The market risks to which Property & Casualty operating units are exposed to arise from the following factors: ■ infl ation may increase the compensation payable to policyholders, so that the actual payments may exceed the associated reserves set aside. This risk can be signifi cant for long-tail businesses but is managed through regular pricing adjustments or specifi c protections against peaks of infl ation; ■ a sustained fall in yields on fi xed-income investments would generally not present a material risk. The exceptions would be policies implicitly providing a guaranteed rate (disability income, workers’ compensation) – but the risk is mitigated by duration management; ■ a rise in yields on fi xed-income investments (linked to interest rates or spreads) reduces the market value of fi xed-income investments and could impact adversely the solvency margin; ■ a decline in asset market values (equity, real estate, alternatives, etc.) could impact adversely the Group’s solvency margin, as well as available surplus;
■ a change on the foreign-exchange rates would have limited impact for the operating units since foreign-currency commitments are matched to a large extent by assets in the same currency or covered by hedges, but it could affect the earnings contribution in euros.
The investments of Property & Casualty insurance companies are managed so as to optimize the return on assets while considering all of the aforementioned risks and the requirements in terms of regulatory solvency. A large portion of investments is made in liquid fi xed maturities to secure the capacity to pay unexpected exceptional benefi ts and claims. The capacity to have diversifi ed investments (real estate or equity securities)
Processes in place and related Governance for Asset & Liability management
AXA manages its fi nancial risks through a disciplined investment and reporting process within a dedicated governance structure.
T he ALM Supervisory Committee determines the Group asset liability management policies, ensures that the Group exposures are within the Group risks limits. The Group
AXA’s investment function and provides the forum for AXA’s investment family and other key participants to take the major decisions that drive the performance of the Group’s investment portfolio.
A group overview is prepared each month and allows necessary actions to be taken.
The strategic asset allocation allows for taking a tactical stance within given leeways.
Local CIOs mandate asset managers with the day-today management of local asset portfolios, contingent to full compliance with clearly defi ned investment guidelines.
operates. These local regulations may prescribe: ■ the required category and nature of investments; ■ the required diversifi cation within the portfolio, by type of issuer, geographical zone, and asset class; ■ the minimum proportion of assets invested in local currency, considering commitments denominated in this currency
As part of an on-going capital allocation process, local insurance operating units perform at least twice a year a simulation of the impact, given the various regulatory constraints, of severe scenarios for all asset classes. The Group Central Finance
The positioning of the Group with two internal asset managers leverages their distinct investment expertises to total Group level and benefi ts to all local insurance companies.
Products that involve hedging programs based on derivative instruments are designed with the support of dedicated teams at AXA Bank Europe, AXA IM and AllianceBernstein. In a similar way, this set-up ensures that all entities benefi t from the best possible expertise, highest levels of legal security and operational excellence in the execution of such transactions.
The main fi nancial risks for the AXA Group are as follows: ■ interest-rate, spread risk and equity risk related to the operating activities of Group subsidiaries; ■ credit risk. Please read the next part “Credit risk” included in the Part 3 – Section 3.3– “Quantitative and Qualitative
Group subsidiaries; ■ risks relating to the management of holding companies’
foreign exchange exposure and debt; ■ liquidity risk. Please read “Liquidity position and risk management framework” included in Part 1 – Section 1.4 –
Net unrealized capital gains/losses, not included in IFRS shareholders’ equity 1,337 2,080 3,417 936 1,920 2,855
Life & Savings Adjusted Net asset Value (ANAV) and Other Businesses TNAV 21,056 (6,606) 14,451 20,389 (6,324) 14,065
The Group EV is not an estimate of AXA’s “fair value”. It does not include the value of business to be sold in the future, nor does it include any value for future profi ts from existing business of other-than-life businesses (Property & Casualty, International
EEV, AXA has adopted a “market-consistent” approach to setting asset return assumptions. Each cash fl ow is discounted at an appropriate discount factor, so that starting with Euro 1 of bond or of equity, projecting expected cash fl ows and discounting, will simply give Euro 1 of value. Mechanically, this can be described as assuming that, in the future, all assets will earn the risk-free rate (referred to as the “reference rate” in the
10% higher value of equity markets at start of projection 959 3% 389 1% 1,348 4% 1,401 4% 780 2% 2,181 6%
2011 interest rate sensitivities (% of Group EV) for Life &
EEV behaves more like a portfolio of fi xed-income assets. In addition, higher interest rates affect the value both positively through higher investment rate and negatively through lower starting value of fi xed income assets and higher discount rates for future profi ts. For different product types these interactions produce different results.
2011 interest rate sensitivities (% of Group EV) for other-thanlife businesses of -5% to upward 100 bps and 5% to downward 100 bps (2010: -5% and 5%) refl ect mainly the impacts on fi xed-income assets, partly offset by derivatives and sensitivities to changes in debt value, should interest rates curve move, with all debt classifi ed as liabilities and re-measured at market value. The majority of other-than-life reserves in the fi nancial statements and therefore in TNAV is generally not sensitive to interest rate changes as not discounted in most cases.
2011 equity market sensitivities (% of Group EV) for Life &
Group assets at December 31, 2011 (89% in 2010), assets and liabilities with foreign currency exposure were generally matched or hedged.
■ Life & Savings business: 77% of Group assets at the end of 2011 (77% in 2010): In France, AXA is exposed to exchange-rate risk through the units it owns in certain investment funds partly invested in foreign currencies (particularly US Dollar: €2,062 million vs. €2,184 million in 2010, Pound Sterling: €155 million vs. €163 million in 2010, and Japanese Yen: €98 million vs.
€113 million in 2010). AXA France owns these invested funds in order to diversify its investments and enable policyholders to benefi t from the performance of international fi nancial markets.
AXA France controls and limits its exposure to exchange-rate risk by using foreign exchange forwards and other derivatives
At the end of 2011, the total assets denominated in foreign currencies (mainly US Dollars) represented an amount of €16,867 million (€17,216 million in 2010). Excluding assets backing unit-linked contracts, the corresponding exchange rate risk was fully hedged through the use of derivatives.
In Switzerland, the AXA entities are exposed to exchange rate risk through their investments in foreign currencies (mainly Euro and US dollar) due to the on-going low interest rate environment in Switzerland and to the limited investment possibilities in the
Swiss market. As a result the entities hold foreign exchange exposure on equity securities as well as on fi xed maturities denominated in currencies other than Swiss Francs. However the main part of the exposure is hedged back into Swiss Francs with foreign exchange swaps, options and forwards.
AXA Hong Kong holds investments denominated in foreign currencies €5,716 million (€4,827 million in 2010), both in directly and indirectly through investment funds, with aim of diversifying its investments. These investments are mainly in
US Dollar €5,583 million (€4,756 million in 2010). Exchangerate risk exposure is partially hedged using foreign exchange forwards.
Life & Savings companies do not have any signifi cant exposure to exchange-rate risk.
France controls and limits its exposure to exchange-rate risk by using forwards in all these currencies (notional of €464 million vs. €487 million in 2010).
In Belgium, parts of AXA Belgium’s reinsurance portfolio liabilities are denominated in US Dollar. The foreign exchange risk associated to these liabilities is fully hedged through investments in US Dollar. The US Dollar exposure was €106 million at the end of 2011 (€127 million in 2010).
AXA Ireland also operates in Northern Ireland, and so manages a portfolio of pound sterling policies for an amount of €248 million (€203 million in 2010), hedged with investments in the same currency of €224 million (€185 million in 2010).
In Switzerland, foreign exchange exposure amounted to €4,062 million (circa 30% of total assets) at the end of 2011, of which €3,734 million were hedged with foreign exchange futures and forwards.
■ International Insurance business (2% of Group assets at the end of 2011 vs. 2% in 2010): In the course of its business,
US Dollar (€1,267 million at the end of 2011 vs. €1,270 million in 2010) and, to a lesser extent, Pound Sterling (€654 million at the end of 2011 vs. €607 million in 2010). The Company carries assets denominated in foreign currencies to ensure balance sheet congruence. The congruence between the c ompany’s foreign-currency assets and liabilities is regularly adjusted, but is subject to unpredictable loss occurrence and the corresponding liabilities movements.
■ As regards holding companies (6% of Group assets at the end of 2011, same as 2010), AXA SA has, since 2001, adopted a hedging policy on net investments denominated in foreign currencies, which aims at protecting the Group’s consolidated shareholders’ equity against currency fl uctuations, using derivatives instruments and foreigncurrency debt.
US Dollar 2.4 7.0 1.8 5.2 In respect of the US activities, mainly in the form of debt
Swiss Franc 9.0 10.4 7.4 8.3 In respect of the Swiss business, in the form of derivatives
DEFINITION: interest-rate risk may result from: ■ a mismatch between types of interest rates (fi xed versus fl oating); ■ a mismatch between fl oating rate benchmarks; ■ a mismatch between fl oating rate renewal dates.
AXA has a database consolidating the Group’s assets and analyzing them by issuer, credit rating, sector and geographic region, in order to assess the risk of concentration in its equity and debt security portfolios at Group level, in addition to local procedures. This database allows AXA to monitor, on a monthly basis, exposure to the default risk of a given issuer, particularly through holding of its debt securities. It also allows the monitoring of equity exposure.
At December 31, 2010, the breakdown of the debt security portfolio (€349.4 billion) by credit rating was: 33% in AAA, 31%
in AA, 20% in A, 10% in BBB, 3% in BB and lower, and 3%
The exposure to sovereign debt securities issued by governments and related in Greece, Ireland, Italy, Portugal and Spain classifi ed as available for sale as of December 31, 2011 were as follows: Issuer (in E uro million) Fair Value
ASSET BACKED SECURITIES BY UNDERLYING TYPE OF ASSET (EXCLUDING COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs))
in CDO, 17% in Commercial MBS, 15% in Prime Residential, 8% in US Subprime & Alt-A, and 3% in Non conforming RMBS.
At December 31, 2011, the analysis by rating of the ABS
portfolio was as follows and showed that 56% were AAA & AA.
At December 31, 2010, the breakdown of the ABS portfolio by rating was: 37% in AAA, 22% in AA, 8% in A, 6% in BBB, 19%
At December 31, 2011, the nominal amount of positions taken through credit derivatives was €25.4 billion (1) (cumulated notional amounts of protections bought and protections sold), of which €23.9 billion of CDS, which can be broken down as follows: i. €6.7 billion of CDS protections bought to hedge credit risk with regard to certain investments in corporate bonds mainly in Japan (€4.0 billion), Switzerland (€1.8 billion) and
France (€0.7 billion); ii. €17.2 billion of CDS protections sold and bought to manage our credit exposure, which corresponds to a €8.5 billion (2) net credit investment, of which €6.5 billion representing the corporate credit risk overlay.
For these €8.5 billion net CDS, the credit risk taken by the
Section “Invested assets”. Limits applied to issuers take into account these credit derivative positions.
The breakdown of these net CDS’s underlying debt securities by rating is as follows: BBB
The breakdown of all reserves ceded to reinsurers by reinsurer rating as of December 31, 2011 (€10.7 billion) was as follows: BBB
At December 31, 2010, the breakdown of reserves ceded to reinsurers (€11.1 billion) by reinsurer rating was: 6% in AAA, 44% in AA, 22% in A, 3% in BBB/BB/B, and 25% in others.
At year end 2011, total invested assets of the banking segment
As such, AXA banks risk management policies are based on their stated Risk Appetite, with the following key principles: ■ dedicated counterparty and credit risk functions with Internal
Rating Based model and appropriate c ommittees; (1) This fi gure represents an accounting view i.e. 100% of assets held directly and in consolidated “core block” and “satellite” funds.
(2) This fi gure represents an economic view i.e. 100% of assets held in consolidated ”core block” and “satellite” funds and assets held by non consolidated funds.
This activity is limited with strong control processes in place: a limit framework (by country, currency, ratings, and individual issuer – based on internal rating system), one dedicated
Credit risks are regularly reviewed by the Management Board of each bank, and are subject to regulation. AXA Bank Europe’s internal capital adequacy assessment and strategic planning processes take into account capital required to mitigate all material risks, capital required for expected business growth, intra-risk diversifi cation benefi ts, liquidity requirements and stress testing results. Its capital allocation processes also incorporate Risk-Adjusted Return on Capital (RAROC) analysis.
As for retail credit risk in Hungary, it should be noted that in an attempt to reduce household debt, the Hungarian government has published legislation in September 2011 allowing customers to pay back foreign currency denominated mortgages at non-market rates for a limited time period. This legislation forced banks to provide for the likely cost related to these measures. As a consequence, AXA Bank Europe has provisioned €103 million for the impact of legislation on top of the €54million additional provisions set up to cover the loan losses on the existing portfolio. In this context, Hungarian lending activities have been stopped.
The bank aims to meet all regulatory capital obligations and to remain suffi ciently capitalized in the light of AXA internal capital model. As at December end 2011, AXA Bank Europe’s core tier 1 ratio is signifi cantly above the minimum regulatory requirements.
In its Life & Savings activities, the AXA Group has set up product approval procedures in each subsidiary, to ensure that new risks underwritten by the Group undergo a thorough approval process before products are offered to customers.
This harmonized approach also facilitates the sharing of product innovation within the Group, which has been further developed by AXA Global Life.
These procedures are defi ned and implemented locally. They are structured and harmonized using minimum requirements defi ned by Group Risk Management (GRM). The main characteristics of these procedures are: ■ although the decision to launch a new product is taken locally, it must result from a documented approval process that complies with local governance practices and AXA
Group standards in terms of product features, pricing, hedging and aspects related to legal, compliance, regulatory, reputation and accounting. For Variable Annuity products with guarantees, as well as Long Term Care products, the local governance is supplemented by a centralized review performed by GRM, and submitted to the Management
Committee; ■ all signifi cant Life & Savings products must go through this process; ■ guarantees and options embedded in the product must be quantifi ed using market consistent stochastic methods in order to ensure that there is adequate measure of their manufacturing cost. This work, along with an analysis of the return on capital across multiple scenarios, also gives a better understanding of any asset-liability mismatch risk and the capital requirement at an early enough stage of the product’s design. Where signifi cant fi nancial risks exist, an ALM study must be performed to confi rm the hedging strategy for the product; ■ stress tests are also required on key assumptions to ensure that appropriate “what if” scenarios are considered in the development process; ■ pricing reports for material products are sent to GRM.
Casualty as a regular technical & risk audit with methods adapted to the underwriting of risks, while maintaining the principle of local decision-making based on a documented approval procedure. The aim is threefold: ■ for pre-launch business, to ensure that new risks underwritten by the Group have undergone a rigorous process before the products are offered to customers and show adequate profi tability adjusted for the cost of capital; ■ for post-launch business, to ensure the appropriate profi tability and risks control of the in-force P&C underwritings; ■ this profi tability framework complements strong and basic underwriting rules to ensure that no risks are taken outside the Group tolerances and that value is created by adequately pricing the risk.
has developed and deployed common models/metrics to measure risks consistently throughout the Group (in particular via its economic capital framework). This is designed to check that the Group’s exposure is within the Group’s consolidated risk appetite limits, along a number of dimensions (earnings, value, capital and liquidity).
P&C, AXA Global Life and GRM to optimize the quality and cost of reinsurance cover. These analyses are performed in collaboration with the technical and reinsurance departments of Group operational entities. They measure frequency risks as well as specifi c severity risks in P&C
In order to build adjusted and optimized protection, the Group’s various operating entities place 100% of their reinsurance treaties with AXA Global P&C. Only a small part (10-20%) of most local treaties is placed directly on the reinsurance market through AXA Global P&C with the remainder is retained and combined at AXA Global P&Clevel to build internal Group reinsurance pools by line of business.
In addition to controlling risks through prior product approval, regular risk exposure monitoring and reviewing reinsurance covers, operational entities specifi cally monitor reserve risks, both in Life & Savings and Property & Casualty. Reserves have to be booked for claims as they are incurred or reported. These reserves are measured individually for each fi le by the claims departments. Additional reserves for incurred but not reported
Global P&C teams, performs in-depth reviews on specifi c portfolios to re-assess all underlying assumptions, methods and processes driving the exercise (claims management, actuarial, underwriting, etc.) and to check the compliance with the Group standard on reserving, which covers, among other matters, the independency of opinions, the documentation of the escalation process (meant to solve signifi cant differences of opinion between fi rst and second assessments) and the reconciliation process.
Assumptions depend on available data relating to reported losses at the time of the estimates, as well as local regulations, claims management procedures, pricing, underwriting information and the type of activities and claims (coverage type, attritional or major claims, recent or old occurrence). They also depend on economic, social and environmental factors, as well as on the legislative and political context, which are important variables in terms of reserves. Assumptions are made following discussions with claims managers, pricing actuaries, underwriters and other specialized departments.
These discussions lead to the defi nition of reasonable estimate ranges.
Global warming is now proven beyond doubt, although experts may disagree on its magnitude and projection. Even if an international agreement freezes greenhouse gas emissions at year 2000 levels, which remains a challenge after the 17th Conference of the Parties in Durban in December 2011, there is a broad consensus among the scientifi c community to consider that climate change will be inevitable due to past emissions. It remains very diffi cult to estimate the local effect of climate change due to the large number of local geographical factors to be taken into account (sea currents, topography, etc.), some results are now available at regional level and used in our catastrophe risk estimations. However, it is still very diffi cult to estimate the consequences of extreme events
(heat waves, droughts and fl oods, high winds and intense precipitation caused by cyclones), which are of particular concern to insurance companies. It was one of the reasons whichled the Group to launch in 2007 the AXA Research Fund, which supports academic research projects on Climate.
AXA has defi ned a framework to identify and measure its operational risks that may arise from a failure in its organization, systems and resources or from external events. Ensuring an adequate mitigation of these risks across the Group is a key pillar of the risk management functions.
Guide defi nes rules for day-to-day professional conduct and covers a variety of matters, including specifi c rules concerning confl icts of interest, transactions involving AXA securities and those of its listed subsidiaries, confi dentiality and control of sensitive information as well as record keeping and retention.
Group’s principal business activities of insurance and asset management are subject to comprehensive regulation and supervision in each of the various jurisdictions where the Group operates. AXA SA, the ultimate parent holding company of the
CONSOLIDATED FINANCIAL STATEMENTS/FULL YEAR 2011 4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 228 4.2 CONSOLIDATED STATEMENT OF INCOME 231 4.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 232 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 234 4.5 CONSOLIDATED STATEMENT OF CASH FLOWS 238 4.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 240
NOTE 10 Investments in associates accounted for using the equity method 303
NOTE 32 Subsequent events 402 4.7 REPORT OF THE STATUTORY AUDITORS 403
(e) In 2010, assets and liabilities related to Australian and New Zealand operations and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were classifi ed as held for sale (see Note 5.3).
Share capital and capital in excess of nominal value 25,188 24,723
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders (d) 104,642 108,587
14 LIABILITIES ARISING FROM INSURANCE AND INVESTMENT CONTRACTS 549,841 536,717 15 Liabilities arising from banking activities 34,023 27,532 16 Provisions for risks and charges 10,760 10,495 19 Deferred tax liabilities 4,526 4,098
(c) In order to improve the consolidated statement of fi nancial position presentation consistency, balances disclosed so far as “Other debt instruments issued and bank overdrafts” of AXA Bank Europe have been reclassifi ed to “Liabilities arising from banking activities” aggregate in 2010.
CONSOLIDATED FINANCIAL STATEMENTS/FULL YEAR 2011 4 4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Total Liabilities arising from other insurance and investment contracts 396,384 380,512
(c) Also includes liabilities arising from contracts where the fi nancial risk is borne by policyholders with Guaranteed Minimum features.
CONSOLIDATED FINANCIAL STATEMENTS/FULL YEAR 2011 4 4.2 CONSOLIDATED STATEMENT OF INCOME
Income from operating activities before tax 4,856 4,228 10 Income arising from investments in associates – Equity method 62 85 24 Financing debts expenses (h) (329) (488)
(d) Includes impairment releases on investments sold and net realized gains on sale of Australian and New Zealand operations (€742 million gross or €626 million net) and Taikang Life (€830 million gross or €798 million net).
(e) Includes realized and unrealized forex gains and losses relating to investments at cost and at fair value through shareholders’ equity.
Reserves relating to the change in fair value of hedge accounting derivatives (cash fl ow hedge) Other (a) Translation reserves Undistributed profi ts and other reserves
(c) Actuarial gains and losses accrued since opening January 1, 2010.
Charges related to the partial disposal of UK Life & Savings operations 38 1,642
Net increase/(write back) in impairment on investments, tangible and other intangible assets 2,144 954
Change in fair value of investments at fair value through profi t or loss 6,859 (18,810)
Income arising from investments in associates – Equity method (62) (85)
Adjustment for reclassifi cation to investing or fi nancing activities (6,501) (1,271)
Investment income & expense recorded in profi t or loss during the period (16,704) (15,393)
Net cash provided by other assets and liabilities (g) 21 2,788
Disposal of subsidiaries and affi liated companies, net of cash ceded 1,369 2,257
Sales of equity instruments and non controlled investment funds (g) (h) 21,253 16,653
Sales of investment properties held directly or not (g) 1,036 786
Net cash related to sales and repayments of investments (h) (g) (i) 136,152 132,357
Purchases and/or issues of loans and other assets (g) (i) (22,904) (39,260)
Net cash impact of assets lending/borrowing collateral receivables and payables 1,144 (228) Other investing cash impact and non cash adjustment - 186 NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES (3,425) (17,263) Issuance of equity instruments 317 224
Impact of change in consolidation method and of reclassifi cations as held for sale (l) (189) 335
Net impact of foreign exchange fl uctuations and reclassifi cation on cash and cash equivalents 825 3,770
(a) AXA Japan closes its full year accounts at September 30. Given signifi cant movement in foreign exchange rates between September end and December end, balance sheet items have been translated using December 31 exchange rates for both 2010 and 2011 closings.
(c) Includes premiums/discounts capitalization and relating amortization, amortization of investment and owner occupied properties (held directly).
(h) Includes equity instruments held directly or by controlled investment funds as well as non controlled investment funds.
The consolidated fi nancial statements are prepared in compliance with IFRS standards and interpretations of the
Union before the balance sheet date. However, the Group does not use the “carve out” option allowing not to apply all hedge accounting principles required by IAS 39. In addition, the adoption of the new IFRS 9 standard published by the
AMENDMENTS TO STANDARDS AND INTERPRETATIONS PUBLISHED AND ADOPTED ON JANUARY 1, 2011
November 4, 2009, simplifi es the disclosure requirements for government-related entities and clarifi es the defi nition of a related party; ■ IFRIC 19 – Extinguishing Financial Liabilities with Equity
They are presented in a single document rather than as a series of piecemeal changes. They involve accounting changes for presentation, recognition or measurement purposes and terminology or editorial changes with minimal effect on accounting.
IFRS 9 – Financial I nstruments, published on November 12, 2009, amended on October 28, 2010 and December 16, 2011 and applicable to the Group from January 1, 2015 with earlier application permitted, represents the completion of the fi rst part of a three-part project to replace IAS 39. IFRS 9 uses a single approach to determine whether a fi nancial asset is measured at amortized cost or fair value. A fi nancial asset is measured at amortized cost if both a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash fl ows and b) the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding. At initial recognition, an entity can use the option to designate a fi nancial asset at fair value through profi t or loss if doing so eliminates or signifi cantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in profi t or loss. Additionally, for fi nancial liabilities that are designated as at fair value through profi t or loss, the amount of change in the fair value of the
fi nancial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profi t or loss. The adoption date of IFRS 9 including its different phases (the second and third phases respectively relate to the impairment methodology and the hedge accounting), its method of implementation and its impact are currently being examined within the Group.
Financial Assets, published on October 7, 2010, increases the disclosure requirements for transactions involving transfers of fi nancial assets. The amendment is intended to provide additional information regarding risk exposures when a fi nancial asset is transferred but the transferor retains some level of continuing exposure to the asset. The amendment also requires disclosure where transfers of fi nancial assets are not evenly distributed throughout the period. The disclosure amendment is effective for annual periods beginning on or after
Ventures includes amendments for conforming changes based on the issuance of IFRS 10, IFRS 11 and IFRS 12.
IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value. IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with early application permitted, and it is not expected to have a material impact on the Group’s consolidated fi nancial statements.
The amendment to IAS 1 – Presentation of Financial Statements, published June 16, 2011, requires entities to group together items presented within other comprehensive income based on whether they are potentially reclassifi able to profi t or loss in a subsequent period. The amendment also preserves the requirement that items in other comprehensive income and profi t or loss should be presented as either a single statement or two consecutive statements. The amendment is effective for annual periods beginning on or after July 1, 2012, with early application permitted, and it is not expected to have a material impact on the Group’s consolidated fi nancial statements.
The amendments to IAS 32 – Financial Instruments: Presentation, and the amendments to IFRS 7 – Financial
Instruments Disclosure published December 16, 2011, provide clarifi cations of the application of the offsetting rules and amend the related disclosure requirements. The amendments to IAS 32 clarify that to result in offset of a fi nancial asset and a fi nancial liability, a right to set-off must be available today rather than be contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.
Additional clarifi cations are presented regarding the settlement process. The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements.
Deliberations at joint meetings of IASB and FASB regarding the Insurance Contracts Phase II project as well as change in interpretation of US GAAP (ASU-2010-26) applicable as at
IFRS requires the use of estimates and assumptions. It requires a degree of judgment in the application of Group accounting principles described below. The main balance sheet captions concerned are goodwill (in particular impairment tests described in Section 1.6.1), intangible assets acquired in a business combination, the value of acquired business in force, deferred acquisition costs and equivalent, certain assets accounted at fair value, deferred tax assets, liabilities relating to the insurance business, pension benefi t obligations and balances related to share-based compensation. The principles set out below specify the measurement methods used for these items. These methods, along with key assumptions where required, are discussed in greater depth in the notes relating to the asset and liability items concerned where meaningful and useful.
All amounts in the consolidated statement of fi nancial position, consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of cash fl ows, consolidated statement of changes in equity and in the notes are expressed in Euro million, and rounded up to the nearest whole unit, unless otherwise stated.
Unless otherwise stated, the AXA’s accounting policies have been consistently applied to all the periods presented in its fi nancial statements, including policies relating to the classifi cation and measurement of insurance contracts, investment contracts and other fi nancial investments and liabilities including derivatives.
(also referred to as value of acquired business in force or VBI).
Other identifi able intangible assets such as the value of customer relationships should be recognized. The value of customer relationships intangible represents the value of future cash fl ows expected from renewals and the cross-selling of new products to customers known and identifi ed at the time of the acquisition. These projections include assumptions regarding claims, expenses and fi nancial revenues, or they can be estimated on the basis of the new business value. In line with accounting practices in force before the adoption of
for a put granted after January 1, 2009, to the extent there is no immediate transfer of risks and rewards. Similarly, subsequent changes in the liability are recorded against goodwill for puts existing before January 1, 2009 and against equity (Group share) for puts granted after that date.
■ to the extent of AXA’s interest for entities consolidated by equity method or proportionate consolidation.
The value of purchased insurance contracts and investment contracts with discretionary participating features recognized in a business combination (see Section 1.3.2) is amortized as profi ts emerge over the life of the contracts’ portfolio. In conjunction with the liability adequacy test (see Section 1.13.2),
VBI is subject to annual recoverability testing based on actual experience and expected changes in the main assumptions.
In Life, the asset is amortized based on the estimated gross profi ts emerging over the life of the contracts. In conjunction to the liability adequacy test (see Section 1.13.2) this asset is tested for recoverability: any amount above future estimated gross profi ts is not deemed recoverable and expensed.
They also include customer relationships intangibles as well as distribution agreements recognized as a result of business
combinations. If these assets have a fi nite useful life, they are amortized over their estimated life. In all cases, they are subject to impairment tests, at each closing for assets with a fi nite useful life and at least annually for other assets. In the event of a signifi cant decline in value, an impairment is booked corresponding to the difference between the value on the balance sheet and the higher of value in use and fair value less costs to sell.
• debts held by structured bond funds controlled and consolidated by the Group and made up of CDOs
Changes in the fair value of derivatives designated and qualifying as fair value hedge are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability. Therefore, the gain or loss relating to any ineffective portion is directly recognized in the income statement.
The main characteristics of the accounting principles applied prior to IFRS and retained after the conversion to IFRS are as follows: ■ reserves must be suffi cient; ■ life reserves cannot be discounted using a discount rate higher than prudently estimated expected assets yield; ■ acquisition costs are deferred to the extent recoverable and amortized based on the estimated gross profi ts emerging over the life of the contracts; ■ claims reserves represent estimated ultimate costs. Post claims reserves are generally not discounted, except in limited cases (a detail of discounted reserves is shown in
methodology). The discount rates used by AXA are less or equal to the expected future investment yields (assessed on prudent basis).
Except when these guarantees are covered by a risk management program using derivative instruments (see next paragraph), guaranteed minimum benefi ts reserves relating to contracts where the fi nancial risk is borne by policyholders
Some guaranteed benefi ts such as Guaranteed Minimum Death or Income Benefi ts (GMDB or GMIB), or certain guarantees on return proposed by reinsurance treaties, are covered by a risk management program using derivative instruments. In order to minimize the accounting mismatch between liabilities and hedging derivatives, AXA has chosen to use the option allowed under IFRS 4.24 to re-measure its provisions: this revaluation is carried out at each accounts closing based on guarantee level projections and takes into account interest rates and other market assumptions. The liabilities revaluation impact in the current period is recognized through income, symmetrically with the impact of the change in value of hedging derivatives.
This change in accounting principles was adopted on the fi rst time application of IFRS on January 1, 2004 for contracts portfolios covered by the risk management program at that date. Any additional contracts portfolios covered by the risk management program after this date are valued on the same terms as those that applied on the date the program was fi rst applied.
Claims reserves include the claims incurred and reported, claims incurred but not reported (IBNR) as well as claim handling costs. Claims reserves are based on historical claim data, current trends, and actual payment patterns for all insurance business lines as well as expected changes in infl ation, regulatory environment or anything else that could impact amounts to be paid.
or asset (DPA) is recorded. The DPL or DPA corresponds to the discretionary participation available to the policyholders and is generally determined by applying on the basis of estimated participation of policyholders in unrealized gains and losses and any other valuation difference with the local contractual basis.
Switzerland (for example “legal quote” for Group insurance policies), Germany and France where minimum are set to respectively 90%, 90% and 85% of a basis which may include not only fi nancial income but also other components such as in Germany or Switzerland. Participating business is less developed in the United States or in Japan.
Liability Adequacy Test In addition, at each balance sheet date, liability adequacy tests are performed in each consolidated entity in order to ensure the adequacy of the contract liabilities net of related
and VBI. For non-life insurance contracts, an unexpired risk provision is accounted for contracts on which the premiums are expected to be insuffi cient to cover expected future claims and claims expenses.
Sensitivities of: ■ fi nancial assets and liabilities; ■ insurance and investment contracts related assets and liabilities including the value of Life & Savings business inforce, to interest rate risk and equity risk are disclosed in Note 4.2.
EMBEDDED DERIVATIVES IN INSURANCE AND INVESTMENT CONTRACTS WITH DISCRETIONARY PARTICIPATING FEATURES
Embedded derivatives that meet the defi nition of an insurance contract or correspond to options to surrender insurance contracts for a set amount (or based on a fi xed amount and an interest rate) are not separately measured. All other embedded derivatives are bifurcated and booked at fair value when material (with change in fair value recognized through income statement) if they are not considered as closely related to the host insurance contract and/or do not meet the defi nition of an insurance contract.
In accordance with IAS 39, these contracts are accounted for using “deposit accounting”, which mainly results in not recognizing the cash fl ows corresponding to premiums, benefi ts and claims in the statement of income (see “Revenue recognition” section below). These cash fl ows shall rather be recognized as deposits and withdrawals.
This category includes mainly unit-linked contracts that do not meet the defi nition of insurance or investment contracts with discretionary participating features. For these unit-linked contracts, the liabilities are valued at current unit value, i.e. on the basis of the fair value of the fi nancial investments backing those contracts at the balance sheet date together with Rights to future management fees, also known as Deferred origination costs (DOC, described in Section 1.6.4).
The present value of the future benefi ts paid by the employer, known as the DBO (Defi ned Benefi t Obligation), is calculated annually on the basis of long-term projections of rate of salary increase, infl ation rate, mortality, staff turnover, pension indexation and remaining service lifetime. The amount recorded in the balance sheet for employee benefi ts is the difference between the Defi ned Benefi t Obligation and the market value at the balance sheet date of the corresponding invested plan assets after adjustment at fair value. If the net result is negative, a provision is recorded under the provision for risks and charges heading. If the net result is positive, a prepaid asset is recorded in the balance sheet. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in shareholders’ equity (in the Statement of
The AXA Shareplan issued under specifi c French regulatory framework includes two options: traditional and leveraged option (with an application subject to specifi c local regulations within the Group).
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of past events, when it is probable that an outfl ow of resources will be required to settle the obligation, and when the provision can be reliably estimated.
Gross written premiums correspond to the amount of premiums written by insurance and reinsurance companies on business incepted in the year with respect to both insurance contracts and investment contracts with discretionary participating features, net of cancellations and gross of reinsurance ceded.
Subsequent events relate to events that occur between the balance sheet date and the date when the fi nancial statements are authorized for issue: ■ such events lead to an adjustment of the consolidated fi nancial statements if they provide evidence of conditions that existed at the balance sheet date,
■ such events result in additional disclosures if indicative of conditions that arose after the balance sheet date, and if relevant and material.
The Group proceeded to a refi nement of its IFRS chart of accounts in 2011 for some limited areas of its consolidated fi nancial statements (including the Notes). This process, also driven by the perspective of the upcoming Solvency II change in regulation, was applied to the 2011 opening balance sheet so that the December 31, 2010 statement of fi nancial position is presented on comparable basis. The 2010 Full Year statement of income disclosed as at December 31, 2011 has not been adjusted as these changes do not materially affect the statement of income presentation.
■ Private equity assets held directly are now shown together with equity securities instead of being disclosed as other assets.
Some accounts were also remapped from one aggregate of the statement of fi nancial position to another to improve the consistency of presentation in the fi nancial statements (e.g.
The level of breakdown collected in relation to receivables and payables was also reviewed and rationalized, notably by nature of business and activity type of counterparty. The gross-up of assets/liabilities transactions has been reviewed and further improved regarding transactions with double sided entries on the statement of fi nancial position such as repurchased transactions.
AXA Affi n General Insurance Berhad (a) 42.41 42.41 42.41 42.41
(a) AXA Group has a full control given the shareholders’ agreements.
Portman Insurance Ltd. (previously AXA Global Risks UK) 100.00 100.00 100.00 100.00
The 5 consolidated CDOs at the end of 2010 have been unwound during the year. No CDOs are any longer consolidated.
“Minority interests of controlled investment funds and puttable instruments held by minority interest holders”. As of
Philippines AXA Life Insurance Corporation AXA Asia Pacifi c Holdings minority
AXA Minmetals Assurance Co Ltd (a) AXA Asia Pacifi c Holdings minority
(a) “AXA Minmetals Assurance Co Ltd” is accounted for using the equity method as its shareholders’ agreements don’t provide the Group with controlling power.
As of December 31, 2011, real estate companies accounted for using the equity method represented total assets of €306 million (€392 million at the end of 2010) and investment funds accounted for using the equity method represented total assets of €3,829 million (€3,559 million at the end of 2010), mainly in the United States, the United Kingdom, Germany and
Held assets amounted to €1,204 million as of December 31, 2011.
The Life & Savings Global business line, as part of its role to defi ne a common strategy has set the following priorities: ■ accelerate diversifi cation into Protection and Health; ■ enhance profi tability in Savings business; ■ prioritize investments for growth; ■ foster business effi ciency.
Other countries) and one operating component for the Direct business (previously included within countries and regions and now reported as a separate reporting unit).
of the reinsurance business to PartnerRe (ex Paris Ré). It also includes reinsurance activity managed by AXA Global Life and
AXA Global P&C (ex AXA Cessions), which write reinsurance treaties of AXA entities after a selection of reinsurers. AXA
The Banking segment includes banking activities (mainly retail banking, mortgages loans, savings) conducted primarily in
In this document, “Insurance” covers the three insurance segments: Life & Savings, Property & Casualty and International Insurance.
Change in unearned premiums net of unearned revenues and fees (152) (431) 26 - - - 7 (549)
Net realized gains and losses relating to investments at cost and at fair value through shareholders’ equity (d) 2,006 373 54 (4) - 723 - 3,153
(a) As described in Note 1.10, the contribution of discontinued Canadian operations is reclassifi ed on a separate line of the income statement .
(d) Includes net realized gains on sale of Australian and New Zealand operations (€742 million gross or €626 million net) and Taikang Life (€830 million gross or €798 million net).
Charges related to the partial disposal of UK Life & Savings operations (37) - - - - (1) - (38)
(c) Revenues net of intercompany eliminations amounted to €52 billion for Life & Savings, €27 billion for Property & Casualty and €3 billion for International Insurance (see Note 21).
Net revenues from banking activities - - - - 496 1 (45) 452
Change in unearned premiums net of unearned revenues and fees (333) (148) 30 - - - - (451)
Net realized gains and losses relating to investments at cost and at fair value through shareholders’ equity 1,543 277 17 16 - 41 - 1,894
Net realized gains and losses and change in fair value of other investments at fair value through profi t or loss (d) 16,033 (31) 37 24 - (610) (26) 15,427 of which change in fair value of assets with fi nancial risk borne by policyholders 13,798 - - - - - (10) 13,788
Technical charges relating to insurance activities (74,907) (17,855) (2,021) - - - 283 (94,500)
Change in tangible assets impairment - (12) - - - - - (13)
Change in goodwill impairment and other intangible assets impairment (30) (78) - - (3) - - (111)
Charges related to the partial disposal of UK Life & Savings operations (1,642) - - - - - - (1,642)
Income from operating activities before tax 2,433 2,196 481 492 (2) (527) (844) 4,228
(c) Revenues net of intercompany eliminations amounted to €57 billion for Life & Savings, €26 billion for Property & Casualty and €3 billion for International Insurance (see Note 21).
All of the following paragraphs form an integral part of the Group fi nancial statements. They appear in Section 3.3 “Quantitative and Qualitative Disclosures About Market Risk and Risk
Please refer to pages 205 to 206 of the “Quantitative and
Please refer to pages 96 to 101 , “Liquidity and capital resources” section.
(b) All the different g oodwill of UK Life & Savings has been allocated to one single line “UK Life & Savings” in the context of the partial disposal of its business.
(c) Following a revaluation of deferred tax assets booked at the time of the Nippon Dantaï acquisition, goodwill was reduced by an equivalent amount (€70 million in 2005, equivalent to €96 million as of December 31, 2011 due to change in foreign exchange).
As of December 31, 2011, the main contributors in terms of cash generating units to : ■ Life & Savings net goodwill of €6,824 million were Japan
Mediterranean and Latin American Region (€890 million) and the United Kingdom (€599 million); ■ Property & Casualty net goodwill of (€4,502 million) were
The total goodwill Group share amounted to €14,845 (1) million as of December 31, 2011 and €15,511 (1) million as of
Of which: (a) Includes €-80 million following the disposal of Denplan and €-141 million (translated by using exchange rate as of September 23, 2011) from the disposal of Canadian operations (see Note 5.3).
AXA Bank Hungary (ELLA Bank) 59 - - - - - - 59
Sterling Grace (Australia & New Zealand) (d) - - - - - 28 (28) -
(b) All the different goodwill of UK Life & Savings lines has been allocated to one single line “UK Life & Savings” in the context of the partial disposal of its business. (see Note 5.3).
(d) IPAC, Sterling Grace and a part of the line “Others” are related to Australian and New Zealand. The movements are due to forex which are reclassifi ed as held for sale.
Accumulated impairment losses transferred out relating to goodwill transferred in the “held for sale” category
Fair value includes quotations when available and/or relevant or valuation techniques incorporating observable market data, adjusted when necessary to take into account control premiums. Value in use calculations are also based on valuation techniques.
(present value of projected future distributable profi ts generated from business written in a year) or on a projection of each of the expected annual future earnings when multiples are not appropriate. Major assumptions include expected growth, expenses, cost of capital, future investment margins, fi nancial market volatility, fi rst assessed on a risk free basis (basic test)
and then on the basis of illustrative investment assumptions suitable for a traditional embedded value approach if the previous recoverable value is lower than the carrying amount.
The deterioration of market conditions in the second half of the year 2011 and especially the additional drop in interest rates resulted in the recognition of a USD 1.3 billion (€943 million)
reduction in goodwill allocated to the US Life & Savings cash generating unit (CGU), attributable to the US Accumulator
September 2011 allowing customers to redeem foreign currency denominated mortgages at non-market rates.
The discontinuation of lending activities led to the impairment of the related goodwill (€-59 million) and other intangibles
The results of the projections net of the 2011 goodwill reduction charge for US cash generating unit and the outcomes of the tests run for the other cash generating units support the carried amount of each related cash generating unit or group of units.
AMP to AXA APH whereby AXA disposed of its 54% stake in
AXA APH’s Asian operations for AU$ 9.8 billion (or €7.1 billion (1))
(1) Translated from Australian Dollar to Euro using exchange rate as of March 31, 2011.
The major classes of assets and liabilities of the Australian and New Zealand operations that were classifi ed as held for sale separately from other assets and liabilities in the consolidated statement of fi nancial position as of December 31, 2010 included the following (amounts are presented net of inter-company balances with other AXA entities): (in Euro million ) December 31, 2010
In addition, the completion of the held for sale portfolio transfer generated a €-38 million adjustment in 2011 net income.
On September 23, 2011, AXA completed the disposal of its Canadian operations in Property & Casualty and Life &
€72 million) in contingent considerations based on profi tability metrics over a period of 5 years.
As of June 30, 2011, comprehensive income amounted to €91 million.
The statement of cash fl ows of the Canadian operations disposed is as follow as of June 30, 2011: (in Euro million ) June 30, 2011
As of December 31, 2011, impact of the disposal of Canadian operations in the consolidated statement of cash fl ows amounted of €1,875 million and is presented on the row «net cash from discontinued operations ».
Related assets and liabilities (€189 million) are classifi ed as held for sale .
The change in Value of Business In-force (“VBI”) in the Life & Savings segment was as follows: (in Euro million ) 2011 2010 (a)
Deferred acquisition costs and equivalent relating to Life & Savings 20,099 17,845
Deferred acquisition costs and equivalent relating to Property & Casualty and International Insurance 1,686 1,796
Changes in deferred acquisition costs and equivalent for Life & Savings were as follows: (in Euro million )
Life & Savings deferred acquisition costs and equivalent net carrying value as of January 1 17,122 723 15,824 1,225
DAC and similar costs capitalization for the period 2,321 186 2,365 197
The value of Life & Savings deferred acquisition costs and equivalent, net of amortization, unearned revenue reserves and unearned fee reserves, was as follows: (in Euro million )
Unearned revenues and unearned fees reserves 2,475 501 2,324 433 of which shadow unearned revenues reserves (138) - (150) -
DAC net of unearned revenues and unearned fees reserves 16,788 336 14,799 290
Other intangible assets represented €3,382 million net value as of December 31, 2011 and mainly included: (in Euro million ) Gross value
(a) In 2010, a ssets and liabilities related to Australian and New Zealand operations and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were reclassifi ed as held for sale (see Note 5.3).
Assets backing contracts where the fi nancial risk is borne by policyholders 134,230 134,230 23.59%
Investment in real estate properties at amortized cost 18,505 14,628 2.60%
Investment in real estate properties designated as at fair value through profi t or loss (c) 1,122 1,122 0.20%
Non controlled investment funds designated as at fair value through profi t or loss (c) 4,990 4,990 0.89%
Assets backing contracts where the fi nancial risk is borne by policyholders 137,757 137,757 24.46%
Investments (excluding those backing contracts where the fi nancial risk is borne by policyholders) 429,972 425,380 75.54%
Breakdown of the carrying value and fair value of investments in real estate properties at amortized cost, excluding the impact of all derivatives: (in Euro million )
Change in impairment and amortization of investments in real estate properties at amortized cost (all activities): (in Euro million )
Debt instruments available for sale 313,472 326,306 326,306 20,749 7,915 296,425 306,408 306,408 15,973 5,990
Equity instruments available for sale 8,988 10,886 10,886 2,010 111 11,335 15,900 15,900 4,702 137
Debt instruments available for sale 8,489 8,184 8,184 36 340 6,326 6,099 6,099 26 254
Debt instruments (at cost) that are not quoted in an active market 4,364 4,364 4,364 - - 2,235 2,235 2,235 - -
Equity instruments available for sale 2,762 2,750 2,750 281 293 2,635 2,860 2,860 226 1
Non controlled investment funds available for sale 175 180 180 5 - 227 237 237 13 3
Debt instruments (at cost) that are not quoted in an active market 11,155 11,106 11,155 97 146 10,462 10,465 10,462 71 67
Non controlled investment funds available for sale 6,195 7,000 7,000 900 96 5,900 6,858 6,858 1,050 92
See also table 9.8.1 Breakdown of fi nancial assets subject to impairment.
Debt instruments (at cost) that are not quoted in an active market, the effect of derivatives (detailed in Note 20.3), loans and debt instruments backing contracts where the fi nancial risk is borne by policyholders are excluded from the tables below.
Debts instruments designated as at fair value throught profi t or loss (a ) 2,336 7,237 8,645 18,218
Loans designated as at fair value throught profi t or loss (a ) - - - -
TOTAL – FINANCIAL INVESTMENTS EXPOSED TO CASH FLOW INTEREST RATE RISK 3,711 8,105 21,790 33,606
Debts instruments designated as at fair value throught profi t or loss (c) 4,630 7,678 11,795 24,103
TOTAL – FINANCIAL INVESTMENTS EXPOSED TO FAIR VALUE INTEREST RATE RISK 28,300 95,912 239,195 363,407
TOTAL FINANCIAL INVESTMENTS EXPOSED TO INTEREST RATE RISK 30,067 101,681 254,107 385,855
Excluding the effect of derivatives (detailed in Note 20.3) and equity instruments of real estate companies, the breakdown by industry of equity instruments owned across the Group is as follows: (in Euro million ) Financial
Equity instruments designated as at fair value through profi t or loss 324 13 1 12 4 5 - 140 498
Sub-total: Equity instruments held directly 4,748 2,932 999 1,018 1,312 875 563 1,687 14,134
TOTAL EQUITY INSTRUMENTS AS OF DECEMBER 31, 2010 9,916 4,316 2,026 1,290 2,967 1,471 1,504 1,407 24,897
Non controlled investment funds held for trading mainly holding equity securities - - 271 -
Non controlled investment funds mainly holding equity securities 1,889 - 356 -
Non controlled investment funds held for trading mainly holding debt instruments - - 103 -
Other Non controlled investment funds available for sale 4,408 3,938 99 99
Other Non controlled investment funds held for trading - - - -
9.8.1. Breakdown of fi nancial assets subject to impairment (excluding investment in real estate properties)
Debt instruments (at cost) that are not quoted in an active market 11,144 - 11,144
Impairment – Non controlled investment funds 1,107 87 (76) - 23 1,141
(a) Mainly relates at changes in the scope of consolidation and impact of changes in exchange rates.
The amount of assets for which fair value is determined in whole directly by reference to an active market is disclosed in level 1 of the table shown below in Section 9.9.2.
However, valuations are determined using generally accepted models (discounted cash fl ows, Black&Scholes models, etc.)
Use of valuation techniques in dislocated markets The dislocation of certain markets may be evidenced by various factors, such as very large widening of bid ask spreads which maybe helpful indicators in understanding whether market participants are willing to transact, wide dispersion in the prices of the small number of current transactions, varying prices over time or among market participants, inexistence of secondary markets, disappearance of primary markets, closing down of dedicated desks in fi nancial institutions, distress and forced transactions motivated by strong needs of liquidity or other diffi cult fi nancial conditions implying the necessity to dispose of assets immediately with insuffi cient time to market the assets to be sold, and large bulk sales to exit such markets at all costs that may involve side arrangements (such as sellers providing fi nance for a sale to a buyer). Primary transactions’ prices in markets supported by government through specifi c measures following the fi nancial crisis do not represent fair value.
Amounts presented exclude the impact of all derivatives (set out in Notes 20.3 and 20.5) and investment funds consolidated by equity method. Investment funds accounted for using the equity method represented assets of €2,988 million as of
Investments in real estate properties - 1,148 95 1,243 - 1,122 - 1,122
Financial investments and loans designated as at fair value through profi t or loss 16,079 22,206 6,103 44,389 26,596 15,816 4,992 47,404
TOTAL FINANCIAL INVESTMENTS AND LOANS ACCOUNTED FOR AT FAIR VALUE 192,381 197,572 10,200 400,153 272,762 103,023 10,698 386,483
Methods applied to determine the fair value of held assets measured at fair value in the fi nancial statements are described in Section 9.9.1 above. The Group applies the IAS 39 fair value hierarchy.
Level 2 and 3 assets are investments which are not quoted in an active market or for which there is no active market. Fair values for level 2 and 3 assets include: ■ values provided by external parties which are readily available including last transaction prices but relate to assets for which the market is not always active or values provided at the request of the Group by pricing services and which are not readily publicly available, and
The common characteristic of level 2 and 3 assets is that their related market is considered as inactive. Their value is generally based on mark to market basis, except when there is no market or when the market is distressed, in which case a mark to model approach is used. Assets not quoted in an active market which are marked to market are classifi ed in level 2. For all assets not quoted in an active market/no active market and for which a mark to model approach is used, the classifi cation between level 2 and level 3 depends on the proportion of assumptions used supported by market transactions and observable data: ■ assumed to be used by pricing services, or
Since the 2008 fi nancial crisis, a signifi cant volatility related to corporate spreads has been observed leading to more or less large transfers between level 1 and 2 with both yield and bid ask spreads widening and narrowing from one closing to another.
Overview of the nature of such investments Amounts presented in level 2 and 3 represent a variety of circumstances. A fi nancial instrument is regarded as not quoted in an active market if there is little observation of transaction prices as an inherent characteristic of the instrument, when there is a signifi cant decline in the volume and level of trading activity, in case of signifi cant illiquidity or if observable prices can not be considered as representing fair value because of dislocated market conditions. Characteristics of inactive markets can therefore be very different in nature, inherent to the instrument or be indicative of a change in the conditions prevailing in certain markets.
CDOs (Collaterized Debt Obligations) held by the Group were transferred as level 2 and 3 assets as of December 2007 when markets became no longer active while still measured using the same valuation approaches (mainly external valuations and indices). As of December 31, 2008, the turmoil reached a further point of dislocation. Many fi nancial institutions closed their desks dedicated to structured assets deals and were no longer in a position of delivering meaningful quotes with the
appropriate knowledge and dedication at the end of year 2008. The lack of activity with very few prices representing arm’s length transactions between willing market participants restricted the possibility and the relevance to refer to the very limited number of observed deals. As a result, more valuation techniques were introduced at year end 2008 based on a maximum use of observable inputs whenever possible. Such modeled based valuation were maintained at the end of the year 2011 because of the continued inexistence of primary markets and the lack of transactions representing fair values during the period on the secondary market.
ABS and CDOs were ranked according to their underlying risks characteristics such as their underwriting and origination year for example to determine the appropriate set of assumptions to be used, giving consideration to market conditions in pricing these instruments. Cash fl ows were developed based on current observable inputs refl ecting the credit metrics of each type of underlying assets: for example weighted average rating factors – WARF – provided by rating agencies, historical default rates or third parties credit defaults studies, with loss severity assumptions and recovery lag, adjusted with adequate risk margins to refl ect the uncertainty related to these inputs and the historical dimension of some of these data. Risk adjusted discount rates have been based on interest rates and discount margins derived from observations of implied rates of return adjusted considering the current evolution of available quotes which refl ect spreads widening due to increased liquidity risks. The objective of these models is to arrive at the price at which an orderly transaction would take place between market participants (a willing buyer and a willing seller) at the measurement date.
For ABS and CDOs measured as of December 31, 2011 using the valuation techniques described above (€9,906 million): ■ using alternative credit risks assumptions higher by 25%
9.10. INVESTMENTS BACKING CONTRACTS WHERE THE FINANCIAL RISK IS BORNE BY POLICYHOLDERS
AXA Life Insurance Corporation Philippines (b) 26 - 6 1 (4) 29
AXA Minmetals Assurance Co Ltd 56 - (3) 7 28 89
PT AXA Mandiri Financial Services (b) 22 - 27 1 (16) 33
(b) Those entities close their full year accounts as of September 30.
AXA Mandiri Financial Services (€-16 million); ■ the share of assets reevaluation by shareholders’ equity of
At the end of 2011, Reso Garantia’s fi nancial information was as follow (on a 100% basis and excluding goodwill on the AXA
investment): ■ total assets: €1,841 million (€1,507 million as of December 31, 2010); ■ total liabilities (excluding shareholders’ equity): €1,554 million
(€601 million as of December 31, 2010). Changes are related to foreign exchange impacts.
At the end of 2011, Neufl ize Vie’s fi nancial information was as follows (on a 100% basis): ■ total assets: €8,935 million (€9,313 million as of December 31, 2010); ■ total liabilities (excluding shareholders’ equity): €8,796 million
(€9,178 million as of December 31, 2010); ■ gross revenues: €727 million (€883 million as of December 31, 2010).
AXA Life Insurance Corporation Philippines (c) 20 - 6 - (1) 26
AXA Minmetals Assurance Co Ltd 32 - (3) 3 23 56
Kyobo AXA Investment Managers Company Limited (c) 24 - 1 2 (1) 26
Ltd ( €+23 million) and Bharti AXA Life (€+19 million); ■ the deconsolidation of NEXTIA Life Insurance Company
Limited (€-18 million), included in the line “Other”; ■ the dividends paid by Reso Garantia to AXA SA (€-16 million).
Current accounts receivables from other companies 1,515 (11) 1,504 1,504 1,217 - 1,217 1,217
Premiums earned not yet written 3,109 - 3,109 3,109 3,002 - 3,002 3,002
Receivables arising from direct insurance and inward reinsurance operations 13,727 (381) 13,346 13,346 13,897 (429) 13,468 13,468
(a) Fair value is assessed as being equal to net carrying value given the nature of such assets.
Thus the cash held by Australia and New Zealand (€643 million in 2010), the cash held by UK Life & Savings not fi nalized disposal business (€162 million in 2010), and the cash held by are excluded from cash and cash equivalents.
The table below reconciles assets and liabilities cash and cash equivalent balances with the statement of consolidated cash fl ows: (in Euro million ) December 31, 2011 December 31, 2010 (a) (b)
Asian businesses and changes in margin calls paid to bank counterparties under collateral agreements; ■ France Life & Savings €+880 million mainly driven by lower purchases of fi nancial instruments combined with higher dividends received partly offset by lower operating cash.
New Zealand operations. This amount should be looked at together with the amount from fi nancing activities regarding minority shares in AXA APH Asian operations buy back;
■ €1,144 million of net cash impact of assets lending/borrowing collateral receivables and payables.
Net cash used in investing activities was €-17,263 million in 2010 and mainly due to: ■ €-18,938 million of net cash used in the purchases and sales of fi nancial invested assets; ■ United Kingdom €+3,162 million net of cash proceeds related to the partial disposal of UK Life & Savings operations.
Net cash relating to fi nancing activities totaled €-5,560 million in 2011 mainly due to: ■ dividends payments of €-1,769 million; ■ €-3,296 million following the buy back of minority shares in
December 31, 2010.The share repurchase program terminated on February 18, 2011, impacting shareholders’ equity by €+110 million.
Undated subordinated debt instruments are classifi ed in shareholders’ equity at their historical value as regards credit spread and interest rates and their closing value as regards exchange rates. The corresponding exchange differences are cancelled out through the translation reserve.
As of December 31, 2011 and December 31, 2010, undated subordinated debt recognized in shareholders’ equity broke down as follows: (in Euro million )
Undated notes – (of which 500 MUS$ at 7.1%) in US$ 875 676 875 655
equity included net accumulated fi nancial expenses of: ■ €-1,834 million as of December 31, 2011; ■ €-1,543 million as of December 31, 2010.
■ interest rate step-up clauses with effect from a given date.
AXA APH Asia Life operations. This transaction had an impact on AXA Group of €0.6 billion realized capital gains recorded in net income regarding the sale of its Australian and New
APH Asian operations in accordance with the application of the new accounting principles on Business Combinations. The ownership increase in a controlled company while maintaining the control is accounted for in shareholders’ equity and no additional goodwill is recognized.
As of December 31, 2010, the carrying value of treasury shares and related derivatives was €495 million. This fi gure included €0.8 million relating to AXA shares held by consolidated Mutual funds (51,158 shares) not backing contracts where fi nancial risk is borne by policyholders.
At April 29, 2010 Shareholders’ Meeting, shareholders approved a dividend distribution of €1,259 million with respect to the 2009 fi nancial year.
The following table shows reconciliation between gross unrealized gains and losses on available for sale fi nancial assets and the corresponding reserve recognized in shareholders’ equity: (in Euro million )
Shadow accounting on Value of purchased Business In force (554) (629)
UNREALIZED GAINS AND LOSSES (NET OF TAX) – 100% – TOTAL 5,124 6,651
At December 31, 2011, most of the unrealized gains on assets available for sale related to the Life & Savings segment, leading to signifi cant movements in shadow policyholders’
Unrealized gains and losses (net of tax) – Assets available for sale 1,506 203 274
UNREALIZED GAINS AND LOSSES (NET OF TAX) – 100% – TOTAL 1,507 203 274
The change in reserves related to changes in fair value of available for sale fi nancial instruments included in shareholders’ equity relating to changes in fair value of assets as of December 31, 2011 and December 31, 2010 broke down as follows: (in Euro million )
Transfer in the income statement on the period (a) (745) (878)
Investments bought in the current accounting period and changes in value (566) 2,519
(a) Transfer induced by disposal of fi nancial assets, impairment write-back following reevaluation, or transfer of expenses following impairment charge during the period, and debt instruments discount premium impacts.
The total impact of foreign exchange rate movement was €+163 million (of which €+473 million from Group share and €-310 million from minority interest) as of December 31, 2011.
A ) RESERVE RELATED TO CHANGES IN FAIR VALUE OF AVAILABLE FOR SALE FINANCIAL INSTRUMENTS INCLUDED IN SHAREHOLDERS’ EQUITY
The change in reserves for unrealized gains and losses on assets available for sale totaled €1,495 million (net Group share), mainly attributable to the United States (€+494 million), Japan
The increase of gross unrealized gains and losses on assets available for sale totaled €3,153 million, primarily following the decrease in interest rates and favorable change in foreign exchange rates.
The total impact of foreign exchange rate movements was €+1,262 million (of which Group share was €+1,000 million and minority interests was €+262 million) as of December 31, 2010.
The total impact of employee benefi ts actuarial gains and losses was €-456 million (of which Group share was €-450 million and minority interests was €-6 million) as of December 31, 2010.
Claim reserves (b) 10,917 35,579 of which IBNR (e) 3,805 6,923
Liabilities arising from insurance contracts 299,666 48,879 Of which measured at current assumptions (d) 10,860 -
Reinsurers’ share in claim reserves (b) 775 1,625 of which IBNR (e) 270 242
Reinsurers’ share in liabilities arising from insurance contracts 6,049 2,023 Of which measured at current assumptions (d) - -
NB: Liabilities relating to unearned revenues and fees (see Note 7.3), to policyholders participation (see Note 14.8), and derivative instruments (see Note 20.4) are excluded from the table above. Reinsurer’s share in insurance contracts liabilities relating to policyholders’ participation (€51 million in 2011, €70 million in 2010), as well as derivatives instruments (none in 2011 and 2010) are excluded from the table above.
(e) For the detail of P&C and International Insurance IBNR, see Note 21.2.4.
As of December 31, 2010, liabilities arising from insurance contracts (net of reinsurance ceded) related to the Canadian operations included in the table above amounted to €502 million in Life & Savings and €2,294 million in Property & Casualty.
Liabilities arising from insurance contracts, including those where the fi nancial risk is borne by policyholders, were split by segment as follows:
The following table shows a segmental breakdown of liabilities arising from investment contracts, including those where the fi nancial risk is borne by policyholders: (in Euro million )
Reinsurers share in liabilities arising from investment contracts where the fi nancial risk is borne by policyholders 5 256
Claim handling cost reserves as of January 1 1,232 234 1,466 1,239 241 1,479
Loss reserves development (prior years) (563) (168) (731) (1,772) (138) (1,911)
Impact of foreign currency fl uctuation 164 15 179 1,318 463 1,780
Claim reserves as of December 31 34,423 8,138 42,561 35,176 8,833 44,009
In 2011, changes in the scope of consolidation totaled €-1,337 million, mainly due to the disposal of Canadian operations
Reinsurers’ share in claim reserves as of January 1 1,725 2,839 4,564 1,935 2,854 4,789
Reinsurers’ share in total claim expenses 474 500 974 443 390 832
Impact of foreign currency fl uctuation (16) (5) (21) 58 243 301
Reinsurers’ share in claim reserves as of December 31 1,625 2,401 4,027 1,725 2,839 4,564
Surrenders, maturities and other claims and benefi ts paid net of charges and penalties (-) (42,511) (9,644) (52,155) (42,293) (9,985) (52,278)
Unit-Linked technical reserves value adjustment (+/-) (4,639) (19) (4,658) 10,414 2,616 13,029
Change in reserves relating to technical and actuarial items (+/-) (d) 11,506 542 12,048 8,216 3,351 11,568
Transfers following technical reserves/contract reclassifi cation (788) 788 - 1,409 (1,409) -
Change in scope of consolidation, portfolio transfers and change in accounting principles (761) 111 (650) (26,602) (36,441) (63,043)
Impact of foreign currency fl uctuation 9,001 92 9,093 21,899 3,279 25,178
In 2010, changes in the scope of consolidation totaled €-63,043 million, mainly due to the partial sale of UK Life and
(c) Includes: future policy benefi ts reserves (including shadow accounting reserves), unearned premiums reserves, unexpired risk reserves, claims reserves, claims expense reserves, other policy benefi ts reserves. Excludes: unearned revenues and unearned fees reserves, liabilities from policyholders participation.
(b) In accordance with IFRS 4 standard which allows, under certain conditions, to continue to use a previous accounting policy to liabilities arising from contracts with discretionary participating features.
Only the valuation of related assets is different: - for unit-linked contracts with a discretionary participating feature (d), an asset representing the deferred acquisition costs is recognized in continuity with previous accounting policies; - for unit-linked contracts with no discretionary participating feature (e), an asset representing the rights to future management fees is recognized in accordance with IAS 18 (Rights to future management fees also known as Deferred Origination Costs “DOC”) – see Section 1.6.4 and Note 7.
The loss reserves development table shows movements in loss reserves between 2001 and 2011, based on previously applied accounting standards, in accordance with IFRS 4. All contracts concerned are insurance contracts as defi ned by IFRS.
The second line entitled “Gross reserves for unpaid claims and claim expenses developed in 2011 adjusted for changes in exchange rates and scope of consolidation” indicates the amount that would have been developed initially at the booking date, had the exchange rates for the current year been used
Preparation of the last diagonal refl ects the fact that, following the merger of some newly-acquired portfolios with the
Gross reserves for unpaid claims and claims expenses developed initially at the booking date (b) 28,636 28,465 27,825 29,128 31,168 41,301 44,020 44,046 44,470 46,367 45,946
(a) It is not appropriate to extrapolate future redundancies or future defi ciencies based on the loss reserves development presented in the table, as conditions and trends that have affected development of the liability in prior periods may not necessarily occur in the future periods. Redundancy/defi ciency disclosed includes forex impact between one year and the next.
(d) In accordance with IFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items impacting the allocation of Seguros ING (Mexico) purchase price, resulting in a €33 million increase in the goodwill to €512 million. Most of this increase in goodwill was due to adjustments to provisions for liabilities and claims reserves.
(e) Following the dis posal of Canadian operations, amounts in its respect were reported for the current year while previously disclosed amounts were unchanged.
Initial net claims reserves in excess of (less than) re-estimated net claims reserves as of December 31, 2011 - - - - -
Percentage of original net reserve (a) 33.7% 46.5% 31.4% 21.5% 37.5%
(c) In 2001, Colisée RE’s (ex AXA RE) claims reserves were adversely affected by the September 11 attacks.
TOTAL GROSS CLAIM RESERVES AND OTHER RESERVES FOR PROPERTY & CASUALTY AND INTERNATIONAL INSURANCE 48,298 49,917
(b) Includes reserves inward reinsurance (€854 million in 2011, €762 million in 2010).
At year-end 2011, key data relating to asbestos claims were as follows: KEY RESERVES DATA FOR ASBESTOS
Claims reserves at end of year 1,071 984 1,087 1,050 of which Reported claims 199 174 214 191 of which IBNR claims 873 810 873 859
The decrease of the asbestos survival ratio on the net basis was mainly driven by the new reinsurance cover on UK asbestos exposure.
As shown in the table below, as of December 31, 2011: 89%
In the Property & Casualty and International Insurance business, most reserves (91% at December 31, 2011) are
not discounted, with the exception of disability annuities and worker’s compensation liabilities that are deemed structured settlements and where the discount rate is revised regularly.
The risk factors associated with the contracts are set out in
Life & Savings – locked-in discount rate (b) 263,614 2.48% 255,344 2.48%
■ many of the features themselves would qualify as insurance contracts under Phase I (IFRS 4).
The risk of GMDB and GMIB features to AXA is that protracted under-performance of the fi nancial markets could result in benefi ts being higher than the accumulated policyholder account balances could support. Reserves are established for these features on the basis of actuarial assumptions related to projected benefi ts and related contract charges. The determination of estimated GMDB and GMIB liabilities is based on models which involve numerous estimates and subjective judgments, including those regarding expected market rates of return and volatility, contract surrender rates and GMIB election rates. There can be no assurance that ultimate experience will not differ from management’s estimates. In addition to providing for risk through establishing reserves, AXA also manages the risk through a combination of reinsurance programs and active fi nancial risk management programs including investment in exchange-traded futures contracts and other instruments.
assumed in the guaranteed purchase rates, or that investment returns during the payout period will be lower than assumed in the guaranteed purchase rates. Reserves are established for these features on the basis of actuarial assumptions related to projected benefi ts and related contract charges. The determination of this estimated liability is based on models which involved numerous estimates and subjective judgments, including those regarding expected rates of return and volatility, contract surrender rate, mortality, and benefi t election rates.
Macro hedge derivatives and other derivatives relating to liabilities arising from banking activities 96 96 309 309
(a) In order to improve the consolidated statement of fi nancial position presentation consistency, balances disclosed so far as “Other debt instruments issued and bank overdrafts” of AXA Bank Europe have been reclassifi ed to “Liabilities arising from banking activities” aggregate in 2010.
Refi nancing with central banks 791 - - 791 - - - -
Other liabilities arising from banking activities 18 1,113 - 1,131 - - 599 599
Impact of change in scope of consolidation and changes in accounting method (9) (5) 28 (77) (63)
Write back after fi nal cost review (48) (20) (2) (20) (91)
Impact of change in scope of consolidation and changes in accounting method - (7) 1 - (2) (7)
Impact of foreign exchance fl uctuations 5 9 1 - 49 64
Debt component of subordinated convertible notes, 3.75% due 2017 (€) 1,419 1,360
Other fi nancing debt instruments issued (less than €100 million) 189 170
Other fi nancing debts instruments issued under euro 100 million 137 135
Derivatives relating to other fi nancing debts instruments issued (a) 52 35
Derivatives on fi nancing debt instruments issued (a) 52 52 35 35
Minority interests of controlled investment funds and other puttable instruments held by minority interest holders 3,896 4,855
Debts relating to investments under lending agreements and equivalent 27,509 23,399
(c) In order to improve the consolidated statement of fi nancial position presentation consistency, balances disclosed so far as «Other debt instruments issued and bank overdrafts» of AXA Bank Europe have been reclassifi ed to «Liabilities arising from banking activities» aggregate in 2010 (€323 million)
Minority interests in funds under this caption, totaled €3,896 million as of December 31, 2011 (€4, 855 million as of
December 31, 2010). They represented the put option held by the minority interests of AXA Winterthur subsidiaries in Central and Eastern Europe.
18.2. OTHER DEBT INSTRUMENTS ISSUED, NOTES AND BANK OVERDRAFTS (OTHER THAN FINANCING DEBT) BY ISSUANCE
Derivatives on other debt instruments issued (other than fi nancing debt) - CDO (Collateralized Debt Obligations) - 29
REOF2: mortgage loan based on Euribor 3M + 65bps, due 2012 113 116
APIV+EHV: mortgage loan based on Libor CHF 3M + 120bps, due 2015 74 68
APIV+EHV: amortizing loan based on Euribor 3M + 160bps, due 2015 40 41
OTHER DEBT (OTHER THAN FINANCING DEBT) - OWED TO CREDIT INSTITUTIONS 1,835 1,886
OTHER DEBT INSTRUMENTS ISSUED, NOTES (OTHER THAN FINANCING DEBT) AND BANK OVERDRAFTS 6,272 6,504
(a) In 2010, assets and liabilities related to Australian and New Zealand operations and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 we re classifi ed as held for sale (see Note 5.3).
(c) In order to improve the consolidated statement of fi nancial position presentation consistency, balances disclosed so far as « Other debt instruments issued and bank overdrafts » of AXA Bank Europe have been reclassifi ed to « liabilities arising from banking activities » aggregate in 2010 (€323 million).
The fair value of other debt instruments issued and bank overdrafts (other than fi nancing debt) was €6,289 million as of December 31, 2011. Among the elements included in the preceding table, fair value is only calculated for other debt instruments issued.
18.3.1. Other debt instruments issued and bank overdrafts (other than fi nancing debt) by accounting method
Other debt instruments issued designated as at fair value through profi t or loss - 189
Other debt owed to credit institutions held as trading - -
(c) In order to improve the consolidated statement of fi nancial position presentation consistency, balances disclosed so far as «Other debt instruments issued and bank overdrafts» of AXA Bank Europe have been reclassifi ed to «Liabilities arising from banking activities» aggregate in 2010 (€323 million).
At December 31, 2011, the Group does not hold any debt other than fi nancing debt designated as at fair value through profi t or loss whereas there was €189 million at December 31, 2010.
Such fair values are based on a majority of observable data
Payables to policyholders, brokers and general agents 5,812 5,812 5,720 5,720
Payables arising from direct insurance and inward reinsurance operations 7,212 7,212 7,472 7,472
Current accounts payable to other companies (c) 3,812 3,812 4,543 4,543
The table below sets out the contractual maturities of other debt instruments issued, notes and bank overdrafts (excluding the impact of derivatives – detailed in note 20.4). Effective maturities may differ from those presented, mainly because some instruments include clauses allowing early redemption, with or without penalty.
(a) In 2010, assets and liabilities related to Australian and New Zealand operations and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were classifi ed as held for sale (see Note 5.3).
The current tax amount due on foreign income amounted to €265 million in 2011 (versus €524 million in 2010), including €33 million related to policyholders’ tax (versus €127 million in 2010).
Income from operating activities, gross of tax expenses (excluding discontinued activities and result from investments consolidated using equity method) 4,527 3,741
Impact of differences in tax rate and impact of taxes not linked to pre-tax income (c) (68) (2)
Impact of differences in tax rates and tax bases (392) (167)
Derocognition of deferred tax assets on tax losses of prior years (b) 20 10
Impact of adjustments, decrease in value and other items (304) (314)
(c) Including the effect of policyholders’ tax (€17 million in 2011 vs. €50 million in 2010)
Excluding policyholders’ tax, the effective tax rate would have been 23% as of December, 31 2011 (versus 22% in 2010).
The impact of rate differences on notional tax charge represents the difference between the expected tax calculated at each entity level with the applicable standard rate and the tax calculated using the 36.1% French tax rate applicable to the Company. The blended standard rate was 28% as of
As of December 31, 2011, corrections and adjustments of tax relating to prior years (€-335 million) mainly included positive tax benefi ts following tax audit settlements in the US ,
Permanent differences mainly represented the impact in some countries of non-deductible fi nancial impairments and realized capital losses on equity instruments, or non taxable dividends and realized capital gains on equity instruments.
Deferred tax Assets/ (liabilities) concerning: ■ R eserves relating to the fair value adjustment of available for sale assets 3,271 5,378 (2,107) (1,979)
■ R eserves relating to hedge accounting and other items 77 89 (12) (24)
In the table above, the net deferred tax position corresponds to the difference between deferred tax assets (DTA) and deferred tax liabilities (DTL) carried on the Group’s consolidated statement of fi nancial position. Note that the breakdown of DTA/
The change from a nil position in 2010 to a net liability position in 2011 mainly came from a utilization of tax losses carried forward in the Company, and additional unrealized capital gains on fi xed income assets.
Deferred tax through profi t or loss 1,072 (1,416) - (80) (80) (505)
Deferred tax through reserves relating to the fair value adjustment of available for sale assets (1,979) - (106) (63) 41 (2,107)
Deferred tax through reserves relating to hedge accounting and other items (24) (1) 12 1 1 (12)
Deferred tax through reserves relating to stock options 3 - (2) - (1) -
Net deferred tax excluding policyholders’ tax (1) (1,417) 110 (111) (53) (1,474)
Policyholders’ tax - Deferred tax through reserves relating to hedge accounting and other items - - - - - -
Policyholder tax - Deferred tax through reserves relating to the fair value adjustment of available for sale assets 4 - (2) - (2) -
Policyholder tax - Deferred tax through reserves relating to the fair value adjustment of cash fl ow hedge derivatives - - - - - -
Policyholder tax - Net deferred tax assets/ (liabilities) (279) 51 (2) (8) 237 -
TOTAL NET DEFERRED TAX ASSETS/ (LIABILITIES) (1,226) (405) 1,372 9 248 (1)
(a) In 2010, assets and liabilities related to Australian and New Zealand operations and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were classifi ed as held for sale (see note 5.3).
(c ) The movements through shareholders’ equity mainly concern net investment hedge in the Company
Other recognized deferred tax assets 89 19 16 13 85 18 375 4,995 7,191 12,800
TOTAL RECOGNIZED DTA BY EXPECTED DATE OF USE 4,050 711 870 598 3,084 284 1,277 3,860 - 14,733
The tables below break down the potential Deferred Tax Assets (DTA) which have not been recorded in the accounts at the year end as considered unrecoverable and the “expiry date”, i.e the latest date the Group could use them.
Unrecognized DTA on tax losses carried forward 39 9 3 1 6 4 15 68 115 259
Net current tax liability (+) / asset (-) as of January 1 (498) (471)
Cash paid (-) / received (+) in the period 163 (652)
(c) Mainly concern tax impact of net investment hedge transactions, fi nancial expense on undated subordinated debt and AXA share transactions in the Company.
which are recognized at fair value in accordance with IAS 39 .
NB: This table includes all derivatives (assets and liabilities), i.e. hedge, macrohedge and other, asset or liability positions.
Notional amount Positive fair value Negative fair value Net fair value Change in fair value
Hedging derivative instruments broke down as follows: Derivative instruments subject to hedge accounting and other derivatives (in Euro million )
Derivative instruments subject to hedge accounting and other derivatives (in Euro million )
(a In 2010, a ssets and liabilities related to the Australian and New Zealand operations and some UK Life & Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were classifi ed as held for sale (see Note 5.3).
Risk Management within the Group, and describes its main principles and guidelines. In general, derivatives are used by various entities and by the Company for economic hedging purposes. However, the notion of hedge accounting within the meaning of IAS 39 only applies to a small portion of derivatives used by the Group. The overall objectives of the economic hedging implemented by AXA are described briefl y below, along with details of any items that qualify for hedge accounting in the meaning of IAS 39.
As of December 31, 2011, the notional amount of all derivative instruments totaled €464 billion (€385 billion at the end of 2010). Their net fair value as of December 31, 2011 totaled €-2,098 million (€437 million at the end of 2010).
OTC (over-the-counter) derivatives through a specifi c Groupwide policy. This policy includes a limit framework and an exposure monitoring process. Limits are set specifi cally for each authorized counterparty, based on an internal scoring system.
Default Swaps (CDS) protections used for negative basis trades (€6.1 billion at the end of 2010). This strategy consisted in purchasing (i) corporate debt instruments and (ii) CDS with the same name, maturity and seniority so as to lock associated liquidity premiums.
AXA’s hedging strategies to manage its equity exposure and represented a total notional value of €11,528 million at the end of 2011 (€7,601 million at the end of 2010). These instruments are mainly used by United States Life & Savings to hedge
Variable Annuities (notional amount of €9,222 million compared with €6,191 million at the end of 2010).
Swap contracts are agreements between two parties to exchange one set of cash fl ows for another set of cash fl ows.
On a consolidated basis, the notional amount of interest rate swaps at December 31, 2011 was €152,758 million (€131,433 million at the end of 2010). Their market value was €-411million
Annuity products. The increase in notional value in 2011 was mainly driven by new sales of Variable Annuity products and by exchange rate movements; (iv) Germany Life & Savings (notional amount of €21,715 million versus €17,536 million at the end of 2010) mainly due to the active fi nancial risk management program associated with the guaranteed minimum benefi ts on Variable Annuity products following the decrease in interest rates; (v) United States Life & Savings (notional amount of €9,595 million versus €4,638 million at the end of 2010) related to the active fi nancial risk management program associated with the guaranteed minimum benefi ts on Variable Annuity products. The increase is mainly due to dynamic interest rate hedging program on Variable Annuities following the decrease in interest rates; (vi) France Life & Savings (notional amount of €4,650 million versus €4,918 million at the end of 2010) mainly to adjust the duration of its fi xed income portfolio (notional amount of €2,047 million versus €2,287 million at the end of 2010), as well as to get long term variable interest rate bonds
IAS 39 (89% at the end of 2010), and notably included €53,055 million for the Company (€56,371 million at the end of 2010), €21,508 million for AXA Germany Life & Savings ( €17,285 million at the end of 2010), and €19,088 million for AXA Bank
The notional amount of interest rate caps and fl oors at
December 31, 2011 was €30,535 million or 60% of the total notional amount of all interest rate options (€34,609 million or 62% at the end of 2010). The net fair value of caps and fl oors was €171million at December 31, 2011 (€236 million at the end of 2010).
On a consolidated basis, the notional amount of interest rates futures and forwards at December 31, 2011 was €24,801 million (€15,760 million at the end of 2010). These instruments are predominantly used in United States Life & Savings to hedge Variable Annuities for a total notional amount of €18,579 million (versus €11,075 million in 2010) consisting in US
As of December 31, 2011, 93% of the notional value of futures and forwards at the end of 2011 did not qualify for hedge accounting under IAS 39 (88% at the end of 2010).
The Group, as part of its investment and credit risk management activities, uses strategies that involve credit derivatives (mainly
CDSs), which are mainly used as an alternative to fi xed income portfolios, but also as a protection on single corporate names or specifi c portfolios.
AXA Belgium (€212 million); ■ €23,208 million held directly or within “core investment portfolio” or CDOs.
Such credit derivatives were mainly used in AXA Japan (notional amount of €7,059 million compared to €6,692 million at the end of 2010), in Germany Life and Savings (notional amount of €2,771 million compared to €2,369 million at the end of 2010) and in France Life & Savings (notional amount of €1,690 million compared to €3,245 million at the end of 2010) on debt instruments to enhance the return on their government bonds portfolios.
CDS with the same name, maturity and seniority so as to lock associated liquidity premium.
(mainly € and US$). Japan Life & Savings also uses future and forward foreign currency contracts for a total notional amount of €18,173 million (€17,080 million at the end of 2010) to hedge exchange-rate risk arising from its investments in fi xedmaturity debt instruments denominated in foreign currencies. In accordance with IAS 21 and IAS 39, the translation difference relating to these debt instruments is recognized in profi t & loss and offsets most of the change in market value of associated derivative instruments, which is also recognized in profi t & loss.
Currency swaps and currency options constitute another part of AXA’s hedging strategies to manage foreign currency exposures, and are primarily used by the company (€104,421 million versus €56,376 million at the end of 2010) and AXA
Bank Europe (€2,135 million versus €2,809 million at the end of 2010) to manage fi nancing operations.
Investments in real estate properties at amortized cost 14,818 - - 14,818
Investments in real estate properties designated as at fair value through profi t or loss 1,243 - - 1,243
Equity securities designated as at fair value through profi t or loss 5,391 - - 5,391
Non controll ed investment funds designated at fair value through profi t or loss 5,019 - (10) 5,010
Non controll ed investment funds held for trading - - - -
Investments in real estate properties at amortized cost 14,628 - - 14,628
Debt instruments designated as at fair value through profi t or loss 29,465 - 10 29,474
Non controll ed investment funds designated at fair value through profi t or loss 4,907 - 83 4,990
Assets backing contracts where the fi nancial risk is borne by policyholders 137,757 - (1) 137,757
(c) Carrying value, i.e net of impairment, discount premiums and related amortization, including accrued interest, but excluding any impact of derivatives.
The impact of derivative instruments is presented in the balance sheet within their related underlying fi nancial liabilities (and assets, see section 20.3). The tables below set out the impact of derivative instruments on the related underlying liabilities.
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders 104,642 - (167) 104,475 108,587 - (139) 108,448
Total liabilities arising from insurance contract 462,788 - (779) 462,009 451,146 - (342 ) 450,804 liabilities arising from investment contracts with discretionary participating features 37,858 - - 37,858 37,233 - - 37,233 liabilities arising from investment contracts with no discretionary participating features 380 - - 380 720 - - 720
Total liabilities arising from investment contracts 68,195 - (36) 68,158 67,659 - (4) 67,655
Macro hedge and other derivative instruments on insurance and investment contracts (liabilities) - - (1,241) (1,241) - - (395) (395)
As of December 31, 2011, the fair value of derivatives related to macro hedges shown in Note 15 are used to hedge interest rate risk exposures in the context of ordinary banking activities, in order to achieve an appropriate interest rate spread between its interest earning assets and interest bearing liabilities. Related hedged assets are disclosed in Note 9.4.2 and liabilities in Note 15.
Financing debt owed to credit institutions 807 - - 807 887 - - 887
Liabilities arising from banking activities 33,927 (31) 128 34,023 27,223 34 275 27,532
Payables arising from direct outward reinsurance operations 5,179 - - 5,179 5,916 - - 5,916
Instruments not quoted in an active market - No active market
Total net value of derivative instruments - assets (1) (570) (2,922) 1
Derivatives on insurance & investment contracts (hedge accounting) - - -
Other derivatives on insurance & investment contracts (c) 7 (823) -
Total derivative instruments relating to insurance and investment contracts 20 (2,078) 3
Derivative instruments relating to fi nancing debt, operating debt and other fi nancial liabilities - 503 -
Among amounts presented as Level 3, fair values determined in whole or in part using a valuation technique based on assumptions that are not supported by a majority of prices from observable current market transactions in the same instrument or a majority of available observable market data represented as of December 31, 2011 net fair values of €-1 million of derivatives held by the Group (including an estimation of the extent to which external quotes on inactive markets are based on observable data), in comparison with net fair values of €+3 million as of December 31, 2010. There was no signifi cant transfer in or out of the level 3 category and all changes relate to changes in fair value through income or expirations.
The identifi cation of such derivatives among assets held at fair value representing instruments not quoted in an active market involves a signifi cant level of judgment. Are considered as observable: inputs provided by external pricing services, information observable on data providers screens, rating agencies, external surveys. The extent to which such data are external to the Group and not assessed by internal valuation teams is one of the main criteria applied in assessing whether data are observable or not. Should those data be signifi cantly adjusted or would they be outdated because of the lack of new available factors, such inputs would be deemed unobservable.
Another area of judgment is the assessment of the signifi cance of an input against the fair value measurement in its entirety. As a result, a different cut between observable and unobservable data and variances in the weighting of the signifi cance of each input against the fair value measurement in its entirety could produce a different categorization
PROPERTY & CASUALTY 27,046 25,986 of which direct premiums 26,724 25,605 of which reinsurance assumed 414 303 of which revenues from other activities 74 78
(b) The contribution of discontinued Canadian operations is reclassifi ed on a separate line of the income statement.
(c) In order to improve visibility on Direct operations in P&C, this activity is now reported as a separate reporting unit and no longer included within countries or regions. Reported full year 2010 fi gures by country were modifi ed accordingly with this new presentation.
(a) In 2010, assets and liabilities related to Australian and New Zealand operations, and some UK Life and Savings portfolios for which the disposal process was not fi nalized as of December 31, 2010 were classifi ed as held for sale (see Note 5.3).
As of December 31, 2010, liabilities arising from insurance contracts related to the Canadian operations included in the table above amounted to €2,352 million.
TOTAL - PROPERTY & CASUALTY EXCLUDING INTERNATIONAL INSURANCE 28,256 6,920 1,063 169 36,408 13,853 50,261
As of December 31, 2010, liabilities arising from insurance contracts related to the Canadian operations included in the table above amounted to €2,352 million in Property & Casualty.
Investment in real estate properties at amortized cost 735 455 - (43) 1,147
Debt instruments designated as at fair value through profi t or loss (b) 1,010 - (60) - 950
Assets backing contracts where the fi nancial risk is borne by policyholders - (4,977) (4,977)
Net realized gains and losses relating to investments at cost and at fair value through shareholders’equity
Investment in real estate properties at amortized cost 690 266 - (14) 942
Equity instruments designated as at fair value through profi t or loss (c) 241 - 13 - 255
Non controlled investment funds available for sale 141 140 - (90) 191
Non controlled investment funds designated as at fair value through profi t or loss 49 - 78 - 126
Non controlled investment funds held for trading 13 - 18 - 31
Other assets held by controlled investment funds designated as at fair value through profi t or loss 211 - 378 589
Assets backing contracts where the fi nancial risk is borne by policyholders - 13,788 13,788
underlying assets designated as at fair value through profi t or loss part of an economic hedge not eligible for hedge accounting as defi ned by IAS 39).
Premiums ceded and unearned premiums ceded (1,392) (1,452) (984) 395 (3,434)
Other staff expenses and employees’ profi t sharing (a) 347 356
The weighted-average assumptions used by AXA for pension plans in the principal regions in which AXA operates were as follows: DECEMBER 2011 ASSUMPTIONS
Expected return on plan assets and separate assets 5.6% 6.8% 1.3% 7.3%
Expected return on plan assets and separate assets 6.1% 6.8% 1.3% 7.3%
Expected return on plan assets and separate assets 6.3% 8.3% 1.3% 7.5%
For any given plan, the discount rate is determined at the statement of fi nancial position date by reference to market yields for the corresponding currency on high quality corporate bonds (based on a risk free rate and AA spread) depending on the plan’s duration and characteristics.
UK pension scheme as these have been retained by AXA UK
Benefi ts paid by plan assets and by separate assets (486) (464) (474) (434) (443) - - - - (0)
Benefi t obligation at the end of the year (A) 16,353 15,732 13,661 11,729 12,955 624 606 534 511 506
Fair value of plan assets at the beginning of year 7,834 6,181 4,662 7,057 8,216 5 4 3 3 9
Fair value of plan assets at the end of the year (B) 8,311 7,834 6,181 4,662 7,057 4 5 4 3 3
Fair value of separate assets at the beginning of year 985 893 789 739 2,480 - - - - -
Actual return on separate assets (6) 59 31 (25) 12 - - - - -
Benefi ts paid by separate assets (90) (71) (66) (64) (60) - - - - -
Impact of foreign currency fl uctuations - - - (5) (69) - - - - -
Fair value of separate assets at the end of the year 952 985 893 789 739 - - - - -
Cumulative impact of asset ceiling (7) (2) (10) - - - - - - -
Liability and asset recognized in the statement of financial position (excluding separate assets)
For pension plans where the benefi t obligation exceeds the fair value of plan assets, the aggregate benefi t obligation and fair value of plan assets were €16,317 million and €8,268 million, respectively, as of December 31, 2011.
The annual expense for employee pension and other benefi ts recorded in the income statement (included in the “employee benefi ts expenses” presented in Note 26.1), for the years ended December 31, 2011, 2010, 2009, 2008 and 2007 is presented below: (in Euro million )
Expected return on separate assets (42) (40) (34) (35) (33) - - - - -
(c) This amount includes additional contributions paid to plan assets in the United Kingdom and in the United States to reduce the defi cit in 2010 and 2011.
(€551 million) and in the United Kingdom (€103 million) to reduce the defi cit.
Pension and other benefi ts expense (448) (517) (404) (306) (371) 4 (44) (37) (37) (40)
Benefi ts directly paid by the employer 310 275 310 270 227 40 37 39 44 45
Net transfer In/(Out) (including acquisitions and disposals) (a) (b) 86 (52) 884 50 (2,253) 15 - - (11) (20)
Net transfer of separate assets to plan assets (c) - - 41 10 1,695 - - - - -
Actuarial gains and losses recognized in the SoCI component (840) (532) (1,493) (1,229) 1,022 (61) (29) (36) 19 54
Statement of fi nancial position liability at the end of the year (7,981) (7,840) (7,423) (6,995) (5,818) (619) (600) (529) (506) (501)
Net economic funding position at the end of the year (7,029) (6,855) (6,530) (6,206) (5,079) (619) (600) (529) (506) (501)
January 1, 2007 and December 31, 2011 due to adjustments arising on plan liabilities and adjustments arising on plan assets and separate assets.
Experience adjustments on plan assets and separate assets (161) 164 151 (2,028) (33) (1) - (0) (1) (3)
During 2011, the variation of the SoCI was mainly due to actuarial losses on pension liability (due to decrease in discount rates in most countries, especially in the United States and in the United Kingdom) and on plan assets and separate assets
As pension liabilities have a long-term nature, a mix of equity instruments, debt instruments and real estate investments is used in the plan assets and separate assets.
The table below shows the asset mix for plan assets at the end of 2011: Asset mix for plan assets Total Group Europe North
The table below shows the asset mix for plan assets and separate assets at the end of 2011: Asset mix for plan assets and separate assets Total Group Europe North
less assets/(liabilities) held for sale (b) - 31 41 - -
All fi gures 100%, gross of tax (in E uro million) 2011 2010
AXA stock options for US holding company 5.2 8.3 ■ 2006 AXA SA grants 0.9
AXA performances units plans 21.9 45.2 ■ 2008 equity grants 0.7
AllianceBernstein share-based compensation instruments 381.5 117.5 ■ of which accelerated vesting (a) 234.5
(a) The amount shown is due to a restructuring of compensation plans on November 17th, 2011, leading to an accelerated vesting of all AllianceBernstein deferred compensation plans for a total cost of €340.2 million. €234.5 million exclude the impact on the deferred cash awards.
The number of outstanding options and the number of exercisable options as of December 31, 2011 and 2010 are shown below by maturity date: Expiry date of options (in million)
The following table shows AXA SA stock options granted under all plans after November 7, 2002: Options (in million) Weighted price (in E uro)
The number of outstanding options and the number of exercisable options as of December 31, 2011 and 2010 are shown below by maturity date for AXA SA plans granted after November 7, 2002: Expiry date of options (in million)
SA share price volatility is estimated on the basis of implied volatility, which is checked against an analysis of historical volatility to ensure consistency. The expected AXA SA dividend yield is based on the market consensus. The risk-free interest rate is based on the Euro Swap Rate curve for the appropriate term.
Weighted average fair value per option at grant date in Euro (a) (c) 1.78 2.24 1.91 3.23 6.80
(a) For employees who have been granted more than 5,000 options the vesting of the fi nal instalment is subject to the fulfi lment of a condition regarding the performance of the AXA shares compared to the DowJones Europe Stoxx Insurance index. The options with performance criteria were valued at €1.44 per option granted in 2011 and €1.68 per option granted in 2010, based on a Monte-Carlo model. The options without performance criteria were valued at €1.90 per option granted in 2011 and €2.47 per option granted in 2010, based on the Black & Scholes model.
(b) Assumptions at grant date, in average weighted by grants of the year.
The total cost of the AXA SA plans is amortized over the vesting period and an estimated 5% pre-vesting lapse rate is applied.
Following these actions, AXA ADRs continue to trade in the over-the-counter markets in the U.S. and be exchangeable into AXA ordinary shares on a one-to-one basis while AXA
The terms and conditions of AXA Financial’s share-based compensation programs generally were not impacted by the delisting and deregistration except that AXA ordinary shares
generally will be delivered to participants in lieu of AXA ADRs at exercise or maturity of outstanding awards and new offerings are expected to be based on AXA ordinary shares. In addition, due to U.S. securities law restrictions, certain blackouts on option exercise are expected to occur each year when updated fi nancial information for AXA will not be available.
The following tables show a summary of the U.S. holding company’s AXA ADR stock option plans: Options (in million)
(FCPE) or through direct share ownership) with a discount of up to 20%. The shares are restricted from sale during a period of 5 years (except specifi c early exit cases allowed by applicable laws). Employees bear the risk of all movements in the share as compared to the subscription price.
(either through Mutual funds (FCPE) or through direct share ownership) with a discount. The leverage on the employees’
On October 28, 2011, the AXA Group made an employee share offering at €8.43 per share for the traditional plan (discount of 20% to the reference price of €10.53 representing the average over the twenty trading days ending on October 27, 2011) and at €9.10 per share for the leverage plan (discount of 13.60%
to the reference price) Subscriptions amounted to 36.7 million shares, increasing the share capital by €332.6 million. This offering represented a total cost of €10.9 million taking into account the fi ve-year lock-up period.
The table below shows the main features of the plan, the amounts subscribed, valuation assumptions, and the cost of the plan for 2010 and 2011: Traditional Leveraged Traditional Leveraged
Total number of shares subscribed (in million shares) 2.3 34.5 2.0 28.1
[B] Cost of the lock-up for the employee 18.49% 13.53% 19.71% 16.53%
In 2011 the valuation was based on a market price of €14.0 per share at grant date and an estimated 5% pre-vesting lapse rate per year. The grant date fair value of Performance Shares granted in 2011 was €9.6.
The total cost of Performance Shares was €20.4 million in 2011.
AXA Performance Units AXA issues Performance Units to executive offi cers and other key employees outside France.
The total cost of the Performance Units recorded in earnings in 2011 was €21.9 million (€1.2 million for the equity-settled portion and €20.7million for the cash-settled portion).
AXA ADRs) and €0.2 million in respect of AXA ADR Restricted
Shares and Performance Accelerated Restricted Shares granted to senior executives and non-employee directors.
On November 17th, 2011 AllianceBernstein amended all outstanding deferred incentive compensation awards of active employees, so that employees who terminate their employment or are terminated without cause may retain their award, subject to compliance with certain agreements and restrictive covenants set forth in the applicable award agreement, including restrictions on competition, employee and client solicitation, and a clawback for failing to follow existing risk management policies. This amendment eliminated employee service requirement but did not modify delivery dates contained in the original award agreements.
The total granted in 2011 including these awards was 10,474,544 restricted Holding Units (13,064,764 Restricted
Most of the awards granted in 2011 contained the same conditions than awards amended in November 2011, resulting in the immediate recognition of the cost of these awards in 2011 instead of an amortization over a maximum of four years.
At the end, the 2011 total cost amounted to €381.5 million
In 2011: ■ short-term benefi ts: compensation paid to members of the Management Committee in 2011 totaled €13.3 million, including fi xed salary, bonuses, directors’ fees and benefi ts in kind; ■ share-based compensation: the expense recognized in 2011 in respect of share-based compensation granted to
At December 31, 2011, the Group employed 96,996 salaried people on a full-time equivalent basis (97,901 at the end of 2010, excluding salaried people in Canada and Australia &
UK life (+322) mainly due to the growth from Elevate and recruitments at end of 2011 related to a Bancassurance transaction; ■ AGS (+581): From 2011, fi gures include the staff outside of
Weighted average number of ordinary shares (net of treasury shares) - opening 2,294 2,264
BASIC NET INCOME PER ORDINARY SHARE C = A / B 1.75 1.08
Fully diluted - weighted average number of shares (d) D 2,305 2,275
FULLY DILUTED NET INCOME PER ORDINARY SHARE F = A / D 1.75 1.08
In 2010, net income per ordinary share stood at €1.08 on both basic and fully diluted basis, of which €1.01 attributable to continuing operations and €0.07 from discontinued operations on both basic and fully diluted basis.
In 2011, the Company was party to the following transactions with related parties which may be deemed to have been material to AXA or the related party in question or unusual in their nature or conditions.
& Casualty insurance business and Life & Savings insurance business in France. As of December 31, 2011, the Mutuelles
AXA collectively owned 14.54% of the Company’s outstanding ordinary shares representing 22.76% of the voting rights.
This agreement includes provisions designed to ensure the legal independence and protection of the respective clients’
Mutuelle and AXA France IARD, a Property & Casualty insurance subsidiary of the Company. For coinsurance, AXA France IARD
Mutuelle 11%. Technical results are shared between these companies in proportion to their written premiums. Aggregate written premiums recorded in this coinsurance agreement amounted to €1,644 million in 2011 (of which €1,461million was attributed to AXA France IARD).
(e.g. fi nance, accounting and reporting, tax, legal, marketing and brand, internal audit, human resources, procurement, information systems, risk management, cash management) as well as certain other services. Expenses invoiced by these GIEs to the Company and its subsidiaries are generally invoiced at cost and are included in the consolidated expenses refl ected on the Company’s audited consolidated fi nancial statements.
Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” to the Group’s consolidated fi nancial statements . Certain of these guarantees are given by the Company for the benefi t of its subsidiaries and affi liates for various business purposes including to promote development of their business (e.g. to facilitate acquisitions, integration of acquired businesses, distribution arrangements, off-shoring arrangements, internal restructurings, sales or other disposals of assets or businesses, sales or renewals of products or services or similar transactions), to support their credit ratings,
The Company, from time to time, makes capital contributions, loans, other extensions of credit, or otherwise provides liquidity and capital resources to its subsidiaries and affi liates for various business purposes including to fi nance their business operations and/or to promote the development of their business (e.g. to facilitate acquisitions, integration of acquired businesses, distribution arrangements, internal restructurings, or similar transactions). These transactions may involve the
I Note 29 Contingent assets and liabilities and unrecognized contractual commitments
(a) In order to improve the presentation consistency, fi nancing commitments received from credit institutions have been modifi ed in 2010.
Guarantee commitments received totaled €13,871 million at the end of 2011, and mainly consisted in (i) guarantees from customers related to mortgage loans (€11,556 million) received by Switzerland Life & Savings (€6,354 million), Switzerland
Property & Casualty (€1,105 million), AXA Bank Europe (€2,479 million) and Belgium Life & Savings (€1,346 million), and (ii)
The € 1,984 million increase in guarantee commitments received was mainly driven by the increase of guarantees related to mortgage loans (€+1,194 million), including Switzerland Life &
Pledged securities and collaterized commitments received totaled €32,530 million at the end of 2011, and mainly consisted in: ■ mortgage security collateral taken for loans totaled €19,830 million, mainly from AXA Bank Europe (€15,715 million) and
Life & Savings (€1,540 million); ■ €2,204 million in AXA Bank Europe related to consumer loans & commercial funding.
Pledged securities and collaterized commitments 45,268 6 10 611 45,895 34,673
Commitments given totaled €64,544 million at the end of 2011, an increase of €+9,634 million compared to the end of 2010, mainly due to an increase in pledged securities and collaterized commitments of €+11,222 million mainly in relation with repurchase transactions and similar operations (see below).
Financing commitments given totaled €3,266 million at the end of 2011, and mainly consisted in fi nancing commitments to customers (€2,993 million), notably comprising loan commitments granted by AXA Germany Life & Savings (€1,233 million),
AXA Bank Europe (€949 million) and by AXA Banque (€722 million)
Guarantee commitments given increased by €+532 million, including €+333 million from AXA Banque Europe related to guarantees in case of insolvency or default and €+125 million from German Banks related to mortgage loan.
Property & Casualty; ■ €9,932 million in Japan Life & Savings, including pledged assets for securities repurchase agreements (€9,770 million)
(€3,116 million) and derivative transactions (€352 million); ■ €2,201 million in United States Life & Savings for securities repurchase agreements.
Pledged assets and collaterized commitments given increased by €+11,222 million in 2011 mainly in relation with pledged assets and collaterals for (i) repurchase transactions and similar operations (€+8,610 million) driven by AXA Bank Europe
Switzerland Life & Savings (€+985 million) and (ii) derivatives instruments (€+1,063 million) driven by France Life & Savings
Other commitments given totaled €10,587 million at the end of 2011 and mainly consisted in: ■ capital call options to Private Equity funds (€3,249 million)
and United States Life & Savings (€332 million); ■ €1,609 million guarantees given by the Company as part of group employee insurance contracts; ■ €600 million guarantees given by the Company as part of acquisition and disposal of companies; ■ €516 million of unamortized balance of the Company’s subordinated debt instruments: the Company issued subordinated debts with reimbursement premiums which are amortized over the life of the instrument at the effective interest rate for each debt; ■ €570 million commitments given by France Life & Savings as commitments from real estate funds; ■ €479 million in Germany Life & Savings commitments given to “Protektor” and “Medicator”, the German insurance guarantee funds in the case of a bankruptcy of insurance companies.
In force for a period of one year from the date of signature, this agreement is renewable automatically for successive periods of one year thereafter, unless one of the parties decides to terminate it beforehand, in which case the terminating party is required to give a three month notice prior to the next renewal date.
AXA and Schneider Electric informed the AMF of their decision not to renew their May 15, 2006 agreement. The termination of this agreement was published by the AMF on December 27, 2011. The current agreement will expire in the term planned by the agreement, i.e. on May 15, 2012.
AXA subsidiaries are required to indemnify their employees against certain liabilities and costs that they may incur from time to time in performing activities within the scope of their employment duties. These activities may include, for example, service as a director, offi cer, agent, general partner, or in a similar capacity for (i) an AXA Group company other than the employee’s principal employer or (ii) a company outside the AXA Group where service is at the request of (or for the benefi t of) the Group (e.g. joint ventures, partnerships, or special-purpose investment companies or funds). The potential amount of compensation relating to commitments covered by these obligations cannot be evaluated with any certainty, and the Group purchased D&O (Directors and Offi cers) insurance to mitigate such risk.
Some AXA subsidiaries, principally insurance companies, are subject to restrictions on the amount of funds they may transfer in the form of cash dividends or otherwise.
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations and cash fl ows. For example, a strengthening of the Euro against the US Dollar and/or certain other currencies in 2011 and future periods may adversely affect AXA’s results of operations and the price of its securities. In addition, the currency hedges used by AXA to manage foreign exchange rate risk may signifi cantly impact the Company cash position.
I Note 30 Fees paid to Statutory Auditors 30.1. STATUTORY AUDITORS
PricewaterhouseCoopers Audit is registered as an independent auditor with the Compagnie Régionale des Commissaires aux
61, rue Henri Regnault – 92400 Courbevoie Cedex, represented by Messrs. Philippe Castagnac and Gilles Magnan, fi rst appointed on June 8, 1994. The current appointment is for a term of 6 years, until the General Shareholders Meeting called to approve the fi nancial statements for the fi scal year 2015.
Affi liated Companies/Mutual funds 11,699 12,068 - - 1,299 1,369 - -
(b) Consistently with its nature, Solvency II and EEV related fees have been reclassifi ed from «Other services» to «Other specifi c audit assignment».
AXA SA is involved in lawsuits, investigations, and other actions arising in the various jurisdictions where it does business, including the following: In 2007, AXA SA completed the squeeze out of the minority shareholders at two German subsidiaries, AXA
Directors hired an independent law fi rm to conduct an internal investigation into this matter and an independent consultant was engaged to assist in assessing the impact of this error on the performance of each client’s account. On February 3, 2011, the United States Securities and Exchange Commission charged three AXA Rosenberg entities with securities fraud for concealing this error which was determined to have caused $217 million in investor losses. Without admitting or denying the SEC’s fi ndings, AXA Rosenberg Group LLC (“ARG”), AXA
On February 4, 2011, a putative class action law suit was fi led against AXA Rosenberg on behalf of an AXA Rosenberg client
District of New Jersey in July 2011, entitled Mary Ann Sivolella v. AXA Equitable Life Insurance Company and AXA Equitable
for investment management services. In November 2011, plaintiff fi led an amended complaint, adding claims under
Sections 47(b) and 26(f) of the Investment Company Act, as well as a claim for unjust enrichment. In addition, plaintiff purports to fi le the lawsuit as a class action in addition to a derivative action. In December 2011, AXA Equitable and FMG
or its affi liates, in their capacity as plan administrator, failed to properly effect equalization due to certain defects (including failure to execute amending scheme documentation, defects in the documentation equalized or defects in the form of amendment executed itself). AXA UK has asked a number of scheme trustees to check the equalization of their schemes, which work FP is now progressing.
Group companies engaged in regulated businesses around the world including for their ability to obtain and/or maintain licenses to engage in certain types of regulated business activities such as asset management, insurance and banking.
In some jurisdictions, juries have substantial discretion in awarding punitive damages.
Although the outcome of any lawsuit cannot be predicted with certainty, particularly in the early stages of an action, management believes that the ultimate resolution of the matters described above are not likely to have a material adverse effect on the consolidated fi nancial position of AXA, taken as a whole. However, due to the nature of such lawsuits and investigations and the frequency of large damage awards in certain jurisdictions (particularly the United States) that bear little or no relation to actual economic damages incurred by plaintiffs, AXA’s management cannot make an estimate of loss, if any, or predict whether or not these matters will have a material adverse effect on AXA’s consolidated results of operations in any particular period.
The closing of the transaction is subject to regulatory approvals and is expected in the course of the second half of 2012.
We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit involves performing procedures, on a test basis or by selection, to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Group as at December 31, 2011 and of the results of its operations for the year then ended in accordance with International
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifi cally required by French law in such reports, whether modifi ed or not. This information is presented below the opinion on the consolidated fi nancial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain signifi cant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated fi nancial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated fi nancial statements.
CONSOLIDATED FINANCIAL STATEMENTS/FULL YEAR 2011 4 4.7 REPORT OF THE STATUTORY AUDITORS
The on-going economic downturn and related uncertainties, the evolution of the fi nancial crisis as well as the development of the sovereign debt crisis of certain eurozone members (in particular Greece) continue this year to give rise to specifi c circumstances for the preparation of the fi nancial statements, in particular with respect to the accounting estimates. In the context of these economic and fi nancial uncertainties, and in accordance with Article L.823-9 of the French Commercial Code requiring statutory auditors to justify their assessment, we bring to your attention the following matters: ■ Your company details in Notes 1.7.2, 4.3 and 9.9 to the consolidated fi nancial statements the valuation methods it applies to fi nancial assets. We have assessed the appropriateness of the process of the fi nancial assets valuation, as well as the information disclosed in the above mentioned notes.
■ Deferred tax assets and liabilities are recorded and measured using the methods described in Note 1.16.1 of the notes to the consolidated fi nancial statements. We have verifi ed that the valuation methods used take into account the nature of tax differences, business plans established by the Group and, when accounting policies permit, its intentions.
Under Article 3 of its Charter, AXA’s corporate purpose is generally to: ■ acquire all types of ownership interests in any French or foreign company or business, including insurance company or business; ■ acquire, manage and sell all listed or unlisted shares and securities, as well as personal or real estate properties, rights, shares or securities, whether listed or unlisted, that are related to such properties; and
Meeting and apportioned by the Board of Directors among its members. Notwithstanding the above, the Board of Directors’
Bylaws provide that no directors’ fee shall be paid to directors exercising in the Executive M anagement (Chief Executive
Company, the value of which, on the basis of the closing price of the AXA share on December 31 of the preceding fi scal year, shall correspond to an amount at least equivalent to the gross director’s fees earned in respect of the previous fi scal year.
Each AXA share entitles its holder to one vote at every
AXA Shareholders’ Meeting, subject to the provisions regarding double voting rights described below. As a result of the decision of the Shareholders’ Meeting of the Company held on May 26, 1977, each ordinary share fully paid and held in registered form by the same person for at least two full fi scal years entitles its holder to double voting rights with respect to such share at any AXA Ordinary or Extraordinary Shareholders’ Meeting.
The double voting right will automatically terminate for any share that has been converted into a bearer share or for which ownership has been transferred. Any transfer of shares as a result of merger, split-up, inheritance, division of community property by spouses or donation to a spouse or heir does not affect the double voting rights of such shares.
Under the provisions of AXA’s Charter, the actual dividend payment date is decided by the Board of Directors. AXA must pay any dividend within nine months of the end of its fi scal year.
Dividends not claimed within fi ve years of the date of pay-out become the property of the French Treasury Department.
In accordance with the provisions of AXA’s Charter, the shareholders may grant each shareholder the choice of receiving dividends in either cash or additional ordinary shares during an Ordinary Shareholders’ Meeting.
(“société anonyme”) have the power to amend the c harter of the Company. Such an amendment generally requires the approval of two-thirds of the shareholders attending or represented at an Extraordinary Shareholders’ Meeting.
However, no such Extraordinary Shareholders’ Meetings may decide (i) to increase the liability of the shareholders in respect of the company or a third-party; or (ii) to reduce the individual rights vested in each shareholder (such as voting rights, the right to distributable profi ts of the Company when allocated as dividends, the right to sell one’s shares and the right to sue the
Company is subject to a tender offer, for purposes of approving measures, the implementation of which, would be likely to cause such tender offer to fail) prior to the date set for the meeting on fi rst call, and at least 10 days (or 4 days if convened, in the event that the Company is subject to a tender offer, for purposes of approving measures, the implementation of which, would be likely to cause such tender offer to fail) before any second call, the Company shall send a fi nal notice containing, among other things, the fi nal agenda, place, date and other information in respect of the meeting by mail to all registered shareholders who have held shares for more than one month prior to the date of this fi nal notice and publish this fi nal notice in a newspaper as well as in the BALO.
in accordance with the seventh paragraph of Article L.228-1 of the French Commercial Code, on the third business day preceding the meeting at midnight (Paris time), either in the registered share accounts kept by the Company or in the bearer share accounts kept by a qualifi ed intermediary. The accounting registration or recording of the shares in the bearer share accounts in the books of the qualifi ed intermediary is evidenced by a certifi cate of attendance delivered by the latter.
concerning takeover bids, may have certain anti-takeover effects. In the case of AXA, the relevant provisions include, among other things, the Company’s ability to repurchase its own shares regarding legal requirements and the existence of
On December 31, 2011, AXA’s share capital was comprised of 2,357,197,520 ordinary shares, each with a par value of €2.29. All these shares were fully paid up and non assessable and began earning dividends on January 1st, 2011. The following table sets forth changes in the number of shares from December 31, 2008 to December 31, 2011: Date Transaction
Share capital increase with preferential subscription rights 174,123,628 1,642,341,991 2,263,505,553 5,183,427,716
Share capital reduction by cancellation of shares (552) (25,961) 2,289,992,166 5,244,082,060
APPENDIX II MANAGEMENT’S ANNUAL EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING 423
APPENDIX IV STATEMENT OF THE PERSON RESPONSIBLE FOR THE ANNUAL REPORT 429
APPENDIX XI COMMISSION REGULATION OF APRIL 29, 2004 - CORRESPONDENCE TABLE 518
Board of Directors and the application of gender balance on the Board, the conditions of preparation and organization of the Board of Directors’ work (Part 1) as well as the internal control and risk management procedures implemented by the Company (Part 2). The report also presents the principles and the rules adopted by the Board of Directors in order to determine the compensation and the advantages granted to the corporate offi cers (Part 3). Finally, the report indicates the
For information on the composition of the Board of Directors and the application of the principle of gender balance on the Board, as well as on the conditions of preparation and organization of the Board of Directors’ work please see Part 2 – “Corporate governance - Executive compensation, major shareholders and related matters”, “Board of Directors ” and “Board of Directors’
Executive Offi cer decided by the Board of Directors please see
In this context, the following report provides a summary of the AXA Group’s principal internal control mechanisms and procedures that allow Management to conclude that the
AXA’s Management and has taken into account information furnished to the Board of Directors with respect to the Group’s internal control environment. This report was assessed by the
Since April 29, 2010, AXA’s former dual governance structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors. This unitary board structure enhances the effi ciency and reactivity of the Group’s governance processes and has been carefully designed to ensure an appropriate balance of powers.
For more information about the Audit Committee including its composition and the principal matters it handled in 2011,
AXA’s principal subsidiaries, whether publicly traded or not, are generally governed by: ■ a b oard of d irectors or a s upervisory board whose membership includes independent or non-executive directors; and
These management structures and controls include the following: The Management Committee
AXA currently has a 7-member Management Committee which is an internal committee having for main mission to assist the
AXA currently has an 18-member Executive Committee which is an internal committee composed of the members of
The principal control processes that fall under the responsibility of GRM are described below: ■ the local Risk Management Departments carry out regular reviews of the technical reserves established by
GRM performs regular reviews of models followed throughout the Group in order to ensure the consistency between actuarial and fi nancial standards; ■ GRM conducts a decentralized review of risk-adjusted pricing and profi tability for new products prior to launch; this review is centralized for Variable Annuity products with secondary guarantees as well as for long term care products and submitted to the Management Committee. Regular reviews on existing products are performed to ensure that profi tability of the new business is sustainable; ■ the asset/liability management policy, in place at operating unit level, is monitored and controlled through an annual detailed analysis of asset/liability matching. This work is undertaken to validate the strategic allocations of invested assets. In addition, a quarterly reporting process is used to monitor portfolio developments and detect deviations from strategic asset allocations as well as with respect to benchmarks determined with asset managers; ■ credit and concentration risks in the Group’s asset portfolios
Committee. The Board of Directors and the Audit Committee are also informed.
PBRC Department within the Group Finance Department is responsible for consolidation, management reporting and control over accounting and fi nancial information. It works with local PBR units within Finance Departments of Group subsidiaries.
PBRC’s role encompasses principally the following: ■ establishing and distributing both consolidation and reporting standards and instructions; ■ managing the Group’s fi nancial reporting system; ■ producing the consolidated fi nancial statements and analyzing key performance indicators; ■ managing the Internal Financial Control (IFC) program ; ■ developing and using management control tools; ■ steering the European Embedded Value process; ■ coordinating the production of AXA’s Annual Report
(Document de Référence) fi led with the AMF ; ■ liaising with the Statutory Auditors and contributing to Audit
Standards (IFRS) as adopted by the European Union (EU). As it relates to the fi nancial statements included in the Group’s 2011
This consolidation process and its related controls are based on the following: Defi nition of standards and maintenance of an information system Group accounting standards, which are consistent with accounting and regulatory principles for consolidated fi nancial statements, are set forth in the AXA Group Accounting Manual and updated regularly by PBRC experts. These guidelines are submitted to AXA’s Statutory Auditors for review before being made available to AXA subsidiaries.
Operating control mechanisms At entity level, AXA subsidiaries are responsible for entering and controlling accounting and fi nancial data that comply with the AXA Group Accounting Manual and refl ect consolidation rules under IFRS accounting standards. In this respect, the
“clearance meetings” in which local and central fi nancial teams participate, as well as the Statutory Auditors; ■ the principal options for closing the consolidated accounts are presented to the Audit Committee and then to the Board of Directors; ■ the auditing of accounting and fi nancial data is fi nalized at the accounts closing stage in meetings attended by local and central fi nancial teams, as well as local and central Statutory
Committee, to the Audit Committee and then to the Board of
Practice Groups are: ■ Corporate Law which covers Mergers & Acquisitions,
Corporate Finance, Securities Law and Corporate Law matters; ■ Corporate Governance & Company Law; ■ Litigation, Regulatory & Compliance.
(ii) implementation of the Group Compliance and Ethics Guide which applies to all AXA Group employees worldwide and
Committee in any part of the Group; ■ reviewing and aggregating the results of local internal audit work for the Group Audit Committee; ■ providing support and guidance to the Group’s Audit
Committees and reviewing the performance of subsidiary a udit c ommittees and reporting on this to the Group Audit
Management, PBRC, Compliance and Group Legal, as well as the Statutory Auditors.
Local internal audit teams report directly to the Group Head of
Audit whilst also having a direct and unfettered reporting line to their local a udit c ommittee c hairman and an administrative reporting line within their local management structure. These local teams focus mainly on identifying the key risks facing their business units, and on evaluating the design and operation of the associated controls.
In addition to its other activities, the Committee has undertaken a comprehensive risk mapping exercise covering the aggregate risks to which the Group is exposed including fi nancial, solvency, insurance, operational, legal and compliance, tax, audit, human resources, and communication risks. As part of the process, priorities and action points were established for the various GMS Departments that manage these risks.
AXA has put in place a comprehensive program coordinated by PBRC, (the Internal Financial Control (IFC) programme), designed to ensure that AXA’s Chief Executive Offi cer and
The IFC program is based on AXA’s IFC Standard which is an internal control and governance standard developed by AXA.
AXA Group company, as part of the IFC programme, 3. Disclosure Controls & Procedures Certifi cates required to be submitted by AXA Executive Committee members, regional CFOs and certain other executives (including heads of GMS Departments) pursuant to which each of these executives is required to review the Group’s
Statements: PBRC provided regional CFOs with the contribution of the companies under their responsibility to the consolidated fi nancial statements in order to facilitate their certifi cation on the accuracy and completeness of the information in the Annual Report.
Board of Directors in order to determine the compensation and the advantages granted to the corporate offi cers please see
Part 2 – Section 2.2 “Full disclosure on executive compensation and share ownership” of this Annual Report.
Pursuant to the provisions of a French law of July 3, 2008, the Supervisory Board and the Management Board decided, in December 2008, to adopt all of the AFEP/MEDEF
Report describing corporate governance mechanisms and containing information about executives’ compensation.
In order to take into account certain specifi cities of its governance practices, AXA has decided to adapt the following provisions of the AFEP/MEDEF Code: ■ Section 14.2.1 of the AFEP/MEDEF Code related to the review of the accounts by the Audit Committee: for practical reasons, the review of the accounts by the Audit Committee generally occurs on the day preceding the Board of Directors’
her annual cash remuneration (fi xed salary plus annual variable remuneration) received for the previous fi scal year.
Executive Offi cer is required to hold the equivalent of his/
her fi rst appointment as Executive Director if he/she was appointed after January 1, 2007. Considering the already high level of this shareholding requirements imposed upon Executive Directors, the Board of Directors, upon recommendation of its Compensation & Human Resources
(“subscription and sale” transactions), but does not prohibit, in accordance with common practice, the simple exercise of options that is not followed by the sale of the shares acquired subsequently.
AXA’s ICOFR includes policies and procedures that: ■ pertain to the maintenance of records that, in reasonable detail, accurately and fairly refl ect the transactions and dispositions of Group assets; ■ provide reasonable assurance that transactions are recorded as necessary to permit the preparation of fi nancial statements in accordance with the applicable generally accepted accounting principles; ■ provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of management and directors of the Group, and
In line with the COSO framework, AXA’ ICOFR is organized around the following key processes and controls: Entity-Level
(b) Management’s Annual Report on ICOFR based on AXA IFC Standard
Management conducted an evaluation of the effectiveness of AXA’s ICOFR in accordance with the AXA IFC Standard as described above. Based on this evaluation, management concluded that AXA’s ICOFR was effective as of December 31, 2011.
AXA management’s assertion included in Management’s Annual Evaluation of Internal Control Over Financial Reporting that internal control is effective, is fairly stated.
(the “IFC standard”), which is an internal control and governance standard developed by AXA and used as the framework for its IFC
programme, as described in Management’s Annual Evaluation of Internal Control Over Financial Reporting on page 423 of this Annual
In our opinion, the Company’s management’s assertion that internal control over fi nancial reporting as of December 31, 2011, is effective, in all material respects, is fairly stated based on the criteria established in the IFC standard.
Pursuant to Article 222-7 of the AMF General Regulations (Règlement Général de l’Autorité des marchés financiers), the table below sets forth all information published or otherwise made public by the Company over of the previous twelve months in one or more
AXA to close AXA APH transaction on April 1st, 2011/New management structure in Asia (03/23/2011)
AXA Shareholders’ Meeting convened today. AXA publishes its 2010 Activity and Corporate Responsibility Report (04/27/2011)
Reliance Industries Limited to acquire Bharti’s stake in the insurance Joint-Ventures with AXA in India (06/10/2011)
Henri de Castries will be speaking at the Bank of America Merrill Lynch Conference (10/05/2011)
Thomas Buberl is appointed Chief Executive Offi cer of AXA Germany and will join AXA Group’s Executive Committee (01/16/2012).
The AXA Group launches another free share grant to all employees worldwide (02/16/2012)
Resolutions submitted to the Shareholders’ Meeting of April 25, 2012 (02/17/2012)
AXA teams up with the NGO CARE in order to improve access to clean drinking water and reduction of water-borne diseases in Benin (02/24/2012)
Junior Achievement and AXA Group launch global youth rist education program (03/08 /2012)
Notice of Meeting (Shareholders’ Meeting to be held on 04/27/2011) (03/21/2011)
Extract of the minutes of the Board of Directors of 08/03/2011 related to the increase of the share capital
Minutes of the Deputy Chief Executive Offi cer of 12/09/2011 related to the increase of the share capital
Headquarters of the Company 25, avenue Matignon 75008 Paris - France
Disclosure of trading in own shares by the Company www.axa.com www.amf-france.org
AXA/Schneider Electric agreement (12/27/2011) (decision related to the non-renewal of the agreement)
The Statutory Auditors have provided me with a letter of completion of assignment, in which they confi rm that they have verifi ed the information relating to the fi nancial position and the fi nancial statements contained in this Annual Report and have reviewed the entire document.
FINANCIAL AUTHORIZATIONS TO ISSUE SHARES OR OTHER TYPES OF SECURITIES AS OF DECEMBER 31, 2011
Restricted shares (actions gratuities) (f)/ Plan for all employees – 0.4% (h) 38 months June 27, 2014
(c) The aggregate nominal value of debt instruments associated with the issue of securities with or without preferential subscription rights may not exceed the global upper limit of €6 billion. This upper limit is separate and distinct from the limit on issuances of debt securities and does not give a claim on the Company’s share capital (ceiling of €2 billion).
consent. They will be submitted to the Shareholders’ Meeting for approval on April 25, 2012: Issues without preferential subscription rights for shareholders
Ordinary shares or securities giving access to the capital, reserved for employees – 135 million (a) 18 months October 25, 2013
December 2011, AXA issued a total of approximately 37 million new shares each with a par value of €2.29, all of which were entitled to dividends for 2011.
In 2011, by virtue of the authorization granted by the shareholders at the Shareholders’ Meeting of April 22, 2008 (16th resolution)
Since January 1, 2011, the Company has applied hedge accounting rules to fi nancial instruments purchased to hedge foreign-exchange risk in equity securities but whose value has been booked in euros since the purchase date applying the historic cost rule. This exchange-rate hedging is carried out through derivatives or through debts denominated in foreign currencies. This change in method is justifi ed by improved fi nancial reporting, since the application of hedge accounting fully refl ects AXA SA’s intentions, and by a change in the fi nancial and regulatory context, since a proposed regulation by France’s accounting standards authority (ANC) will allow hedge accounting to be used for instruments used in a hedge relationship.
The change in method had a positive impact of €1,592 million on shareholders’ equity as at January 1, 2011 through a decrease in the exchange-rate risk provisions by the same amount.
Canadian businesses, a reduced foreign-exchange loss of €329 million compared to €1,522 million in 2010 on a comparable basis, and a €1,113 million profi t due to receivables from carry back compared to €197 million in 2010.
AXA Leben AG and €260 million paid by the company Vinci following the repayment of a loan granted to AXA Canada.
Australia and Canada totaled €501 million, versus €520 million in 2010.
Financial charges amounted to €1,407 million, up €109 million, owing mainly to €120 million discount related to the assignment of a tax receivable.
Operating expenses fell by €10 million to €320 million, mainly as a result of the Group’s cost-cutting policy.
The corporate income tax benefit amounted to €2,002 million, compared with €944 million in 2010. It mainly included €1,113 million of tax benefit linked to carryback receivables, €759 million of tax receivable from members of the tax consolidation group in France and a €235 million release of the provision for the risk of tax repayments.
shares following the merger into AXA SA of its wholly-owned subsidiary AXA Participation II.
Loans amounted to €810 million, and consisted mainly of a $1 billion credit facility granted to shareholders in RESO Garantia and guaranteed by these shareholders’ interests in RESO
Miscellaneous receivables totaled €561 million, including €351 million of tax receivable from entities belonging to the
Canadian businesses and from the increase in dividends received, partly offset by net reinvestment in Asian businesses and changes in margin calls paid to bank counterparties under collateral agreements.
Cash instruments totaled €654 million and chiefly comprised €260 million in premiums for share call options, €327 million
in premiums paid for Swiss franc and Japanese yen hedging strategies, as well as €48 million of call options acquired in 2007 to neutralize the dilutive impact of the 2017 subordinated convertible bonds.
Other shareholders’ equity included undated deeply subordinated notes amounting to €6,341 million as opposed to €6,233 million in 2010, the difference being due to €108 million of exchange-rate effects.
Financial debt stood at €15,243 million, versus €16,166 million at December 31, 2010: ■ Bonds amounted to €6,761 million, an increase of €75 million arising from exchange-rate effects,
(€2,530 millions), which is primarily used to fi nance margin calls under collateral agreements, protecting the Company’s from counterparty risk on derivative instruments,
■ Payables to subsidiaries, which amounted to €2,758 million, a fall of €936 million. This decrease relates mainly to the cancellation of €455 million of loans granted by the companies Colisée Excellence and AXA Participation II
December 31, 2010. This item reflects the positive effects derived from the revaluation of foreign-currency denominated assets and liabilities at the balance sheet closing exchange rate. This item declined compared with 2010 owing mainly to increases in the US dollar and sterling exchange rates, which had an adverse impact on liabilities.
In 2011, AXA did not acquire any significant equity interests within the meaning of Article L.233-6 of the French Commercial
Net book value on the sale of fi xed assets (2,814) (486)
a) Capital - Ordinary shares (in E uro million) 4,719 4,784 5,244 5,313 5,398 b) Ordinary shares (numbers in million) 2,061 2,089 2,290 2,320 2,357 c) Bonds convertible into ordinary shares (numbers in million) 7 7 7 7 7(a)
AXA EQUITY AND LAW PLC 1 2,826 99.96% 1,133 5 Old Broad Street - LONDON EC2N 1AD - England 395-70, Shindaebang-dong, Dongjak-gu - SEOUL - South Coréan
Last closing revenues available (a) Last closing result available Dividends received Closing date and other observations
Wolfe Tone House - Wolfe Tone Street - DUBLIN - Irland
AXA LIFE INSURANCE COMPANY LTD 6 1 100.00% 90 151, Gloucester Road - Wan Chai - HONG KONG
Level 4 - 143 York Street - SIDNEY NSW 2010 - Australia 140, Frenchurch Street - LONDON EC3M 6BL - England
Ratu Plaza offi ce Building 2nd Floor, Jl.Jend Sudirman N°9 - JAKARTA - Indonesia
Guarantees and commitments given by the company under commitments made by subsidiary/
a) French subsidiaries (total) 187 b) Foreign subsidiaries (total) 136 2) Participating interests not shown in section A
I Notes to the fi nancial statements as at December 31, 2011
Since January 1, 2011, the Company has applied hedge accounting rules to fi nancial instruments purchased to hedge foreign-exchange risk in equity securities but whose value has been booked in euros since the purchase date applying the historical cost convention. This exchange-rate hedging is carried out through derivatives or through debts denominated in foreign currencies. This change in method is justifi ed by improved fi nancial reporting, since the application of hedge accounting fully refl ects AXA SA’s intentions, and by a change in the fi nancial and regulatory context, since a proposed regulation by France’s accounting standards authority (ANC)
Net income for the fi scal year ended December 31, 2011 was €8,649 million, compared to a net loss of €488 million for the year ended December 31, 2010 and a 2010 profi t of €1, 688 million on a comparable basis. This result is mainly explained by a €4,922 million gain on the disposal of the Australian and
(1) Mr. François Pierson decided to retire as of January 1, 2012.
Intangible assets amounted to €383 million, and mainly included the AXA brand contributed by FINAXA as part of the merger in 2005 and valued at €307 million based on brand royalties billed to Group subsidiaries and to the Mutuelles AXA.
SICAV and FCP mutual funds and to the average share price over the last month before the balance sheet date for the other securities.
The General Meeting of 2017 bondholders did not approve the amendment. As a result, to fully neutralize the dilution impact of the 2017 convertible bonds, AXA bought call options on
At December 31, 2011, the remaining amount to be amortized was €48 million.
Employee benefi t liability is reviewed to ensure it covers future retirement benefi t obligations and post-retirement benefi ts.
Pursuant to this review, the employee benefi t liability amounted to €11 million at December 31, 2011.
Undated deeply subordinated notes are classifi ed as “Other shareholders’ equity” when, like for ordinary shares, there is no contractual obligation to remit cash or any other fi nancial assets.
Other shareholders’ equity included €6,341 million of undated subordinated notes at December 31, 2011, versus €6,233 million at December 31, 2010, representing an increase of €108 million mainly due to exchange rate fl uctuation impact.
(a) Of which: ■ T he acquisition of Asian activities previously held by AXA Asia Pacifi c Holdings for €7,146 million; t he Company wishes to transfer its stake in its Asian life and non-life insurance businesses to AXA ASIA, in which it is the sole shareholder. The goal is for AXA ASIA to eventually become the new holding company for the AXA Group’s Asian activities. As part of this internal restructuring, AXA SA transferred shares in the following entities to AXA ASIA in December 2011: AXA China Region Limited, AXA Financial Services (Singapore) Pte. Ltd, AXA General Insurance Hong Kong Ltd. and AXA Insurance Singapore Ltd, for a value of €5,263 million; the restructuring would have to continue on the year 2012; ■ T he removal of shares in AXA Asia Pacifi c Holdings and AXA Canada at their book value of €930 million; ■ A nd the cancellation of €455 million of AXA Participation II shares following the merger into AXA SA.
(b) The net decrease of €1,361 million mainly resulting from the reimbursement of the £730 million loan granted to the company Beaujon in 2010 and the repayment of AUD711 million of loans by AXA Asia Pacifi c Holdings.
(c) The increase is mainly due to margin calls paid to bank counterparties relating to collateral agreements linked to derivative instruments’ management.
Amounted to €852 million, up €185 million, of which €512 million related to the deferred recognition of exchange-rate losses in line with the principles of hedge accounting.
Other shareholders’ equity amounted to €6,341 million, compared to €6,233 million at the end of 2010.
(a) The €468 million provision for deferred taxes includes a €412 million provision for the possible repayment of tax savings to subsidiaries belonging to the French tax consolidation group.
(b) This amount mainly consisted of the rises of €1,592 million with respect to the aforementioned change in accounting method.
Subordinated debt totaled €7,030 million as opposed to €6,995 million in 2010 owing a €84 million increase relating to exchange-rate effects, partly offset by €50 million of loan repayments.
■ Directors’ fees allocated to members of the Board of Directors K€1,200
(b) The corporate income tax benefit amounted to €2,002 million, compared with €944 million in 2010. It mainly included €1,113 million of tax benefit linked to carryback receivables, €759 million of tax receivable from members of the tax consolidation group in France and a €235 million release of the provision for the risk of tax repayments.
Commitments to buy back shares and bonds from Group entities 42 -
Subordinated convertible bond redemption premium (see § 2.9 of this note) 383 5. 2. Commitments in respect of shareholder pacts
Agreement with the BNP Paribas Group On August 5, 2010, and after authorization by the AXA Board of Directors of August 3, 2010, the AXA Group and the BNP
In force for a period of three years starting from August 5, 2010, this agreement is renewable automatically for successive periods of one year there after, unless one of the two parties decides to terminate the agreement earlier, in which case the terminating party is required to give three months notice prior to the next renewal date.
Agreement with the Schneider Group On May 15, 2006, and after authorization by the AXA Supervisory
The agreement was made public by the AMF on May 31, 2006.
(2) A 10% depreciation of the Euro leads to a 2.9% increase in the fair value of debt, a 1.0% increase in the fair value of loans and a 38.2% decrease in the fair value of derivatives.
I Report of Statutory Auditors on the Company’s fi nancial statements (For the year ended December 31, 2011)
The above mentioned fi nancial statements have been approved by the Board of Directors. Our role is to express an opinion on these fi nancial statements based on our audit.
In our opinion, the fi nancial statements give a true and fair view of the Company’s fi nancial position and its assets and liabilities as of December 31, 2011 and of the results of operations for the year then ended, in accordance with accounting rules and principles applicable in France.
Without qualifying our opinion expressed above, we draw your attention to the paragraph “change in accounting principles” in the note of the annual fi nancial statements which discloses the change in accounting method concerning the application of hedge accounting rules to fi nancial instruments purchased to hedge foreign-exchange risk in equity securities but whose value has been booked in euros since the purchase date applying the historical cost convention.
This is a free translation into English of the Statutory Auditors’ report issued in French and which is provided solely for the convenience of English readers. The Statutory Auditors’ report includes information specifically required by French law in all audit reports, whether qualified or not, which is presented below in the opinion on the financial statements. This information includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters.
These assessments were considered for the purpose of issuing an audit opinion on the statutory financial statements of the
We have assessed whether the impairment tests performed by the Company, depending on the invested assets situation and the volatility of fi nancial markets, are appropriate and we also assessed the reasonableness of the resulting provisions. Regarding investments, for which impairment is based on the value-in-use and the intent to hold, we have assessed the data used in order to determine the value-in-use of the main investments in the portfolio and obtained confi rmation of the intent to hold.
The Life & Savings ANAV is derived by aggregating the local regulatory (statutory) balance sheets and reconciling with the
The table below shows the reconciliation of Life & Savings IFRS shareholders’ equity to Life & Savings ANAV: (in E uro million - Group share) 2011
Unrealized capital gains/losses projected in the VIF other Stat-GAAP adjustments (2,125)
“Life & Savings New Business Value” (NBV) measures the value of new business sold during the year. It includes the VIF on new business, as well as the upfront costs associated with acquiring new business (often called “strain”). Therefore NBV
is a measure of the new business volume which includes the present value of the future premiums expected to be received over time for business sold in the current year. The “PVEP
The Life & Savings VIF calculation by nature involves many assumptions about the future. For Life & Savings EEV, AXA
has adopted a “market-consistent” approach to setting asset return assumptions. Each cash fl ow is discounted at an appropriate discount factor, so that starting with Euro 1 of bond or of equity, projecting expected cash fl ows and discounting, will simply give Euro 1 of value. Mechanically, this can be described as assuming that, in the future, all assets will earn the risk-free rate (referred to as the “reference rate” in the
Future earnings available to shareholders are assessed across this range of stochastic scenarios, with the present value being the Life & Savings VIF. Our major assumptions include: ■ actuarial assumptions refl ect best estimates based on recent experience; ■ no productivity gains in the future are assumed, while a 2.0%
(31.6% in 2010); ■ consistent with previous years, AXA used, at end 2011, reference rates which included, where applicable, liquidity premia over the swap curves for some of its entities.
Values and other techniques, AXA performs a calculation that determines the “Implied Risk Discount Rate” (IDR) which would equate the cashfl ows from a single scenario with “real world”
economic assumption to the Life & Savings VIF. The following table summarizes the “real world” assumptions for 2010 and 2011 used in determining the IDRs: FI Return Equity Return Cash Return Real Estate Return
Others (incl. Life & Savings EEV of acquired/ disinvested business) 9
Operating performance from existing business considers the movements in EEV relating to the business inforce at the beginning of the year, excluding the investment impacts that are shown below. The total operating performance of €3,312 million is analyzed in several components: ■ expected existing business contribution of €2,906 million is the expected contribution from existing business assuming assets earned the rates in the illustrative investment scenarios used to calculate IDR for the prior year; ■ operational experience changes of €456 million is the impact of actual versus expected experience for items like mortality, expenses, lapse rates, etc.; ■ operational assumptions changes of €-49 million is the impact on VIF of changes in future assumptions for items like mortality, expenses, lapse rates, etc.
Operating Return on Life & Savings EEV of €4,757 million is the sum of the New Business Value and the operating performance from existing business. It represents 11% of the adjusted opening Life & Savings EEV.
Current year investment experience of €-7,361 million includes (i) the variance in experience during 2011 from the one expected in the illustrative real world investment scenario at the end of 2010, and (ii) the change in value created by refl ecting year-end 2011 yield curves and investment conditions in the
Return with the Investment impacts. It represents -6% of the adjusted opening Life & Savings EEV.
The sensitivities of 2011 Life & Savings EEV and NBV to changes in major assumptions were as follows: Life & Savings sensitivities (in E uro million - Group share) EEV 2011 NBV 2011 (a)
10% higher value of real estate at start of projection 493 12 10% lower value of real estate at start of projection (514) (17)
Overall and permanent decrease of 10% in expenses 1,539 132 5% lower mortality rate for annuity business (498) (7)
(a) The NBV sensitivities shown this template assumed a shock “aftersale”. It indicates how the new business written in 2011 would have been affected by an economic shock after sale but prior to year-end.
Value (EEV) information regarding the EEV and its components, the new business value, the analysis of movement in EEV and the sensitivities (hereinafter referred to as “the EEV Information”) at December 31, 2011 of the AXA Group contained in the attached document (“Embedded Value 2011 Report” hereinafter referred to as “the EV Report”).
We are responsible for expressing a conclusion on the compliance of the results of the EEV Information with the methodology and assumptions adopted by management and on the consistency of accounting information used with the AXA Group consolidated fi nancial statements at December 31, 2011.
Our work, which does not constitute an audit, has been performed in accordance with the professional standards applicable in
Report; ■ checking the consistency of the accounting information and other relevant underlying data used in preparing the EEV Information with the annual fi nancial statements and underlying accounting records at December 31, 2011.
We note that, due to the uncertain nature of estimation, actual outcomes can differ, perhaps signifi cantly, from those expected in the
AXA Group’s market consistent methodology and assumptions adopted by management and described in the EV Report which are consistent with the European Insurance CFO Forum EEV Principles and Guidance; ■ the consistency of accounting information used with the AXA Group consolidated fi nancial statements at December 31, 2011, on which we expect to issue our audit report on the 14 March 2012.
Earnings appropriation for the fi scal year 2011 and declaration of a dividend of €0.69 per share
Appointment of Mr. Herbert Fuchs to the Board of Directors upon proposal of the employee shareholders of the AXA Group
Appointment of Mr. Denis Gouyou-Beauchamps to the Board of Directors upon proposal of the employee shareholders of the AXA Group
Appointment of Mr. Thierry Jousset to the Board of Directors upon proposal of the employee shareholders of the AXA Group
Appointment of Mr. Emmanuel Ramé to the Board of Directors upon proposal of the employee shareholders of the AXA Group
Authorization granted to the Board of Directors in order to purchase ordinary shares of the Company
Modifi cation of the Bylaws regarding agreements for ongoing business operations conducted in a usual way
I Report of the AXA Board of Directors on proposed resolutions
To the shareholders of AXA: We have convened you to this Ordinary and Extrao rdinary
Directors related to the share repurchase program and to the cancellation of shares (V); ■ The renewal of the delegations of power granted to the Board of Directors in order to issue ordinary shares or securities giving a claim to ordinary shares of the Company through the employee savings plans (VI); ■ The approval of several modifi cations of the Company’s
The fi rst items on the agenda pertain to the approval of AXA’s annual fi nancial statements (resolution 1) and consolidated fi nancial statements (resolution 2). AXA’s annual fi nancial statements for the year ended December 31, 2011 show a profi t of €8,649 million, compared to a loss of €488 million for the preceding fi scal year. The consolidated fi nancial statements for the fi scal year 2011 show a net income Group share of €4,324 million, compared to €2,749 million for the preceding fi scal year. For further information on AXA’s 2011 fi nancial statements as well as the evolution of the Company’s business during 2011 and since the beginning of 2012, please refer to the Board of Directors’ report included in the 2011 Annual
des marchés financiers) on March 15, 2012 which is made available in accordance with applicable laws and regulations, in particular on AXA’s website (www.axa.com).
€9,183,852,270.59, would be allocated to the retained earnings. It is specifi ed that treasury shares held by the
Company on the date the dividends are made available for payment do not give right to a dividend, you are therefore being asked to allocate the amounts corresponding to unpaid dividends for such shares to retained earnings.
The fl at deduction at the source shall be completed on the date of the dividend payout.
Code), AXA agreed to absorb into its balance sheet the special reserve for long-term capital gains (réserve spéciale des plusvalues à long terme) of AXA Participations 2 for an amount of €300,293,069. As a consequence, you are being asked to approve the proposal of your Company’s Board of Directors to affect to the special reserve for long-term capital gains an amount of €300,293,069 drawn from the reserve in case of contingencies (réserve pour éventualités diverses).
In resolution 4, you are being asked to approve, based on the Statutory Auditors’ special report, the contribution in kind agreement between your Company and AXA ASIA signed on
ASIA, participating interests in Life and Property & Casualty businesses of the Group in Asia. This internal corporate reorganization follows the completion of the repurchase by your Company, on April 1st, 2011, of its Asian Life, Savings and
Pacifi c Holdings Limited (Australia and New-Zealand excluded), transferred on the same date to AMP Limited.
The Statutory Auditors’ special report also mentions the agreements and commitments referred to as “regulated agreements” previously approved and which remained in force in 2011. These agreements and commitments as well as the contribution in kind agreement between your Company and
Re-appointment of Mr. François Martineau (resolution 5) You are being asked to approve the re-appointment of
Company’s Bylaws. If re-appointed, his term of offi ce would expire at the end of the Shareholders’ Meeting called in 2016 to approve the fi nancial statements of the preceding fi scal year.
Meeting called in 2016 to approve the fi nancial statements of the preceding fi scal year. Mr. Stefan Lippe’s (56 years old)
candidacy was selected due to his large experience of the insurance business acquired through thirty years within the
Committee as of 2001 and Chief Executive Offi cer from 2009 to the beginning of 2012. The Board of Directors furthermore assessed the independence of Mr. Stefan Lippe on the basis of the recommendations contained in the AFEP/MEDEF
Company’s Bylaws, at the end of 2011 and in early 2012, the Company conducted the process of consulting the AXA
The proposed appointment of each candidate is the subject of a separate resolution, and you are being asked to vote on each one of them. A short biography of each candidate may be found in the exhibits to this report.
The Board of Directors also recommends that the shareholders vote in favo r of only one of resolutions 7 to 14, and that they reject the others, because the Bylaws of your Company request the appointment of only one member of the Board designated upon recommendation of the employee shareholders.
The term of offi ce of PricewaterhouseCoopers Audit as incumbent Statutory Auditor and the term of offi ce of
Mr. Patrick Frotiée as alternate Statutory Auditor expire at the end of this Shareholders’ Meeting. Consequently, the Board of Directors, upon recommendation of its Audit Committee, proposes to: ■ re-appoint PricewaterhouseCoopers Audit as incumbent
V – Authorizations enabling the Company to buy its own shares and, as the case may be, to cancel these shares
The Board of Directors requests that the shareholders once again authorize it to purchase up to 10% of the Company’s outstanding share capital, or 5% of the total number of shares constituting the share capital in the case of shares acquired by the Company for the purpose of holding them for subsequent payment or tender in a merger, spin-off or contribution, it being specifi ed that the purchases of the Company’s ordinary shares may not, under any circumstances, result in the Company holding more than 10% of the ordinary shares representing its share capital.
Articles L.225-197-1 et seq. of the French Commercial Code, b) optimizing the liquidity of the AXA share through a liquidity contract that complies with the Association française des marchés financiers (AMAFI) Code of Ethics approved by the
Autorité des marchés financiers (AMF), c) holding shares for the purpose of subsequent payment or in exchange in the event of potential external growth operations, in accordance with the market practice accepted by the AMF, d) delivering shares upon exercise of rights attached to securities representing debt instruments giving a claim on the Company’s share capital, e) cancelling some or all of these shares, provided that the shareholders, in an extraordinary resolution, approve resolution 20 allowing the Board of Directors to reduce the capital through the cancellation of the shares acquired pursuant to a share repurchase program, or f) in general, performing all operations relating to hedging operations or any other admissible operation or to be subsequently admissible by the laws and regulations in force, provided that the shareholders
APPENDIX VIII SHAREHOLDERS’ MEETING – APRIL 25, 2012 are informed beforehand, by any means admitted by the regulations, in the event the Board of Directors wishes to use this share repurchase authorization for any objective that has not been expressly listed above.
The maximum unit price of purchase may not exceed €35, excluding expenses.
Meeting of April 27, 2011, under resolution 8, be granted for a period of 18 months, starting from the date of this Shareholders’
This resolution would replace and render null and void the unused portion of the authorization granted by the
In resolution 18, you are being asked to delegate to the Board of Directors, for a period of 18 months, with the right to subdelegate as provided by law, the power to issue, as provided in Articles L.225-129 et seq., and L.225-138-1 of the French
The Board of Directors may consequently, if it deems appropriate, reduce or suppress the aforementioned discount in particular in order to take into consideration the new international accounting standards, or locally applicable legal, accounting, fi scal or social provisions in the countries of certain benefi ciaries.
Deputy Chief Executive Officer (Capital increase reserved for the employees of the AXA Group)) of the 2011 Annual Report fi led with the AMF (Autorité des marchés financiers) which is made available in accordance with applicable laws and regulations, in particular on AXA’s website (www.axa.com).
The nominal amount of the capital increase that may result from the implementation of this delegation shall not exceed €135 million, provided that this limit is common to resolutions 18 and 19, so that the amount of the capital increase that may result from the implementation of resolutions 18 and 19 m ay not exceed the nominal amount of €135 million.
The issue price of the new shares to be issued under resolution 19 shall not be more than 20% lower than the average quoted price of the AXA share on NYSE Euronext Paris over the twenty trading days preceding the day on which the Board of Directors formally sets the opening date of the subscription period, nor higher than this average, and the Board of Directors may reduce or suppress the 20% discount hereabove mentioned if it deems appropriate in order, specifi cally, to comply with locally applicable legal, accounting, fi scal and social regulations in the countries of certain benefi ciaries.
Article L.225-38 of the French Commercial Code but which are related to ongoing business operations conducted in a usual way.
In order for your Company’s Bylaws to comply with the provisions of this law of May 17, 2011, you are asked, through resolution 21 to modify Article 21 of your Company’s Bylaws in order to delete any indication regarding the communication process related to agreements for ongoing business operations conducted in a usual way.
Furthermore, Decree n° 2011-1473 of November 9, 2011 regarding communication means in corporate law simplifi ed the legal provisions related to the electronic signature of mail voting forms and proxies issued in the context of general meetings of public limited companies. You are therefore being asked, through resolution 22, to adapt Article 23 of the Bylaws of your Company to the new provisions of Articles R.225-77 and R.225-79 of the French Commercial Code.
In compliance with the delegation, pursuant to the provisions of A rticles L.225-129 et seq, L.225-138 I and II and L.225138 -1 of the French Commercial Code and A rticles L.33321 et seq of the French Labor Code, granted to the Board of
Board of Directors for a period of 18 months from the date of such Meeting to increase the share capital, in one or several offerings, at its sole discretion, through the issue of shares reserved to (i) present and former employees, corporate offi cers and general insurance agents enrolled in the Employee Stock
In the context of the investment leverage formula, the holders of FCPE units will be the benefi ciaries of a mechanism that allows them to limit their personal contribution to 10% of the subscription price for all of the shares that are subscribed to for their own account; the remaining 90% is fi nanced by the additional contribution made by the banking partner in the transaction. Under a swap agreement entered into by the
FCPE, the net asset value of their units at the time of liquidation at the term of the FCPE, or in any event provided for under law at the time of any early redemption prior to this date, will be equal to the amount of their personal contribution guaranteed in euros and a percentage of any gain on all of the shares they subscribed to through the FCPE.
Autorité des marchés financiers on July 1st, 2011, defi ne more completely the parameters applicable to this operation.
of NYSE Euronext Paris, over the 20-day trading period ending on the last trading day prior to the decision of the
Deputy Chief Executive Offi cer setting the dates for the retraction/subscription period; ■ for the investment leverage formula, 86.40% of the arithmetical average of the opening price for AXA shares traded on Compartment A of NYSE Euronext Paris, over the 20-day trading period ending on the last trading day prior to the decision by the Deputy Chief Executive Offi cer setting the dates for the retraction/subscription period.
October 28, 2011: 1. fi nd that the average of the opening price for AXA
to October 27, 2011 (inclusive) is 10.53 euros, after rounding down to the nearest eurocent (hereinafter the
The date of establishment of the increase in the share capital is set for December 9, 2011. In accordance with the provisions of A rticle L.225-138-1 of the French Commercial Code, the number of newly issued shares will correspond to the number of shares actually subscribed by the benefi ciaries and will be known at the end of the retraction/subscription period.
After the issue of the maximum number of 65,502,183 new shares 19.69 euros
■ in the event where the entire offer is subscribed to under the investment leverage formula: Interest in consolidated shareholders’ equity on June 30, 2011 (per share)
In compliance with the provisions of A rticle R.225-116 of the French Commercial Code, this report is available to the shareholders at the registered offi ce of the Company and the shareholders will be informed of it at the next Shareholders’
In our capacity as Statutory Auditors of AXA, and in accordance with Articles L.225-135 et seq. and L.228-92 of the French Commercial
The Board of Directors’ report specifi es that this maximum amount (€135 million) is common to the capital increases that may be carried out pursuant to this resolution and the 19th resolution.
Your Board of Directors is required to prepare a report in accordance with Articles R.225-113 et seq. of the French Commercial
We performed our work in accordance with the standards of our profession applicable in France. These standards require that we verify the fairness of the information contained in the Board of Directors’ report and the fairness of the terms and conditions under which the issue price is being determined.
The Board of Directors’ report specifi es that this maximum amount (€135 million) is common to the capital increases that may be carried out pursuant to this resolution and the 18th resolution.
Acting on the basis of its report, your Board of Directors proposes that you grant it, over a period of 18 months and with the right to sub-delegate, the power to set the terms of such capital increase and that you waive your preferential subscription rights on the shares to be issued.
Shareholders’ Meeting, full authority so as to cancel the shares purchased under any share repurchase program up to a maximum of 10% of the share capital per 24-month period.
This is a free translation into English of the Statutory Auditors’ report issued in the French language and which is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
m eetings, and having reviewed the Board of Directors’ report and the Statutory Auditors’ report on the Company’s fi nancial statements, acknowledge that the change in the accounting method, with retroactive effect as of January 1st, 2011 as described in the appendix to the fi nancial statements, refl ects a decrease of the provision for exchange rate risk of €1,591,530,000 and accordingly, an increase of the retained earnings from hereby approve the fi nancial statements of AXA (the “Company”)
for the fi scal year ended on December 31, 2011 as presented, together with the transactions refl ected therein or referred to in the aforementioned reports.
m eetings, and having reviewed the Board of Directors’ report and the Statutory Auditors’ report on the consolidated fi nancial statements, hereby approve the Company’s consolidated fi nancial statements for the fi scal year ended December 31, 2011 as presented, together with the transactions refl ected therein or referred to in the aforementioned reports.
m eetings, upon recommendation of the Board of Directors, and after acknowledging that the earnings of the fi scal year 2011 amount to €8,648,648,978.53: ■ resolve to draw from these earnings, in accordance with the legal provisions, and to allocate to the legal reserve an amount of €11,793.27; ■ note that earnings for the fi scal year ended
Company having agreed, following the merger with its wholly-owned subsidiary AXA Participations 2 which took place during the fi rst semester of 2011, to absorb into its balance sheet the special reserve for long-term capital gains which appeared in AXA Participations 2’s liabilities.
The shareholders further resolve that a dividend of €0.69 per share shall be made available for payment on May 9, 2012 for each of the 2,357,197,520 existing shares earning dividends on January 1st, 2011.
Pursuant to paragraph 2° of Article 158.3 of the French General
tax relief on the dividend, i.e. €0.28 per share, provided that the option for a fl at deduction at source as provided under
Save the dividend referred to hereinbefore, no other earnings, whether or not eligible to the above-mentioned 40% tax relief, are distributed pursuant to this Shareholders’ Meeting.
Fourth resolution Statutory Auditors’ special report on regulated agreements The shareholders, having fulfi lled the quorum and majority requirements pertaining to ordinary general s hareholders’
Fifth resolution Re-appointment of Mr. François Martineau as director The shareholders, having fulfi lled the quorum and majority requirements pertaining to ordinary general s hareholders’
m eetings, having reviewed the Board of Directors’ report and upon proposal of the employee shareholders of the AXA Group,
■ hereby appoint Mrs. Fewzia Allaouat to the Board of Directors for a term of four years which will expire at the end of the
Shareholders’ Meeting called in 2016 to approve the fi nancial statements of the preceding fi scal year in accordance with
(ii) if none of the seventh to fourteenth resolutions receive a number of votes “in favor” superior to the majority of voting rights held by attending or represented shareholders, none of the candidates elected by the employee shareholders shall be appointed to the Board of Directors by this Shareholders’
Appointment of Mr. Emmanuel Ramé to the Board of Directors upon proposal of the employee shareholders of the AXA Group The shareholders, having fulfi lled the quorum and majority requirements pertaining to ordinary general s hareholders’
The term of offi ce of Mr. Yves Nicolas will expire at the end of the Shareholders’ Meeting called in 2018 to approve the fi nancial statements of the preceding fi scal year.
Seventeenth resolution Authorization granted to the Board of Directors in order to purchase ordinary shares of the Company The Shareholders, having fulfi lled the quorum and majority requirements pertaining to ordinary general s hareholders’
• or 5% of the total number of shares constituting the
of the French Labor Code, or (iii) granting free shares to employees or executive offi cers of the Company in accordance with the provisions of Article L.225-197- 1 of the French Commercial Code and/or its affi liated entities or economic interest groups in accordance with the provisions of Article L.225-197-2 of the French
3) Resolve that the maximum purchase price per share shall not exceed, excluding charges, €35 (or the equivalent of this amount on the same date in any other currency).
4) Resolve that the acquisition, assignment or transfer of these shares may be carried out and paid by all appropriate means in accordance with applicable laws and regulations, including through open market transactions or private agreements, over-the-counter and in particular through block trades, specifi cally by using options or other fi nancial derivatives or warrants, or more generally, by using securities granting rights to shares of the Company, at such time as the Board of Directors deems appropriate, excluding times of public offerings concerning the
The Board of Directors shall inform the shareholders, as provided by law, of any transaction performed under this authorization.
Eighteenth resolution Delegation of power granted to the Board of Directors for the purpose of increasing the share capital by issuing ordinary shares or securities giving a claim to the Company’s ordinary shares, reserved for employees enrolled in the employer-sponsored Company savings plan The shareholders, having fulfi lled the quorum and majority requirements pertaining to extraordinary general s hareholders’
Articles L.3332-1 et seq. of the French Labor Code, 1) Decide on the principle of the capital increase and delegate to the Board of Directors, with the right to sub-delegate as provided by law, the power to increase the share capital, in one or several times, within the timeframe, conditions and proportions it will determine at its own discretion, through the issue of ordinary shares or securities giving a claim to the Company’s ordinary shares reserved to current or former employees, executive offi cers and general insurance agents of the Company and its affi liated companies or economic interest groups within the meaning of Article L.225-180 of the French Commercial
Labor Code, who are enrolled in the Company or the AXA
The issue of shares may be paid in cash or through the capitalization of reserves, earnings or premiums in case of free allotment of shares or securities giving a claim to the capital as a grant (“abondement”) and/or discount.
3) Resolve that the issue price of the ordinary shares or securities to be issued by virtue of this resolution will be set in accordance with Articles L.3332-18 et seq. of the
Directors to reduce or cancel the aforementioned discount, as it deems appropriate, in particular in order to take into consideration the international accounting standards, or, inter alia, locally applicable legal, accounting, tax or social provisions in the countries of certain benefi ciaries.
The Board of Directors may delegate, to any person authorized by law, full authority to carry out the capital increases mentioned in this resolution, as well as the authority to postpone them, to the extent and in accordance with the terms and conditions that it may defi ne beforehand.
Nineteenth resolution Delegation of power granted to the Board of Directors for the purpose of increasing the share capital of the Company by issuing ordinary shares, without preferential subscription rights, in favor of a specifi c category of benefi ciaries The shareholders, having fulfi lled the quorum and majority requirements pertaining to extraordinary general s hareholders’
m eetings, and having reviewed the Board of Directors’ report and the Statutory Auditors’ special report, and pursuant to the provisions of Articles L.225-129 et seq. and L.225-138 of the
French Commercial Code, 1) Decide on the principle of the capital increase and delegate to the Board of Directors, with the right to sub-delegate as provided by law, the power to increase the share capital of the Company, in one or several times, by issuing ordinary shares, within the limit of a nominal amount of €135 million, these issues being reserved for the category of benefi ciaries defi ned hereinafter, provided that this limit is common to the capital increases that may be carried out pursuant to this resolution and the eighteenth resolution hereinabove.
2) Resolve to waive the preferential subscription rights of the shareholders on the shares issued by virtue of this resolution and to reserve the subscription rights to the category of benefi ciaries meeting the following characteristics: (i) the eligible employees, executive offi cers and general insurance agents of the companies or economic interest groups affi liated with the Company p ursuant to Article L.225-180 of the French Commercial
Meeting, nor higher than this average, and, (ii) shall not be more than 20% lower than an average quoted price of the
AXA share on NYSE Euronext Paris over the twenty trading days preceding the day on which the Board of Directors, or its delegatee, sets the opening date of the subscription to a capital increase reserved to a benefi ciary included in the category defi ned hereinbefore, provided that the structured offer referred to in paragraph (iii) of point 2) of this resolution would not be established concurrently to a capital increase carried out by virtue of the eighteenth resolution adopted by this Shareholders’ Meeting, nor higher than this average. The Board of Directors may reduce or cancel the 20% discount hereabove mentioned, if it deems appropriate, in order to take into account locally applicable legal, social, tax or accountancy regulatory rules in the countries of certain benefi ciaries.
4) Resolve that the Board of Directors will have full powers, with the right to sub-delegate as provided by law, to implement this delegation, including postponing or delaying such, and specifi cally to: • determine the date and the issue price of the new shares to be issued, as well as the other terms and conditions of the issues, including, the date – even retroactive – on which the shares to be issued will earn dividends, and the terms of payment of such shares; • set the list of benefi ciaries of the suppression of the preferential subscription rights within the categories above defi ned, as well as the number of shares to be subscribed by each of them; • charge, on the share premiums, if need be, all expenses related to the capital increases, as well as all sums required in order to bring the legal reserve to one-tenth of the new share capital after each increase;
Twentieth resolution Authorization granted to the Board of Directors to reduce the share capital through the cancellation of ordinary shares The Shareholders, having fulfi lled the quorum and majority requirements pertaining to extraordinary general s hareholders’
m eetings, and having reviewed the Board of Directors’ report and the Statutory Auditors’ special report and pursuant to the provisions of Article L.225-209 of the French Commercial
Code, 1) Authorize the Board of Directors to cancel, in one or several times, all or a portion of the ordinary shares acquired by the Company and/or that it may acquire in the future pursuant to any authorization granted by an
This authorization replaces and renders null and void the unused portion of the authorization granted by the Shareholders at their