CERTAIN PRELIMINARY INFORMATION ABOUT THIS ANNUAL REPORT 1 Group profi le 4 Chairman and Chief Executive Offi cer’s messages 6
RISK FACTORS AND RISK MANAGEMENT 177 4.1 Risk factors 178 4.2 Internal control and risk management 190 4.3 Market risks 204 4.4 Credit risk 211 4.5 Liquidity risk 214 4.6 Insurance risks 215 4.7 Operational risk 219 4.8 Other material risks 220
CONSOLIDATED FINANCIAL STATEMENTS 223 5.1 Consolidated statement of fi nancial position 224 5.2 Consolidated statement of income 226 5.3 Consolidated statement of comprehensive income 227 5.4 Consolidated statement of changes in equity 228 5.5 Consolidated statement of cash fl ows 232 5.6 Notes to the Consolidated Financial Statements 234 5.7 Report of the Statutory Auditors on the consolidated fi nancial statements 370
SHARES, SHARE CAPITAL AND GENERAL INFORMATION 373 6.1 AXA shares 374 6.2 Share capital 375 6.3 General information 381
Appendix II Management’s annual evaluation of internal control over fi nancial reporting 429
Appendix III Statement of the person responsible for the Registration Document 432
Appendix VIII European Commission regulation (EC) n° 809/2004 of April 29, 2004 – Cross-reference table 463
This Registration Document includes (i) all the components of the Annual Financial Report (Rapport Financier Annuel)
(the relevant sections of this Registration Document corresponding to such required disclosures have been approved by AXA’s Board of Directors and are referred to in the cross-reference table on page 462 of this Registration Document
This Registration Document, the French version of which was filed with the French Autorité des marchés fi nanciers (“AMF”) on March 23, 2017, in accordance with the provisions of Article 212-13 of its General
Regulation (the “Registration Document”), may be used in support of a financial transaction if supplemented by a securities note approved by the AMF. This document has been prepared by the issuer, and its signatories are responsible for its content.
“AXA ordinary shares”. The principal trading market for AXA’s ordinary shares is Euronext Paris (Compartment A), which we refer to in this Annual Report as “Euronext Paris”.
Cautionary statement regarding forward-looking statements and the use of n on-GAAP fi nancial m easures
“ continue” , “ aims” , “ estimates” , “ projects” , “ believes” , “ intends” ,
“Risk factors and risk management” of this Annual Report for a description of certain important factors, risks and uncertainties that may affect AXA’s business and/or results of operations.
AXA assumes no obligation to update or revise any of these forward-looking statements, whether to refl ect new information, future events or circumstances or otherwise, except as required by applicable laws and regulations.
Annual Report refers to certain non-GAAP fi nancial measures, or alternative performance measures, used by Management in analyzing the Group’s operating trends, fi nancial performance and fi nancial position and providing investors with additional information that Management believes to be useful and relevant regarding the Group’s results. These non-GAAP financial measures generally have no standardized meaning and therefore may not be comparable to similarly labelled measures used by other companies. As a result, none of these non-GAAP fi nancial measures should be considered in isolation from, or as a substitute for, the Consolidated Financial Statements included in Part 5 –
A worldwide leader in insurance and asset management 1st global insurance brand (1)
(6 ) Direct business underlying earnings are split within geographies .
(8 ) Other: AXA Corporate Solutions Assurance, AXA Assistance, AXA Life
Architas, AXA Global P&C, AXA Liabilities Managers, Family Protect and Banking.
(9 ) EMEA-LATAM: Luxembourg, Russia (P&C and underlying earnings only), Poland, Czech Republic and Slovak Republic (L&S only), Greece,
2016 was a historic year for the AXA Group with the success of the Ambition AXA strategic plan and the retirement of
I am very honored by the confi dence that the Board has shown me and have been pleased to devote my time to my new role of non-executive Chairman, for over six months now .
The Board of Directors will continue to pay close attention to corporate responsibility matters as they contribute to sustainable economic development and to the interests of society as a whole.
AXA has also launched a major transformation to move from a payer of insurance indemnities to a partner of its customers.
Group employees for their commitment and to our stakeholders for putting their trust in AXA’s women and men every day and working with them to make our Group succeed.
AXA is a worldwide leader in insurance and asset management, known for its fi nancial strength, its brand, its entrepreneurial history and the high quality of its teams. It was therefore with great humility and enthusiasm that I became the Chief Executive
These transformations are already in development or are well under way. Today, we need to move up a gear whilst continually questioning and challenging ourselves. This is how we will open up new horizons for growth and play a key role in society and the economy.
“Transform” will enable us to become a genuine partner for our clients, using data and digital power so that our teams can be part in this transformation.
We continued to grow our profi table Protection & Health and capital light Savings businesses, in line with our strategy. In
In 2016, in terms of the headline indicators of the Ambition 2020 plan, we recorded €5.7 billion in underlying earnings and a growth of 4% on a per share basis. We generated over €6.2 billion of operating free cash fl ows and our Solvency II ratio of 197% (1)
AXA operates primarily in Europe, North America, Asia-Pacifi c Region and, to a lesser extent, in other regions including the Middle
AXA has four operating business segments: Life & Savings, Property & Casualty, Asset Management and Banking. In addition, various holding companies within the Group conduct certain non-operating activities.
(2) Ranking in terms of total assets established by AXA based on information available in 2015 annual reports.
(3) Ranking in terms of assets under management established by AXA based on information available as of September 30, 2016.
The new Management Committee notably reinforced the role of large countries (“M ature markets”) and Global Business
Lines, while the Group’s Regions were repositioned to focus on the development of emerging and smaller markets (“E merging markets”) in Asia and in the rest of the world.
The following changes have been implemented in the fi nancial reporting in order to refl ect the above-mentioned evolutions in the governance of the Group and are retroactively restated in this Annual Report: ■ Spain and Italy, which were formerly reported within the
& Latin American Region (except Spain and Italy) as well as all entities formerly included in Central and Eastern Europe,
Luxembourg and Russia; ■ the International Insurance segment is no longer reported separately. Entities which were part of this segment have been reallocated as follows: • AXA Corporate Solutions Assurance, AXA Assistance, AXA
The table set out below is only a summary. You should read it in conjunction with the Consolidated Financial Statements for the year ended December 31, 2016 included in Part 5 – “Consolidated Financial Statements” of this Annual Report.
(d) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements.
Report” and the Glossary set forth in Appendix VI to this Annual Report.
(a) Alternative Performance Measures. For further information, refer to Section 2.3 “Activity R eport” and the Glossary set forth in Appendix VI of this Annual Report.
(b) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of the International Insurance segment into the Life & Savings and the Property & Casualty segments.
Assets backing contracts with fi nancial risk borne by policyholders (Unit-linked) 175,292 194,601
For additional information on AXA’s revenues by segment and geographic area, see Note 21 “Information by segment” in Part 5 - “Consolidated Financial Statements” of this Annual Report.
For additional information on AXA’s business segments, see Section 2.3 “Activity Report” and Note 3 “Consolidated statement of income by segment” in Part 5 - “Consolidated
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.32 per share for fi scal year 2013.
– “Consolidated Financial Statements” and Section 6.3 “General information – Bylaws – Dividends” of this Annual Report.
to meet its payment obligations and may not refl ect the potential impact of all risks on the value of AXA’s securities. A rating is not a recommendation to buy, sell or hold securities. None of these ratings should be construed as an indication or forecast of the historical or potential performance of AXA’s securities nor should any such rating be relied upon for the purpose of making an investment decision with respect to any of the Company’s securities. The Company does not undertake to maintain its ratings, nor in any event shall the Company be responsible for the accuracy or reliability of any of the ratings set forth below.
At the date of this Annual Report, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Date of last review
AXA’s social, societal, environmental and governance performance is rated by a number of specialists, including investors, brokers and rating agencies that focus specifi cally on the SRI market, as well as specialist organizations focused on single sustainability themes. The
International Bank (“CIB”) and Legal & General in Egypt and conclusion of an exclusive Life & Savings distribution partnership with CIB; and (v) Genworth Lifestyle Protection Insurance; Launch of (i) AXA Strategic Ventures, a €230 million venture capital fund dedicated to emerging strategic innovations in insurance and fi nancial services; and (ii) Kamet, a €100 million
Acquisition of (i) Charter Ping An Insurance Co.; and (ii) the Polish
Life & Savings segment: ■ AXA Corporate Solutions Life Reinsurance Company, which is a reinsurance company in the United States, in runoff, notably managing a book of reinsurance contracts of variable annuities; ■ AXA Global Life, which alongside its role as a global business line, is in charge of analysis, structuring and negotiation of reinsurance treaties on behalf of AXA Group insurance companies to a selection of third party reinsurers.
Gross revenues (a) Years ended December 31, Gross insurance liabilities at December 31, 20162016 2015 restated (e)
(b) Includes Portugal, Turkey, Greece, Morocco, Mexico, Colombia, Poland, Czech Republic, Slovak Republic and Luxembourg.
(e) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of a part of the International Insurance segment into the Life & Savings segment.
These products are offered through various distribution channels, as described in the “Distribution channels” paragraph below.
The nature and level of competition vary among the countries in which the Group operates for all the types of Individual and Group Life & Savings products sold by AXA. Many other insurance companies offer similar products to those offered by
AXA, and, in some cases, also use similar marketing techniques and distribution methods.
Life & Savings products offered by AXA include term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. Health products offered include critical illness and permanent health insurance products. Types and specifi cities of the products offered by AXA vary from market to market.
(b) Includes revenues from other activities (mainly commissions and related fees on m utual funds sales).
(c) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of a part of the International Insurance segment into the Life & Savings segment.
AXA distributes its products through exclusive and non exclusive channels that vary from country to country. Proprietary channels include exclusive agents, salaried sales forces and direct sales.
Non-proprietary channels include brokers, independent fi nancial advisors, aligned distributors or wholesale distributors and partnerships.
■ Salaried sales forces are salespeople employed by a single insurance company (or an affiliated company) to sell the
The Group implemented an organization by global business line in 2010. AXA Global Life, which is the Life & Savings business line, defi nes a group-wide strategy and has set the following priorities: ■ focus on inforce optimization; ■ increase productivity and effi ciency; ■ reshape the Savings business; and
In addition, in December 2014, the Group announced the creation of a third global business line (alongside the global business lines Life & Savings and Property & Casualty) dedicated to the Health insurance business with the following priorities: ■ focus on becoming a leader in 11 countries where AXA is present; ■ focus on increasing AXA’s presence in Health insurance in the international health insurance segment; and
■ developing the Health business model focus on partnering the client in his health care management.
(b) Includes Portugal, Greece, Morocco, Turkey, Mexico, Colombia, the Gulf Region, Brazil and Luxembourg.
Commercial Property & Casualty insurance products in other countries in Asia (mainly in Hong Kong, Singapore, Malaysia,
The nature and level of competition vary among the countries where AXA operates. AXA competes with other insurers in each of its Property & Casualty lines and in all the markets where it operates. In general, the Property & Casualty insurance industry tends to be cyclical with surplus underwriting capacity leading to lower premium rates.
The principal competitive factors are as follows: ■ price; ■ quality of service; ■ distribution network; ■ brand recognition; and
For additional information on markets, see Section 2.1 “Market e nvironment - Market conditions at segment level” of this Annual
The tables below sets forth gross written premiums and gross insurance liabilities by major product for the periods and as at the dates indicated: GROSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
The Group implemented an organization by global business line in 2010. AXA Global P&C, which is the Property & Casualty business line, defi nes a group-wide strategy and has set the following priorities: ■ focus on improving profi tability (loss ratio) and effi ciency; ■ develop excellence in underwriting standards and pricing policy; ■ optimize claims management; ■ enhance the quality of technical expertise; ■ foster dedicated offer to small and medium size entities.
The development of asset management activities is a key part of AXA’s fi nancial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the Management’s belief that its asset management expertise will enable AXA to benefi t in the future from the expected growth in savings-related products in the markets where it operates. For the year ended December 31, 2016, the Asset Management segment accounted for €3.7 billion (2015: €3.8 billion), or 4% of
Assets backing contracts with fi nancial risk borne by policyholders (Unit-Linked) 60,567 57,179
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on asset management companies only. AXA Group (including insurance companies) assets under management amounted to €1,429 billion as of December 31, 2016.
AB, a 63.7% subsidiary, is a leading global investment management firm based in the United States. AB provides diversifi ed investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA and its insurance subsidiaries (which collectively are AB’s largest client). AB Holding L.P. (AB Holding)
AB’s offering includes: ■ diversified investment management services through separately managed accounts, hedge funds, m utual funds, and other investment vehicles to private clients (such as high net worth individuals and families, trusts and estates, and charitable foundations); ■ management of retail m utual funds for individual investors; ■ management of investments on behalf of institutional clients; and
At December 31, 2016, AB had €486 billion of assets under management, including €337 billion of assets managed on behalf of third party clients (2015: €455 billion and €324 billion, respectively). AB accounted for €2,530 million or 68% of the
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset Management business. Through its operating entities located in more than 20 countries, AXA IM provides its clients with a wide range of global products and expertises principally via m utual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom m utual 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, 2016, AXA IM had €717 billion of assets under management, including €289 billion of assets managed on behalf of third party clients (2015: €669 billion and €246 billion, respectively). AXA IM accounted for €1,180 million or 32% of
Asset Management segment consolidated gross revenues for the year ended December 31, 2016 (2015: €1,242 million or 32%).
December 31, 2016, the Banking segment accounted for €596 million (2015: €621 million), or less than 1% of AXA’s consolidated gross revenues (2015: less than 1%).
at the end of 2016, with a retail and private banking product offer. Directly linked with the Group’s insurance business, banking products are offered to AXA France clients through its distribution networks. AXA Banque also manages direct clients through internet banking relationships.
Segment information by entity 55 2.4 LIQUIDITY AND CAPITAL RESOURCES 93
Subsequent events after December 31, 2016 impacting AXA’s liquidity 99 2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2016 100
British Pound. In the United States (US), after the election of
Donald Trump as US President in November, markets were upbeat on expectations of higher infl ation, public spending and favorable tax policies. In Italy, the ‘No’ vote at the referendum on constitutional reforms led to higher volatility for Italian assets, although with no contagion across the rest of Europe.
The US Federal Reserve initiated a normalisation of its monetary policy, raising its benchmark interest rate range by 25 basis points to 0.50%-0.75%. In Japan, the central bank introduced
In the US, economic growth was moderate in 2016, at around 1.6%, down from 2.6% in 2015, driven mainly by h ousehold consumption and an improving trade balance, while investment remained depressed. The labour market continued to return to normal conditions with unemployment rate falling from 5.0% in 2015 to 4.6%. The improvement of the labour market combined with the increase in infl ation rate (at around 1.2% in 2016 from 0.1% in 2015) led the US Federal Reserve to raise interest rates.
Infl ation remained at a low level (0.2% on average in 2016), dragged lower by energy prices, while core infl ation remained subdued at around 0.9%.
The Japanese economy disappointed again in 2016 with economic growth of 1.0%, mainly supported by a signifi cant budget stimulus, while h ousehold and corporate consumption did not bounce back. Infl ation remained also very low at around
The MSCI G7 index increased by 8.1% and the MSCI Emerging index increased by 7.1%. The S&P 500 implied volatility index
In most mature economies except the US, government bond yields declined in 2016 as the strong decrease in the fi rst part of the year was partly offset in the latter part of the year: the 10-year German Bund yield decreased by 43 bps to 0.21%, the
The 10-year government bond yields declined also in most of the Eurozone peripheral countries: -126 bps to 7.13% in Greece, -39 bps to 1.39% in Spain and -38 bps to 0.77% in Ireland while it increased by 122 bps to 3.76% in Portugal and by 21 bps to 1.82% in Italy.
In Europe, the iTRAXX Main spreads decreased by 5 bps to 72 bps compared to December 31, 2015 while the iTRAXX
Crossover decreased by 26 bps to 289 bps. In the United
In mature markets, premium income growth slowed in 2016, decelerating or turning negative in most countries in Europe
Overall, markets kept growing at a fast pace in Asia, especially in China and Hong Kong with the exception of Thailand where market growth has been subdued by lower economic growth, low interest rates environment and political instability. In China, sales were still supported by strong volumes of traditional life policies, while in the rest of the region Unit-Linked sales were negatively affected by fi nancial markets volatility. In Latin
United States Variable Annuities 3 9.7 5 7.1 Morningstar VARDS as of September 30, 2016 and September 30, 2015.
Switzerland 2 26.0 2 27.0 SIA (Swiss Insurance Association) as of December 31, 2016 and December 31, 2015. Market share based on statutory premiums and market estimations by the SIA.
Spain 9 2.8 9 2.9 Spanish Association of Insurance Companies. ICEA as of September 30, 2016 and December 31, 2015.
Greece 8 3.2 Hellenic association of Insurance Companies as of December 31, 2015. 2016 information not available.
Indonesia 2 9.7 2 9.8 AAJI Statistic as of September 30, 2016 and September 30, 2015 measured on Weighted New Business Premium.
Middle East, Africa and Latin America markets expanded at a slower pace than initially expected due to various reasons: US
elections in Mexico as well as persistency of low oil prices in the
Ireland (Republic of Ireland) – Motor 1 24.0 Insurance Ireland Non-Life Headline Statistics 2015. 2016 information not available.
Spain 5 5.5 5 5.6 Spanish Association of Insurance Companies. ICEA as of September 30, 2016 and December 31, 2015.
Italy 6 4.5 6 4.4 Associazione Nazionale Imprese Assicuratrici (ANIA) as of December 31, 2016 and December 31, 2015.
Greece 8 5.3 Hellenic Association of Insurance Companies as of December 31, 2015. 2016 information not available.
Mexico 2 12.7 AMIS (Asociacion Mexicana de instituciones de Seguros) as of December 31, 2015. 2016 information not available.
Turkey 3 10.7 3 11.3 Turkish Association of Insurance Companies as of September 30, 2016 and December 31, 2015.
Singapore 2 10.7 2 11.6 General Insurance Association as of September 30, 2016 and December 31, 2015.
Malaysia 3 8.5 5 7.8 BNM (Bank Negara Malaysia) as of October 31, 2016 and December 31, 2015.
Most emerging markets experienced very strong growth driven by multiple factors: increased access to healthcare as a direct consequence of economic development in the markets of South-East Asia, change in disease patterns, e.g. higher prevalence of chronic conditions in Mexico increasing medical infl ation. One exception needs to be noticed in the Gulf region where the economic slowdown has led to increased pressure on corporate accounts leading to decrease in coverage and premiums.
Institutional investors further diversifi ed their portfolios with a heightened focus on cost and better alignment of interest. In the low interest rates environment, the search for yield continued with diversified fixed income, multi-assets and alternative investment strategies being the most favoured. Responsible investment has also moved further ahead on the agenda of institutional investors.
In a market environment characterized by political turbulence and rising interest rates in the US, retail investors took limited risks. Bonds strategies gathered infl ows, especially in US and emerging market bonds, whereas equities suffered outfl ows, especially regional strategies.
In the asset management market, AXA Investment Managers ranked 20th (1) and AB 26th (1) based on volume of assets under management. On a combined basis, AXA ranked 9th (1).
Denis Duverne appointed Chairman of AXA’s Board of Directors and Thomas Buberl appointed AXA’s Chief Executive Offi cer
Henri de Castries’ decision to step down from the Board of
Executive Offi cer to assist him in the operational management of the Group and to discuss Group strategic, financial and operational matters. For information on the Management
On September 1, 2016, AXA announced the composition of a new Partners Group that is the successor of the Group’s
Group’s Management Committee members plus other senior executives from across the Group. For information on the
The first priority is a continued and immediate focus on sustainable earnings growth over the plan based on selective growth, cost effi ciencies, technical margin improvement and an active management of capital and cash. These initiatives will position AXA to grow earnings and increase dividends, even in a context of continued low interest rates.
At the same time, AXA will accelerate the transformation of its business model based on initiatives related to meeting rapidly evolving customer expectations in the digital world, moving from a payer model to a partner model, and adapting its workforce capabilities in order to succeed in this ambition.
(e.g. effi ciencies, margin improvement, topline growth, M&A) are targeted to contribute 8% underlying earnings per share CAGR, more than offsetting interest rates headwinds.
(1 ) Average annual growth over the 5 year plan period; period-to-period results may vary.
(3 ) EUR 1 = PHP 52.2981 as of March 31, 2016.
On September 30, 2016, AXA announced that it had completed the acquisition of the Polish Property & Casualty operations of
In 2015, the two buildings, “787 7th Avenue” and “1285 Avenue of Americas” located in New York, were reclassifi ed as held for sale. On January 27, 2016, AXA Financial completed the sale of the “787 7th Avenue” fully-owned property, at a sale price of $1,950 million. On May 23, 2016, AXA Financial completed the sale of the “1285 Avenue of Americas” (owned at 50%) for a total sale price of $1,650 million. At December end 2016, a total net exceptional gain for the sale of the two buildings has been recorded in net income for €972 million after tax ($1,075 million after tax).
AXA completed the sale of its UK offshore investment bonds business based in the Isle of Man to Life Company Consolidation Group
Life plc, and of its UK (non-platform) investment, pensions and direct protection (“Sunlife”) businesses to Phoenix Group
(2) EUR 1 = PLN 4.3056 as of September 29, 2016 (Source: Bloomberg).
(3) AXA owned 99.7% of the P&C business, 95.1% of the L&S business and 100.0% of the Direct business.
(4) AXA Life Insurance SA is the AXA Life & Savings operating entity in Romania.
Europe as a fully focused Belgian retail bank, serving almost one million clients and operating jointly with AXA Insurance in
AXA completed the sale of its Serbian operations to Vienna Insurance Group
On December 1, 2016, AXA announced that it had completed the sale of both its Serbian Life & Savings (AXA Životno osiguranje
On January 2, 2017, AXA announced that it had completed the sale of Bluefin Insurance Group Ltd (“Bluefin”), its P&C
commercial broker in the UK, to Marsh. AXA recorded an exceptional negative impact of €82 million, accounted for in 2016 net income.
Africa Internet Group and AXA partner to provide insurance products and services to African customers
On February 8, 2016, AXA and Africa Internet Group (“AIG”), a leading e-commerce group in Africa announced a partnership whereby AXA would become the exclusive provider of insurance products and services through Jumia and other AIG online and mobile platforms in Africa. As part of the partnership, AXA
On April 19, 2016, AXA announced that it was targeting the rapidly expanding market for African specialty insurance by partnering with Chaucer, a Lloyd’s specialty insurance group.
Financial Services had agreed to engage in a global strategic partnership to jointly explore opportunities to distribute AXA’s insurance products and services through Alibaba’s global ecommerce ecosystem, benefitting the businesses and consumers that transact via Alibaba’s marketplaces. The companies will seek to work together to co-innovate and to develop value-added products and services to customers around the world as well as to mutually support each other in developing and exploring new markets and segments.
On October 27, 2016, S&P Global Ratings upgraded its longterm fi nancial strength rating of AXA’s core operating subsidiaries to ‘AA-’ with a stable outlook, from ‘A+’ with a positive outlook.
On September 9, 2016, Moody’s Investors Service reaffi rmed the ‘Aa3’ insurance fi nancial strength ratings of AXA’s principle insurance subsidiaries, maintaining a stable outlook.
(1) Vienna Insurance Group AG is the holding company of the Vienna Insurance Group.
In order to meet its obligation to deliver shares and to eliminate the dilutive effect of certain share-based compensation schemes (1), on February 2, 2016, AXA bought back 20,100,000 shares for €460 million. These shares were delivered to the benefi ciaries of share-based compensation schemes or canceled, all in accordance with the share repurchase program (2).
On December 5, 2016, AXA announced the results of the AXA
The aggregate proceeds from the offering amounted to over €430 million, for a total of over 24.5 million newly-issued shares, subscribed at a price of €15.53 for the classic plan and €17.73 for the leveraged plan. The new shares are created with full rights as of January 1, 2016.
Sharep lan 2016, AXA bought back 23,823,572 shares for €462 million on December 5, 2016. AXA undertook the cancellation of its shares on December 14, 2016 in accordance with its share repurchase program as authorized by the
The total of number of outstanding AXA shares amounted to 2,425,149,130 as of December 31, 2016.
On March 24, 2016, AXA announced the successful placement of €1.5 billion of Reg S subordinated notes due 2047 to institutional investors to refinance, in advance, part of its outstanding debt. The initial spread over swap is 275 basis points. The initial coupon has been set such as it corresponds to a reoffer yield of 3.462%. It will be fi xed until the fi rst call date in July 2027 and fl oating thereafter with a margin including a 100 basis points step-up. Settlement of the notes took place on March 30, 2016. The notes will be treated as capital from a regulatory and rating agencies’ perspective within applicable limits. The transaction has been structured for the notes to be eligible as Tier 2 capital under Solvency II.
4.5% undated subordinated notes to refi nance, in advance, part of its outstanding debt. Settlement of the notes took place on
Pursuant to the new regulation, advisors and employees, including those affi liated with AXA US, who provide investmentrelated information and support to retirement plan sponsors, participants, and Individual Retirement Account (“IRA”) holders would be subject to enhanced fi duciary duty obligations and requirements. Implementation of the rule is currently scheduled to be phased in, starting in April 2017, with a transition period for certain requirements through January 2018. In February 2017, however, the DOL was directed by executive order and memorandum (the “President’s Order and Memorandum”) to review the fi duciary rule and determine whether the rule should be rescinded or revised, in light of the new administration’s
(2) AXA share repurchase program has been authorized by the Shareholder’s Meeting of April 30, 2015.
policies and orientations. On March 2, 2017, the DOL submitted a proposal to delay for sixty days the applicability date of the fiduciary rule and invited comments on both the proposed extension and the examination described in the President’s
Order and Memorandum. Comments on the proposed extension were due by March 17, 2017, and comments on the President’s
While implementation of the rule remains uncertain, and is currently subject to judicial challenge, Management continues to evaluate its potential impact on AXA US. If implemented as planned, the new fi duciary rule may affect the range of services provided by AXA US and its affi liated advisors and fi rms, as well as the nature and amount of compensation and fees such entities receive which may have a signifi cant adverse effect on
Building upon its existing micro-insurance schemes developed locally across Asia, Africa and Latin America that currently protect over 3 million emerging customers, AXA has allocated dedicated resources and expertise to address this growth segment, and develop offerings encompassing Life & Savings,
On May 23, 2016, the AXA Group announced its decision to divest its tobacco industry assets, currently valued at approximately €1.8 billion. Equity holdings in tobacco companies were sold immediately, while corporate bonds will be run off.
This decision was primarily motivated by the belief that investing in the tobacco industry, which presents a signifi cant net cost to society in terms of externalized health expenses, is not consistent with AXA’s new health strategy, which stresses the importance of prevention.
January 1, 2017) of a parental leave policy for employees in all of the 64 countries in which it operates.
(b) Excluding (i) net realized capital gains or losses and (ii) change in the fair value of assets under fair value option and derivatives, net banking revenues and total consolidated revenues respectively amounted to €519 million and €100,115 million for full year 2016 and €565 million and €98,080 million for full year 2015 restated.
(c) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of the International Insurance segment into the Life & Savings and the Property & Casualty segments.
Consolidated gross revenues amounted to €100,193 million as of December 31, 2016, up 2% compared to December 31, 2015, on both reported and comparable basis.
(iii) the acquisition of Genworth in France in 2015 (€-0.9 billion or -0.9 point).
In the comments below, reported figures, changes on a constant exchange rate basis and changes on a comparable basis are restated in order to refl ect the disposal of the United
(1) Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premium, in line with EEV methodology. APE is
East Asia, India & China (+19% or €+125 million) and Hong
Belgium (-45% or €-44 million), partly offset by the United States
following higher sales of whole life and single premium term products, (ii) Hong Kong (€+54 million) mainly driven by the successful launch of a G/A capital light product and (iii) Japan
■ Funds & Other APE (€664 million, 10% of total) up 10% (or €+60 million) notably from France (€+69 million) driven by the underwriting of a large and profi table contract.
mainly due to the discontinuation of Protected Unit product sales in a context of higher regulatory constraints and adverse market conditions, (ii) Belgium (€-37 million) in line with the strategy to focus on Protection products and to exit the
following signifi cant regulatory changes as well as the nonrepeat of exceptional sales of large contracts in 1H15, partly offset by (iv) the United States (€+63 million) driven by higher sales of non-GMxB Variable Annuity products, partly offset by a decrease in GMxB Variable Annuity sales.
Property & Casualty gross revenues were up 2% on a reported basis and up 3% on a comparable basis to €35,604 million.
Region, AXA Assistance, partly offset by France. Overall, tariffs increased by 3%.
Kingdom & Ireland and Germany, partly offset by negative product mix and volume impacts in the EMEA-LATAM Region: ■ Direct (+8%) mainly from Poland, the United Kingdom,
France, Japan and Spain following tariff increases; ■ the EMEA-LATAM Region (+11%) refl ecting signifi cant tariff increases, mainly in Turkey; ■ the United Kingdom & Ireland (+12%) mainly due to tariff increases in both Great Britain and Ireland; ■ Germany (+2%) driven by tariff increases.
Commercial lines (48% of P&C gross revenues) increased by 2% (or €+386 million) on a comparable basis.
Motor revenues increased by 7% (or €+253 million): ■ the United Kingdom & Ireland (+21%) mainly due to increased new business volumes and higher retention rates as well as tariff increases notably in Ireland; ■ the EMEA-LATAM Region (+10%) refl ecting tariff increases in Turkey, higher new business in Mexico and higher volumes in the Gulf Region; ■ AXA Assistance (+10%) mainly driven by higher new business in Europe and in Mexico; partly offset by: ■ AXA Corporate Solutions Assurance (-10%) due to actions undertaken to protect the profi tability.
Non-Motor revenues increased by 1% (or €+133 million) mainly refl ecting tariff increases across the board as well as higher volumes: ■ the United Kingdom & Ireland (+3%) from Great Britain as a result of higher volumes in Health and Property; ■ the EMEA-LATAM Region (+3%) mainly from Mexico driven by tariff increases and new business volumes in Health, Brazil refl ecting higher volumes and Colombia due to higher new business volumes in Property, partly offset by the Gulf Region due to the loss of large accounts in Health; ■ Germany (+4%) mainly in Property driven by new business in SME and Mid-Market; partly offset by: ■ France (-5%) as tariff increases were offset by lower volumes notably in Construction in a context of selective underwriting and lower average premium in Property and Liability.
National Interprofessionnel (ANI) starting on January 1, 2016, partly offset by a decrease in the Individual business due to negative portfolio developments in the context of the ANI,
Asset Management revenues decreased by 3% on both reported and comparable basis to €3,710 million from AB (€82 million) mainly driven by lower management and distribution fees.
or €+5 billion) due to market appreciation in the second half of the year.
Asset Management net inflows amounted to €+45 billion driven by AXA Investment Managers (€+56 billion) mainly due to infl ows from Asian Joint Ventures (€+39 billion) and other third party clients (€+18 billion), partly offset by AB (€-12 billion) mainly driven by outfl ows from the Institutional channel.
AB revenues were down 3% (or €-82 million) on a comparable basis to €2,530 million mainly driven by lower management fees as a result of a decline in management fee bps combined with lower distribution fees mainly from the Retail channel.
AB AUM increased by 7% (or €+31 billion) from year-end 2015 to €486 billion as a result of €+26 billion market appreciation, €+14 billion favorable foreign exchange impact and €+2 billion positive scope impact, partly offset by €-12 billion net outfl ows.
Fees and revenues from investment contracts without participating feature 219 236
Change in unearned premium reserves net of unearned revenues and fees (348) (281)
Net income from investments in affi liates and associates 239 174
(a) Including (i) net realized capital gains or losses and (ii) change in the fair value of assets under fair value option and derivatives, total consolidated revenues respectively amounted to €100,193 million for full year 2016 and €98,136 million for full year 2015 restated.
(c) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements.
Underlying earnings correspond to Adjusted earnings excluding net capital gains or losses attributable to shareholders, and including the following elements net of policyholder participation, deferred acquisition costs, VBI, taxes and minority interests: ■ realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); ■ cost at inception, intrinsic value and pay-off of derivatives involved in the economic hedging of realized gains and impairments of equity securities backing General Account and shareholders’ funds.
■ lower fees and revenues (€-231 million or -3%): • loadings on premiums and m utual funds were down €121 million mainly in (i) Japan (€-122 million) primarily due to a reclassifi cation of loadings on premium to technical margin (€-147 million), (ii) AXA MPS (€-94 million) driven by lower Unearned Revenues Reserves amortization as a consequence of lower surrenders (partly offset in Deferred
mainly due the non-repeat of the acceleration of the amortization of deferred premiums loadings in 2015,
• Unit-Linked management fees were down €91 million mainly driven by (i) the United States (€-120 million)
refl ecting lower average legacy GMxB balances, partly offset by (ii) France (€+41 million) due to higher account value,
GMxB products (€43 million), partly offset by (iv) France (€312 million) mainly due to an unfavorable change in prior reserve developments in Group Protection; ■ h igher expenses (€-659 million or +9%) as a result of: • higher acquisition expenses (€-644 million) mainly in (i) the
• higher administrative expenses (€-15 million) mainly due to the combined effects of infl ation, business growth and investments, partly offset by the effects of cost savings programs; ■ higher underlying earnings arising from investment in associates – Equity Method (€+39 million or +28%) mainly refl ecting growth of the portfolios in (i) China (€+20 million)
• higher expense ratio by 0.6 point to 26.9% driven by
(i) the acquisition expense ratio up 0.5 point mainly driven by higher commissions following a change in business mix both at AXA Assistance and in the United Kingdom &
Ireland combined with (ii) the administrative expenses ratio up 0.1 point mainly from Direct refl ecting investments in IT
EMEA-LATAM Region (€+41 million) mainly from Turkey as a result of both higher interest rates and average asset base, and (ii) Germany (€+15 million) mainly due to higher private equity dividends, partly offset by (iii) Belgium (€-24 million)
due to lower dividend distribution on m utual funds and lower reinvestment yields on fi xed income assets, (iv) Switzerland
(€-20 million) mainly driven by lower reinvestment yields on fi xed income assets and higher foreign exchange hedging costs and (v) Italy (€-17 million) mainly due to the non-repeat of an exceptional distribution from m utual funds; ■ lower tax expenses and minority interests (€+154 million or -14%) mainly driven by lower pre-tax underlying earnings and lower corporate tax rate in France.
Health underlying earnings (as reported in the Life & Savings and Property & Casualty segments) increased by 5% (or €+21 million) on a comparable basis to €516 million mainly driven by (i) lower expenses and an improved technical result in Japan as well as an improved technical result combined with higher volumes in Germany, partly offset by (ii) a lower technical result in the EMEA-LATAM Region mainly due to the loss of large accounts in the Gulf Region. As a result, the combined ratio improved by 0.2 point to 94.9%.
Asset Management underlying earnings amounted to €416 million. On a constant exchange rate basis, underlying earnings decreased by €37 million (or -8%) attributable to (i) AB
Group net realized capital gains attributable to shareholders amounted to €415 million. On a constant exchange rate basis,
Group net realized capital gains and losses attributable to shareholders decreased by €19 million mainly due to: ■ €+158 million higher net realized capital gains to €880 million mainly driven by higher net realized capital gains on real estate (€+166 million); ■ €-120 million higher impairments to €-395 million mainly driven by real estate (€-43 million), alternative investments
(€-29 million) and fi xed income assets (€-24 million); ■ €-57 million more unfavorable intrinsic value to €-70 million related to equity hedging derivatives.
+3%). On a constant exchange rate basis, adjusted earnings increased by €167 million (or +3%).
+2%) mainly as a result of: ■ higher adjusted earnings (€+167 million); ■ positive exceptional and discontinued operations impacts
(€+157 million) to €387 million mainly due to the gain on the sale of two real estate properties in New York (€+1.0 billion), partly offset by the losses on the disposals of the Life &
Group due to the decrease in the corporate tax rate from 34% to 28% enacted in 2016 to be effective as of January 1,
• €+40 million favorable foreign exchange rate movements on investments denominated in foreign currencies as well as on change in the fair value of economic hedge derivatives not eligible for hedge accounting under IAS 39,
As of December 31, 2016, consolidated shareholders’ equity totalled €70.6 billion. The movements in shareholders’ equity since
December 31, 2015 are presented in the table below: (in Euro million)
Basic Fully diluted Basic Fully diluted Basic Fully diluted Basic Fully diluted
Weighted average number of shares 2,416 2,423 2,429 2,441 2,429 2,441
Net income (Euro per Ordinary Share) 2.30 2.30 2.19 2.18 2.19 2.18 5.3% 5.5%
Adjusted earnings (Euro per Ordinary Share) 2.42 2.41 2.35 2.34 2.32 2.31 4.1% 4.3%
Underlying earnings (Euro per Ordinary Share) 2.24 2.24 2.17 2.16 2.14 2.13 4.8% 5.0%
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share attributable to AXA’s Life & Savings segment for the periods indicated: (in Euro million)
Net capital gains or losses attributable to shareholders net of income tax 250 265
(a) EMEA-LATAM Region includes Portugal, Greece, Turkey, Morocco, Mexico, Colombia, Poland, Czech Republic, Slovak Republic and Luxembourg.
(b) South-East Asia, India & China revenues include Singapore and non bancassurance subsidiaries in Indonesia.
(b) South-East Asia, India & China earnings include Indonesia, Thailand, Philippines, China, India and Singapore.
(c) Other corresponds to AXA Life Invest (excluding Germany & Japan), Architas, AXA Global Life, AXA Corporate Solutions Life Reinsurance Company and Family Protect.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 66 (35)
(a) EMEA-LATAM Region includes other than Direct operations in Portugal, Greece, Turkey, Morocco, Gulf Region, Mexico, Colombia, Brazil and Luxembourg.
(e) Restated: Reclassifi cation of a part of the International Insurance segment into the Property & Casualty segment.
(a) EMEA-LATAM Region includes other than Direct operations in Portugal, Greece, Turkey, Morocco, Gulf Region, Mexico, Colombia, Brazil and Luxembourg. Excluding RESO - RESO combined ratio amounted to 86.3% as of December 31, 2016.
(d) Restated: Reclassifi cation of a part of the International Insurance segment into the Property & Casualty segment.
(a) EMEA-LATAM Region includes other than Direct operations in Portugal, Greece, Turkey, Morocco, Gulf Region, Mexico, Lebanon, Colombia, Nigeria, Brazil, Luxembourg and RESO.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share attributable to AXA’s banking activities for the periods indicated: CONSOLIDATED GROSS REVENUES
Net realized capital gains or losses attributable to shareholders (0) 0
(a) Before intercompany eliminations. Gross Revenues amounted to €17,010 million net of intercompany eliminations as of December 31, 2016.
In the comments below, the comparable basis excludes the contribution of Genworth entities, consolidated starting from
Gross revenues increased by €1,090 million (+7%) to €17,095 million. On a comparable basis, gross revenues increased by €920 million (+6%): ■ Protection & Health revenues (43% of gross revenues)
(ANI) effective since January 1, 2016, and a €44 million increase in Individual Protection refl ecting a signifi cant growth in new contracts, partly offset by a €17 million decrease in
(-6%) to €518 million in line with the strategy to focus on products with a signifi cant Unit-Linked component; ■ Unit-Linked sales (18% of APE) decreased by €12 million
(-4%) to €332 million refl ecting unfavorable market conditions at the beginning of the year; ■ Funds & Other sales (5% of APE) increased by €69 million
(+221%) to €100 million due to the sale of a large and profi table contract in 2H 16 .
to €492 million. On a comparable basis, net technical margin decreased by €312 million (-44%) mainly due to an unfavorable change in prior year reserves development in
As a result, the underlying cost income ratio increased by 2.3 points to 70.0%. On a comparable basis, the underlying cost income ratio increased by 1.8 points.
Income tax expenses decreased by €124 million (-33%) to €-256 million. On a comparable basis, income tax expenses decreased by €123 million (-32%) driven by lower pre-tax underlying earnings and a decrease in the corporate tax rate from 38% to 34.43%.
(-13%) driven by lower adjusted earnings, an unfavorable change in the fair value of interest rate and foreign exchange derivatives not eligible for hedge accounting and higher restructuring costs, partly offset by realized gains on the disposal of AXA Portugal and a favorable change in the fair value of m utual funds.
(a) Before intercompany eliminations. Gross Revenues amounted to €14,303 million net of intercompany eliminations as of December 31, 2016.
(b) Restated: Reclassifi cation of Accident & Health run-off portfolio from the International Insurance segment into the United States Life & Savings operations.
Gross revenues increased by €677 mill ion (+5%) to €14,305 million. On a comparable basis, gross revenues increased by €493 million (+4%): ■ Variable Annuity revenues (71% of gross revenues) increased by €525 million (+6%) to €10,196 million due to strong sales of non-GMxB Variable Annuity products, partly offset by a decrease in GMxB Variable Annuity sales; ■ Life revenues (20% of gross revenues) increased by €10 million
(+0%) to €2,925 million primarily driven by higher renewals mostly offset by lower sales of Protection products; ■ Asset Management fees (7% of gross revenues) decreased by €36 million (-4%) to €947 million, refl ecting unfavorable market conditions and lower average asset balances; ■ M utual funds revenues (2% of gross revenues) decreased by €5 million (-2%) to €237 million, refl ecting lower advisory fees and lower sales.
Variable Annuity sales; ■ M utual funds sales (30% of APE) decreased by €6 million
Investment margin decreased by €27 million (-5%) to €562 million. On a constant exchange rate basis, investment margin decreased by €34 million (-6%) mainly driven by lower reinvestment yields on fi xed income assets and lower distributions from private equity investments.
Annuity GMxB results and the impact of model and assumption changes in 2015 and 2016.
Income tax expenses decreased by €16 million (-29%) to €-40 million. On a constant exchange rate basis, income tax expenses decreased by €17 million (-29%) as higher pre-tax underlying earnings were more than offset by higher positive tax settlements and one-offs (€164 million in 2016 vs. €104 million in 2015).
Underlying earnings increased by €71 million (+9%) to €905 million. On a constant exchange rate basis, underlying earnings increased by €60 million (+7%).
Net capital gains or losses attributable to shareholders net of income tax 19 (0)
(a) Before intercompany eliminations. Gross Revenues amounted to €5,161 million net of intercompany eliminations as of December 31, 2016.
Gross revenues increased by €967 million (+23%) to €5,161 million. On a comparable basis, gross revenues increased by €428 million (+10%): ■ Protection & Health revenues (75% of gross revenues)
APE increased by €81 million (+19%) to €499 million. On a comparable basis, APE increased by €28 million (+7%): ■ Protection & Health sales (84% of APE) decreased by €6 million (-2%) to €417 million mainly due to lower new business in Health in the context of strong competition, partly offset by higher sales in Protection with Savings (€+2 million)
refl ecting client appetite and continued commercial efforts; ■ G/A Savings sales (16% of APE) increased by €48 million
Investment margin decreased by €35 million (-100%) to €0 million mainly due to the non-repeat of exceptional dividends from a Japanese equity fund in 2015.
Amortization of VBI decreased by €6 million (-27%) to €-17 million. On a constant exchange rate basis, amortization of VBI decreased by €8 million (-34%) mainly due to favorable assumption changes.
Income tax expenses increased by €16 million (+9%) to €-195 million. On a constant exchange rate basis, income tax expenses decreased by €5 million (-3%) mainly due to a decrease in corporate tax rate, partly offset by higher pre-tax underlying earnings.
Underlying earnings increased by €68 million (+17%) to €480 million. On a constant exchange rate basis, underlying earnings increased by €19 million (+5%).
Adjusted earnings increased by €88 million (+21%) to €499 million. On a constant exchange rate basis, adjusted earnings increased by €37 million (+9%) mainly due to higher underlying earnings as well as higher net realized capital gains.
APE increased by €9 million (+2%) to €382 million. On a comparable basis, APE increased by €9 million (+2%): ■ Life sales (72% of APE) increased by €5 million (+2%) to €273 million due to higher regular premiums in Unit-Linked and Pure Protection, partly offset by lower single premiums from hybrid products while regular premiums remained stable; ■ Health sales (28% of APE) increased by €4 million (+3%)
Annuity GMxB products (€+43 million), reflecting the new hedging strategy implemented in 2015 and the non-repeat of related one-off transaction costs, as well as an improved technical margin in Health.
Expenses increased by €73 million (+40%) to €-257 million mainly due to the non-repeat of the favorable one-off impact of the reduction of the deferred policyholder participation in 2015 in Life, higher acquisition costs related to new business in Life and Health, and higher pension costs which partly offset the gain in holdings.
Net income increased by €78 million (+43%) to €262 million mainly due to higher adjusted earnings and a favorable change in the fair value of fi xed income securities and economic hedge derivatives not eligible for hedge accounting, partly offset by higher restructuring costs.
Net capital gains or losses attributable to shareholders net of income tax 7 42
Gross revenues decreased by €132 mill ion (-2%) to €7,044 million. On a comparable basis, gross revenues decreased by €55 million (-1%): ■ Group Life revenues (87% of gross revenues) increased by €128 million (+2%) to €6,138 million driven by the successful sale of a large contract; ■ Individual Life revenues (13% of gross revenues) decreased by €189 million (-17%) to €906 million driven by lower sales of single premium products, partly offset by higher sales of regular premium Protection products in line with the strategy.
APE decreased by €12 million (-4%) to €301 million. On a comparable basis, APE increased by €4 million (+1%): ■ Group Life sales (70% of APE) increased by €27 million
(+15%) to €211 million driven by the successful sale of a large contract; ■ Individual Life sales (30% of APE) decreased by €23 million
Investment margin increased by €7 mill ion (+4%) to €212 million. On a constant exchange rate basis, investment margin increased by €10 million (+5%) due to a lower allocation of policyholder participation, partly offset by lower reinvestment yields on fi xed income assets, higher foreign exchange hedging costs and lower private equity distributions.
Fees & revenues decreased by €1 million (0%) to €347 million.
On a constant exchange rate basis, fees & revenues increased by €2 million (+1%) driven by higher Unit-Linked management fees.
As a result, the underlying cost income ratio increased by 6.4 points to 53.9%.
Income tax expenses decreased by €17 million (-21%) to €-63 million. On a constant exchange rate basis, income tax expenses decreased by €16 million (-20%) mainly driven by lower pre-tax underlying earnings.
Adjusted earnings decreased by €75 million (-20%) to €294 million. On a constant exchange rate basis, adjusted earnings decreased by €72 million (-20%) mainly driven by lower underlying earnings and lower net realized capital gains.
On a constant exchange rate basis, net income decreased by €93 million (-26%) mainly driven by lower adjusted earnings and an unfavorable change in the fair value of alternative investments and convertible bonds (€-13 million) and interest rate derivatives not eligible for hedge accounting (€-10 million).
Savings business line; ■ Unit-Linked revenues (8% of gross revenues) decreased by €370 million (-80%) to €94 million mainly due to lower sales of the Oxylife Invest hybrid product, in line with the strategy to focus on Protection products and to exit the Individual
APE decreased by €44 million (-45%) to €55 million. On a comparable basis, APE decreased by €44 million (-45%): ■ Protection & Health sales (52% of APE) increased by €5 million
(+19%) to €29 million mainly due to higher new business in
Group Protection; ■ G/A Savings sales (32% of APE) decreased by €12 million
Fees & revenues decreased by €5 million (-4%) to €134 million refl ecting lower gross revenues.
Expenses decreased by €19 million (-8%) to €-224 million: ■ acquisition expenses decreased by €23 million (-21%) to €-88 million, mainly due to lower commissions and overhead costs driven by lower volumes as well as a reallocation of some costs from acquisition to administrative expenses in the context of the exit from the Individual Savings business line; ■ administrative expenses increased by €4 million (+3%) to €-136 million driven by the above-mentioned reallocation, partly offset by the positive impacts of cost savings programs as well as lower commissions.
Amortization of VBI increased by €4 million to €-8 million as a result of unfavorable fi nancial assumptions update.
Adjusted earnings increased by €7 million (+3%) to €232 million as higher underlying earnings were partly offset by higher impairments mainly on equities.
(a) Before intercompany eliminations. Gross Revenues amounted to €3,411 million net of intercompany eliminations as of December 31, 2016.
capital light products due to the above-mentioned context; ■ Protection & Health sales (13% of APE) increased by €7 million
Fees & revenues decreased by €76 million (-21%) to €288 million due to lower Unearned Revenues Reserves amortization as a consequence of lower Protected Unit product surrenders (partly offset in Deferred Acquisition Costs).
Expenses decreased by €30 million (-10%) to €-288 million mainly driven by lower Deferred Acquisition Costs amortization
Income tax expenses decreased by €9 million (-16%) to €-46 million due to lower pre-tax underlying earnings.
(a) Before intercompany eliminations. Gross Revenues amounted to €794 million net of intercompany eliminations as of December 31, 2016.
(-11%) to €24 million mainly due to adverse market conditions; ■ Unit-Linked sales (21% of APE) decreased by €6 million
Investment margin decreased by €7 million (-14%) to €40 million mainly due to lower reinvestment yields on fi xed income assets, partly offset by lower interests credited to policyholders.
Net income increased by €16 million (+36%) to €60 million mainly driven by higher adjusted earnings as well as a favorable foreign exchange impact combined with a positive change in the fair value of m utual funds.
Net capital gains or losses attributable to shareholders net of income tax (2) 1
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 10 9
(a) Before intercompany eliminations. Gross Revenues amounted to €1,092 million net of intercompany eliminations as of December 31, 2016.
Gross revenues decreased by €190 million (-15%) to €1,095 million. On a comparable basis, gross revenues increased by €15 million (+1%) mainly driven by: ■ Mexico (€+11 million or +4%) and Colombia (€+9 million or
+3%) both mainly in Protection & Health; ■ Luxembourg (€-11 million or -8%) mainly due to lower sales of G/A Savings products.
Poland (€-8 million) driven by lower sales of Unit-Linked products following regulatory changes.
Investment margin decreased by €10 million (-15%) to €57 million. On a comparable basis, investment margin increased by €5 million (+8%) mainly in Mexico.
Net technical margin decreased by €4 million (-5%) to €84 million. On a comparable basis, net technical margin increased by €8 million (+10%) mainly in Mexico with improved mortality margin reflecting pruning actions and lower large claims.
Amortization of VBI decreased by €1 million to €-4 million. On a comparable basis, amortization of VBI remained stable.
Adjusted earnings decreased by €21 million (-31%) to €47 million. On a comparable basis, adjusted earnings decreased by €9 million (-15%) driven by lower underlying earnings as well as lower net realized capital gains.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 6 2
Gross revenues increased by €229 mill ion (+9%) to €2,769 million. On a comparable basis, gross revenues increased by €307 million (+13%): ■ Protection & Health revenues (80% of gross revenues)
(+76%) to €125 million driven by the successful launch of a
G/A capital light product, partly offset by; ■ Unit-Linked sales (5% of APE) decreased by €19 million (-44%)
Underlying earnings increased by €13 million (+4%) to €366 million. On a constant exchange rate basis, underlying earnings increased by €9 million.
On a constant exchange rate basis, net income decreased by €228 million (-39%) mainly due to the non-repeat of the exceptional capital gain on the disposal of the pension business
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (38) 10
(a) Before intercompany eliminations. Gross Revenues amounted to €606 million net of intercompany eliminations as of December 31, 2016.
Scope: (i) for gross revenues: Singapore and non-bancassurance subsidiaries in Indonesia, on a 100% share basis; (ii) for APE, underlying earnings, adjusted earnings and net income: China,
APE increased by €108 million (+17%) to €754 million. On a comparable basis, APE increased by €125 million (+19%)
mainly driven by China (€+133 million) due to strong sales of
Underlying earnings increased by €28 million (+20%) to €174 million. On a constant exchange rate basis, underlying earnings increased by €31 million (+22%) mainly due to: ■ strong new business, in-force portfolio growth and higher investment returns in China (€+20 million); ■ in-force portfolio growth in Thailand (€+18 million); ■ better market performance in the Philippines (€+3 million); ■ partly offset by lower investment performance and deteriorated claims experience in Health in Indonesia (€-9 million).
Adjusted earnings increased by €18 million (+11%) to €177 million. On a constant exchange rate basis, adjusted earnings increased by €21 million (+13%) mainly due to higher underlying earnings (€+31 million), partly offset by lower net realized capital gains in China (€-11 million).
(a) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of a part of the International Insurance segment into the Life & Savings segment.
Underlying earnings decreased by €9 million to €-18 million. On a constant exchange rate basis, underlying earnings decreased by €10 million mainly due to accelerated Deferred Acquisition
Costs amortization as a result of the decision to stop sales of the Secure Advantage product.
Net income decreased by €15 million to €-24 million. On a constant exchange rate basis, net income decreased by €17 million mainly driven by lower adjusted earnings and exceptional restructuring costs, partly offset by a favorable change in the fair value of interest rate derivatives not eligible for hedge accounting.
Underlying earnings and adjusted earnings increased by €3 million to €-14 million mainly driven by an improved technical margin.
Adjusted earnings and net income decreased by €3 million to €-21 million due to lower net realized capital gains in 2016.
Underlying earnings and adjusted earnings decreased by €4 million to €2 million. On a constant exchange rate basis, underlying and adjusted earnings decreased by €4 million mainly driven by higher expenses due to growth in the Architas business, partly offset by higher fees and revenues.
Net income decreased by €4 million to €0 million. On a constant exchange rate basis, net income decreased by €4 million mainly due to lower adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax 50 44
Expense ratio increased by 3.7 points to 27.3%. On a comparable basis, expense ratio remained stable.
As a result, the combined ratio improved by 0.7 point to 94.5%. On a comparable basis, the combined ratio improved by 1.2 points to 94.1%.
Income tax expenses increased by €8 million (+3%) to €-287 million. On a comparable basis, income tax expenses increased by €12 million (+4%) due to higher pre-tax underlying earnings, partly offset by the decrease in the corporate tax rate from 38% to 34.43%.
Adjusted earnings increased by €97 million (+18%) to €648 million. On a comparable basis, adjusted earnings increased by €76 million (+14%) driven by higher underlying earnings and higher net realized capital gains.
Net capital gains or losses attributable to shareholders net of income tax 11 10
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 17 (32)
In the comments below, the comparable basis excludes the contribution of Simplyhealth whilst the fi rst consolidation took place at the end of 2015.
to €21 million due to a reduction in the retrocession of the
• Motor was up 21% to €597 million principally due to increased new business volumes and higher retention rates; ■ Personal lines (46% of gross revenues) were up 7% to €2,162 million: • Non-Motor was up 5% to €1,457 million: (i) Health was up 7% to €801 million following strong growth in Great
Net technical result decreased by €75 million (-5%) to €1,363 million. On a constant exchange rate basis, net technical result increased by €72 million (+5%): ■ the current year accident loss ratio decreased by 0.8 point to 69.2% due to a reduction in Nat Cat and other weatherrelated claims (-1.5 points), an improvement in Personal
Motor (-8.4 points) refl ecting tariff increases in Great Britain and Ireland, and a reduction in Health (-0.4 point) due to an improvement in Simplyhealth and tariff increases in
Commercial, partly offset by a deterioration in the international business. These improvements in profi tability were partly offset by a deterioration in Personal Travel (+6.0 points)
(+4.0 points) refl ecting higher average damage costs as well as increases in the Group pool; ■ the all accident year loss ratio increased by 0.9 point to 70.3%
Great Britain following changes in business mix, increased broker business in the Republic of Ireland and further growth in
As a result, the combined ratio increased by 1.3 points on both reported and a constant exchange rate basis to 98.9%.
Net investment result decreased by €36 million (-16%) to €191 million. On a constant exchange rate basis, net investment result decreased by €16 million (-7%) due to higher foreign exchange hedging costs.
Income tax expenses decreased by €28 million (-42%) to €-38 million. On a constant exchange rate basis, income tax expenses decreased by €24 million (-36%) mainly refl ecting lower pre-tax underlying earnings.
Underlying earnings decreased by €70 million (-26%) to €203 million. On a constant exchange rate basis, underlying earnings decreased by €48 million (-18%).
On a constant exchange rate basis, net income increased by €34 million (+16%) due to a favorable change in the fair value of interest rate derivatives not eligible for hedge accounting
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (2) (32)
(a) Before intercompany eliminations. Gross Revenues amounted to €4,016 million net of intercompany eliminations as of December 31, 2016.
Gross revenues increased by €100 mill ion (+3%) to €4,045 million. On a comparable basis, gross revenues increased by €111 million (+3%): ■ Personal lines (57% of gross revenues) were up 2% to €2,283 million mainly driven by tariff increases in both Motor and Non-Motor; ■ Commercial lines (34% of gross revenues) were up 3% to €1,364 million mainly in Property driven by new business in
SME and Mid Market; ■ Other lines (9% of gross revenues) were up 9% to €397 million mainly driven by higher assumed business from Commercial lines.
Net technical result decreased by €107 million (-8%) to €1,257 million: ■ the current accident year loss ratio remained stable at 67.4%
as the unfavorable impact of Nat Cat events (+0.9 point or €66 million) from Marine and Elvira storms and higher net large claims (+0.6 point) were offset by a lower impact from natural events (-1.5 points); ■ the all accident year loss ratio increased by 3.5 points to 69.0% due to the non-repeat of favorable 2015 prior year reserve developments.
Expense ratio increased by 0.2 point to 28.4% mainly due to higher administrative costs for pensions which partly offset the gain in holdings.
Net investment result increased by €16 million (+6%) to €306 million mainly due to higher private equity dividends.
Adjusted earnings decreased by €72 million (-20%) to €293 million mainly driven by lower underlying earnings partly offset by higher net realized capital gains mainly from equities.
Net income decreased by €99 million (-31%) to €216 million as a result of lower adjusted earnings, higher restructuring costs and an unfavorable impact of foreign exchange derivatives not eligible for hedge accounting, partly offset by a favorable change in the fair value of fi xed income funds as a result of lower interest rates.
(+1%): ■ Personal lines (55% of gross revenues) were up 1% to €1,712 million driven by higher volumes and positive price effects in Motor as well as higher volumes in Household and
Net technical result decreased by €25 million (-2%) to €1,191 million. On a constant exchange rate basis, net technical result decreased by €13 million (-1%): ■ the current accident year loss ratio decreased by 1.2 points to 66.1% driven by an improvement in Workers’ Compensation; ■ the all accident year loss ratio increased by 0.6 point to 61.7%
Income tax expenses decreased by €1 million (-1%) to €-123 million. On a constant exchange rate basis, income tax expenses remained stable.
(€-11 million), partly offset by a favorable change in the fair value of alternative investments (€+10 million).
(a) Before intercompany eliminations. Gross Revenues amounted to €2,081 million net of intercompany eliminations as of December 31, 2016.
and the terrorist attacks in March 2016 (€26 million), partly offset by lower large claim charges; ■ the all accident year loss ratio increased by 4.4 points to 64.8%
Expense ratio decreased by 0.2 point to 30.5% driven by a lower administrative expense ratio.
As a result, the combined ratio increased by 4.2 points to 95.2%.
Net income decreased by €111 million (-42%) to €150 million mainly due to lower adjusted earnings as well as higher restructuring costs (€-80 million) following the plan announced in September 2016.
(a) Before intercompany eliminations. Gross Revenues amounted to €1,557 million net of intercompany eliminations as of December 31, 2016.
Expense ratio increased by 0.3 point to 28.9% mainly driven by an increase in the acquisition expense ratio from higher commissions due to a change in business mix and a large partnership in Commercial Motor, partly offset by the positive impacts of cost savings programs.
Income tax expenses decreased by €43 million (-40%) to €-64 million driven by lower pre-tax underlying earnings.
Expense ratio increased by 0.6 point to 26.9% mainly driven by an increase in the acquisition expense ratio mainly refl ecting lower gross earned premiums.
As a result, the combined ratio improved by 1.8 points to 98.0%.
Income tax expenses increased by €1 million (+4%) to €-29 million driven by higher pre-tax underlying earnings, partly offset by the decrease in the corporate tax rate.
Net income increased by €11 million (+21%) to €61 million mainly driven by higher adjusted earnings, partly offset by higher restructuring costs.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 19 38
Nigeria and Lebanon are consolidated under the equity method and contribute only to the underlying earnings, adjusted earnings and net income; (iii) Brazil is fully consolidated since January 1, 2016; (iv) Portugal was disposed on April 1, 2016.
In the comments below, the comparable basis includes the contribution of Brazil and excludes Portugal.
(63% of gross revenues) were up 5% to €2,660 million and Other lines (1% of gross revenues) were up 209% to €84 million, with: ■ Turkey up €163 million (+17%) mainly driven by tariff increases in Motor; ■ Mexico up €124 million (+8%) mainly driven by tariff increases in Health; ■ Brazil up €66 million (+359%) driven by new business in
On a comparable basis, enlarged expense ratio increased by 1.1 points.
As a result, the combined ratio improved by 5.0 points to 102.9%. On a comparable basis, the combined ratio improved by 5.1 points.
On a comparable basis, income tax expenses increased by €40 million primarily due to higher pre-tax underlying earnings.
Net income from investments in affi liates and associates 9 8
Net capital gains or losses attributable to shareholders net of income tax (2) (2)
(a) Before intercompany eliminations. Gross Revenues amounted to €2,864 million net of intercompany eliminations as of December 31, 2016.
(+8%) to €2,500 million driven by (i) Poland (€+67 million or
(€-18 million or -3%) due to the implementation of a pruning strategy to restore profi tability;
Net technical result increased by €84 million (+14%) to €691 million. On a comparable basis, net technical result increased by €109 million (+18%): ■ the current accident year loss ratio improved by 1.2 points to 76.9% mainly from (i) the United Kingdom mainly driven by a reduction in claims handling costs, lower Nat Cat and natural events, as well as improvements in Motor refl ecting tariff increases, and (ii) lower attritional losses in South Korea,
Expense ratio increased by 0.7 point to 21.8%. On a comparable basis, expense ratio increased by 0.7 point mainly from investments in IT systems in the United Kingdom.
As a result, the combined ratio improved by 1.2 points to 96.8%. On a comparable basis, the combined ratio improved by 1.4 points.
Net investment result decreased by €8 million (-7%) to €115 million. On a comparable basis, net investment result decreased by €1 million (-1%).
Underlying earnings increased by €34 million (+25%) to €168 million. On a comparable basis, underlying earnings increased by €47 million (+35%).
Net income increased by €50 million (+46%) to €157 million. On a comparable basis, net income increased by €64 million (+58%)
mainly driven by higher adjusted earnings and a favorable change in the fair value of interest rate derivatives not eligible for hedge accounting in the United Kingdom.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (1) 0
Gross revenues increased by €2 million to €1,111 million. On a comparable basis, gross revenues increased by €6 million
(+1%). Personal lines (50% of gross revenues) were up 4% to €560 million and Commercial lines (50% of gross revenues) were down 3% to €551 million. The overall increase was driven by: ■ Malaysia (€+33 million or +11%) driven by (i) Personal lines
Motor as well as (ii) Commercial lines (€+13 million) from new large accounts in Health and Property; ■ Thailand (€+5 million or +7%) driven by Commercial lines
(€+7 million) from new large accounts in Property; partly offset by: ■ Singapore (€-17 million or -6%) mostly due to market competition in (i) Commercial lines (€-11 million) mainly from
Workers’ Compensation and Construction and in (ii) Personal lines (€-7 million) mainly from Motor due to tariff decreases and lower renewals; ■ Hong Kong (€-15 million or -3%) due to (i) Commercial lines
(€-28 million) mainly due to the pruning of large accounts in
As a result, the combined ratio increased by 1.4 points to 95.3%. On a constant exchange rate basis, the combined ratio increased by 1.4 points.
Income tax expenses decreased by €7 million (-35%) to €-12 million. On a constant exchange rate basis, income tax expenses decreased by €6 million (-33%) mainly due to lower pre-tax underlying earnings.
Underlying earnings decreased by €4 million (-8%) to €49 million. On a constant exchange rate basis, underlying earnings decreased by €4 million (-8%) mainly driven by lower pre-tax underlying earnings and lower results from affi liates and associates, driven by China due to higher digital marketing investments. Restating from the change of the Group share in
On a constant exchange rate basis, adjusted earnings decreased by €5 million (-8%) driven by lower underlying earnings.
In the comments below, the comparable basis excludes the contribution of the Brazil activities consolidated starting from
Net technical result decreased by €8 million (-2%) to €383 million. On a comparable basis, net technical result decreased by €27 million (-7%): ■ the current accident year loss ratio increased by 0.3 point to 85.7% driven by higher large losses in Liability, partly offset by lower large losses in Marine and Aviation; ■ the all accident year loss ratio increased by 1.0 point to 83.4%
Net investment result increased by €9 million (+5%) to €182 million. On a comparable basis, net investment result decreased by €1 million due to lower reinvestment on the fi xed income portfolio, partly offset by higher distribution from mutual funds .
Income tax expenses decreased by €38 million (-54%) to €-32 million. On a comparable basis, income tax expenses decreased by €38 million (-54%) mainly due to lower pre-tax underlying earnings as well as positive tax one-offs.
Underlying earnings decreased by €12 million (-9%) to €122 million. On a comparable basis, underlying earnings decreased by €12 million (-9%).
On a comparable basis, net income remained stable as lower adjusted earnings and unfavorable change in the fair value of mutual funds were offset by the realized capital gain related to the disposal of Portugal.
Net income from investments in affi liates and associates 1 1
Net capital gains or losses attributable to shareholders net of income tax 0 1
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (2) (1)
(a) Before intercompany eliminations. Gross Revenues amounted to €1,276 million net of intercompany eliminations as of December 31, 2016.
Underlying earnings decreased by €12 million (-47%) to €13 million mainly driven by costs incurred in relation with the set-up of AXA Partners, a higher commission ratio and a higher corporate tax rate due to an unfavorable country mix.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 4 7
Adjusted earnings decreased by €13 million (-20%) to €51 million. On a constant exchange rate basis, adjusted earnings decreased by €10 million (-16%) mainly driven by lower underlying earnings and lower net realized capital gains.
Underlying earnings decreased by €9 million (-25%) to €28 million mainly driven by a lower technical margin.
Adjusted earnings decreased by €9 million (-25%) to €28 million due to lower underlying earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 23 (1)
Assets under Management (“AUM”) increased by €31 billion from year-end 2015 to €486 billion as a result of €26 billion market appreciation, €14 billion favorable foreign exchange rate impact and €2 billion change in scope from the acquisition of
Ramius, partly offset by €-12 billion net outfl ows mainly from
Gross revenues decreased by €48 mil l ion (-2%) to €2,642 million. On a comparable basis, gross revenues decreased by €82 million (-3%) due to (i) lower investment management fees (-3%) resulting from an unfavorable shift in product mix, (ii) lower Institutional Research Services fees (-3%)
(iii) lower distribution fees (-10%) due to lower average AUM in retail mutual funds .
The underlying cost income ratio improved by 2.1 points to 72.9%.
Income tax expenses increased by €81 million (+59%) to €-220 million. On a constant exchange rate basis, income tax expenses increased by €79 million (+57%) due to higher pre-tax underlying earnings and an unfavorable tax one-off (€-66 million).
Comparable basis in the comments below refers to constant foreign exchange rate restatement, excluding distribution fees.
Assets under Management (“AUM”) increased by €48 billion from December 31, 2015 to €717 billion at the end of
General expenses decreased by €26 million (-2%) to €-1,201 million. On a comparable basis, net general expenses increased by €30 million (+3%) to €881 million, mainly due to higher staff costs following business development initiatives launched in 2016.
Income tax expenses decreased by €39 million (-29%) to €-96 million. On a comparable basis, income tax expenses decreased by €37 million (-27%) driven by lower pre-tax underlying earnings, the non-repeat of unfavorable tax one-offs in 2015 as well as a lower effective tax rate driven by a more favorable country mix.
(+2%) mainly driven by fair value adjustments to the deferred consideration linked to the disposal of AXA Private Equity in 2013.
Net banking revenues decreased by €27 million (-7%) to €375 million.
Underlying earnings and adjusted earnings decreased by €16 million (-18%) to €74 million due to (i) lower operating net banking revenues (€-22 million), (ii) higher distribution commissions (€-5 million), (iii) higher bank levies (€-4 million), partly offset by (iv) improved cost of risk (€+13 million) and
Net income decreased by €29 million (-29%) to €71 million due to (i) lower adjusted earnings, (ii) higher expenses in the context of the closure of the Hungarian branch, (iii) a less favorable change in the fair value of interest rate derivatives and (iv) higher restructuring costs.
Net banking revenues decreased by €11 million (-7%) to €141 million.
Underlying earnings and adjusted earnings decreased respectively by €4 million (-87%) to €1 million and by €5 million
Net income increased by €94 million to €27 million. On a constant exchange rate basis, net income increased by €94 million mainly due to (i) the non-repeat of the booking of a €77 million provision in 2015 in anticipation to the loss related to the sale of the Hungarian operations and (ii) the release of part of this provision (€+21 million) following positive credit experience on the underlying mortgage portfolio.
Net banking revenues decreased by €1 million (-2%) to €21 million.
exchange economic derivatives not eligible for hedge accounting combined with (iv) a negative tax one-off refl ecting the partial write-off of the net deferred tax asset position of the French
Tax consolidation Group due to the decrease in the corporate tax rate from 34% to 28% enacted in 2016 to be effective as of January 1, 2020.
On a comparable basis, underlying earnings increased by €5 million due to the decrease of the tax on dividends received from subsidiaries.
Adjusted earnings and net income increased by €2 million to €-13 million. On a comparable basis, adjusted earnings and net income increased by €6 million due to the increase in underlying earnings, partly offset by impairments on equity securities.
Net income increased by €909 million to €892 million. On a constant exchange rate basis, net income increased by €897 million refl ecting the exceptional net capital gain on the sale of two real estate properties in New York.
Underlying earnings remained stable at €-1 million on both reported and constant exchange rate basis.
Net income decreased by €109 million to €-101 million. On a constant exchange rate basis, net income decreased by €121 million mainly refl ecting the loss related to the disposal of
Underlying earnings increased by €60 million to €53 million mainly due to lower pension costs and one-off interest profi ts on tax claims.
Net income increased by €57 million to €64 million mainly as the result of higher adjusted earnings and a favorable change in the fair value of hedging derivatives related to pensions not eligible for hedge accounting.
On a constant exchange rate basis, adjusted earnings decreased by €2 million as higher underlying earnings were more than offset by lower net realized capital gains.
Note 4 “Financial and insurance risk management” in Part 5 –
Over the past several years, the Group has expanded its core operations (insurance and asset management) through a combination of organic growth, direct investments and acquisitions. This expansion has been funded primarily through a combination of (i) dividends received from operating subsidiaries, (ii) proceeds from debt instruments issuance
The principal sources of liquidity for the Group’s insurance subsidiaries are premiums, investment income and proceeds from sales of invested assets. These funds are mainly used to pay policyholder benefi ts, claims and claims expenses, policy surrenders and other operating expenses and to purchase investment assets and meet potential collateral exchange obligations in relation to derivatives. The liquidity of the Group’s insurance operations is affected by, among other things, the overall quality of the Group’s investments and the Group’s ability to liquidate its investment assets in a timely manner and to meet policyholder benefi ts and insurance claims as they fall due.
Liquidity needs of Property & Casualty subsidiaries can be affected by actual claims experience. Property & Casualty
Insurance’s net cash fl ows are generally positive. They can be negative in the case of exceptional loss events, such as natural catastrophe events. A portion of these cash fl ows is invested in liquid, short-term bonds and other listed securities in order to manage the liquidity risk that may arise from such events.
Statements” of this Annual Report). As of December 31, 2016, AXA’s consolidated statement of financial position included cash and cash equivalents of €25.7 billion, net of bank overdrafts of €0.6 billion; ■ broad access to various markets via standardized debt programs: for example, at the end of 2016, this included a maximum capacity of €6.0 billion of French commercial paper, $2.0 billion of US commercial paper, €17.0 billion under a
SA also held €12.4 billion of committed undrawn credit lines at year-end 2016. AXA has its own liquidity requirements resulting mainly from solvency needs of Group entities under severe stress scenarios and collateralized derivatives held by AXA SA. The derivatives book is monitored and managed on a daily basis by the AXA Group Treasury Department.
(€7,465 million including derivatives), thus showing an increase of €2,184 million excluding the impact of derivatives.
At December 31, 2016, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
(2) “Debt gearing” is defi ned in the Glossary set forth in Appendix VI of this Annual Report.
(4) Only information contained in Section 4.2 “Internal control and risk management ” of this Annual Report and referred to in Note 4 “Financial and insurance risk management” in Part 5 – “Consolidated Financial Statements” of this Annual Report is covered by the report of the Statutory
At December 31, 2016, other debt instruments issued was equal to €1,191 million, down from €2,612 million at the end of 2015. The decrease of €1,421 million resulted mainly from the reimbursement of commercial papers by AXA SA.
At December 31, 2016, other debt owed to credit institutions was equal to €890 million (including €580 million of bank overdrafts), decrease of €37 million compared to €927 million at the end of 2015 (including €645 million of bank overdrafts).
For several years, the AXA Group has offered to its employees, in and outside France, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2016, employees invested a total of €430 million leading to the issue of approximately 24.5 million new shares. To eliminate the dilutive impact of the newly issued shares, AXA bought back the equivalent number of such shares to cancel them.
Miles and stock options) amounted to 5.4 million shares in 2016.
To eliminate the dilutive impact of the newly issued shares, AXA
Interest paid by the Company in 2016 was equal to €1,078 million (€1,094 million in 2015), of which interest on undated subordinated debt of €444 million (€431 million in 2015).
The Group was in compliance with the applicable solvency requirements as of December 31, 2016 and monitors compliance with such requirements on a continuous basis.
Dated and undated subordinated notes issued by the Company qualify as available fi nancial resources.
Subordinated notes issued since January 17, 2015 have been structured to be eligible as own funds regulatory capital under Solvency II regulations. Subordinated notes issued prior
Company may, at its option, under certain circumstances and shall, in other circumstances, defer interest payment (e.g. no dividend declared or paid in the preceding Annual Shareholders’
In particular, most of the Company’s TSS include loss absorption mechanisms which provide that under certain circumstances where the Company does not meet its regulatory capital requirements, the principal amount of each of the relevant TSS
In addition, for most of the Company’s TSS, upon the occurrence of certain events relating to the Company’s consolidated net earnings and shareholders’ equity, the Company is required to defer payment of interest. In such events, the Company may choose to pay such deferred interest by way of alternative coupon settlement mechanisms within five years (such as, issuance of new shares or other securities including TSS or preference shares, sale of treasury shares, or an increase in the principal amount of the relevant notes, subject to applicable limits), failing which the interest is forfeited. However, the settlement of deferred interest becomes due, on a best efforts basis, in certain circumstances including redemption of the notes, liquidation of the Company, payment of a dividend or interest on any other TSS, any share buyback outside the
Finally, under its TSS, the Company has an option to cancel payments of interest upon the deterioration of its financial 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 Group share buy-back program or a repurchase or redemption of any TSS).
Group SCR would not be possible within a maximum of 9 months.
Shareholders’ Meeting to be held on April 26, 2017. Subject to the Shareholders’ Meeting approval, the dividend will be payable on May 9, 2017, with an ex-dividend date of May 5, 2017.
AXA on January 1, 2017. Bondholders holding in aggregate 348 bonds, representing €93,668, have elected, in accordance with the terms and conditions of the bond, to maintain their conversion option into shares until March 31, 2017, rather than being repaid on January 1, 2017. Among these, the bonds for which the conversion option will not have been exercised by
AXA ANNOUNCED THE SUCCESSFUL PLACEMENT OF $1 BILLION DATED SUBORDINATED NOTES DUE 2047
The notes have been swapped into Euro over 10 years at a rate of 2.80%, corresponding to a 209 basis points spread over swap.
AXA’s continued discipline has positioned the Company well to remain resilient and strong in an environment characterized by continued market volatility, low rates and political uncertainties.
This should enable AXA to continue creating lasting shareholder value and offer an attractive return.
Transactions involving Company securities completed in 2016 by the members of the Board of Directors 163
Special report of the Statutory Auditors on regulated agreements and commitments 172
Implementing sound corporate governance principles has been a priority at AXA for many years. In this context, AXA chose to adopt, in 2008, the Corporate Governance Code for French listed corporations (Code de gouvernement d’entreprises des sociétés cotées) published by the Afep (Association française des entreprises privées) and the Medef (Mouvement des entreprises de France) (the “Afep-Medef Code”). The Board of Directors believes that AXA’s corporate governance practices are in line with the recommendations of the Afep-Medef Code (revised in
and its accompanying guide and have followed the evolution of corporate governance practices in France and abroad, as well as the recommendations and standards of shareholders, regulators, the French High Committee for Corporate Governance (Haut
Intérieur) (the “Board’s Terms of Reference”) which detail in particular the role and responsibilities of the Board and its
Separation of the positions of Chairman of the Board of Directors and Chief Executive Offi cer
Since April 2010, the positions of Chairman of the Board of
These decisions were taken following a comprehensive succession planning process carried out by the Compensation &
Mr. Thomas Buberl and would lead to a smooth transition with the previous organization .
Chief Executive Offi cer, the Board of Directors also decided to maintain the position of Senior Independent Director for a variety of reasons including that Mr. Denis Duverne is not considered as an independent Board member under Afep-Medef criteria due to his role as Deputy Chief Executive Offi cer of AXA until
Thomas Buberl The Chief Executive Officer is vested with the broadest powers to act in all circumstances on behalf of the Company and to represent the Company in its relationships with third parties
The members of the Board of Directors are appointed by the
Compensation & Governance Committee regularly review the membership of the Board and endeavor to ensure that directors come from diverse backgrounds with different experiences, technical skills, gender, age and nationality. The Board believes that this diversity fosters open debate within the Board and brings a broader perspective to Board discussions.
Diversity directors out of 16 are non-French nationals – 6 nationalities are represented on the Board.
Denis Duverne (63) Chairman of the Board of Directors 25, avenue Matignon – 75008 Paris – France French nationality
Chairman of the Board of Directors April 2010/2018 Annual Shareholders’ Meeting
Director and Chief Executive Offi cer September 2016/2018 Annual Shareholders’ Meeting
Senior Independent D irector Chairman of the Compensation & Governance Committee
André François-Poncet (57) Partner of CIAM (Paris) 72 boulevard Haussmann – 75009 Paris – France French nationality
Mrs. Suet Fern Lee (58) Managing Partner of Morgan Lewis Stamford LLC (Singapore) 10 Collyer Quay #27-00 Ocean Financial Centre – Singapore 049315 – Singapore Singaporean nationality
Stefan Lippe (61) Co-founder and Chairman of the Board of Directors of Yes Europe AG (formerly Paperless Inc.) (Switzerland) and co-founder and Vice-Chairman of the Board of Directors of Acqupart Holding AG (Switzerland) Baarerstrasse 8 – CH 6300 Zug – Switzerland German and Swiss nationalities
François Martineau (65) Attorney at Law at Lussan/Société d’avocats 282, boulevard Saint Germain – 75007 Paris – France French nationality
Ramon de Oliveira (62) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue – New York – NY 10065 – United States French nationality
Mrs. Doina Palici-Chehab (59) Chief Executive Offi cer of AXA Insurance Singapore Pte Ltd (Singapore) 8, Shenton Way – #27-01 AXA Tower – Singapore 068811 – Singapore German and French nationalities
The Shareholders’ Meeting to be held on April 26, 2017 will be asked to vote on (i) the re-appointment of two members of the Board of Directors whose terms of offi ce end at that meeting (Mrs. Deanna Oppenheimer and Mr. Ramon de Oliveira)
and (ii) the ratifi cation of the cooptation of two members to the Board (on September 1, 2016, the Board of Directors appointed Mr. Thomas Buberl as a Board member, replacing
Mr. Henri de Castries until the 2018 Shareholders’ Meeting, and on December 14, 2016, the Board of Directors appointed
Elected on April 23, 2014 – Term expires at the 2018
C ommerciales (HEC). After graduating from the École N ationale d’A dministration (ENA), he started his career in 1979 at the Tax
Department of the French Ministry of Finance, and, after 2 years as commercial counselor for the French Consulate General in New
York, he became director of the Corporate Taxes Department and then responsible for tax policy within the French Ministry of Finance from 1986 to 1991. In 1991, he was appointed Corporate Secretary of Compagnie Financière IBI. In 1992, he became a member of the
In 1995, Mr. Denis Duverne joined the AXA Group and assumed responsibility for supervision of AXA’s operations in the US and the UK. He also managed the reorganization of AXA companies in Belgium and the United Kingdom. From February 2003 until
Operations. From April 2010 to August 31, 2016, Mr. Denis Duverne was director and Deputy Chief Executive Offi cer of AXA, in charge of Finance, Strategy and Operations. Mid-2014, Mr. Denis Duverne became a member of the Private Sector Advisory Group (PSAG), which brings together international leaders of the private sector whose shared goal is to help developing countries improve their corporate governance, co-founded in 1999 by the World Bank and the Organisation for Economic Co-operation and Development
(1) The current directorships held by members of the Board of Directors within a listed company are indicated by the following symbol: *.
Number of AXA shares held on December 31, 2016: Born on March 24, 1973
Koblenz (Germany), a MBA from Lancaster University (UK) and a PhD in
Economics from the University of St.Gallen (Switzerland). In 2008 he was nominated as a Young Global Leader by the World Economic Forum.
Group as a consultant for the banking & insurance sector in Germany and abroad. From 2005 to 2008, he worked for the Winterthur Group as member of the Management Board of Winterthur in Switzerland, fi rst as Chief Operating Offi cer and then as Chief Marketing and Distribution
Offi cer. Then, he joined Zurich Financial Services where he had been
Chief Executive Offi cer for Switzerland. From 2012 to April 2016, he was Chief Executive Offi cer of AXA Konzern AG (Germany). In 2012, he became member of the AXA Executive Committee. In March 2015, he became Chief Executive Offi cer of the Global Business Line for the Health
(1) Mr. Thomas Buberl requested the Board of Directors’ advice before accepting new directorships in companies outside the AXA Group.
Mr. Jean-Pierre Clamadieu is a graduate of the École N ationale
Executive Committee and member of the Board of Directors of Solvay.
Elected on April 27, 2016 – Term expires at the 2020
Barrister-at-Law (College of Law, London) and then became in-house counsel for Citibank N.A. In 1986, she joined Samuel Montagu as Head of the Legal Department and, following the HSBC acquisition of Midland
Number of AXA shares held on December 31, 2016: Born on January 11, 1947
Mr. Jean-Martin Folz is a graduate of the École Polytechnique and ingénieur du Corps des Mines. Between 1975 and 1978, he has held various French government cabinet positions, his last position being head of cabinet of the Secretary of State for Industry. In 1978, he joined Rhône-
Executive Vice-President of Rhône-Poulenc for the Specialty Chemicals business unit. In 1984, he became Senior Executive Vice-President and then Chairman & Chief Executive Offi cer of Jeumont-Schneider
Offi cer of Péchiney and Chairman of Carbone Lorraine (in 1988). In 1991, he became Group Chief Executive Offi cer of Eridania Béghin-Say and Chairman & Chief Executive Offi cer of Béghin-Say. Mr. Jean-Martin
Director or member of the Management Committee: AXA*, AXA Millésimes (SAS)
(MBA) from the Harvard Business School. He began his career, in 1984, at Morgan Stanley in New York and then in London and in Paris, where he was in charge of the opening of Morgan Stanley French offi ce in 1987.
Partners (Paris and London) as Managing Partner until December 2014 and then as Senior Advisor until December 2015. Since September 2016,
Mr. André François-Poncet has been a Partner at the French asset manager CIAM in Paris.
Mr. Paul Hermelin is a graduate of the École P olytechnique and
Jacques Delors. He was chief of staff to the Minister of Industry and Foreign Trade, from 1991 to 1993. Mr. Paul Hermelin joined the Capgemini Group in May 1993, where he was fi rst in charge of coordinating central functions. In May 1996, he was appointed member of the Management Board of Cap Gemini and Chief Executive Offi cer of Cap Gemini France. In May 2000, following the merger between Cap
Deputy Chief Executive Offi cer of the Group and member of the Board of Directors. As of January 1 , 2002, he is Chief Executive Offi cer of the Capgemini Group. Since May 2012, Mr. Paul Hermelin has been
Chief Finance & Risk Offi cer of the APG Group N.V. (the Netherlands)
In 2009, Dr. Angelien Kemna joined APG Group N.V. as member of the
Mrs. Isabelle Kocher is a graduate of the École N ormale S upérieure (ENS-
From 1997 to 1999, she was in charge of budget of Telecommunication and Defense at the French Ministry of Economy. From 1999 to 2002, she was Advisor on Industrial Affairs of the French Prime Minister’s
Office . In 2002, she joined the Suez group. She then held various positions: from 2002 to 2005, at Strategy & Development; from 2005 to 2007, director of Performance and Organisation; from 2007 to 2008,
September 2011, Mrs. Isabelle Kocher was Chief Executive Offi cer of Lyonnaise des Eaux, in charge of the development of activities in
Mrs. Suet Fern Lee graduated with a double fi rst in law from Cambridge
University in 1980 and qualifi ed as a Barrister-at-Law at Gray’s Inn
London in 1981. She was admitted to the Singapore Bar in 1982 and has practised law in London and Singapore since then. Since 2000, and until its combination in 2015 with the law fi rm Morgan Lewis in the
United States, she has been founder and managing partner of Stamford
University, where she also chairs the Expert Panel Centre of Cross-
Border Commercial Law in Asia and a trustee for Nanyang Technological
Co-founder and Chairman of the Board of Directors of Yes Europe AG (formerly Paperless Inc.) (Switzerland)
Number of AXA shares held on December 31, 2016: Born on October 11, 1955
In 1993, he became Chairman of the Management Board of Bavarian Re.
Mr. Stefan Lippe was appointed a member of Swiss Re’s Executive Board in 1995, as Head of the Bavarian Re Group. In 2001, he was assigned the role of Head of the Property & Casualty business Group and appointed a member of Swiss Re’s Executive Committee. Beginning in 2005, he led
Re and was also appointed Deputy Chief Executive Offi cer of Swiss
Re. In 2009, he was appointed Chief Executive Offi cer of Swiss Re and stayed in this function until January 2012. Mr. Stefan Lippe was named
Awards 2013 ceremony with the “Lifetime Achievement Award”. After nearly 30 years with Swiss Re, he turned to other activities. In 2011,
Chairman of the Board of Directors: CelsiusPro AG (Switzerland), Yes Europe AG (formerly Paperless Inc.) (Switzerland)
Number of AXA shares held on December 31, 2016: Born on June 11, 1951
Mr. François Martineau is a graduate of the University Paris IV (Philosophy
Honorary Professor at the Law and Political Sciences School of Lima
and lawyers’ training and the revision of the Code of Civil Procedure.
He also taught professionals at the École N ationale de la M agistrature
(ENM). Since 1987, Mr. François Martineau has been a Partner of the law fi rm Lussan/Société d’avocats, and Managing Partner since 1995
Vice-Chairman and member of the Supervisory Board: Associations Mutuelles Le Conservateur**, Assurances
Number of AXA shares/ ADS AXA held on December 31, 2016: 11,300
Manhattan Bank in 2001, Mr. de Oliveira was the only executive from
Executive of UK Retail and Business Banking (UK RBB). In recognition of her importance to retail banking at Barclays, she was given the additional title of Vice Chair, Global Retail Banking in 2009 where she shared the UK
Number of AXA shares held on December 31, 2016: Born on November 4, 1957
Matter Expert in AGF (now Allianz) in Cologne (Germany). In 1990, she joined the AXA Group as Reinsurance Director of AXA Germany based in
Offi cer of AXA Business Services in Bangalore (India). From April 2013 to December 2016, she was Chief Executive Offi cer of AXA Insurance
Pte Ltd (Singapore). Since April 2012, Mrs. Doina Palici-Chehab has been the employee shareholder representative to the AXA Board of Directors.
Number of AXA shares held on December 31, 2016: French nationality
In 1978, she joined Procter & Gamble and in 1983 became Associate
In 1998, she was appointed Chairman & Chief Executive Offi cer of
Chairman of Coca-Cola Enterprises – Groupe Europe. From May 2005 to March 2014, Mrs. Dominique Reiniche was Chairman Europe of The
4 Not be related by close family ties to an executive offi cer
6 Not have been a director of the Company for more than twelve years
Independent director after assessing the Afep-Medef criteria * The Company considers the fact that certain members of the AXA Board of Directors hold non-executive directorships in one or more Group subsidiaries wholly owned, directly or indirectly, by AXA does not automatically (i) place them in a situation of confl ict of interest, or (ii) impair their independence in any way. The Board believes that permitting its members to sit on the Boards of certain Group subsidiaries is benefi cial to the Board’s overall knowledge and appreciation of the Group’s operations, strategy and risk profi le. Directors who also serve on the Boards of Group subsidiaries, however, are required to abstain from participating in the decisions of the AXA Board which could affect the interests of the entity in which they hold a directorship to prevent any confl ict of interest or potential independence issues.
** Mr. Paul Hermelin is Chairman & Chief Executive Offi cer of Capgemini, a company which provides services to the AXA Group in the course of its ordinary business. Considering that (i) the revenues for Capgemini generated by these services do not exceed 0.5% of its consolidated total revenues, (ii) the conditions of these services are negotiated at arm’s length, and (iii) Mr. Paul Hermelin does not directly take part in negotiating any of the contracts with AXA, AXA’s Board of Directors considers that these business relationships are not signifi cant either for AXA or for Capgemini and they do not create a situation of economic dependence. Therefore, these relationships are not likely to question Mr. Paul Hermelin’s independence as a member of AXA’s Board of Directors.
*** As Mr. François Martineau is the Chairman of the Mutuelles AXA’s Strategy Committee, the Board of Directors concluded that he was no longer independent.
The Board is collectively responsible for determining the strategic orientations of the Company, ensuring its implementation, and establishing the internal framework for oversight of Executive
Bylaws of the Company. In addition, the Board inter alia: ■ chooses the appropriate governance framework; ■ appoints and dismisses the Chairman, any Vice-Chairman/
(ORSA – Own Risk and Solvency Assessment – report); ■ approves non-audit services and recommends the Group’s
As the Chief Executive Offi cer, who is also a Board member, is vested with the broadest powers to act in all circumstances on behalf of the Company and to represent the Company in its relationships with third parties, the Board of Directors also reserves the approval of certain matters to itself in its Terms of
Reference, including the approval of certain material transactions including sales or acquisitions (over €500 million), signifi cant fi nancing operations and other material transactions.
To ensure that the personal interests of the members of the
Board of Directors and those of the Company are appropriately aligned, the Board’s Terms of Reference provide that each member of the Board of Directors must hold, within two years following his/her fi rst appointment, a number of AXA shares with a value at least equal to the director’s gross fees earned in respect of the previous fi scal year (1).
The Board of Directors conducts an annual self-assessment to review its composition, Board work and performance.
The Chairman convenes the members of the Board without directors who are members of the Executive Management being present, in particular to permit debate on the performance and compensation of Executive Management and succession planning.
Following its decision to separate the positions of Chairman and Chief Executive Offi cer and to appoint Mr. Denis Duverne as Chairman, the Board decided, in light of his experience and knowledge of the AXA Group, to extend the role of the Chairman as follows (1): ■ promote the Company’s values and culture in particular, in relation to corporate responsibility and professional ethics; ■ upon request by the Chief Executive Offi cer, represent the
Company in its relations, nationally and internationally with public bodies, institutions, regulators, shareholders and the
Company’s main strategic partners and stakeholders; ■ consult with the Chief Executive Offi cer on major topics and events relating to the Company (including the Company’s strategy, major acquisition or divestment projects, signifi cant fi nancial transactions, major community projects and the appointment of the most senior executives of the Group); (1) For this purpose, AXA shares are valued using the closing price of the AXA share on December 31 of the preceding fi scal year.
Following the decision to separate the positions of Chairman and Chief Executive Offi cer, the Board of Directors decided to maintain the position of Senior Independent Director (2) which was established in 2010 when the Board decided to combine the roles of Chairman and Chief Executive Offi cer.
Senior Independent Director also reviews, with the Chairman of the Board of Directors, the agenda of Board meetings and the quality of information provided to the Board.
In addition, the Senior Independent Director may convene meetings of independent members of the Board, without the presence of the Chairman and Executive Management, in particular, to assess the performance of the Chairman, review his compensation and prepare his succession plan. He may also request the Chairman to convene the Board on a specifi c agenda.
In this context, he: ■ maintained regular dialogue with the members of the Board of Directors, in particular the independent members, and with the Executive Management and the Chairman of the Board ; ■ was actively involved in the preparation of Board meetings, working closely with Executive Management, the Chairman and other Board members; ■ worked closely with the Compensation & Governance
Management, the selection process for future members of the Board and Committees, the organization of the selfassessment of the Board and Committees, the review of all communications made to shareholders on corporate governance topics.
Mr. Norbert Dentressangle informed the Board of his decision to step down from the Board. In accordance with its Terms of Reference, the Board of Directors decided to appoint
Governance Committee, as Senior Independent Director, effective immediately, for the duration of his term of offi ce which will expire at the 2019 Shareholders’ Meeting.
In 2016, the Board of Directors met eleven times and scheduled a session at each Board of Directors’ meeting without the presence of Executive Management.
Offi cer, review of the Group’s strategy including its new 2020
Management Plan, the Group’s dividend policy, internal control and r isk m anagement, the self-assessment of the Board of
The Board of Directors conducts an annual self-assessment to review its composition, operating procedures and overall functioning.
The main identified areas for improvements were: (1) more regular information between Board meetings from the Chief
Executive Offi cers on insurance sector-related news or public announcements made by the Company to Board members,
To ensure a well-balanced governance, the Board’s Terms of Reference go beyond the requirements of French law and specifi cally provide that independent directors have a major role in all Board Committees, as follows: ■ each of the three Committees is chaired by an independent director; ■ all members of the Audit Committee and the Compensation &
Board at the following Board meeting. However, under French law, Board Committees do not have any formal decision making power and are advisory only.
Composition on December 31, 2016: Stefan Lippe, Chairman Irene Dorner Angelien Kemna Ramon de Oliveira
The scope of the Audit Committee’s responsibilities is set out in its Terms of Reference which are reviewed and approved each year by the Board of Directors. The principal missions of the Committee are: ■ to monitor the fi nancial reporting process and the integrity of the publicly reported results and disclosures made in the fi nancial statements; ■ to monitor the adequacy and effectiveness of the internal control and r isk m anagement frameworks and compliance with risk appetite limits; ■ to form an opinion on the effectiveness, performance and independence of the Group’s internal auditors; ■ to consider the appointment and oversee the process for selecting Statutory Auditors, monitor the Statutory Auditors’ audits and review of the Group’s consolidated fi nancial statements, as well as the auditors’ independence and the breakdown of their fees and review and make a recommendation to the Board as to the appointment of Statutory Auditors to provide non-audit services.
The review of fi nancial statements by the Audit Committee is accompanied by a report from the Statutory Auditors on the results of the statutory audit and the accounting methods chosen. The Committee examines and issues an opinion on documents required by the Solvency II regulation .
The Committee regulatory meets (1) the Statutory Auditors and the Global Head of Internal Audit, (2) the Group Chief Financial Offi cer and (3) the Group Chief Risk Offi cer. The Committee also receives presentations from the Group Chief Risk Offi cer, the Group General Secretary, the Group General Counsel and the Group Chief Financial Offi cer describing the Company’s principal risk exposures and where applicable the material off-balance-sheet commitments. The Group Chief Financial Offi cer, the Global Head of Internal Audit, the Group Chief Risk Offi cer, the Group Chief Accounting Offi cer, the Group General Secretary as well as the Statutory Auditors attend each Audit Committee meeting. The Chief Executive Offi cer also attends the Committee’s meetings on a regular basis.
The Audit Committee met six times in 2016. The average attendance rate was 100%. The Committee focused, in particular, on the following issues: ■ the 2015 fi nancial statements; ■ the 2015 Annual Report (Document de Référence); ■ the 2016 half-year fi nancial statements; ■ internal control and r isk m anagement (reports from Internal Audit, from the Compliance Department, on Litigation, on r isk m anagement, from Group IT security – cyber risk, on the Group’s Internal Financial Control (IFC) function, and on the Global Business Lines…); ■ c ompliance with the Solvency II regulation and ORSA report; ■ Risk Management Framework, Risk Appetite and Reporting; ■ the results of internal and external audit work; ■ the review, for recommendation to the Board, of non-audit services provided by the Statutory Auditors; and
Composition on December 31, 2016: Ramon de Oliveira, Chairman Suet Fern Lee Stefan Lippe Doina Palici-Chehab
The principal missions of the Committee are: ■ to examine and issue an opinion on any sureties, guarantees, endorsements and warrantees in favor of third parties which exceed the delegations of power granted to the Chief Executive Offi cer by the Board of Directors; ■ to examine and issue an opinion on any of the following: – securities issuances giving a claim, whether directly or indirectly, to the Company’s share capital,
– fi nancing operations that might substantially change the Company’s fi nancial structure; ■ any plan to perform a fi nancial operation of signifi cant size for the AXA Group, except for M&A transactions discussed directly at the Board; ■ to examine any subject relating to the fi nancial management of the AXA Group including: – the policy on fi nancial r isk m anagement,
The Finance Committee met fi ve times in 2016. The average attendance rate was 100%.
■ Review of the proposed capital increase reserved for the employees of the AXA Group ( SharePlan 2016 ).
The Chairman of the Board of Directors, as well as the Chief Executive Offi cer, although not members of the Committee, contribute to the work of the Committee and attend its meetings, except when their personal situation is discussed.
– the number of Company stock options or performance shares to be granted to the Chief Executive Offi cer, the Deputy Chief Executive Offi cers and the other members of the Management Committee; ■ to formulate an opinion on the proposals of the Chief Executive Offi cer concerning: – the principles and conditions for the determination of the compensation of the main executives of the AXA Group,
The Committee focused, in particular, on the following issues: Compensation issues: ■ the compensations paid to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and to the members of the Management Committee; ■ the compensations of the Chairman of Board of Directors and the Chief Executive Offi cer as of September 1, 2016; ■ the 2016 and 2017 equity allocations (stock options and performance shares) and their performance conditions; ■ the grant of performance shares dedicated to retirement to replace the defi ned benefi ts supplemental retirement plan for senior executives in France; ■ the “say-on-pay” for the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer; and
The Chief Executive Officer is assisted in the day-to-day operational management of the Group by a Management
Reference provide for specifi c limitations of the powers of the
Chief Executive Offi cer and require prior Board approval for certain signifi cant transactions as indicated in Section 3.1.1 above.
The Chief Executive Offi cer reports to the Board on a regular basis on the Company’s fi nancial condition and all key issues, and provides regular written updates to the Board between
Executive Offi cer to assist him in the operational management of the Group.
The Management Committee has no formal decision making authority and is advisory in nature.
Paul Evans Group Chief Executive Offi cer of AXA Global Life, Savings & Health and Chief Executive Offi cer of AXA Global Asset Management
On September 1, 2016, Mr. Thomas Buberl announced the establishment of a new Partners group which replaced the former Executive Committee.
Mrs. Doina Palici-Chehab, who is the employee shareholder representative to the AXA Board of Directors, is currently an employee of AXA Insurance Pte Ltd, which is one of AXA’s principal Singaporean subsidiaries.
To the best of the Company’s knowledge, there are no family relationships among the members of the Board of Directors or with members of the Executive Management.
Offi cer do not currently carry out any professional activity or hold any directorship outside the AXA Group that the Board believes substantially interfere with or impede in any material way their availability to focus on the Group and its business.
AXA Group including furnishing services or goods, providing credit facilities, purchases of securities (for their own account or for third parties), underwriting of securities. These agreements or deals are systematically negotiated and performed at arm’s length terms and conditions. Consequently, AXA does not believe that any of 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/other duties of these individuals.
To the best of the Company’s knowledge and based on the 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 body 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 body with any company that has declared bankruptcy or been put into receivership or liquidation, provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated affi liated companies in connection with these or similar transactions and certain members of
AXA’s Board of Directors may have been associated with other companies that have undertaken similar solvent liquidations.
■ AXA Bank Central & Eastern Europe (k) 330 290 8
AXA Technology Services, AXA Group Solutions, AXA Business Services (l) 7,356 8,061 7,394
In addition, the employees of insurance and fi nancial services activities in France are included in the “cadre de convention” of four not consolidated “mutuelles”.
(b) In 2016, the increase by 326 in France was driven by the integration of Genworth, partly offset by effi ciency programs and early retirements.
(d) Includes Portugal, Turkey, Greece, Morocco, Mexico, Colombia, Brazil, Poland, Czech Republic, Slovak Republic and Luxembourg. In 2016, the decrease by 129 in the EMEA-LATAM Region was mainly attributable to the sale of the Portuguese operations, partly offset by business growth notably in Mexico and the Gulf Region, as well as the consolidation of Brazil since January 1, 2016.
(f) In 2016, the increase by 163 in AXA Corporate Solutions Assurance was driven by the integration of the newly consolidated Brazilian entities.
(i) In 2016, the decrease by 154 in AB was mainly driven by restructuring measures across the organization and attrition.
(l) In 2016, the decrease by 668 was mainly refl ected the sale of the Indian subsidiary of AXA Technology Services, partly offset by business growth in AXA Business Services.
AXA’s overall policy on executive compensation focuses on the variable part of the compensation package, which is the compensation at risk for benefi ciaries. The structure of AXA’s executive compensation is composed of a variable portion which represents a signifi cant portion of the aggregate remuneration.
The Compensation & Governance Committee is exclusively composed of independent members. Their independence is assessed annually by the Board in accordance with the criteria set forth in the Afep-Medef Code. The Senior Independent
Director (Mr. Jean-Martin Folz) is the Chairman of the Committee and presents the compensation policy of the Company each year at the Shareholders’ Meeting.
In this context, AXA has undertaken a comprehensive review of its existing compensation policies and practices against the requirements of Solvency II and has adopted a new Group
January 1, 2016. This compensation policy is designed to support the Group’s long-term business strategy and to align the interests of its employees with those of the shareholders by (i)
Group can offer competitive compensation arrangements across the multiple markets in which it operates while avoiding potential confl icts of interest that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance with Solvency II
It follows three guiding principles: ■ competitiveness and market consistency of the remuneration practices; ■ internal equity, based on individual and collective performance, in order to ensure fair and balanced compensation refl ecting employee’s individual quantitative and qualitative achievements and impact; and
■ achievement of the Group’s overall fi nancial and operational objectives over the short, medium and long term as well as execution against medium and long term strategic objectives as a prerequisite to fund any mid-to-long term award.
The requirements set out in our Group Compensation policy may be supplemented where necessary in order to comply with local regulatory requirements or identifi ed best practices.
recognises achievement of defi ned fi nancial and operational targets aligned with AXA’s business plan (ii) promotes longterm sustainable performance by incorporating risk adjustment measures in performance metrics and (iii) determines individual compensation amounts on the basis of both fi nancial results and demonstrated individual leadership skills.
Each year, AXA, with the assistance of specialized fi rms, conducts compensation reviews in order to ensure the competitiveness and consistency of executives compensation and to measure the suitability of the global compensation policies. In this context, four markets are used as a reference: ■ a first market composed of 13 companies in the French
Mr. Thomas Buberl as Chief Executive Offi cer as of September 1, 2016 and decided to set his annual cash compensation target at €2,900,000.
European Commission and the Financial Stability Board in terms of compensation.
Both the fi xed and the variable compensation due to Mr. Thomas
Chairman & Chief Executive Offi cer, Mr. Henri de Castries, until
Total target compensation of the Deputy Chief Executive Offi cer until August 31, 2016
Compensation & Governance Committee, maintained unchanged in 2016 the total cash compensation target of the Deputy Chief
Executive Offi cer, Mr. Denis Duverne, until August 31, 2016 at €2,200,000 (amount unchanged since 2010).
Officer, was €750,000 and the variable component of his compensation was €1,450,000 in 2016, i.e. 193% of his fi xed annual compensation.
Compensation of the Chairman of the Board of Directors as of September 1, 2016
The Board of Directors also took into account the extensive duties that it entrusted to Mr. Denis Duverne with as Chairman of the Board of Directors as described in Section 3.1 of this
Consequently, the Board of Directors decided to set the fi xed annual compensation of the Chairman of the Board, Mr. Denis
The determination of the variable compensation to be paid to executive offi cers (to Mr. Henri de Castries as Chairman &
Chief Executive Offi cer and Mr. Denis Duverne as Deputy Chief
Executive Offi cer until August 31, 2016 and to Mr. Thomas
was based in 2016, on the following two metrics: ■ Group performance for 50%. This metric is measured based on underlying earnings per share, return on equity (adjusted
MR. THOMAS BUBERL AS CHIEF EXECUTIVE OFFICER AS OF SEPTEMBER 1, 2016
Executive Offi cer may not exceed 150% of his variable target compensation, i.e. 150% of his fi xed annual compensation.
In order to assess Mr. Henri de Castries’ individual performance in 2016, the Board of Directors assessed the achievement of the following objectives set in his target letter : (i) the active management of the Group’s senior executive succession planning process (40%), (ii) the preparation of the Group’s new strategic plan “Ambition 2020”, articulated around the two strategic priorities: focus and transform , (25%) and (iii) the further inorganic development of the business through various strategic partnerships (e.g. the partnership with Alibaba and Ant Financial
Services) (20%) and (iv) continued business transformation with a focus on digital transformation (e.g. the partnership with
The total effective variable compensation of Mr. Henri de Castries as Chairman & Chief Executive Offi cer could not exceed 150%
Eastern European Region) (25%), (iii) the further strengthening of the Group’s operational controls and second line of defence
(20%) (iv) the further acceleration of the digital transformation of the Group as well as the successful industrialization of a big data project in the Company’s largest entities (15%), and (v) the continued active promotion of diversity and inclusiveness as a key element of the Group’s internal culture (e.g. the presence of 25% of women within the Group Senior Executives across
The total effective variable compensation of Mr. Denis Duverne as Deputy Chief Executive Offi cer could not exceed 150% of his variable target compensation, i.e. 290% of his fi xed annual compensation.
Committee with Regional/Global Business Line responsibilities is determined according to the following metrics: Group performance (20%), Regional/Global Business Line performance which they are responsible for (30%) and Individual performance
to the following metrics: Group performance (50%) and Individual performance (50%).
EUR; 1 HKD = 0.1164 EUR and 1 GBP = 1.2206 EUR.
The variable compensations paid to the Management Committee members for 2014, 2015 and 2016 were: VARIABLE COMPENSATIONS PAID TO MANAGEMENT COMMITTEE MEMBERS
The introduction of this variable compensation deferral component subject to a clawback mechanism to the deferred variable compensation, while not required by the applicable regulations, is designed to further align AXA with the evolving regulatory environment on executive compensation in the fi nancial services’ sector both in France and abroad.
(please refer to pages 147 as well as 154 and following) and therefore do not guarantee any grant or minimal gain for the benefi ciaries.
Compensation & Governance Committee, decided not to grant any LTIs to Mr. Henri de Castries and Mr. Denis Duverne as respectively Chairman & Chief Executive Offi cer and Deputy
(c ) This amount does not include the compensation received by Mr. Thomas Buberl in respect of his employee position for the period from January 1 to August 31, 2016 (i.e. €554,999 fi xed compensation and €592,850 variable compensation).
IFRS standards. This is a historical value on the date of grant, calculated for accounting purposes as described in Note 26.3.1
(a) This amount does not include the part of the variable compensation with respect to 2016 as the case m ay be, which has been deferred in accordance with the mechanism described on page 142 .
(c) This amount does not include the compensation paid to Mr. Thomas Buberl in respect of his employee position for the period from January 1 to August 31, 2016 (€554,999 fi xed compensation and €592,850 variable compensation).
The only “benefi ts in kind” for Messrs. Thomas Buberl, Henri de
Thomas Buberl – Chief Executive Offi cer as from September 1, 2016 0 -
Norbert Dentressangle – Vice-Chairman – Lead Independent Director until December 14, 2016 224,888.30 217,841.21
No directors’ fees are paid by the Company to the corporate officers (i.e. Chairman of the Board of Directors and Chief
■ the remaining 35% shall be allocated by the Board of Directors to the Board Committees as follows: 25% to the Finance
Committee and 50% to the Audit Committee. Each Committee shall then allocate such amount to its members as follows: 40% shall be divided equally among members and paid as a fi xed fee and 60% shall be paid according to Committee attendance, with the Chairman of the Committee receiving in each case a double fee.
Each year, the Board of Directors, upon recommendation of its Compensation & Governance Committee, approves the grant of a global option pool. The pool of options allocated to each business unit is essentially determined on the basis of their contribution to the Group’s fi nancial results during the previous year and with consideration of specifi c local needs
(market competitiveness, adequacy with local practices, specifi c regulatory frameworks, and support to Group development).
(iv) specifi city of compensation arrangements due to regulatory frameworks. The recommendations for individual grants of options are made by the Chief Executive Offi cers of the local entities or business units and by the Group functional department heads. These recommendations are reviewed by the Executive
Management to ensure a global coherence. Individual grants of options are then decided by the Board of Directors, provided that individual grants to the Chief Executive Offi cer and the other members of the Management Committee are preceded by a proposal of the Compensation & Governance Committee which especially takes into consideration the aggregate elements of compensation of the executive as well as the market studies carried out by the Group with an independent compensation consulting fi rm. Furthermore, the level of allotment of options to the executive offi cers also depends on the level of achievement of the strategic objectives defi ned by the Board of Directors.
Usually, annual grants are made during the fi rst half of the year.
On December 31, 2016, approximately 7,100 AXA employees held a total of 35,496,930 outstanding options, representing 1.46% of the Company’s share capital on the same date.
Since 2010, performance conditions were applied to all options granted to all members of the Management Committee. This performance condition also applies to the last tranche of each option grant (i.e. the last third of the options granted), for all benefi ciaries of options .
Pursuant to this performance condition, the options become fully exercisable only if the AXA share price performs at least as well as the stock reference index of the insurance sector (1) over a same period. No option submitted to such performance condition can be exercised as long as this criterion has not been reached.
(1) SXIP index (StoxxInsurance Index): a capitalization-weighted index, which includes European companies that are involved in the insurance sector.
Grant date (Board of Directors or Management Board) 31/03/2006 31/03/2006 31/03/2006 25/09/2006 25/09/2006 13/11/2006 10/05/2007 10/05/2007 10/05/2007 24/09/2007
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (b ) 830,960 656,518 227,593 53,733 36,684 - 645,899 246,161 284,022 -
(b) “Employees” non e xecutive d irectors at gran t date.
Grant date (Board of Directors or Management Board) 24/09/2007 19/11/2007 19/11/2007 01/04/2008 01/04/2008 19/05/2008 19/05/2008 22/09/2008 22/09/2008 24/11/2008
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by
Expiry date of options 24/09/2017 19/11/2017 19/11/2017 01/04/2018 01/04/2018 19/05/2018 19/05/2018 22/09/2018 22/09/2018 24/11/2018
Number of options exercised at 31/12/2016 0 0 0 1,510,180 171,984 0 0 0 1,274 16,117
Grant date (Board of Directors or Management Board) 20/03/2009 20/03/2009 02/04/2009 10/06/2009 10/06/2009 21/09/2009 08/12/2009 08/12/2009 19/03/2010 19/03/2010
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by : Executive Directors: Start date of exercise 20/03/2011 20/03/2011 02/04/2011 10/06/2013 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012 19/03/2012
Number of options exercised at 31/12/2016 14,000 6,458 0 7,121 5,582 3,400,634 36,651 216,890 2,114,314 76,089
Grant date (Board of Directors or Management Board) 22/03/2013 24/03/2014 19/06/2015 06/06/2016
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (b ) 789,382 661,900 683,100 813,477
(b ) “Employees” non e xecutive d irectors at grant date.
(c ) In 2016, options were granted to Mr. Thomas Buberl prior to his appointment as AXA Chief Executive Offi cer.
Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016 06/06/2016 subscription or purchase 06/06/2026 -
This value does not represent a current market value, a current valuation of these options, nor does the actual proceed if and when the options are exercised. On June 6, 2016, the fair value of one option was €1.92 for options without performance conditions, €1.67 for options with performance conditions.
Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016 22/03/2013 subscription or purchase 56,334 13.81 22/03/2023 100% of options: SXIP index 16/03/2012 subscription or purchase 64,000 12.22 16/03/2022 100% of options: SXIP index
Stock options granted during the year by AXA or any eligible AXA Group subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of stock options (aggregate information)
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS OF DECEMBER 31, 2016)
Thomas Buberl Chief Executive Offi cer as of September 1, 2016 187,002 -
Denis Duverne Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016 -
Group’s best talents and critical skills by aligning their interests with the performance of the AXA Group, of their operational entity/business unit as well as with the stock performance of the AXA share in the medium-term (3 to 5 years). Performance
Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant and the possibility to deliver existing shares, this choice being the one made up to this date.
Shares are made by the management of each operational entity or business unit and by the Group functional department heads. These recommendations are reviewed by the Executive
Performance Shares are then decided by the Board of Directors, provided that individual grants to the Chief Executive Offi cer and other members of the Management Committee are preceded by a proposal of the Compensation & Governance Committee, which takes into consideration the aggregate compensation elements of the executive offi cer as well as the market studies carried out by the Group together with an independent compensation consulting fi rm. Furthermore, the grant to AXA
executive offi cers shall depend on the level of achievement of the strategic objectives previously defi ned by the Board of Directors.
Directors, depending on the evolution of the Group’s strategic objectives and after consideration of market practices as well
As from the 2016 grant, for benefi ciaries in operational entities or business units, the performance of the operational entity and/
DJSI during the acquisition period is compared to the average of the scores achieved by the other companies included in the DJSI over the same period. Consequently, under this indicator: • no share shall be granted if AXA’s score is lower than the seventy-fi fth percentile (1),
or more) compared to the SXIP index shall trigger a maximum increase of the global performance rate of 5 points (subject however to the upper limit of 130% of the global performance rate) and AXA’s under-performance (75% or less) compared to the SXIP index shall trigger a maximum decrease of 5 points of the global performance rate. Between these minimal and maximal performance levels, the number of shares defi nitely granted shall be calculated on a linear basis depending on the performance achieved.
The global performance rate is therefore calculated as follows: [10% CSR (DJSI) + 40% Group performance (Adjusted Earnings
(Adjusted Earnings + Underlying Earnings)] ] +/- 5 points of relative performance (TSR) within the upper limit of 130%.
(“target”) is achieved only in the event of a global performance corresponding to a 5% (2) weighted-compound annual growth rate of the diverse criteria of the Group performance and the entity performance. In this case, the number of shares defi nitively granted at the end of the acquisition period would be equal to the number of Performance Shares initially granted.
(2) 5% for mature entities/Regions (including Group), 7% for composite entities/Regions and 10% for Regions with a high growth rate.
a delivery of 50% of the shares initially granted. This reinforced stringency also applies to two thirds of the shares subject to the Adjusted Earnings per Share of the Group performance condition (i.e. two thirds of 40% of the total grant) granted to the members of the Management Committee.
Furthermore, for all the members of the Management Committee, including the corporate offi cers, the defi nitive grant of one third of the shares subject to the Adjusted Earnings Per Share of the Group performance condition (i.e. one third of 40% of the total grant) is directly linked to the evolution of the weightedcompound annual growth rate of the Adjusted Earnings Per
Between the different levels of performance listed above, the number of shares defi nitively granted shall be calculated on a linear basis depending on the achieved performance.
Furthermore, should no dividend be paid by the Company during any fi scal year of the acquisition period, the number of Shares defi nitively granted would be automatically divided by 2.
Group Performance (40%) Adjusted E arnings Per Share Capped at 130%
Rate (CAGR) of 5% over the period 100% Target CAGR of 5% over the period
Entity or Business Unit Performance (50%) Average (Adjusted Earnings + Underlying Earnings) Capped at 130%
Floor 80% of the performance required to reach the target 50% Floor 60% of the performance required to reach the target
Calculation of the global performance rate = [ 40% Group Performance + 50% Entity or Business Unit Performance + 10% CSR criterion ] +/- 5 points according to AXA’s score vs a relative performance criterion (TSR) (a)
(a) In 2016, International Performance Shares were granted to Mr. Thomas Buberl prior to his appointment as AXA Chief Executive Offi cer.
(d) 50% of shares to be acquired on March 24, 2017 and 50% on March 24, 2018.
(f) 6,006 units of the June 19, 2015 plan acquired by anticipation.
(g) For plans before 2013, the payment at maturity has been made in cash.
As far as Performance Shares are concerned: ■ the Performance Share grants are conditioned on a minimal 3-year acquisition period allowing the measurement of the performance determining the defi nitive grant of the shares over a longer period, i.e. at least 3 years; ■ shares acquired, under the condition that the benefi ciary is still employed by the AXA Group, at the end of the acquisition period are restricted from sale during a 2-year period.
Chief Executive Offi cer as of September 1, 2016 06/06/2016 International Performance
Chairman & Chief Executive Offi cer until August 31, 2016 06/06/2016 Performance Shares
Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016 06/06/2016 Performance Shares
Number of shares acquired on 31/12/2016 2,853,303 2,905,776 1,204,227 (a) 5,187 (c) 5,455
(a) 50% of shares to be acquired on March 24, 2016, 50% on March 24, 2017, except for the Chairman & CEO, and the Deputy CEO, 100% of shares to be acquired on March 24, 2017.
(b) One benefi ciary has chosen the International Performance Shares vesting calendar (acquisition on June 19, 2019 with no restricted period), based on the plan rules as he has moved out of France during the acquisition period.
Chairman & Chief Executive Offi cer until August 31, 2016 - Performance Shares
Representative of employee shareholders to the Board of Directors 22/03/2013 International Performance
(c) The performance rate of 104% is composed of: 1/3 x 99% (Net income per share) + 2/3 x 107% (Underlying earnings and Net income, 50% of Norcee Region score 99% and 50% of Germany score 116%).
(d) The performance rate of 112% is composed of: 1/3 x 99% (Net income per share) + 2/3 x 119% (Underlying earnings and Net income).
of the Annual Report . This value does not represent a current market value, a current valuation of these performance shares or the actual proceeds if and when the Performance Shares are acquired.
Under the AXA Group Compliance and Ethics Guide, all employees (including the executive offi cers of the Company) are prohibited from engaging in any transaction designed to hedge the value of equity- based compensation awards ( stock options and performance shares ) 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 or the lapse of restrictions on performance shares . In accordance with the recommendations of the Afep-Medef Code, the executive offi cers of the Company make a formal commitment to not resort to hedging transactions.
Denis Duverne Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016 16/03/2012 124,648 16/03/2016
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 16/03/2012 7,575 16/03/2016
(a) No International Performance Sh ares held by Mr. Thomas Buberl beca me unrestricted in 2016.
AXA implemented a shareholding policy applicable to all the main senior executives of the Group. This policy imposes each executive to hold, during the entire duration of his/her functions, a minimum number of AXA shares (the “Minimum Shareholding
Commercial Code, the Supervisory Board and later the Board of Directors have decided that, as long as an executive offi cer has not met his/her Minimum Shareholding Requirement, all stock options and Performance Shares granted to him/her will be subject to the following restrictions: ■ upon each exercise of these stock options granted, the Chief
Executive Offi cer 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
December 31, 2016, the number of AXA shares or ADS AXA indicated in the table below.
Buberl shall comply with this requirement within 5 years as of his appointment as Chief Executive Offi cer i.e. on September 1, 2021 at the latest.
Pursuant to the AXA Group Compliance and Ethics Guide, corporate offi cers and other employees of the Company must refrain from any purchase or sale of AXA securities during specifi c time periods (“blackout periods”) prior to the earnings releases.
These blackout periods generally begin about 30 days before its annual or half-year earnings releases and about 15 days before its quarterly fi nancial information releases. Depending on the circumstances, these blackout periods could be declared at other times or be longer.
Directors made the following disclosures in the course of 2016 concerning their transactions involving Company securities.
Chairman & Chief Executive Officer on August 31, 2016, had decided in 2010 on an individual and voluntary basis and in consultation with the Board of Directors, to limit the compensation to be taken into account in order to calculate his global pension. After 27 years in the Group, including 17 years as Chief Executive Offi cer, he decided to claim his pension rights and benefi ts as of September 1, 2016 according to the collective defi ned benefi t pension scheme, the yearly amount of which is €1,084,573 per year, before taxes and social security charges.
AXA Group entities in France, in a mandatory and collective supplementary pension scheme with defined contributions
Agreement of December 18, 2009. The individual employer contribution rate is set at 0.75% of the total gross compensation, which is not capped (the contribution base is the same as the one used for contributions related to the Social Security General
September 1, 2016 does not benefi t from the collective defi ned benefi ts pension scheme described above.
It provides benefi ciaries with portable pension benefi ts until retirement in line with Directive 2014/50/UE/of the European
The defi nitive acquisition of these shares is subject to (i) the benefi ciary’s presence in the Group on December 31 of the year during which the grant is decided and (ii) the achievement of a performance condition related to the average AXA Group
Solvency II ratio calculated during the acquisition period and subject to different performance levels: to benefi t from the totality of performance shares initially granted, the average AXA Group
Solvency II ratio calculated during the acquisition period must be greater than or equal to 170%. However, if the average ratio is 150%, only half of the shares initially granted will be acquired. Between these performance levels, the number of shares defi nitely acquired will be calculated, on a linear basis depending on the achieved performance.
No shares will be acquired if the average ratio is below 150%.
The Company’s Board of Directors also decided that no more than 10% of the total number of shares granted during any fi scal year should be granted to AXA’s executive offi cers.
(a) Mr. Thomas Buberl is a benefi ciary of the retirement performance shares plans.
Code, Mr. Thomas Buberl has decided to renounce his employment contract as of the date of his appointment as Chief
(health insurance, life insurance, disability insurance, etc.) to which Mr. Thomas Buberl was entitled as an employee. In this context, the Board of Directors was concerned that the decision of Mr. Thomas Buberl to renounce his employment contract in accordance with the recommendations of the Afep-Medef
Code would jeopardize the continuity of his accrued and future social benefi ts.
employee under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of performance conditions in accordance with the
Afep-Medef recommendations. A severance benefi t would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal or non-renewal further to the
Board of Directors’ decision. The payment of the severance benefi t would be subject to the three following performance conditions as determined by the Board of Directors during its August 2, 2016 meeting: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 60% of his variable compensation target,
over a 3-year period preceding the termination of the term of offi ce, and (3) the average consolidated adjusted ROE over the 3 preceding years higher than or equal to 5%.
These commitments authorized by the Board of Directors, will be submitted to the approval of the next Shareholders’ Meeting on April 26, 2017.
This report was prepared in accordance with Article L.225-37-2 of the French Commercial Code and presents the principles and criteria for determination, distribution and allocation of all elements of compensation of the corporate offi cers of the Company as approved by the
AXA’s compensation policy is designed to support the Group’s long-term business strategy and to align the interests of its management with those of its shareholders and all other stakeholders by (i) establishing a close relation between performance and compensation over the short, medium and long term, (ii) ensuring that the Group can offer competitive compensation that is consistent with the various markets in which it operates while avoiding potential confl icts of interests that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance of the Company’s practices with all applicable regulatory requirements.
AXA’s compensation policy aims to, among others: ■ attract, develop and motivate unique skills and best talents; ■ incentivize superior performance; ■ align compensation levels with the Company’s results.
In this context, the compensation policy for the Chief Executive Offi cer is based on a pay-for-performance approach which (i) requires the achievement of challenging fi nancial and operational targets that are defi ned and aligned with the Group’s strategy, (ii) promotes long-term sustainable performance while incorporating risk adjustment measures in performance metrics, and (iii) determines the effective amount of the actual individual compensation on the basis of both fi nancial results and demonstrated individual leadership skills.
Thus, the “at-risk” portion of the Chief Executive Offi cer’s total compensation (variable compensation and share-based compensation)
represents a signifi cant component of his compensation structure, with a view to aligning his compensation more directly with the operational strategy of the Group and the interests of the shareholders.
The different components of the Chief Executive Offi cer’s total compensation are presented in detail hereafter: Fixed annual compensation of the Chief Executive Offi cer
The Chief Executive Offi cer’s variable annual compensation is subject in its entirety to challenging performance conditions and closely aligned with the Group’s strategy. No minimum payment is guaranteed to the Chief Executive Offi cer.
Thus, the Board of Directors, upon recommendation of its Compensation & Governance Committee, and following a comparative review of national, European and industry practices, decided to maintain unchanged, for 2017, the Chief Executive Offi cer’s target annual variable compensation, at €1.45 million, i.e. 100% of the amount of his annual fi xed compensation.
The evaluation of the Chief Executive Offi cer’s individual performance with respect to the 2017 fi scal year will be based on the following two components: ■ the Group’s performance, as assessed based on underlying earnings per share, return on equity (adjusted Return on Equity –
ROE), gross revenues in both Commercial Property & Casualty and in Protection & Health and Net Promoter Score (customer recommendation index). The relative weight of each indicator is, respectively, 55%, 15%, 15% and 15%. The indicators selected to measure the Group’s performance refl ect objectives in terms of growth, profi tability, capital management, operational effi ciency and proximity with clients that have been disclosed both internally and externally. Thus, indicators which are directly linked to the strategic orientations of the Group, include both fi nancial and operating indicators and rely on achievement of a predefi ned budget or target fi gure; ■ individual performance, assessed on the basis of various indicators and qualitative and quantitative objectives determined by the Board of Directors in a target letter drawn up at the beginning of each relevant year, as well as on the basis of demonstrated leadership abilities by the Chief Executive Offi cer. The target letter includes detailed objectives with regards to the Group’s progress in the elaboration of its strategic plan as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives or relating to certain geographic areas, as well as progress on certain investments that are expected to contribute to the development of the Group’s operations.
Each of these two metrics will be evaluated separately so that the Chief Executive Offi cer’s overall variable pay-out refl ects his performance against two distinct components assessed independently.
The determination of the actual amount of variable compensation to be paid to the Chief Executive Offi cer will be based on the following formula: Amount of the variable compensation to be paid = [Target variable compensation * (Group performance * Individual performance)].
However, the value of the stock options and performance shares granted to the Chief Executive Offi cer as determined in accordance with the IFRS standards may not in any event exceed half of the total compensation granted to him.
Benefi ts in kind granted to the Chief Executive Offi cer
Elements of compensation relating to the Chief Executive Offi cer’s retirement
The Chief Executive Offi cer does not participate in any pension scheme with defi ned benefi ts.
Acquisition of the granted performance shares is subject to the satisfaction of a performance condition (the details of which are set out in Section 3.2. of this Registration Document ), linked to the average of the AXA Group’s Solvency II ratio calculated over the vesting period. Therefore, no minimum grant or gain is guaranteed to the Chief Executive Offi cer under the scheme.
In determining the fi xed annual compensation of its Chairman, the Board of Directors has consulted an external advisory fi rm (Willis
Towers Watson) in order to identify compensation practices for similar functions in a sample of CAC 40 fi nancial companies and in the main European insurance companies.
September 1, 2016, has decided to waive, for the duration of his term of offi ce as Chairman of the Board of Directors, payment of his benefi ts (approximately €750,000 per year) under the supplementary pension scheme for executives within the AXA Group in
Having considered that the most appropriate compensation structure for the Chairman of the Board of Directors would be fi xed compensation only, the Board of Directors has resolved, as a consequence, that the Chairman of the Board of Directors will not benefi t from any variable compensation, any directors, fees payments or any grants of options or performance shares, or of any other long-term compensation elements.
In addition, the Board of Directors does not contemplate granting any exceptional compensation to the Chairman of the Board of
APPOINTMENT OF A NEW CHAIRMAN OF THE BOARD OF DIRECTORS AFTER THE SHAREHOLDERS’ MEETING TO BE HELD ON APRIL 26, 2017
For purposes of this report only, and in accordance with applicable regulations, the Board of Directors has also considered the hypothetical appointment of a new Chairman of the Board of Directors following the Shareholders’ Meeting to be held on April 26, 2017.
Under such circumstances, the compensation structure applicable to a new Chairman of the Board of Directors would comply with this policy and the Board of Directors would perform a comprehensive review of the situation of the relevant executive , provided that: ■ the amount and criteria of his compensation would be determined in accordance with existing practices within the Company by reference to compensation practices for similar functions in a sample of CAC 40 fi nancial companies and in the main European insurance companies; and
For further information on the compensation of the Chairman of the Board of Directors, please see Section 3.2 of this Registration
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 given to us, to inform you, the s hareholders, of the main features of those agreements and commitments of which we have been informed and the reasons for the Company’s interest in those. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to Article R.225-31 of the French Commercial Code (Code de commerce), you are being asked to form an opinion on the relevance of such agreements and commitments for the purpose of approving them.
In accordance with Article R.225-40 of the French Commercial Code, we have been informed of the following agreements and commitments previously authorized by the Board of Directors.
With Mr. Thomas Buberl (Chief Executive Offi cer as of September 1, 2016)
Consequently, the Board of Directors proceeded to a full review of the future social status of Mr. Thomas Buberl, once the renunciation of his employment contract will be effective in accordance with the Afep-Medef. In this context, the Board of Directors, in view of the seniority of Mr. Thomas Buberl in his employee status and from the signifi cance Recommendations of his services provided to the
Company, confi rmed his wish to maintain social benefi ts, as an Executive Director, in the same conditions than the ones applicable to AXA Group director-level employees in France, took the following decisions: ■ the Board of Directors confi rmed that Mr. Thomas Buberl will continue to have social benefi ts (health insurance, life insurance, disability insurance, etc.) on terms equivalent to those of all other Group senior employees of the AXA Group in France; PricewaterhouseCoopers Audit 63, rue de Villiers 92208 Neuilly-sur-Seine Cedex
■ the Board of Directors authorized a contractual severance benefi t for Mr. Thomas Buberl designed to replicate the benefi ts to which he would have been entitled as AXA employee under the 1993 collective agreement covering director-level employees of the insurance sector, but subject to performance conditions in accordance with the Afep-Medef recommendations.
Return On Equity (adjusted ROE) over the 3 preceding years higher than or equal to 5%.
Notwithstanding the foregoing, if only two of the three performance conditions are met, the amount of severance benefi t will be reduced by 50% if performance condition (1) is not met or if AXA’s consolidated net income for the preceding fi scal year is negative.
No severance benefi t will be paid if the benefi ciary is entitled to a pension scheme within the 6 months following his termination.
With Mr. Henri de Castries (Chairman & Chief Executive Offi cer until August 31, 2016)
Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. de Castries holds the position of
The amount of the severance benefi t to be paid to the benefi ciary would be adjusted in accordance with the level of achievement against these performance conditions as follows: 100% of the severance benefi t shall be paid if at least 2 of the 3 performance conditions are met; 40% of the severance benefi t shall be paid if only 1 performance condition is met; and no severance benefi t shall be paid if none of the performance conditions are met. Notwithstanding the foregoing, if only 2 of the 3 performance conditions are met, the amount of severance benefi t will be reduced by 50% if performance condition (1) is not met or if AXA’s consolidated net income for the preceding fi scal year was negative.
On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Denis Duverne of his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Denis Duverne holds the position of
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 would 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 that Mr. Denis Duverne would be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the Afep-Medef recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Denis Duverne as employee.
The payment of the severance benefi t should be also subject to performance conditions. During its meeting held on February 20, 2014, upon proposal of the Compensation & Governance Committee, the Board of Directors authorized the execution of a new agreement between the Company and Mr. Denis Duverne in order for the payment of the severance benefi ts to be subject, from now on, to the three following performance conditions: (1) Achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target,
(2) Evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce, and (3) Average adjusted Return On Equity (adjusted ROE) over the three preceding consolidated fi scal years higher than or equal to 5%.
These commitments have expired on August 31, 2016 due to the termination of Mr. Denis Duverne’s mandate as Deputy Chief
On October 7, 2009, the Supervisory Board confi rmed that Messrs. Henri de Castries and Denis Duverne, then members of the
Mr. Henri de Castries, who retired from his position as AXA’s Chairman & Chief Executive Offi cer on August 31, 2016, had decided in 2010 on an individual and voluntary basis and in consultation with the Board of Directors, to limit the compensation to be taken into account in order to calculate his global pension. After 27 years in the Group, and close to 17 years as Chief Executive Offi cer, he decided to claim his pension rights and benefi ts as of September 1, 2016 according to the collective defi ned benefi t pension scheme, the yearly amount of which is €1,084,573 per year, before taxes and social security charges.
You should carefully consider the following risk factors together with other information contained in this Annual Report. Any of these risks could materially affect our business, fi nancial condition or results of operations, cause the trading price of our ordinary shares to decline materially or our actual results to differ materially from those expected or those expressed in any forward- looking statements made by or on behalf of the
“Internal control and r isk m anagement” of this Annual Report, which should be read in conjunction with this Section 4.1.
U.S. administration in January 2017, including with respect to potential changes in U.S. laws, regulations and policies governing financial regulation, foreign trade and foreign investment. Furthermore, certain initiatives from governments and support of central banks in order to stabilize financial markets could be suspended or interrupted which could, in an uncertain economic context, have an adverse effect on the global fi nancial industry. In addition, geopolitical risks in various
These factors have had and may continue to have an adverse effect on our revenues and results of operations, in part because we have a large investment portfolio. Our investment income is an important part of our profi tability, and our sales of insurance and Asset Management products (as well as the level of product surrenders and lapses) are dependent upon fi nancial market performance, customer behavior and confi dence as well as other related factors. Our ability to make a profi t on insurance and investment products, for example, depends in part on the returns on investments supporting our obligations under those products, and the value of specifi c investments may fl uctuate substantially depending on the foregoing conditions. In addition, 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 benefits not necessarily related to prevailing market interest rates or investment returns on underlying assets. Although we use hedging techniques to help mitigate our exposure under certain of these guarantees, not all risks can be effectively hedged against and volatility in the fi nancial markets, combined with unanticipated policyholder behavior, may increase our cost of risk and/or negatively affect our ability to hedge against certain of these risks, which may in turn adversely affect our profi tability.
Adverse business and market conditions as well as accounting rules may impact the amortization of our Deferred Acquisition Costs (“DAC”), Value of Business I n- f orce (“VBI”) and other intangibles and/or to reduce deferred tax assets and deferred policyholders participation assets, which could materially affect our results of operations and fi nancial statements
Business and market conditions as well as accounting rules may impact the amount of goodwill we carry in our consolidated balance sheet, our pattern of DAC, VBI and other intangible assets amortization and the value of our deferred tax assets and deferred participation assets. The value of certain of our businesses including, in particular, our US Variable Life and
Variable Annuity businesses, is signifi cantly impacted by such factors as the state of the financial markets and ongoing operating performance.
Adverse experience relative to the methodologies, estimations and assumptions used by M anagement in valuing investments and determining allowances and impairments may materially adversely affect our results of operations
The determination of the amount of allowances and impairments that we recognize with respect to the investment assets we hold varies by investment type, and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. In considering impairments, management considers a wide range of factors, including those described in Note 1.8.2 “Financial instruments classifi cation”
In- force life insurance and annuity products may become comparatively more attractive to customers in a declining interest rate environment, resulting in an increase in our liabilities
Accordingly, during periods of declining interest rates or a prolonged period of low interest rates, our profi tability may suffer as the result of a decrease in the spread between interest rates credited to insurance policyholders and annuity contract owners and the rates we are able to earn on our fi xed-income investment portfolio. In addition, certain regulatory capital and reserve requirements are based on formulas and models that consider interest rates, and an extended period of low interest rates may increase the regulatory capital we are required to hold and the amount of assets we must maintain to support our reserves.
Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities. Accordingly, ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors, could have a material adverse effect on our consolidated results of operations, fi nancial position or cash fl ows through realized losses, impairments, and changes in unrealized gains and loss positions.
Fluctuations in currency exchange rates may signifi cantly affect our results of operations, fi nancial position, liquidity and solvency
While we seek to manage our exposure to foreign currency fl uctuations through hedging, fl uctuations in exchange rates may have a signifi cant impact on our euro-denominated results of operations, cash fl ows, gearing ratio, shareholders’ equity and solvency. In addition, the currency hedges we use to manage foreign exchange rate risk may signifi cantly impact our cash and liquidity position.
Infl ation or defl ation in our principal markets would have multiple impacts on AXA and may negatively affect our business, solvency position and results of operations
We are subject to infl ation risk in certain of our principal markets through our holdings of fi xed interest and other instruments, and as a result of the potential for claim payments (particularly in relation to “long-tail” risks underwritten by our Property &
Casualty businesses) and expenses to rise faster than anticipated in our reserving and pricing assumptions.
Insurer financial strength and credit ratings are important factors used by the market and customers in establishing the competitive position of insurance companies and in assessing our claims-paying ability. Rating agencies review their ratings and rating criteria and methodologies on a recurring basis, and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. A downgrade or the potential for a downgrade in our ratings could have an adverse effect on us, including (i) damaging our competitive position,
Under our reinsurance arrangements, other insurers or reinsurers assume a portion of the losses and related expenses under policies we issue, although we remain liable as the direct insurer on all risks reinsured. While we evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound by the time their fi nancial obligations to us become due. In addition, reinsurance may not be available to us in the future at commercially reasonable rates, and any decrease in the amount of our reinsurance will increase our risk of loss.
We have also entered into contractual outsourcing arrangements with third-party service providers for a wide variety of services required in connection with the day-to-day operation of our insurance and Asset Management businesses (including policy administration, claims related services, securities pricing and other services) which expose us to operational, fi nancial and reputational risks in the event of a default by our counterparty service providers.
Value (EEV)). Adverse experience relative to such assumptions or inherent product defects may result in an increase in the pricing of our insurance products or the need for us to strengthen our product reserves which may in turn have an adverse effect on our results of operations and fi nancial position.
Historically, Property & Casualty insurers have experienced signifi cant fl uctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency or severity of loss events, levels of underwriting capacity by Region or product line, general economic conditions and other factors. Changes in customer expectations for appropriate premium levels, the frequency or severity of claims or other loss events, or other factors affecting the Property &
Catastrophic events such as hurricanes, windstorms, hailstorms, earthquakes, freezes, floods, explosions, fires, pandemic diseases, terrorist attacks, cyber-crimes, military actions, and power grid and other core infrastructure failures could adversely affect our operations, results or fi nancial condition, including as a result of claims occurring at higher levels or materially earlier than anticipated; losses resulting from disruptions in our operations or failures of our counterparties to perform; or declines in value of our investment portfolio. We monitor the evolution of these risks closely and generally seek to manage our exposure to them through individual risk selection, monitoring risk accumulation, purchase of reinsurance and use of available data in estimating potential catastrophic risks. There can be no assurance, however, that we will be able to adequately anticipate such evolution, and we have experienced in the past and could experience in the future material losses from these types of risks.
In addition, legislative initiatives regarding climate change may affect our operations and those of our counterparties, and potentially limit our investments or affect their value, as certain companies struggle to adapt to these regulations. These may include (i) new investment requirements and/or (ii) new disclosure requirements, similar to the ones imposed by the recent French law on “energy transition for green growth” (transition énergétique pour la croissance verte) or future legislation resulting from the adoption of initiatives from the Financial Stability Board’s
requirements (including less strict capital requirements) as well as from data synergies or technological innovation. In addition, development of alternative distribution channels for certain types of insurance and securities products, including through the Internet, may result in increasing competition as well as pressure on margins for certain types of products. Continued consolidation of the insurance sector may also result in increased competition.
The profitability of AXA’s Variable Annuity products with guarantees depends, among other factors, on AXA’s ability to effectively hedge the Accumulator guarantees. The Company has implemented and continues to pursue a number of initiatives, including re-design and re-pricing of certain product features, designed to improve the profi tability of these products and limit future hedging losses on the Accumulator guarantees.
For example, the advent of driverless cars, connected devices and usage-based insurance could materially alter the way that automobile, health or other Personal lines insurance is marketed, priced, and underwritten. In addition, the market for coverage for so-called “cyber risks” or similar emerging threats is a rapidly evolving one, and any failure by us to provide innovative products relative to our competitors or new entrants in the market may result in a competitive disadvantage.
In addition, the rapid increase in the nature, volume and availability of data in recent years, whether resulting from connected customers, so-called “big data”, cloud computing, personalization of genetic data, artifi cial intelligence or otherwise, may have unanticipated and adverse impacts on our business, for example by changing the nature of insurance underwriting and pricing; by allowing customers and competitors to tailor coverage in ways that we do not currently offer; and by potentially exposing us to increased “moral hazard” in business lines where we are unable for regulatory or other reasons to adjust pricing or coverage to refl ect individual risk profi les. While data-driven changes in the industry are at an early stage and diffi cult to predict, they could adversely impact our business going forward, including through the expense and effort that we will need to incur in order to ensure that our employees, systems and processes are able to effi ciently adapt to and manage such changes as they arise.
Inadequate or failed processes or systems, human factors or external events including hacking or other cyber-security risks may adversely affect our profi tability, reputation or operational effectiveness
Despite the Group’s implementation of a variety of security measures, the Group’s systems may in the future be subject to unauthorized intrusions, such as physical or electronic breakins, unauthorized tampering or other security breaches. Like other global fi nancial institutions and companies, the Group has, from time to time, experienced threats to its data and systems, including malware attacks, unauthorized access, systems failures and disruptions. Management has put in place internal controls and procedures designed to protect client data as well as the Group’s proprietary information from hacking or other types of unauthorized intrusions into the Group’s information technology systems. There is no guarantee, however, that these measures will be effective and prevent all attempted intrusions into the Group’s information systems and any such intrusion could result in operational disruption, loss of sensitive client data and/or proprietary information.
Interruptions or disruptions of our telecommunications and electronic data systems, or those of our third-party providers
framework. It is difficult to predict the ultimate outcome of discussions regarding changes to these requirements and how they could affect our results of operations, fi nancial condition and liquidity and the insurance industry more generally. The
In the event of a failure by our 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 or other shareholder distributions, and/or putting a company into rehabilitation or insolvency proceedings. A failure of the Group and/or any of its insurance subsidiaries to meet their regulatory capital requirements and/or a deterioration of their solvency position negatively impacting their competitive position, may also result in our deciding to inject signifi cant amounts of new capital into such insurance subsidiaries which could adversely affect our liquidity position, results of operations and fi nancial position. Regulatory restrictions that inhibit our ability to freely move excess capital among our subsidiaries or which otherwise restrict fungibility of the AXA Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the capital position of our operating insurance subsidiaries which may have a consequent negative impact on us and the perception of our fi nancial strength. Additional regulatory developments regarding solvency requirements, including changes to the Solvency II
framework, may adversely affect our prudential regime as well as associated costs. There can be no assurance that contingency plans developed by M anagement will be effective to achieve their objectives and any failure by us and/or our insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position.
Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from all our subsidiaries. In particular, our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affi liates. Moreover, our designation as a Global Systemically Important Insurer (“GSII”) could impose similar or other restrictions on the transfer of funds, including intra-group fi nancing arrangements, which could negatively impact the fungibility of our capital. These factors may adversely impact our liquidity position and capacity to pay dividends.
We may, from time to time, retain insurance or reinsurance obligations and other contingent liabilities in connection with our divestiture, liquidation or run-off of various businesses. We may also, from time to time and in the course of our business provide guarantees and enter into derivative and other types of off-balance sheet transactions that could result in income statement charges.
While M anagement cannot predict whether or when 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 conditions. We expect that new laws and regulations will increase our legal and compliance costs.
Stability Board, in consultation with the International Association of Insurance Supervisors (IAIS) and national authorities, and the policy measures for GSII contemplated by IAIS, could have far reaching regulatory implications for the AXA Group, may adversely impact our capital requirements, profitability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position as compared to insurance groups that are not designated as GSIIs. In addition, the multiplicity of different regulatory regimes, capital standards and reporting requirements resulting from our GSII designation and/or works on new capital standards led by the IAIS such as the Insurance Capital Standard (ICS) could increase operational complexity and costs.
Accounting Standards Board (IASB) regarding possible modifications to the IFRS, which could significantly impact insurers and other fi nancial institutions, including AXA, that prepare their consolidated accounts in accordance with such standards. In particular, IFRS 17, which will replace IFRS 4, may signifi cantly affect the accounting of policyholders’ liabilities at the date of fi rst application which is expected on January 1, 2021. As the IASB’s work is ongoing, M anagement cannot predict with any certainty at this time the potential impact of these proposed changes, notably in terms of implementation costs (or of other potential future modifi cations to IFRS). Any significant modifications to IFRS may adversely impact the
We expect the scope and extent of applicable laws and regulations, as well as regulatory oversight, to continue to increase over the coming years. While M anagement proactively manages these risks and has adopted policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where it does business, we cannot predict with any certainty the potential effects that a change in applicable laws or regulations, their interpretation or enforcement (or of the potential effects of any new regulation or legislation in the future) may have on the business, fi nancial condition or results of operations of our various businesses. Any failure by us to remain in compliance with regulations applicable to us could result in fi nes, penalties, injunctions or other similar restrictions, any of which could negatively impact our earnings and reputation.
As a global business, we are exposed to various local political, regulatory, business and fi nancial risks and challenges
We have been and may become in the future subject to regulatory investigations which may affect our image, brand, relations with regulators and/or results of operations
States which have signed up to the Department of Commerce of the United States “Safe Harbour Privacy Principles,” a new safe harbour, referred to as the “EU-US Privacy Shield”, was announced on February 2, 2016. While we currently anticipate that we can continue using alternate mechanisms to transfer data into the United States until the EU-US Privacy Shield is fi nalized, there is no guarantee that such mechanisms will not be subject to challenge, stricter scrutiny by the competent authorities or that further changes in the regulation will not potentially increase our legal and compliance costs, or result in regulatory sanctions or damage to image, brand and/or reputation.
Shield adopted in July 2016 will hinder the ability of EU-based banks and insurance companies, including the Group, to transfer personal data in the United States of America.
Further, there can be no assurance that we will not unintentionally violate such laws or that such laws will not be modifi ed, or that new laws will not be enacted in the future, which would cause us to be in violation of such laws. Any failure to comply with such laws could result in fi nes, penalties, injunctions or other similar restrictions, any of which could negatively impact our earnings and reputation.
Changes in tax laws or uncertainties in the interpretation of certain tax laws may result in adverse consequences
Act (FATCA) withholding requirements and the introduction of the Common Reporting Standard (CRS) across a multitude of jurisdictions in which the Group does business, could result in higher tax expenses and payments and are expected to result in higher compliance costs. Uncertainties in the interpretation or future developments of tax regimes may also affect our tax liability, return on investments and business operations.
We have been and may increasingly become exposed to the risk of tax audits and investigations in the various jurisdictions in which we operate. The international tax environment continues to change as a result of actions taken by the Organisation for Economic Co-operation and Development (OECD) , the
However, there is no guarantee that our tax positions will be upheld by the relevant tax authorities. Our business operations, results, fi nancial position, liquidity, outlook or reputation could be materially affected if one or more of the aforementioned risks materialized.
In order to raise capital to fund future growth or for solvency purposes, we may, in the future, offer rights, warrants or similar securities at prices below the then-current market price which may adversely affect the market price of our ordinary shares and dilute the positions of existing shareholders.
The Mutuelles AXA have stated their intention to collectively vote their shares in AXA and may have interests confl icting with other shareholders’ interests. For example, even though the
Information in this section should be read in conjunction with Note 4 “Financial and insurance risk management” in
“Litigation” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
In this context, AXA has (i) put in place a control framework with three lines of defense with boundaries between each of them clearly defi ned and (ii) established four key functions.
Management and staff 2nd line of defense (independent from the Group’s business operations)
responsible for developing, facilitating and monitoring an effective risk and control framework
The four key functions are: ■ the risk-management function, which is, in particular, responsible for coordinating the second line of defense, ensuring that the risk appetite is implemented with respect to all risks, and in charge of the design, implementation and validation of AXA Group economic capital model which is the basis for the Group Solvency II internal model (“Internal
Model”), the documentation of the Internal Model and any subsequent changes made to it as well as the analysis of the performance of this model and the production of summary reports thereof. The risk-management function holder at
Group level is the Group Chief Risk Offi cer; ■ the compliance function (the “Compliance function”), which is, in particular, responsible for advising on compliance with the laws, regulations and administrative provisions regarding insurance and reinsurance activities as well as ensuring that compliance is effective. The compliance function holder at
The internal audit function holder at Group level is the Global
■ the actuarial function, which is, in particular, responsible for overseeing the calculation of technical provisions (including ensuring the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions), assessing the
The holders of key functions have direct access to the Board of Directors.
regulation . Following this procedure, the Group has implemented regular assessments to ensure that the persons who effectively run the Group and key function holders meet the following requirements both at appointment and on an on going basis: ■ appropriate competence and capability, taking into account professional qualifi cations, training, knowledge and relevant experience (such as prior Board or Board committee membership) including understanding of regulatory requirements to enable sound and prudent management
■ propriety, taking into account reputation, fi nancial soundness and personal characteristics such as integrity and transparency
Furthermore, appointment of each person who effectively runs the Group and each key function holder at Group level is required to be notifi ed to the French Autorité de contrôle prudentiel et de résolution (“ACPR”), through a formal process, including submission of a detailed questionnaire addressing the fi tness and propriety of such person, as well as detailed background information. Solvency II also requires the implementation of procedures whereby the key function holders at Group level must have direct access to the Board of Directors.
For more information about the composition and assignments of the Board of Directors and its Committees, please refer to
Section 3.1 “Corporate governance structure – A balanced and effi cient governance” (1) of this Annual Report.
The Finance Committee examines any subject relating to the fi nancial management of the Group and in particular the policy on fi nancial r isk m anagement (including management of foreign exchange and interest rates exposure), the issues relating to the liquidity and fi nancing of the Group, the capital and solvency.
Asset- Liability Management (“ALM”) policy; and reviews the risk appetite framework developed by the Executive Management for fi nancial, insurance and operational exposures.
For more information about the Executive Management, please see Section 3.1 “Corporate governance structure – A balanced and effi cient governance” of this Annual Report. (1)
The scope of the ARCC covers all of the Group’s operations and include among others: ■ the Group’s overall risk appetite, material breaches of risk limits and proposed remedial actions, the Group’s risk framework as well as action plans proposed to reduce or otherwise modify the Group’s material risk positions when they are beyond defi ned limits; ■ the Group’s standards and limits to ensure they are consistent with the Group’s defi ned risk appetite; ■ the Own Risk and Solvency Assessment (“ORSA”) and of the other Solvency II reports (Group Solvency and Financial
Reporting to the ARCC, the following Group Risk Committees cover the main risk categories: ■ for financial risks: the Asset- Liability Management
Committee determines the Group ALM policies and ensures that the Group exposures are within the Group risks limits; ■ for insurance risks: the Life, Savings & Health Audit, Risk &
Committee are both chaired by the Chief Executive Offi cer of their respective Business lines. These Committees oversee risks in their respective businesses; ■ for operational and other material risks (strategic, reputation, emerging): the Operational Audit Risk &
The role of GRM is to identify, quantify and manage the main risks to which the Group is exposed. To this end, GRM develops and deploys a number of risk measurements, monitoring instruments and methods, including a standardized methodology and framework for stochastic modelling (through the Internal Model)
GRM is also responsible for the defi nition and implementation of the ERM framework within the AXA Group.
The ERM framework is based on the following fi ve pillars, cemented by a strong risk culture: Risk Management independence & comprehensiveness
1. Risk Management independence and comprehensiveness: Chief Risk Offi cers are independent from operations (fi rst line of defense) and Internal Audit Department (third line of defense). The Risk Management Department, together with the Compliance and Internal Financial Control constitute the second line of defense, whose objective is to develop, coordinate and monitor a consistent risk framework across the Group.
2. Common risk appetite framework: Chief Risk Offi cers are responsible for ensuring that senior management reviews and approves the risks to which the relevant entity or business unit is exposed, understands the consequences of an adverse development in such risks, and have action plans that can be implemented in case of unfavorable developments.
Risk Officers provide a systematic and independent second opinion on i nvestments, ALM and r eserves, p roduct a pproval p rocess and r einsurance and challenge on o perational risks and s trategic p lan.
framework. The Internal Model is designed as a consistent and comprehensive r isk m anagement tool, which also forms an important element in the capital management and planning process.
GRM oversees the operating entities’ adherence to the ERM, supported by the local r isk m anagement teams. It coordinates r isk m anagement for the Group, steers the local r isk m anagement d epartments and strives to develop a risk culture throughout the
Executive Management and the Board of Directors on compliance with applicable laws, regulations and administrative provisions adopted in accordance with the Solvency II regulation and other laws and regulations, and on the impact of major changes in the legal and regulatory environment applicable to AXA Group’s operations. The Group Compliance function provides expertise, advice and support to the various entities of the Company to assess situations and signifi cant compliance matters, analyze the major compliance risks and contribute to design solutions to mitigate those risks to which the Group is exposed. The Group Compliance function manages a wide range of compliance related matters including (i) regular reporting on signifi cant compliance and regulatory matters to
Executive Management and to regulators, (ii) fi nancial crime matters (which include anti-corruption, anti-bribery, anti-money laundering programs as well as international sanctions/embargo compliance), (iii) data privacy, (iv) the Compliance and Ethics
Guide, and (v) the monitoring of other major compliance and regulatory risks.
The compliance activities within the Group are set out in a number of Standards and Policies which set the minimum requirements expected to be covered by the entities and their compliance functions.
(“PFPM”) contain standards and policies on signifi cant risks affecting compliance activities as well as the high-level control and monitoring principles to which the entities must adhere.
AXA Compliance Governance Policy. The policy is in force since January 1, 2017 and defi nes the responsibilities, scope, competencies and reporting duties of the compliance function as required by the Solvency II regime. It also describes the responsibilities of the Group Compliance function in terms of risk identifi cation, advice and monitoring activities.
Compliance Plan is developed at the end of each year for the following year.