4 million to cover the restructuring costs related to the operation described below.
AXA Bank Switzerland will close its operations following the transfer of its customer portfolio to bank zweiplus. The one-off costs associated with the closure of the Swiss branch amount to €4 million.
Net realized capital gains or losses attributable to shareholders (224) 2
Adjusted earnings and net income decreased by €10 million to €-19 million, mainly resulting from lower underlying earnings
Adjusted earnings increased by €4 million to €-31 million mainly driven underlying evolution and lower impairments.
Net income decreased by €30 million to €-77 million as a consequence of a €53 million allowance due to the restructuring of the participation in Bharti AXA General Insurance.
On a constant exchange rate basis, net income increased by €116 million (+52%) driven by higher adjusted earnings, a €14 million tax reserve release on a former subsidiary disposal, and a favorable change in the fair value of a cross currency swap.
Underlying earnings increased by €33 million (+101%) to €0 million. On a constant exchange rate basis, underlying earnings increased by €33 million (+101%) mainly due to the reallocation of the proceeds from the partial sale of the
On a constant exchange rate basis, net income increased by €6 million (-69%) principally refl ecting adjusted earnings evolution offset by one–off tax of €15 million on the sale of an inter-group loan and higher foreign exchange losses partially offset by the movement in currency swaps (€-20 million).
Underlying earnings decreased by €32 million to €-17 million mainly due to non-recurring provision releases in 2010 (€21 million) and lower non-recurring positive tax impacts compared to 2010 (€-13 million).
Underlying earnings and adjusted earnings decreased by €13 million to €-12 million mainly due to the lower net investment result following the early reimbursement of a subordinated loan granted to AXA Belgium.
Net income decreased by €15 million to €-14 million mainly due to the adjusted earnings evolution.
On a constant exchange rate basis, net income increased by €8 million (+12%) mainly due to positive fi scal impact on exceptional operations (€15 million) partly offset by lower adjusted earnings.
The new split between High Growth market and Mature Market is detailed below: The notion of High Growth market includes the following countries: Central and Eastern countries (Poland, Czech
before the impact of: (i) exceptional operations (primarily change in scope and discontinued operations); (ii) integration and restructuring costs related to material newly acquired companies as well as restructuring and associated costs related to productivity improvement plans; (iii) goodwill and other related intangibles; and
funds, for which cost at inception, intrinsic value and payoff fl ow though adjusted earnings, and only time value fl ows through net income when there is no intention to sell the derivatives in the short term (if not, fl ows through adjusted earnings).
The calculation is prepared with the following principles: ■ for net income ROE: Calculation is based on consolidated fi nancial statements, i.e. shareholders’ equity including perpetual debt (“Super Subordinated Debts” TSS/“Perpetual
Income “OCI”, and net income not refl ecting any interest charges on TSS/TSDI.
■ for adjusted and underlying ROE: • all perpetual debts (TSS/TSDI) are treated as fi nancing debt, thus excluded from shareholders’ equity,
Technical Margin”; (iii) the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above) 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
(ii) change in UFR (Unearned Fees Reserve - capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
Underlying Investment margin includes the following items: (i) net investment income; (ii) interests and bonuses credited to policyholders and unallocated policyholder bonuses (and the change in specifi c reserves purely linked to invested assets returns)
deposits received on all general account product lines; (iv) deferral income such as capitalization net of amortization of URR (Unearned Revenue Reserve) and UFR (Unearned
Fee Reserve); (v) other fee revenues, e.g. fees received on fi nancial planning or sales of third party products.
Life & Savings underlying cost income ratio: Underlying expenses plus underlying VBI amortization divided by
Underlying expense ratio is the ratio of: (i) underlying expenses (excluding claims handling costs), to
Underlying Cost Income Ratio: (general expenses net of distribution revenues)/(gross revenues excluding distribution revenues).
Liquidity management is a core part of the Group fi nancial planning including debt profi le schedule and, more broadly, the capital allocation process. Liquidity resources result principally from Life & Savings, Property & Casualty and
Asset Management operations, as well as from capital raising activities, and confi rmed bank credit lines.
The fi nancing needs of asset management subsidiaries arise principally from their activities, which require working capital, in particular to fi nance prepaid commissions on some mutual fund-type products at AllianceBernstein or to constitute seed money for new funds at both AllianceBernstein and AXA
In diffi cult market conditions in 2011, AXA continued to manage its liquidity risk carefully and conservatively.
At year end 2011, AXA consolidated its liquidity position with: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
As of December 31, 2011, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €30.0 billion, net of bank overdrafts of €1.0 billion; ■ a stronger debt profi le characterized by (i) a decrease in total net fi nancing debt (1) from €15.2 billion at year-end 2010 to €13.4 billion at year-end 2011 following higher level of cash available (ii) debt mostly subordinated and with a long maturity profi le with €0.9 billion of debt repayments over the next two years, estimated taking into account the fi rst date of step-up calls on subordinated debt, and (iii) improved debt ratios (debt gearing (2): 26% at year-end 2011, versus 28% at year-end 2010; interest coverage (3): 9.1x at year-end 2011, versus 8.5x at year-end 2010); ■ broad access to various markets via standardized debt programs: for example, at the end of 2011, an envelope of €6 billion of French commercial paper, of $1.5 billion of
AXA has a robust liquidity risk management framework, including (i) a regular monitoring of the liquidity position in terms of resources (monthly monitoring of liquidity resources including government bonds and a part of the equity and corporate bond portfolio) and requirements (monthly monitoring of surrender rates at the Group’s principal operating subsidiaries and consolidated view at Group level), (ii) committed undrawn credit lines for €12.5 billion at year-end 2011, up €1.4 billion from year-end 2010, and (iii) a liquidity contingency plan in place designed to deal with liquidity crises that may arise, which can provide short term liquidity of approximately €28 billion of assets eligible for European Central Bank tenders (of which €27 billion immediately available) at year-end 2011, creating a substantial alternative source of refi nancing.
In addition, as part of its risk control system, AXA remains constantly vigilant regarding contractual provisions, such as ratings triggers or restrictive covenants, in fi nancing and other documentation that may give lenders, security holders or other counterparties, rights to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse effect on its consolidated fi nancial position. At year-end 2011, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
December 31, 2011 representing a carrying value of €1, 419 million for its debts component in Note 17 of Part 4 -
Consequently, each issuance of a new ordinary share resulting from the conversion of a bond will be offset by the delivery to
At December 31, 2011, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
At December 31, 2011, the amount of debt owed by AXA and its subsidiaries to credit institutions was €807 million versus €887 million at the end of 2010. The decrease of €100 million on a constant exchange rate basis was mainly due to reimbursement of outstanding debts in the Mediterranean and
At December 31, 2011, other debt owed to credit institutions totaled €2,864 million (including €1,029 million of bank overdrafts), a de crease of €20 million compared to €2,884 million at the end of 2010 (including €998 million of bank overdrafts).
For several years, the AXA Group has offered to its employees, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2011, employees invested a total of €332 million leading to a total of 36.7 million newly issued shares. Employee (including agent) shareholders represented 7.3% of the outstanding share capital and 8.5% of the voting rights at December 31, 2011.
Dividends received by the Company from its subsidiaries amounted to €4,307 million in 2011 (€4,031 million in 2010), of which €1,844 million were in currencies other than the Euro
December 12, 2004, which introduced the notion of fi nancial conglomerate into the French Insurance Code. According to article 20 of the Insurance Code, the provisions of this ordinance applied for the fi rst time to periods starting on or after January 1, 2005.
The various components of what the Group considers as available capital are determined in accordance with these regulatory requirements under Solvency 1, which are not yet harmonized throughout Europe while waiting for Solvency 2. At
(€42.7 billion at December 31, 2010) of which: (i) consolidated shareholders’ equity after dividend proposal: €39.8 billion (€41 billion at December 31, 2010), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and undated subordinated debt; (ii) gross unrealized capital gains and other: €17.5 billion
(€17.4 billion at December 31 ,2010); (iii) admitted subordinated debt: €11.8 billion (€11.7 billion at
December 31, 2010); (iv) locally admitted assets: €2.6 billion (€2.5 billion at
AllianceBernstein as it is part of its net consolidated book value) of €22.8 billion (€24.2 billion at December 31, 2010)
French insurance regulator, which oversees the Company’s consolidated solvency position, and rating agencies.
In particular, the Company’s TSS include loss absorption mechanisms which provide that under certain circumstances relating to the consolidated solvency margin of the Group, the principal amount of each of the relevant TSS will be written down following which interest is payable on the reduced principal amount until such time as it is reinstated (following the Company’s return to fi nancial health as defi ned by the term of the TSS).
Company may, at its option, defer interest payment upon the occurrence of certain events (e.g. absence of dividend payment voted in the preceding Annual Shareholders’ Meeting or receipt by the Company or by certain of its principal subsidiaries of a regulatory demand to restore their applicable minimum solvency margin level). Payment of deferred interest becomes due in certain specifi ed cases (e.g. payment of a dividend, notifi cation of the end of a regulatory demand to restore solvency, liquidation or redemption of the TSDI).
Finally, under its TSS, the Company has an option to cancel payments of interest upon the deterioration of its fi nancial position, unless certain events have occurred in the preceding year (e.g. a dividend payment or interest payment on any TSS, any share buy-back outside the Company’s share buy-back program or a repurchase or redemption of any TSS). However, upon the occurrence of certain circumstances relating to the consolidated solvency margin of the Company, the Company is required to cancel the payment of interest.
Services reaffi rmed the Aa3 rating for counterparty credit and fi nancial strength on AXA’s principal insurance subsidiaries, and
AA- fi nancial strength ratings of AXA’s principal insurance subsidiaries with a stable outlook.
(i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our cost of obtaining reinsurance,
A dividend per share of €0.69 will be proposed at AXA’s Annual
Implementing sound corporate governance principles has been a priority at AXA for many years. Subject to prevailing corporate governance requirements and practices in
(defi ned below) as its corporate governance Code of reference. The AFEP/ MEDEF Code consists, in particular, of recommendations issued by the AFEP and the MEDEF in a report dated October 2003 and recommendations dated
In order to preserve well balanced governance structures and debates, the Board of Directors’ Bylaws require that a majority of the Board be composed of independent directors, that certain Board Committees (including Audit and
Offi cer and the Deputy Chief Executive Offi cer or to inform the
Chairman and the Board of Directors about potential confl icts of interests, and a variety of other powers designed to ensure that the Company’s governance structures remain robust and well balanced at all times when the positions of Chairman &
Company’s purpose, the Board is responsible for considering all material questions and taking all material decisions related to the Company and its business. It notably exercises the following powers: ■ chooses between the two forms of Executive M anagement
■ grants stock options and/or performance shares/units to Group employees and corporate offi cers within the framework of the authorizations it receives from the
Offi cer on a regular basis about the Company’s fi nancial condition, cash position and commitments as well as any signifi cant events or transactions involving the Company or the
Training sessions are offered to the new and existing members of the Board of Directors in order to familiarize them with the principal issues related to the Group and its activities. These sessions focus on a variety of issues relevant to directors including the Group’s primary operating businesses and subsidiaries as well as fi nancial reporting, regulatory and related issues (including Solvency II).
April 29, 2010, the term of offi ce of all Supervisory Board members automatically terminated and most Supervisory
During the following years, the Ethics & Governance Committee shall make further recommendations in order to propose the appointment of an increased number of women to the Board of
Group’s employee shareholders. The Board of Directors does not have any non-voting members (censors).
More particularly, the Lead Independent Director has the power to: ■ require the Chairman & Chief Executive Offi cer to convene full meetings of the Board on a specifi c agenda at any time; ■ convene meetings of the non-executive directors at any time without the attendance of the Chairman & Chief
Executive Sessions; ■ attend and participate in all meetings of Board Committees
Dentressangle Initiatives 30bis, rue Sainte-Hélène 69287 Lyon Cedex 02 – France
Denis Duverne (58) Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations
Member of the Board of Directors Chairman of the Board of Directors of BOURBON
Wendy Cooper (61) Member of the Board of Directors, representing the employee shareholders
AXA UK plc 5 Old Broad Street London EC2N 1AD United Kingdom
GDF SUEZ Tour T1 – 35è étage 1, place Samuel de Champlain Faubourg de l’Arche 92400 Courbevoie – France
Member of the Board of Directors Senior Director of Stamford Law Corporation (Singapore)
Stamford Law Corporation 10 Collyer Quay #27-00 Ocean Financial Centre Singapore 049315 Singapore
Member of the Board of Directors Attorney at Law Lussan & Associés 282, boulevard Saint Germain 75007 Paris – France
Banca Monte dei Paschi di Siena S.p.A. Piazza Salimbeni, 3 53100 Siena – Italy
Member of the Board of Directors Managing Director of Investment Audit Practice, LLC (d) (United States)
Investment Audit Practice, LLC 580 Park Avenue New York, NY 10065 United States
The Shareholders’ Meeting to be held on April 25, 2012 will be asked to vote on the reappointment of a member of the Board of
Committee in 2001 and was Chief Executive Offi cer from 2009 to the beginning of 2012; ■ the appointment of Mrs. Doina Palici-Chehab, representing the employee shareholders, for a four-year term in replacement of Ms. Wendy Cooper, whose term of offi ce will expire at the close of this Shareholders’ Meeting. The Board of Directors acknowledges that Mrs. Doina Palici-Chehab (54 years old) has nearly thirty years of experience in the insurance business and in particular twenty-two years within the AXA
Directors would therefore be comprised of fi fteen members including eleven members considered independent by the
Directors and the Audit Committee Terms of Reference; ■ self-assessment of the Board of Directors; ■ independence of the Board Members.
Vice-Chairman of the AXA Board of Directors, Lead Independent Director 57, French nationality
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 his majority stake in Norbert Dentressangle S.A., also holds equity interests in real estate, industrial and business services fi rms.
Nationale d’Administration (ENA), he started his career in 1984 as commercial counsellor for the French Consulate General in
Management Board member in charge of Finance, Strategy and Operations. Since April 2010, Mr. Denis Duverne has been director and Deputy Chief Executive Offi cer of AXA, in charge of Finance, Strategy and Operations.
Paris (BCG). From 1979 to 2010, Mr. Jacques de Chateauvieux was Chairman & Chief Executive Offi cer of BOURBON and since January 1st, 2011, he has been Chairman of the Board of Directors of BOURBON. From 1989 to 2001, he developed
BOURBON into an international conglomerate and then listed the Company on the Paris Stock Exchange in 1998. From 2001, he has refocused BOURBON’s strategy on making it a world leader in offshore oil and marine services. From April 2008 until
Supervisory Board. From April 2010 until February 2012, he has been a member of the AXA Board of Directors . Mr. Jacques de Chateauvieux resigned from his position of director of AXA
AXA Financial, Inc. – 1290 Avenue of the Americas – New York –
Fordham Law School, New York, NY. From 1981 to 1987, she was Assistant Counsel to New York Governors Carey and Cuomo. From August 1987 to March 1995, she was the
Insurance Department and from January 1990 to June 1990, she held the position of Superintendent of Insurance of the
Associate General Counsel. Since September 1999, she has been Senior Vice-President & Associate General Counsel of
AXA Equitable in charge of the Government Relations function, representing AXA Equitable’s legislative and regulatory interests in front of the U.S. Congress, state legislatures, state i nsurance d epartments, state and national trade associations and other external audiences. As of April 2008, Ms. Wendy Cooper was elected employee shareholder member of the AXA Supervisory
Mr. Anthony Hamilton is a graduate of Oxford University. His early career was spent in London and New York working for the investment banks Schroders, Morgan Grenfell and
Since September 2000, Mr. Anthony Hamilton has been nonexecutive Chairman of AXA UK plc.
GDF SUEZ – Tour T1 – 35e étage – 1, place Samuel de
Offi ce (Lionel Jospin). In 2002, she joined the Suez Group. She then held various positions: from 2002 to 2005, at Strategy &
Bar Association (IPBA) until 2011 . Since 2000, she has been
Senior Director of Stamford Law Corporation (Singapore). She is Chairman of the Asian Civilisations Museum Board, and is also a member of the National Heritage Board, a member of the
National University of Singapore Business School (Singapore), member of the Accounting Advisory Board
Singapore Management University School of Law (Singapore), member of the Advisory Board
Mr. François Martineau has been a Partner of the law fi rm SCP
Banca Monte dei Paschi di Siena S.p.A. – Piazza Salimbeni, 3 –
Chairman of the Criminal Section of the Court of Siena. In
Investment Audit Practice, LLC – 580 Park Avenue – New York,
D irection du Trésor and at the “Cabinets” of two Ministers
Director of member of the Supervisory Board: ■ AXA (Supervisory Board)
Chairman & Chief Executive Offi cer of Coca-Cola Entreprise and Vice-Chairman of Coca Cola Enterprises - Groupe Europe in 2002. From January 2003 to May 2005, she was Chairman of Coca-Cola Enterprises – Groupe Europe. Since May 2005,
FDE (Food & Drink Europe) (formerly CIAA – Confederation of the Food and Drink Industries of the EU) (Belgium), member of the Executive Committee and member of the Board
Ms. Wendy Cooper, who is the employee shareholder representative to the AXA Board of Directors, is an employee of AXA Equitable, which is AXA’s principal United States subsidiary.
AXA does not believe these agreements or transactions give rise to any confl icts of interests between (i) the director’s duties towards AXA and (ii) their private interests and/or other duties of these individuals.
To the best of the Company’s knowledge, there are no arrangements or understandings that have been entered into with major shareholders, customers, suppliers or others pursuant to which a member of the Board of Directors was selected, except for Mr. Giuseppe Mussari who was proposed for appointment to the AXA Supervisory Board during the AXA
To the best of the Company’s knowledge based on information reported to it, none of the members of its Board of Directors have been, during the last fi ve 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 Board of Directors may have been associated with other companies that have undertaken similar solvent liquidations.
The conclusions of this self-assessment are discussed annually during a Meeting of the Board of Directors.
The Board of Directors has four specialised Committees that review specifi c matters and report to the Board: (1) the
All members of the Audit Committee were determined by the Board to be independent in accordance with the criteria contained in the AFEP/MEDEF Code. In addition to assessing independence, the Board of Directors also reviewed the qualifi cations of all Audit Committee members in terms of their fi nancial expertise and business experience and believes that all members have the requisite expertise, experience and qualifi cations to fulfi l their assignments as Audit Committee members.
The scope of the Audit Committee’s responsibilities is set forth in its Terms of Reference which defi ne the Committee’s principal assignments, including the following: ■ reviewing annual and half-year fi nancial statements; ■ monitoring the statutory audit of AXA’s annual and consolidated fi nancial statements; ■ providing for recommendations on proposals for appointment and replacement of the Statutory Auditors as well as monitoring their independence; ■ overseeing the compensation of the Statutory Auditors; ■ monitoring the accounting rules that apply within the Group; ■ considering the Group’s internal control systems and procedures for risk management; ■ examining the program and the goals of the AXA Group’s internal audit function.
Group General Counsel also attend the Committee’s m eetings on a regular basis.
It has the following principal assignments: ■ to examine and issue an opinion on any plan that intends to set up sureties or grant guarantees, endorsements and warrantees in favor of third parties, when their value exceeds the authorizations granted to the Chairman & Chief Executive
Management policy as well as any signifi cant implications of these orientations and limits on AXA’s principal subsidiaries; and
The Finance Committee met four times in 2011. The average attendance rate was 92.86% and focused, in particular, on the following issues: ■ fi nancial risk management; ■ liquidity and fi nancing; ■ capital and solvency; ■ risk appetite and asset allocation;
■ acquisitions, restructurings and disposals; ■ review of the fi nancial resolutions proposed to the AXA
Three of these members were determined by the Board to be independent in accordance with the criteria set forth in the
The Chairman of the Board of Directors even if not a member of the Committee takes part in the Committee’s works and attends its meetings except when his personal situation is at stake.
Directors and its Chairman; ■ to organize the periodic self-assessment of the Board of
Directors; ■ to examine in more depth certain governance matters related to the operation and organization of the Board of Directors
(Board assessment, communication with shareholders…); ■ to review the AXA Group Compliance and Ethics Guide; ■ to examine the Group’s strategy on corporate responsibility and related issues; ■ to examine every year the Company’s policy with respect to professional equality as well as equal pay.
The average attendance rate was 88.24% and the Committee focused, in particular, on the following matters: ■ Board functioning: ■ process of selection of the future directors; ■ composition of the Board and its Committees; ■ independence of the members of the Board; ■ self-assessment of the Board of Directors; ■ review of the modifi cations of the Bylaws of the Board of
Guide; ■ share ownership requirements for members of the Board of
Directors; ■ corporate responsibility; ■ the Company’s policy with respect to professional gender equality as well as equal pay.
Committee were determined to be independent by the Board in accordance with the criteria set forth in the AFEP/ MEDEF Code.
The Chairman of the Board of Directors, even if not a member of the Committee, takes part in the Committee’s works and attends its meetings except when his personal situation is at stake.
Executive Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee; ■ to formulate an opinion on the proposals of the Chairman &
• overall annual allocation of Company stock options or performance shares/units to employees of the AXA Group.
The Committee is also informed of the compensation of the Group Executive Committee members (regarding cash compensation as well as the allocation of Company stock options, performance shares or performance units); ■ to issue proposals on the appointments of the Company’s
Executive Committee; ■ stock options and performance share/unit allocation; ■ profi t sharing premium implementation; ■ organization & Talent Review (OTR) and succession plans; ■ Directors’ fees for Board members.
In the context of the change in AXA’s governance structure that occurred in 2010, the Board of Directors appointed, on
AXA Management Committee currently comprises seven members and generally meets once a week to discuss and take strategic, fi nancial and operational decisions.
Nicolas Moreau Chief Executive Offi cer of AXA France and in charge of overseeing the worldwide operations of AXA Assistance and AXA Global Direct
Mark Pearson President & Chief Executive Offi cer of AXA Financial, Inc. (United States)
On January 1st, 2012, the Executive Committee was comprised of the following eighteen members, including ten non-French nationals: Henri de Castries Chairman & Chief Executive Offi cer of AXA
■ various b oard c ommittees including a c ompensation c ommittee and an a udit c ommittee, whose membership includes independent or non-executive directors.
The Group Governance Standards require the boards of AXA’s principal subsidiaries to establish an a udit c ommittee and a c ompensation c ommittee in addition to any other b oard c ommittees that they consider necessary or appropriate for their specifi c businesses or that are required by local regulators.
(including the requirements for participation of independent directors) are specifi ed in detailed Audit Committee guidelines and Compensation Committee Standard. The Audit Committee
The table below sets forth the number of salaried employees of the AXA Group over the past two years broken down by line of business and geographic region: Salaried employees (full time equivalent) At December 31, 2010 At December 31, 2011 - Belgium (Including AXA Bank Belgium) (f) 5,270 5,085 - Mediterranean and Latin American Region 12,024 11,919 - Other countries and transversal entities 5,351 5,028
Banking (excluding AXA Bank Belgium) (f) 997 1,111 - AXA Bank CEE 331 322
AXA Technology, AXA Group Solutions, AXA Business Services (h) 6,741 7,423
(b) Decrease by 399 in the US due to the restructuring plan undertaken in June 2011.
(f) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the bank activities. Consequently, split is not available.
Executive compensation is structured to foster and reward performance: ■ at both the individual level and collective level (local business entity and AXA Group); and
AXA’s global performance, local entity performance, and the attainment of the executive’s individual objectives. The variable portion is designed to represent a substantial component of the executive’s annual global compensation such that, in cases where an executive attains or exceeds the objectives, the compensation levels of AXA executives will be between median and the third quartile (or, in certain cases, beyond the third quartile) of the benchmark market rate.
The variable component of his compensation is determined on the basis of a predefi ned target amount (€2,350,000 in 2011)
and is based on two metrics: ■ Group performance, as measured by Underlying Earnings per Share, Return on Equity and customer scope index; and
Group results accounts for 60% and the proportion linked to the individual performance for 40%.
“% Target” corresponds to the achievement of performance objectives related to the year.
The assessment of the leadership skills is based on the dimensions of the AXA leadership framework: ■ strategic vision; ■ focus on customers; ■ change leadership; ■ results orientation; ■ building capability; ■ team leadership; ■ share to succeed; ■ living through AXA values.
The variable compensation paid to the Company’s Executive Offi cers for 2009, 2010 and 2011 was: VARIABLE COMPENSATIONS PAID TO EXECUTIVE OFFICERS
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 1,350,000 1,485,480 110% 1,416,667 1,265,910 89% 1,450,000 1,292,542 89%
In reviewing the Group component of the variable compensation of Messrs. de Castries and Duverne, the Compensation &
Chief Executive Offi cer of AXA France France £800,000 £650,000 €832,790 €749,511 €850,000 €918,000
“President” & Chief Executive Offi cer of AXA Financial, Inc. (United States)
Global Head of Property & Casualty France €1,200,000 €1,188,967 €1,052,000 €1,030,467 €978,000 €1,005,803
(a) Mr. François Pierson decided to retire as of January 1st, 2012.
In the tables below, compensation not paid in euro was converted into euro on the basis of the following yearly average exchange rates for 2011: USD/EUR 0.721121; GBP/EUR
Due to substantial differences in the tax systems to which members of the Management Committee are subject, meaningful comparisons of the compensation and benefi ts earned are diffi cult. For information purposes, the relevant marginal tax rates are as follows: Belgium: 53.5% (50%
corresponding to federal taxes and 3.5% to local taxes); France: 54.5% (including an additional 13.5% for social taxes and excluding an additional charge of 3% or 4%); Japan: 50%; United States (New York): 43.27% and the United Kingdom: 52% (including an additional 2% for National Insurance
Peter Kraus (a) Chairman & Chief Executive Offi cer of AllianceBernstein (United States)
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 750,000 1,292,542 - 36,790 4,150 2,083,482
CEO for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings and Health Belgium 700,000 849,123 - 395,360 2,358 1,946,841
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2010
Chief Executive Offi cer of AXA France France 519,997 749,511 - - 147,477 1,416,985
“President” & Chief Executive Offi cer of AXA Life Japan (Japan) Japan 645,181 984,603 - - 461,081 2,090,865
Global Head of Property & Casualty France 578,000 1,030,467 - 17,893 6,034 1,632,394
CEO for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings and Health Belgium 641,667 786,000 - 217,446 1,601 1,646,714
In addition, Mr. Mark Pearson benefi ts from travel, relocation and housing benefi ts paid in respect of his function in AXA
Equitable and benefi ted from an accommodation allowance and other expatriation allowances paid in respect of his expatriate status in Japan until February 10, 2011. Mr. Nicolas Moreau benefi ted from a company car as well as an accommodation allowance paid in respect of his expatriate status in the UK until
Executive Offi cer, received compensation from the Company, with the exception of a fee for attending meetings. The amount of directors’ fees paid to each AXA Board member is indicated in the table below.
The Vice-Chairman – Lead Independent Director, when attending the meetings of a Committee without being one of its members, receives the same fee as other Committee members.
Since 1989, AXA has granted stock options to its directors, offi cers and a large number of its employees in France and abroad, aiming to reward their performance and aligning their interests with those of the Group by linking them to AXA’s stock performance over the long term.
Each year, the Board of Directors, acting upon the recommendation of its Compensation & Human Resources
Stock options are valid for a period of 10 years. They are granted at market value, with no discount, and become exercisable by tranches generally in thirds between 2 and 4 years following the grant date. Pursuant to the stock option plan rules, benefi ciaries who resign from the Group loose their right to exercise the options.
The recommendations for individual grants of options are made by the Chief Executive Offi cers of the business units and by the Group functional department heads. These recommendations are reviewed by the Executive M anagement to ensure coherence and fairness. Individual grants of options are then decided by the Board of Directors, while individual grants to the Chairman & Chief Executive Offi cer, the Deputy
Since 2006, performance conditions apply to the last tranche of each options grant (i.e. the last 1/3rd of options granted)
Grant date (Board of Directors or Management Board) 09/05/2001 30/05/2001 27/02/2002 14/03/2003
Subscription or purchase price of options (a) 30.74 32.57 19.96 10.47
Total number of shares to be subscribed (a) 16,981 240,849 25,039 114,443 or purchased, from which to be subscribed - - - -
The fi rst 10 employees benefi ciaries (b ) - 39,049 - -
Subscription or purchase price of options (a) 19.02 19.32 19.91 20.97
Grant date (Board of Directors or Management Board) 10/05/2007 10/05/2007 10/05/2007 24/09/2007
The fi rst 10 employees benefi ciaries (c) 645,899 246,161 284,022 -
Subscription or purchase price of options (a) 32.95 33.78 33.78 29.72
Subscription or purchase price of options (a) 23.42 21.19 21.19 13.89
20/04/2005 20/04/2005 24/04/2005 20/04/2005 20/04/2005 22/04/2008 24/09/2007 19/11/2007 19/11/2007 01/04/2008 01/04/2008 19/05/2008 24/09/2011 19/11/2009 19/11/2011 01/04/2010 01/04/2012 19/05/2010 24/09/2017 19/11/2017 19/11/2017 01/04/2018 01/04/2018 19/05/2018 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 20/03/2009 20/03/2009 02/04/2009 10/06/2009 10/06/2009 21/09/2009 08/12/2009 20/03/2011 20/03/2013 02/04/2011 10/06/2013 10/06/2011 21/09/2013 08/12/2011 20/03/2019 20/03/2019 02/04/2019 10/06/2019 10/06/2019 21/09/2019 08/12/2019
Grant date (Board of Directors or Management Board) 08/12/2009 19/03/2010 19/03/2010 18/08/2010
Total number of shares to be subscribed (a) 20,890 7,671,540 278,986 22,846 or purchased, from which to be subscribed - - - -
CEO for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings and Health 18/03/2011 subscription or purchase 18/03/2021 100% of options: EuroStoxx
included in Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options or the actual proceeds if and when the options are exercised. On March 18, 2011, the fair value of one option was €1.89 for options without performance conditions, €1.42 for options with performance conditions.
Under the AXA Group Compliance and Ethics Guide, all employees (including all Executive Offi cers) are prohibited from engaging in any transaction designed to hedge the value of equity based compensation awards (including stock options, performance units, restricted shares, or similar awards) 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 EXERCISED BY EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2011
Stock options granted or exercised by the top 10 benefi ciaries (outside management bodies’ members) during the year
Stock options granted during the year by AXA or any eligible AXA Group subsidiary , to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group subsidiaries , who received the highest number of stock options (aggregate information) 980,684 14.73
Stock options on AXA or any eligible AXA Group subsidiary , exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group subsidiaries , who exercised the highest number of stock options (aggregate information) 217,971 10.43
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS AT DECEMBER 31, 2011)
Henri de Castries Chairman & Chief Executive Offi cer 4,575,284 -
Nicolas Moreau Chief Executive Offi cer of AXA France 918,890 -
AXA share in the medium-term (3 to 4 years); ■ reducing shareholder dilution by granting less subscription options.
Criteria for grants of Performance Units/Shares are similar to those used for stock options.
Shares initially granted are subject to collective performance conditions measuring both the performance of the AXA
AXA share during the last 20 trading days of the acquisition period.
■ for the Performance Units granted since 2011, the Units acquired at the end of the 2-year performance period will be subject to an additional 1-year acquisition period and will be paid in cash to the benefi ciary.
As far as Performance Shares are concerned: ■ shares acquired, under the condition that the benefi ciary is still employed by the AXA Group, at the end of the 2-year performance period are restricted from sale during a 2-year period.
Board of Directors approves all Performance Shares programs prior to their implementation.
The annual grants of Performance Shares are generally made simultaneously with the granting of stock options.
of the aggregate number of Performance Shares granted to all benefi ciaries during the same year.
The acquisition period of the Performance Unit plan launched on April 1, 2008 with 2,441,070 Performance Units initially granted to 2,752 benefi ciaries outside France, ended on
AXA shares (276,786 shares) which are subject to a 2-year restriction period until April 1, 2012.
On March 20, 2011, a total of 2,233,609 units had been acquired by 2,749 employees. The settlement of these units was made partly in cash (€26.8 million) and partly in AXA shares
The acquisition period of the Performance Unit plan launched on April 2, 2009 with 160,025 Performance Units initially granted to 216 benefi ciaries in Japan ended on April 2, 2011.
which are subject to a 2-year restriction period until June 10, 2013.
March 19, 2012 for 50% of the units defi nitely granted and on March 19, 2013 for the remaining units defi nitely acquired.
A second Performance Unit plan was launched on April 4, 2011 and 323,105 Performance Units were initially granted to 215 benefi ciaries outside of France.
The acquisition period of the Performance Shares plan launched on April 1, 2008 with 1,401,587 Performance Shares granted to 1,566 benefi ciaries in France, ended on April 1, 2010. At that date, a total of 1,087,393 shares had been acquired by 1,450 employees. These shares are subject to a 2-year restriction period until April 1, 2012.
(the 23,634 acquired shares being restricted for another 2-year period, i.e. until April 28, 2012), and will end on April 28, 2012 for 23,051 Performance Shares granted to 6 employees outside of France (the acquired shares will not be subject to any restriction period).
The acquisition period of the Performance Shares plan launched on June 10, 2009 with a total of 433,231 Performance Shares granted to 8 benefi ciaries in France ended on June 10, 2011.
The acquisition period of the Performance Shares plan launched on March 19, 2010 with a total of 1,940,338 Performance
A new Performance Shares plan was launched on March 18, 2011 and 2,056,780 Performance Shares were initially granted to 1,984 benefi ciaries in France. The 2-year acquisition period of this plan will end on March 18, 2013 and the acquired shares will be subject to a 2-year restriction period until
(a) 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.
(b) The 1,639,604 units acquired (from which 5,722 units acquired by anticipation due to deceased benefi ciaries) by 2,438 benefi ciaries of the April 1st, 2008 plan have been settled as €21.8 million and 276,786 shares restricted until April 1st, 2012.
(c) The 2,233,609 units acquired by 2,749 benefi ciaries of the March 20, 2009 plan have been settled as €26.8 million and 402,262 shares restricted until March 20, 2013.
(e) The 122,361 units acquired by 182 benefi ciaries of the April 2, 2009 plan have been settled as €1.5 million and 19,492 shares restricted until April 2, 2013.
(j) 390 units of the April 4, 2011 plan acquired by anticipation related to deceased benefi ciaries.
The numbers of Performance Units indicated from the April 1st, 2008 plan to the June 10, 2009 plan have been adjusted to take into account the impact of the share capital increase with preferential subscription rights of December 4, 2009.
(a) Performance Shares granted as replacement for 250,306 Performance Units 2004 cancelled.
The numbers of Performance Shares indicated from the April 1st, 2008 plan to the June 10, 2009 have been adjusted to take into account the impact of the share capital increase with preferential subscription rights of December 4, 2009.
PERFORMANCE SHARES GRANTED TO EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2011
Chief Executive Offi cer of AXA France earning -net income per share
Global Head of Property & Casualty earning -net income per share
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2011 “Consolidated
PERFORMANCE SHARES BECOMING UNRESTRICTED DURING 2011 FOR EACH EXECUTIVE OFFICER AND MANAGEMENT COMMITTEE MEMBERS
Henri de Castries Chairman & Chief Executive Offi cer - - -
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 10/05/2007 23,954 10/05/2011
PERFORMANCE UNITS GRANTED TO EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2011
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings and Health earnings - net income per share
PERFORMANCE UNITS ACQUIRED BY EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2011
In the tables above all dates that are indicated are in the format of day/month/year.
Commercial Code, the Supervisory Board and later the Board of Directors have decided that, as long as an Executive
Offi cer (Chairman & Chief Executive Offi cer and Deputy Chief
January 1, 2007, the Executive Offi cers must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France, this equals approximately 50% of the post-tax capital gain). These shares shall be held during the entire term of offi ce of the
On December 30, 2011, based on the AXA share value (€10.045) and on the AllianceBernstein share value (€9.43) at that date, the
Executive Offi cers and other employees must refrain from any purchase or sale of AXA securities during specifi c time periods
As a matter of principle, the discretionary management agreement has been submitted for advice to the Ethics &
The main features of this mandate are the following: ■ the mandate is signed for an indefi nite term; ■ each instruction agreed between the executive and the bank, within the framework of the mandate, is valid for a duration it determines and starts after the expiry of a 3-month abstention period; ■ the mandate and the instructions shall be signed when the executive is not in possession of any inside information and outside blackout periods. During a 3-month abstention period following the signing of each instruction, the bank shall be prohibited from engaging in any transaction on behalf of the executive; ■ the executive may not intervene in management by the bank who exercises discretion in application of the instructions. The executive generally commits to proscribe all communications with the bank and not to exercise any infl uence on it prior to the expiry of a standing instruction.
Henri de Castries – Chairman & Chief Executive Offi cer 1,621,297 0
Norbert Dentressangle – Vice-Chairman – Lead Independent Director 16,687 (a) -
Marcus Schenck 5,500 - * AXA’s shares which could be indirectly held through Mutual funds are not taken into account.
(1) For information, the annual Social Security ceiling for 2012 is equal to €36,372.
Henri de Castries Chairman & CEO Beginning of current mandate: 29/04/2010 Term of offi ce: 2014 – X X – X – – X
Denis Duverne Deputy CEO Beginning of current mandate: 29/04/2010 Term of offi ce: 2014 – X X – X – – X
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
These commitments took effect upon the effective renunciation by Messrs. Henri de Castries and Denis Duverne of their respective employment contracts and will continue so long as they remain executive offi cers of AXA (including under renewed mandates); ■ Messrs. Henri de Castries and Denis Duverne also renounced the indemnities to which they were entitled as employees, pursuant to the 1993 collective agreement , (i) at the time of their retirement (indemnités de départ en retraite) and (ii)
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 plan.
(either through Mutual funds (FCPE) or through direct share ownership, depending on countries) with a 13.60% discount in 2011. 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’ personal investment is guaranteed by a bank, and employees also benefi t from a portion of the share appreciation, as compared to the nondiscounted reference price.
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 during the Company’s Shareholder
The SharePlan 2011 program was carried out through a capital increase that took place in December 2011 and was open to almost all Group employees through voluntary contributions: ■ more than 26,000 employees took part in SharePlan 2011, representing approximately 23% of eligible employees; ■ the total amount invested was more than €332 million, as follows: • €19.1 million in the traditional plan, and
On December 31, 2011, AXA employees and agents held 7.34% of the share capital and 8.48% of the voting rights.
CORPORATE GOVERNANCE 2 2.3 DESCRIPTION OF THE COMPANY’S SHARE REPURCHASE PROGRAM
Pursuant to Article 241-2 of the AMF General Regulations, this section constitutes the description of the Company’s share repurchase program that will be submitted to the shareholders for approval at AXA’s Ordinary Shareholders’ Meeting on April 25, 2012.
The table below sets forth the number of AXA shares and the percentage of shares held by the Company directly (treasury shares)
Number of treasury shares held directly by the Company - 1,676,321 –
Commercial Code, (ii) granting for free or assigning free shares to some or all present or former eligible employees, former employees, executive offi cers and general insurance agents enrolled in any employee savings plan sponsored by the Company or the AXA Group pursuant to applicable law, in particular Articles L.3332-1 et seq.
Code, continued the liquidity contract dated May 16, 2005 compliant with the AMAFI Code of Conduct approved by
AMF. This contract had an initial duration of one year and was automatically renewed unless terminated by one of the parties and appointed Crédit Agricole Cheuvreux to execute transactions pursuant to the terms of the contract. AXA
(11th resolution) and at their General Meeting held on April 27, 2011 (8th resolution) carried out pursuant to Article L.225209 of the French Commercial Code (liquidity contracts being excluded), no AXA share was bought or sold between
(b) AXA Assurances IARD Mutuelle (11.58% of capital ownership and 17.99 % of voting rights) and AXA Assurances Vie Mutuelle (2.96% of capital ownership and 4.77% of voting rights).
Signifi cant changes in the Company’s share capital ownership between December 31, 2009 and December 31, 2011 are set forth in the table below: On December 31, 2011 (a)
On December 31, 2011, to the best of the Company’s knowledge based on the information available to it, the Company had approximately 11,000 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
Stock subscription warrants related to the SharePlan operation in Germany 3,674,454
Maturity of the bonds Total redemption on January 1st, 2017 at €269.16 per bond, i.e. 162.63% of the nominal amount
issued a total of approximately 37 million new ordinary shares each with a par value of €2.29, all of which were entitled to dividends for 2011.
On December 31, 2011, AXA employees and agents held 7.34% of the Company’s share capital and 8.48% of the voting rights. These shares are owned through Mutual funds or directly either in the form of ordinary shares or ADS in the framework of the Group Employee Stock Purchase Plans.
In order to reward its employees for the results obtained in 2005 and 2006, AXA implemented a worldwide program in order to grant free shares to all its employees, called “AXA Miles”.
Shareholders’ Meeting of May 14, 2007, the Management Board granted on July 1st, 2007, 50 AXA shares to each employee of the AXA Group, with the exception of Management Board and
In force for a period of three years starting from August 5, 2010, this agreement is renewable automatically for successive periods of one year there after, unless one of the two parties decides to terminate the agreement earlier, in which case the terminating party is required to give three month notice prior to the next renewal date.
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was provided to us, to inform you, the shareholders, of the main features of th e agreements of which we have been informed. It is not our responsibility to express an opinion on the use or merits of such agreements. Pursuant to Article R.225-31 of the French Commercial Code, you are asked to form an opinion on the relevance of such agreements for the purpose of approving them.
We performed our work in accordance with the standards of our profession applicable in France. These standards consisted in the verifi cation of the consistency of the information we received with the basis documentation from which they are extracted.
■ the Agreement provides that, in accordance with R egulation n°2004-01 of May 4, 2004 of the Comité de la Réglementation
Comptable (French Accounting Regulation Committee), the contribution was realized at the carrying value for a total amount of €5.26 billion. The remuneration of the contribution was calculated based on the net book values of the contributed shares and on the net book value of AXA ASIA, in accordance with the exemption provided for in the administrative instruction BOI 4-I-1-05 n°123; ■ AXA was awarded 469,866,968 new shares of AXA ASIA with a par value of €11.20, as compensation for the above-mentioned shareholdings contribution.
In accordance with Article L.225-30 of the French Commercial Code, we were advised of the following commitments and regulated agreements, approved during previous fi scal years, which remained in force in 2011 .
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; ■ 50% of the average gross compensation of the past 5 years preceding the retirement date, if this average is inferior to 8 annual
The Supervisory Board was concerned that the decision of Mr. Henri de Castries to renounce his employment contract, in accordance with the AFEP/MEDEF recommendations, would not jeopardize the continuity of his accrued and future social benefi ts. Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized the grant to Mr. Henri de Castries of a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the AFEP/MEDEF
recommendations and the applicable laws and regulations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies of 1993 and which was previously applicable to Mr. Henri de Castries as employee.
With Mr. Denis Duverne Nature, purpose, terms and conditions: On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Denis Duverne to his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management
The Supervisory Board was concerned that the decision of Mr. Denis Duverne to renounce his employment contract, in accordance with the AFEP/MEDEF recommendations, would not jeopardize the continuity of his accrued and future social benefi ts. Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Denis Duverne will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance;
■ the Supervisory Board authorized the grant to Mr. Denis Duverne of a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the AFEP/MEDEF
These commitments are in force upon the effective renunciation by Mr. Denis Duverne to his employment contract, i.e. on
We were also advised of the performance, during the fi scal year ended December 31, 2011, of the following agreements and commitments which were previously approved by the Shareholders’ Meeting of April 27, 2011 after review of the Statutory Auditors’
over-the-counter market and are listed on the OTC QX platform under the symbol AXAHY.
3.2 RISK FACTORS 185 3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND RISK FACTORS 205
Group’s principal business activities of insurance and asset management are subject to comprehensive regulation and supervision in each of the various jurisdictions where the
Group operates. AXA SA, the ultimate parent holding company of the AXA Group, is also subject to extensive regulation as a result of its listing on Euronext Paris and its interest in numerous regulated insurance and asset management subsidiaries. Given that the AXA Group is headquartered in
Since 2009, when 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 Group does business have considered or enacted major, and in some cases transformational, changes to the way fi nancial institutions are regulated.
Wall Street Reform and Consumer Protection Act represents a fundamental change to the US fi nancial regulatory landscape and, while directly impacting US fi nancial institutions, may also have a substantial impact on large non-US fi nancial institutions such as AXA and its US affi liates. In addition, while many international reform initiatives revolve around common themes and attempts are being made to coordinate and harmonize these reforms internationally, M anagement believes that the multitude of reform initiatives under consideration may ultimately result in the enactment of a series of technically inconsistent measures across the various jurisdictions where the Group does business, with broad potential implications for the Group and its business.
Act (the “Dodd-Frank Act”or “Dodd-Frank”) continues to have a signifi cant impact on the US fi nancial regulatory landscape.
The full scope of the regulatory changes imposed by the Dodd-
Act is on US fi nancial institutions, many of its provisions could signifi cantly affect non-US companies, with fi nancial operations in the United States, such as AXA. Certain changes that could potentially have a meaningful impact on non-US institutions such as AXA include, but are by no means limited to: ■ the newly established Financial Stability Oversight Council
( “FSOC”) may, among other powers: • designate non-US non-bank fi nancial companies, including possibly AXA, as “systemically important” and therefore subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”), as well as enhanced prudential standards, which may include stress testing, and
• make recommendations to the Federal Reserve regarding the establishment of the supervisory requirements and prudential standards applicable to “systematically important” entities and activities and work with all primary fi nancial regulatory agencies (including state insurance regulators) to establish regulations, as necessary, in order to address fi nancial stability concerns; ■ a new resolution procedure for large fi nancial companies; ■ imposition of comprehensive regulation of the over the counter derivatives market (including new margin and capital requirements on market participants recently imposed by the Commodity Future Trading Commission ( “CFTC”), and which may be imposed by the Securities and Exchange
Commission ( “SEC”) which could substantially increase the cost of hedging and related operations); ■ the Volcker Rule, which will potentially limit in important respects the ability of US and non-US “banking entities”
Consumer Financial Protection, responsible for implementing, examining and enforcing compliance with federal consumer fi nancial laws, many of which are strengthened. Dodd-Frank also facilitates sharing of information between the SEC and US
• enhanced powers of the AMF, the French fi nancial markets authority,
• the tighter regulation of short selling and prohibition of naked short selling,
• enhanced corporate governance standards, including the creation of new b oard c ommittees or by additional responsibilities of existing c ommittees, in particular with respect to supervising risks within fi nancial institutions, and to specifi cally identify and address fi nancial incentives that may lead to “excessive” risk taking by an institution.
Potential areas of reform in other jurisdictions where the Group operates
Management believes that ongoing reforms in other jurisdictions where the Group operates are likely to involve regulatory and legislative changes that will revolve around areas and themes similar to those that have already been addressed by the
• proposals to establish new regulatory or judicial “resolution authorities” designed to stabilize, merge, wind-up/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, (2) fi nancial transactions (e.g. the “Tobin tax”), and/or (3) bonuses or other executive compensation in excess of defi ned limits,
• 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 legislative initiatives designed to “cure” perceived excessive risk taking and misaligned fi nancial incentives: • increased responsibilities of b oards and b oard c ommittees to specifi cally identify and address fi nancial incentives that may lead to “excessive” risk taking by an institution with broad potential implications for fi duciary duties and liabilities of directors,
• increased restrictions on, and new disclosure requirements with respect to, off-balance sheet arrangements,
Management believes that 2012 is likely to see signifi cant additional regulation in some or all of these areas, among others. In addition, during 2012, M anagement believes that
US and European authorities are likely to designate certain companies as “systemically important”. Certain national authorities have already done so and AXA Belgium has been designated systemically important by the Belgian authorities.
The Group will continue to monitor the evolution of these initiatives and their potential impact on its business closely over the coming months.
deferral periods, and performance criteria for vesting of longterm awards) that are designed to ensure an appropriate alignment of interests between (i) Executive management and certain employees (such as traders) who can have a potentially signifi cant impact on the nature and duration of risks incurred,
Group has aligned its global executive compensation practices with these standards and principles and conducts regular reviews of its compensation practices and policies in light of these standards as well as applicable legal and regulatory requirements. The uneven application of these principles and standards to the different actors in the fi nancial sector (e.g.
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’
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared
Rating agencies also take into account the Company’s consolidated solvency margin and the regulatory capital position of its insurance subsidiaries in assessing its fi nancial strength and credit ratings. Rating agencies may make changes to their internal models from time to time that may increase or decrease the amount of capital the Company must hold in order to maintain its current ratings.
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 effect on our business, liquidity, credit ratings, result of operations and fi nancial position”.
(“UK”), Ireland and Belgium through free-standing subsidiaries that are subject to a comprehensive regulatory regime based on the European Union insurance directives on life insurance and insurance other than life insurance. These directives have been implemented in France, Germany, UK and other
Union may do business directly or through branches in all other jurisdictions of the European Union without being subject to additional licensing requirements in the other jurisdictions.
The European Union has also adopted various directives concerning solvency margin requirements for insurers and insurance groups. Certain of these solvency-related measures, as well as additional legislative measures affecting other aspects of insurance company operations in Europe, are described below : ■ a 1998 European Union 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 suffi cient solvency to cover all of the Group’s insurance liabilities, inform the French insurance regulatory authorities annually of certain intra-group transactions, and calculate on a consolidated basis the capital needed to meet the respective solvency requirements of the Group’s insurance subsidiaries. Similar solvency requirements must be fulfi lled by intermediate holding companies that own AXA
Member States, has undertaken a fundamental review of the regulatory capital regime of the insurance industry
(the “Solvency II” project) that has updated the existing life, non-life, reinsurance and insurance group directives.
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
There is a continuing risk that the effect of the fi nal measures adopted could depart from the initial objective of the
Economic Area ( “EEA”) is currently formally required to begin implementing Solvency II by October 31, 2012, discussions are ongoing to postpone the Solvency II implementation date
October 31, 2012, the current Solvency II framework may need to be applied effective as of October 31, 2012.
Implementation of Solvency II by October 31, 2012 may be further complicated by the fact that Level 2 measures and
Level 3 guidance are not expected to be fi nalized by such date and the fact that it is unlikely that all member states will have their regulatory framework in place at that time.
ACP are on-going and, consequently, there is a risk (especially given the uncertainty discussed in the preceding paragraph regarding the fi nal scope and timing of the implementation of Solvency II) that ACP may not approve these models on a timely basis (or otherwise) and/or may impose conditions or require modifi cations which would have multiple adverse consequences for the Group including increasing the levels of required capital.
(“ FINMA”) issued a new directive concerning solvency margin requirements for insurers and insurance groups operating in
Solvency Test” (“ SST”) is designed on a risk-based capital approach and is in large parts equivalent to the European
Solvency II framework. After a transition period of fi ve years, the new capital requirements resulting from the SST have been legally binding since January 1, 2011. The internal model approval process with FINMA for AXA Assurance’s
Commission proposed the revision of IMD in 2010; ■ a 2004 European Union directive, implemented in French
I nstruments and I nvestment Services ( “MiFID”). This directive establishes a legal framework for investment services and is designed to promote two major objectives: (i) protecting investors, and (ii) promoting more integrated, transparent and effi cient fi nancial markets by harmonizing requirements of European member states with respect to fi nancial instruments, intermediaries and related matters. The
organisation. The only defence is if the corporate has put in place “adequate procedures” designed to stop incidences of corruption. The meaning of “adequate procedures” is not defi ned in the Act, though it is now explained in the UK
“failure to prevent bribery” offence applies to any corporate or partnership (wherever it is registered, incorporated or conducts its main activities) as long as it carries on a business, or part of a business, in the UK. In addition, corporates can be guilty of an offence if an “associated person” carries out an act of bribery in connection with the Company’s business whether in the UK or elsewhere. A person will be “associated”
In the United States, the insurance business regulation remains principally at the state level, with AXA’s insurance operations being subject to regulation and supervision by various states and territories. Within the US, the methods of regulation vary between the different states but generally have their source in statutes that delegate regulatory and supervisory powers to a state insurance commissioner. While the extent of regulation varies by jurisdiction, most jurisdictions have laws and regulations governing (i) approval of policy forms and rates,
(ii) sales practices and business conduct, (iii) the standards of solvency that must be met and maintained (including riskbased capital measurements), (iv) the establishment and levels of reserves, (v) the licensing of insurers and their agents, (vi)
sales practices by agents, (vii) the nature of and limitations on permitted investments, (viii) restrictions on the size of risks which may be insured under a single policy, (ix) deposits of securities for the benefi t of policyholders, (x) methods of accounting, (xi) periodic examinations of the affairs of insurance companies, and (xii) the form and content of reports of fi nancial condition and results of operations to be fi led. In addition, many federal laws currently affect the insurance business in a variety of ways, including the Federal Fair Credit Reporting
Title V of the Act establishes a Federal Insurance Offi ce (“FIO”)
(including identifying gaps in regulation that could contribute to a systemic crisis), recommending to the FSOC the designation of any insurer and its affi liates (potentially including the Group and its affi liates) as a non-bank fi nancial company subject to oversight by the Federal Reserve (including the administration of stress testing on capital), assisting the Treasury Secretary in negotiating “covered agreements” with non-US governments or regulatory authorities, and, with respect to state insurance laws and regulation, determining whether such state insurance measures are pre-empted by such covered agreements. In addition, the FIO will be empowered to request and collect data (including fi nancial data) on and from the insurance industry and insurers (including reinsurers) and their affi liates.
may reasonably require. In addition, the FIO’s approval will be required to subject an insurer or a company whose largest US
subsidiary is an insurer to resolution mechanisms described above. Dodd-Frank also reforms the regulation of the nonadmitted property/casualty insurance market (commonly referred to as excess and surplus lines) and the reinsurance markets, including the ability of non-domiciliary state insurance regulators to deny credit for reinsurance when recognized by the ceding insurer’s domiciliary state regulator.
States are also subject to risk-based capital (“RBC”) guidelines, which provide a method of measuring the adjusted capital
Under US tax legislation passed in 2010, a 30% withholding tax will be imposed on “withholdable payments” made to non-
generally include, among other items, payments of US-source interest and dividends and the gross proceeds from the sale or other disposition of property that may produce US-source interest and dividends.
The IRS has issued guidance stating that this withholding tax is expected to take effect on a “phased” schedule, starting in
The Group intends to enter into such agreements as the IRS
may require (and to satisfy any requirements or other guidance promulgated) to the extent necessary to avoid the imposition of a withholding tax. However, certain payments to the Group may be subject to US withholding tax under the legislation if the Group cannot enter into such agreements or satisfy the requirements hereunder. This could occur, including, as a result of local laws or contracts prohibiting information sharing with the IRS or prohibiting withholding on certain payments to accountholders, policyholders, annuitants or other investors, or as a result of the failure of accountholders, policyholders, annuitants or other investors to provide requested information.
European insurers signed a Memorandum of Understanding with certain US insurance regulators and non-governmental
(“ICHEIC”). ICHEIC conducted an investigatory process to determine the status of life insurance policies issued to
ICHEIC process, AXA benefi ts from a statement of interest issued by the US federal government which provides that
Group received a request from the New York State Department of Financial Services, Life Bureau, formerly the New York State
The other jurisdictions in which AXA operates, including those in the Asia-Pacifi c Region, also have comprehensive regulatory regimes with which AXA must comply. In general, insurance laws and regulations grant supervisory authorities broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations or to revoke an insurer’s license to operate.
Japanese legislature adopted a change in inheritance tax treatment that reduced the advantages and attractiveness of certain life insurance products and in 2008, the Government of Japan also enacted a new Insurance Law which became effective in 2010. The main intent of the law is to further protect policyholders’ interest and to increase transparency for the policyholders. AXA Japan is implementing measures to comply with the law and to minimize the potential adverse impact on its business. The Japanese solvency regime is also being revised. The Financial Services Agency released a draft of the revised solvency rules in late 2009. The revision is intended to be part of a roadmap to an economic solvency margin and the new solvency margin ratio was published by insurers from the fi scal year ending March 2011 and is to become effective from
investment returns, (ii) risk characteristics of invested assets in various funds, (iii) suitability of investments for client investment objectives and risk tolerance, as well as (iv) 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.
Act of 1940 (the “Investment Company Act”) and the shares of most of these funds are qualifi ed for sale in all states in the United States and the District of Columbia, except for US
funds offered only to residents of a particular state. Certain subsidiaries of Alliance Bernstein and AXA Financial, Inc. are also registered with the SEC as transfer agents and brokerdealers that are subject to minimum net capital requirements.
Asset management services rendered by AllianceBernstein and/or AXA Investment Managers to the AXA Group insurance companies (and other types of transactions between these companies), are subject to various insurance laws and regulations in the various jurisdictions where these insurance companies’ clients are domiciled. These regulations generally require that the terms of transactions between the investment manager and its client be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to unaffi liated clients for similar services or, in certain cases, which include ancillary service agreements, based on cost reimbursement.
Euronext Paris, the Company must comply with the relevant rules for listing and trading on this exchange and with a number of other laws and regulations including French securities laws administered and enforced by the AMF in France. These listing rules, other laws and regulations govern a wide variety of matters including (i) timely and accurate disclosure of information to investors, (ii) presentation of fi nancial information in accordance with International Financial Reporting Standards (the“IFRS”),
Accounting Standard n°39 (the “IAS 39”). In addition, the adoption of IFRS 9 published by the International Accounting
Standards. These modifi cations include, among others, the following: ■ fi nancial assets and liabilities held by the AXA Group are recognised and measured under IAS 39 which is currently the subject of major potential amendments through its replacement by IFRS 9. In December 2011, the IASB
postponed the mandatory application date of IFRS 9 from 2013 to 2015. However early application of IFRS 9 phase 1 is permitted (depending on endorsement by the European
IFRS 10, the new standard on consolidation based on a control approach, published in May 2011 and applicable from
In addition to these matters, a number of recent legislative and regulatory initiatives in France, at the European Union 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
European Union and facilitate the development of a more open and accessible European market for international companies like AXA. For instance, the European takeover directive, implemented into French law in 2006, provides a more uniform takeover regime within the European Union, and the European directive relating to cross-border mergers, which was implemented into French law in 2008, considerably simplifi es the regulatory framework applicable to these mergers.
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 European jurisdictions where it operates; ■ in France and in certain other European Union jurisdictions, there are continuing discussions concerning implementation of a “class action” litigation mechanism that would allow groups of plaintiffs to bring collective actions. The scope and form of any such mechanism, as well as the timing of introduction, are currently under discussion.
Company. The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, fi nancial condition, results of operations or cash fl ows.
Report, the Group’s risk management activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Section 3.2 or the losses that may be incurred in connection with these risks.
sovereign debt) has continued to experience increased price volatility, credit downgrade events, increased probability of default while global currency markets, particularly Euro foreign exchange rates against other major currencies, have become increasingly volatile. Global equity markets, while improved from 2008, continue to be volatile with very signifi cant volatility experienced during the second half of 2011 and many major markets ending the year still down signifi cantly from their peak.
Our ability to make a profi t on insurance products and investment products, including fi xed and guaranteed products, depends in part on the returns on investments supporting our obligations under these products, and the value of specifi c investments may fl uctuate substantially depending on the foregoing conditions. Certain types of insurance and investment products that we offer expose us to risks associated with fl uctuations in fi nancial markets, including certain types of interest sensitive or variable products such as guaranteed annuities or variable annuities, which have crediting or other guaranteed rates or guaranteed minimum benefi ts not necessarily related to prevailing market interest rates or investment returns on underlying assets. Although we use hedging techniques to manage our exposure under certain of these guarantees, not all risks can be effectively hedged and volatility in the fi nancial markets, combined with unanticipated policyholder behavior, may increase the cost of these hedges and/or negatively affect our ability to hedge certain of these risks, which may adversely affect our profi tability. For further risks related to our hedging techniques, see “Risks relating to the structure of our Group, the scope and nature of our business, and the products we offer – Our hedging programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition.”
Factors such as consumer spending, business investment, government spending, regulation, the volatility and strength of the capital markets, and infl ation all affect the business and economic environment and, ultimately, the amount and profi tability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of lapses or surrenders on certain types of policies, lower surrender rates than anticipated on other types of products, such as certain variable annuities, with in-the-money guarantees 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.
A sovereign debt default or restructuring by a Eurozone or other government (or government-backed) issuer could have potentially signifi cant negative consequences both for holders of such debt and for the stability of the broader fi nancial markets and sector. Any of these events, depending on its precise nature and magnitude, could have a potentially material adverse effect on the Group’s results of operations or fi nancial condition.
These concerns impacted fi nancial markets and resulted in high and volatile bond yields on the sovereign debt of many
Union governments’ fi nancial support programs and worries about sovereign fi nances intensifi ed during the second half of 2011 and persist and, notwithstanding increased purchases of sovereign bonds by the European Central Bank and measures taken by other central banks to enhance global liquidity. Market concerns over the direct and indirect exposure of European banks and insurers to the European Union sovereign debt further resulted in a widening of credit spreads and increased costs of funding for some European fi nancial institutions. In
proposed steps are subject to fi nal agreement and ratifi cation by the European Union member states that are party to such agreement and thus the implementation of such steps in their currently-contemplated form remains uncertain. Even if such measures are implemented, there is no guarantee that they will ultimately and fi nally resolve uncertainties regarding the ability of Eurozone states to continue to service their sovereign debt obligations. Further, even if such long-term structural adjustments are ultimately implemented, the future of the Euro in its current form, and with its current membership, remains uncertain.
European states and/or the replacement of the Euro by one or more successor currencies, could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these European countries and the fi nancial condition of
European fi nancial institutions, including AXA. Since June 2011, as discussed further below, a number of European sovereigns and several major European fi nancial institutions (including
AXA) were downgraded by credit rating agencies in light of the continuing uncertainty stemming from the European debt crisis and future of the Euro. In the event of a default or similar event by sovereign issuer, some fi nancial institutions may suffer signifi cant losses for which they would require additional capital, which may not be available, and could also suffer credit rating downgrades and/or solvency concerns which may, in turn, negatively impact public perceptions about the stability and creditworthiness of fi nancial institutions and the fi nancial sector generally as well as counterparty relationships between fi nancial institutions. Market and economic disruptions stemming from any such event may further dampen consumer confi dence levels and spending, negatively impact the availability of credit and have potentially signifi cant negative consequences for insurers and other fi nancial institutions, including AXA. There can be no assurance that the market disruptions in Europe, including the increased cost of funding for certain government and fi nancial institutions, will not spread, nor can there be any assurance that future assistance packages will be available or, even if provided, will be suffi cient to stabilize the affected countries and markets in Europe or elsewhere. After a period of uncertainty as to whether US lawmakers would be able to reach the political consensus needed to raise the federal debt ceiling, and notwithstanding that US lawmakers passed legislation to raise the federal debt ceiling before the US
Standard & Poor’s Ratings Group, Inc. lowered its long term sovereign credit rating on the United States of America from
Austria from AAA to AA+ . They also downgraded seven other countries by one notch and Cyprus, Italy, Portugal and Spain by two notches. On February 14 , 2012, Moody’s Investor
Italy and Portugal and assigned a negative outlook to the UK,
European peripheral countries at the end of 2011, but said it would not downgrade France in 2012. These rating actions could negatively affect borrowing costs of the affected entities, increase overall economic volatility, and affect the operation of our businesses.
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
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 shortterm 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
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. On December 31, 2011 the Company’s consolidated solvency margin was 188%
In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or, in extreme cases, putting a company into rehabilitation or insolvency proceedings. A failure of any of the
through loans, capital contributions or other mechanisms including approximately €2.4 billion loaned to its US subsidiary
AXA Financial, Inc. that was used to enhance the capitalization of AXA Financial’s insurance subsidiaries. The Company’s ability to effi ciently deploy its capital resources and to inject capital, as needed from time to time, in its operating insurance subsidiaries is critical to ensuring that these subsidiaries remain appropriately capitalized at all times. Regulatory restrictions that inhibit the Company’s ability to freely move excess capital among its subsidiaries or which otherwise restrict fungibility of the Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the solvency position of the Company’s operating insurance subsidiaries which may have a consequent negative impact on the Company’s reputation and the perception of its fi nancial strength.
There are continuing uncertainties around the evolution and fi nal implementation measures that will be adopted under the Solvency II R egime which could have potentially adverse impacts on the Group
Group may be permitted to make use of its internal economic capital models as a basis for calculation of its capital needs and solvency position if these models are approved by the ACP.
(the Level I Framework Directive) setting forth various policy principles and guidelines that acted as a framework for the development of the Solvency II R egime. The Commission is expected to publish the Level 2 implementing measures in 2012 (for an adoption by the end of 2012) and implementation of Solvency II by the European Union Member States is planned by January 1st, 2014. Solvency II, if implemented, will effect a full revision of the insurance industry’s solvency framework and prudential regime and will impose Group level supervision mechanisms.
While AXA is actively participating in the various consultation processes through its involvement in industry bodies and trade associations, there is continuing risk that the effect of the fi nal measures adopted could depart from the initial objective of the
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 January 2012,
Standard & Poor’s affi rmed the AA- fi nancial strength rating on the core operating entities of the AXA Group, and the A
Standard & Poor’s will continue to closely monitor these ratings and indicates an increased risk that Standard & Poor’s could lower AXA’s ratings over the next 12 to 24 months, in particular in case of continued challenges due to the fi nancial market conditions and economic prospects of the Eurozone countries.
AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, assigning a negative outlook. The negative outlook refl ects Moody’s view that (i)
fi nancial risks stemming from the operating and investment exposure to weakened European sovereigns and banks have increased, as well as (ii) Moody’s expectations of continued weak economic growth in certain of AXA’s key markets. In
November 2011, Fitch Ratings reaffi rmed the AA- fi nancial strength ratings of AXA’s principal insurance subsidiaries with a stable outlook. A downgrade or the potential for a downgrade of our ratings, particularly below the AA range, could have a variety of negative impacts on us including (i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our cost of obtaining reinsurance,
Market conditions, changes in accounting policy and/or other factors could adversely affect the carrying value of our goodwill, cause us to accelerate amortization of our DAC and VBI and/or to reduce deferred tax assets and deferred policyholders participation assets which could have a material adverse effect on our consolidated results of operations and fi nancial statements
to the 2011 c onsolidated fi nancial statements included in this
estate market, operational failure or other reasons, including rumors about potential defaults by one or more of these parties (or regarding the fi nancial services industry generally).
(such as clearing agencies, clearing houses, banks, securities fi rms and exchanges) with whom we interact on a daily basis and the fi nancial instruments of governments in which we invest to support long-term liabilities. For risks relating to defaults by reinsurers and retrocessionaires to which we have transferred part of our risks, see “Reinsurance may not be adequate to protect us against losses and we may incur losses due to the inability of our reinsurers to meet their obligations”.
Our accounting principles and policy with respect to valuation of our investments are set forth in Note 9.9 “Financial Assets
Recognized at Fair Value” in the 2011 consolidated fi nancial statements included in this Annual Report. The determination of fair values in the absence of quoted market prices is based on a variety of factors including those described in Note 9.9.
Certain of our investment assets, for which there is no active trading market or other observable market data, are valued using models and methodologies that involve estimates, assumptions and signifi cant management judgment. During periods of market disruption of the type we have experienced over the past four years, an increasing portion of our investment assets may be valued using these models and methodologies as a result of less frequent trading or less observable market data with respect to certain asset classes that were previously actively traded in liquid markets. There can be no assurance that our valuations on the basis of these models and methodologies represent the price for which a security may ultimately be sold or for which it could be sold at any specifi c point in time. Use of different models, methodologies and/or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse effect on our results of operations and fi nancial condition. In addition, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported in our consolidated fi nancial statements. Decreases in value may have a material adverse effect on our results of operations and fi nancial position.
Conversely, in periods of increasing interest rates, surrenders of life insurance policies and fi xed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns. Obtaining cash to satisfy these obligations may require us to liquidate fi xed maturity investments at a time when market prices for those assets are depressed because of increases in interest rates. This may result in realized investment losses. Regardless of whether we realize an investment loss, these cash payments would result in a decrease in total invested assets, and may decrease our net income. Accelerated withdrawals may also cause us to accelerate amortization of deferred policy acquisition costs, which would also reduce our net income.
In addition, in the context of certain Property & Casualty risks underwritten by our insurance subsidiaries (particularly
We expect that dividends received from subsidiaries and other sources of funding available to us will continue to cover our operating expenses, including (i) interest payments on our outstanding fi nancing arrangements and (ii) dividend payments with respect to our outstanding ordinary shares. We expect that future acquisitions and strategic investments will be funded from available cash fl ow remaining after the payment of dividends and operating expenses (including interest expenses), cash on hand from previous securities offerings, proceeds of future offerings of securities, and proceeds from the sale of non-core assets. Certain of our signifi cant subsidiaries, including AXA France Assurance, AXA Financial,
Our hedging programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition
We use derivatives (including amongst others equity futures, treasury bond futures, interest rates swaps and swaptions, equity options and variance swaps) to hedge certain, but not all, risks under guarantees provided to our clients.
(“GMIB”) and/or Withdrawal for Life Benefi ts (“GMWB”), available under our Accumulator series of Variable Annuity products (the “Accumulator guarantees”).
AXA Equitable also incurred signifi cant hedging losses on its legacy book of Accumulator business principally due to a combination of fi nancial market volatility since August, a drop in
US interest rates following the downgrade of the US sovereign rating, and historically low surrender rates.
The establishment of insurance reserves, including the impact of minimum guarantees which are contained within certain of our
of liability, but instead represent estimates, generally using actuarial projection techniques at a given accounting date.
The process of estimating the insurance claims reserves is based on the most current information available at the time the reserves are originally established. However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as: ■ development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience; ■ changes arising due to the time lag between the occurrence of the insured event, notifi cation of the claim (from the insured party, a third party or a ceding company) and the fi nal settlement (payment) of the claim, primarily attributable to long-tail casualty claims that may take several years to settle due to the size and nature of the claim, and the occurrence of large natural catastrophes late in the fi nancial year for which limited information may be available at year-end; ■ judicial trends; ■ expenses incurred in resolving claims; ■ regulatory and legislative changes; ■ changes in economic conditions, including infl ation and foreign currency fl uctuations; and
Many of these items are not directly quantifi able, particularly on a prospective basis. As a result, actual losses may signifi cantly differ from the original gross reserves established.
The failure or inadequacy of our information systems could adversely affect our business
AXA’s direct competitors receiving substantial capital injections from government authorities. While many of these institutions continue to be controlled by government authorities or to benefi t from direct or indirect government support, others have been recapitalized by their governments and subsequently sold to our competitors or re-privatized through initial public offerings or similar mechanisms. This situation may negatively impact the competitive position of AXA in certain markets and adversely affect its results of operations and fi nancial condition.
The fi nancial crisis of 2008-2009 gave rise to numerous legislative and regulatory initiatives (many of which focus on the fi nancial services industry) across many of the principal jurisdictions where the Group does business. These initiatives are described in Section 3.1 “Regulation”. While many of these initiatives revolve around common themes and attempts are being made to coordinate and harmonize these reforms internationally, Management believes that the multitude of reform initiatives under consideration may ultimately result in the enactment of a series of technically inconsistent measures across the various jurisdictions where the Group does business,
While Management cannot predict with certainty at this time whether or when these future legislative or regulatory proposals may ultimately be enacted and the fi nal form they will take, certain of these proposals, if enacted, could have a material adverse impact on our business activities, results of operations and fi nancial condition.
(both class actions and individual lawsuits) and involved in various regulatory investigations and examinations and may be involved in more in the future. These actions arise in various contexts including in connection with our activities as an insurer, securities issuer, employer, investment advisor, investor and taxpayer. Any one or a combination of these lawsuits or regulatory investigations could have a material adverse effect on our fi nancial condition or results of operations or cause us signifi cant reputational harm, which could seriously harm our business. Certain of these lawsuits and investigations seek signifi cant or unspecifi ed amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these proceedings have substantial powers over the conduct and operations of our business. Due to the nature of certain of these lawsuits and investigations, we cannot estimate the potential loss or predict with any certainty the potential impact of these suits or investigations on our business, fi nancial condition or results of operations.
From time to time, governments in the jurisdictions in which we operate, have considered or implemented proposals for changes in tax law that could adversely affect the attractiveness of the insurance, asset management and other products we offer including those described in Section 3.1 “Regulation” of this Annual Report.
In addition, changes in tax laws or regulations or an operating performance below currently anticipated levels may lead to an impairment of deferred tax assets, in which case we could be obligated to write off certain tax assets. Tax assets may also need to be written down if certain assumptions of profi tability prove to be incorrect, as losses incurred for longer than expected will make it more unlikely that we would be able to use our tax assets. Any such changes could be detrimental to our results of operations, fi nancial condition and liquidity, and could impact the costs and profi tability of our transactions.
US fi nancial institutions that fail to comply, this withholding will generally apply without regard to whether the benefi cial owner of a withholdable payment is a US person or would otherwise be entitled to an exemption from US federal withholding tax.
IRS may require (and to satisfy any requirements pursuant to such agreements and any related Treasury regulations or other guidance that has been or may be promulgated) to the extent necessary to avoid the imposition of a withholding tax on payments made to it. However, if the Group cannot enter into such agreements or satisfy the requirements thereunder
Management cannot predict with any certainty at this time the potential impact of these proposed changes (or of other potential future modifi cations to the Standards) given the ongoing nature of the discussions at the IASB; however, any signifi cant modifi cations to the Standards may adversely impact the Company’s results of operations and fi nancial condition.
We cannot assess with any degree of certainty the future effects on our businesses of terrorist attacks, wars, civil unrest and other geopolitical events that have occurred and may occur in the future throughout the world.
Our general account investment portfolios include investments in industries that we believe may be adversely affected by such events, including airlines, lodging, shipping and entertainment companies and non-life insurance companies. The effect of these events on the valuation of these investments is uncertain and could lead to impairments due to lasting declines in the value of investments. The cost, and possibly, the availability, in the future, of reinsurance coverage against terrorist attacks for our various insurance operations is uncertain. In addition, the rating agencies could re-examine the ratings affecting the insurance industry generally, including our companies.
We offer our products and services in Europe, North America, the Asia-Pacifi c Region, the Middle East and Africa through wholly-owned and majority-owned subsidiaries, joint ventures, companies in which we hold non-controlling equity stakes, agents and independent contractors. Our international operations expose us to different local political and regulatory, business, and fi nancial risks and challenges which may affect the demand for our products and services, the value of our investment portfolios, the required levels of capital and surplus, and the credit quality of local counterparties. These risks include, for example, political, social or economic instability in countries in which we operate or we transfer part of our business processes, including the risk of nationalization, expropriation, price controls, capital controls, fl uctuations in foreign currency exchange rates, credit risks of our local borrowers and counterparties, lack of local business experience in certain markets, risks associated with exposure to insurance industry insolvencies through policyholder guarantee funds or similar mechanisms set up in foreign markets and, in certain cases, risks associated with the potential incompatibility with foreign
partners, especially in countries in which we are conducting business through entities we do not control. Our expansion in emerging markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, upon our ability to succeed in different economic, social and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in certain locations where we do business.
We increasingly operate in markets with less developed judiciary and dispute resolution systems; in the event of disputes in these markets, the quality and the effectiveness of such systems could have an adverse effect on our operations and results of operations
In the less developed markets in which we operate, judiciary and dispute resolution systems may be less developed. As a result in case of a breach of contract, regulatory enforcement action or other dispute, we may have diffi culties in making and enforcing claims against contractual counterparties and, if claims are made against us, we might encounter diffi culties in defending such claims. If we become party to legal or regulatory proceedings in a market with an insuffi ciently developed judiciary system, it could have an adverse effect on our operations and results of operations.
(1) Since the delisting of AXA’s American Depositary Shares (“ADS”) from the New York Stock Exchange (“NYSE”) on March 26, 2010, AXA’s
US dollars may affect the value of AXA ADS . Specifi cally, as the relative value of the Euro against the US dollar declines, each of the following values will also decline: ■ the US dollar equivalent of the Euro trading price of AXA
On March 26, 2010, trading in AXA ADS on the New York Stock
could adversely affect the price of the AXA ADS relative to that of AXA ordinary shares on Euronext Paris, and could compel holders wanting to sell AXA ADS to cancel them in exchange for ordinary shares that are tradeable on Euronext Paris.
NYSE and AXA’s fi nancial reporting is no longer subject to
remains committed to maintaining high levels of governance and transparency consistent with international best practices and intends to continue to publish periodic fi nancial and corporate information in the English language on its website but these practices may not be consistent in all respects with the NYSE and SEC standards to which AXA was previously subject.
The holders of AXA ADS may not be able to exercise their voting rights due to delays in notifi cation to and by the depositary
Holders of AXA ADS will have limited recourse if AXA or the depositary fails to meet its obligations under the Deposit Agreement and they wish to involve AXA or the depositary in a legal proceeding
These provisions of the Deposit Agreement will limit the ability of holders of AXA ADS to obtain recourse if AXA or the depositary fails to meet their obligations under the Deposit
Agreement or if they wish to involve AXA or the depositary in a legal proceeding.
The holders of AXA ADS in the United States may not be able to participate in offerings of rights, warrants or similar securities to holders of our ordinary shares on the same terms and conditions as holders of our ordinary shares
Therefore, there can be no assurance that our ADS holders and ordinary shareholders in the US will be able to participate in such an offering, and our deregistration increases the likelihood that any such offering in the future will not be extended to the
US holders of our securities, other than in transactions exempt from the registration requirements of the Securities Act.
Our ADS and ordinary share price could be volatile and could drop unexpectedly and you may not be able to sell your ADS or ordinary shares at or above the price you paid
ADS or ordinary shares at or above the price which you paid for them. In particular, the following factors, in addition to other risk factors described in this Section, may have a signifi cant impact on the market price of our ADS or ordinary shares: ■ investor perception of our Company, including actual or anticipated variations in our revenues, earnings or other operating results; ■ announcement of intended acquisitions, disposals or fi nancings or speculations of such acquisitions, disposals or fi nancings; ■ changes in our dividend policy, which could result from changes in our cash fl ow and capital position; ■ sales of blocks of our shares by signifi cant shareholders; ■ hedging activities on our shares; ■ a downgrade of our credit or fi nancial strength ratings, including placement on credit watch, or rumors of such downgrades; ■ actual or potential litigation involving us or the insurance or asset management industries generally; ■ changes in fi nancial estimates and recommendations by securities research analysts; ■ fl uctuations in foreign exchange rates and interest rates; ■ the performance of other companies in the fi nancial services’
3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND RISK FACTORS
RISK GOVERNANCE WITHIN AXA In order to manage effi ciently local and global risks, the decision process within the risk governance structure is divided into 5 levels: ■ the Management Committee defi nes business objectives and capital allocation with respect to investment return and risk.
It also defi nes the Group appetite for risks in terms of impact on its key fi nancial indicators. The Group Risk Appetite is endorsed by the Board of Directors with the Audit Committee considering the effectiveness of the Group’s internal control and risk management f rameworks supporting it . A report on the Company’s performance against the key fi nancial indicators is presented on a regular basis to the Group Audit
For Life insurance risks and for P&C insurance risks: • Global Business Lines dedicated Boards, chaired by the
Based on risk reports presented by GRM together with other central teams, including AXA Global P&C and AXA Global
Committee actions to manage risks; ■ the Group Chief Risk Offi cer heads GRM and reports to the
Directors; ■ local Chief Risk Offi cers head the local Risk Management teams within each operational entity and report both to a member of their Executive Committee (CEO/CFO) and to the
Audit, which performs, on a periodic basis, as part of its role, an assessment of Group’s risk and governance processes.
Risk Management is the main responsibility of GRM and supported by other central departments (DCFG, PBRC and
Committee; ■ defi ne and run the Group risk appetite process (framework, limits) and monitor the consistency between group and local frameworks; ■ implement Economic Capital measures and co-lead the validation of the Group’s internal model for Solvency II; ■ develop and deploy models/metrics to measure risks and monitor the profi tability of the business lines (please see the
Section “Insurance risk”); The GRM function is also reinforced by AXA Global P&C and
AXA Global Life, which advise and supports local entities in their reinsurance strategy (Property & Casualty; Life & Savings), and centralize the Group’s purchasing of reinsurance. Please refer to the Section “controlling exposure and insurance risk”
Within operational entities, local Risk Management teams are managed by local Chief Risk Offi cers, who report directly to a member of their Executive Committee (CEO/CFO) and to the Group CRO. The roles and responsibilities of local Risk
studies & asset allocation and reinsurance strategy; ■ coordinating pre-launch product approval procedures and regular pricing reviews after launch; ■ coordinating operational risk framework; ■ implementing risk appetite on all risks, with strengthened reporting, risk limits and decision processes; ■ performing the calculation of an internal capital model; ■ carrying out the risk reporting.
REGULATION, RISK FACTORS 3 3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND RISK FACTORS
■ a wide variety of risk management techniques are used to control and mitigate the market risks to which the AXA
Annuities’ guarantees; ■ reinsurance also offers solutions to mitigate certain risks; it is for instance used to de-risk part of the in-force GMIB
The breakdown of life insurance reserves by product type is as follows: ■ 19% at the end of 2011 (20% at the end of 2010) of the
AXA’s risk exposure. On these products, the underlying fi nancial market performance is mostly passed on to the policyholders. This category also includes products that may provide a stand-alone guarantee on invested capital in the event of death. Overall, they present only a limited market risk for the Group through reduction of shareholders’ value; ■ 10% at the end of 2011 (10% at the end of 2010) of the
• biometric risks (e.g. longevity/mortality) and policyholder behaviours on these products (notably lapses and annuity election rates), are regularly monitored. These risks are reviewed from time to time in case of structural deviations.
The hedging programmes embed dynamic policyholder behaviours to a range of possible market situations; ■ 15% at the end of 2011 (13% at the end of 2010) of the
• products that are not surrender-sensitive are usually backed by fi xed-income investments with maturities and interest rates generally suffi cient to cover guaranteed benefi ts, so as to reduce as much as possible the reinvestment risk,
TOTAL – PROPERTY & CASUALTY INSURANCE EXCLUDING INTERNATIONAL INSURANCE 48,879 50,261
For Property & Casualty insurance business, the fi nancial risk is borne directly by the shareholders. Long-tail activities, such as certain Third Party Liability lines, are sensitive to movements in fi nancial markets.