CORPORATE GOVERNANCE 93 2.1 Corporate offi cers, executives and employees 94 2.2 Full disclosure on executive compensation and share ownership 113 2.3 Major shareholders and related party transactions 141 2.4 The offer and listing 149
Certain disclosures about market risks and related matters 3.2 Risk factors 157 3.3 Quantitative and qualitative disclosures about risk factors 171 3.4 Investment community and organization 188
APPENDICES 345 Appendix I Chairman of the Board of Directors’ report 346
Appendix II Management’s annual evaluation of Internal Control Over Financial Reporting 355
Appendix III Statement of the person responsible for the Annual Report 358
Appendix IX Commission regulation of April 29, 2004 – Correspondence table 406
of Euronext Paris, which we refer to in this Annual Report as
For a discussion on the impact of foreign currency fl uctuations on the AXA Group’s fi nancial condition and results of operations, please see Part 1 – “The AXA Group”, Section 1.3 “Activity Report” of this Annual Report.
You should read it in conjunction with the consolidated fi nancial statements and related notes for the years ended December 31, 2014 and 2013 included in Part 4 – “Consolidated Financial
(In Euro million except per share data) 2014 2013 Restated (a)
(a) Restated means comparative informations relative to previous periods was restropectively restated for the application IFRS 10 and 11.
(e) An annual dividend is generally paid each year in respect of the prior year after the Annual General Shareholders’ Meeting (customarily held in April or May) and before September of that year. Dividends are presented in this table in the year to which they relate and not in the year in which they are declared and paid. A dividend of €0.95 per share will be proposed at AXA’s Shareholders’ Meeting that will be held on April 30, 2015. The dividend will be payed out on May 13, 2015, with an ex-dividend date of May 11, 2015.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on its outstanding undated debt securities, and, in each of the past several years, with the exception of 2009, AXA has paid aggregate dividends in a general range of 40% to 50% of this amount. The dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors (as noted above) and, consequently, may fall outside the target 40%
The following table sets forth information on the dividends declared and paid in respect of the last fi ve fi scal years: Fiscal year Distribution (in Euro million)
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2010.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2011.
(d) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.29 per share for fi scal year 2012.
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.32 per share for fi scal year 2013.
Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059. The
until the fi ling of AXA’s next Annual Report (Document de
Private Equity and (ii) AXA Financial of a closed MONY portfolio.
Acquisition of (i) 50% of Tian Ping, a Chinese Property &
Casualty insurance company; (ii) 51% stake in the composite insurance operations of Grupo Mercantil Colpatria in Colombia; and (iii) a majority stake in Mansard Insurance plc in Nigeria.
(1) Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals.
The Company is the holding company for the AXA Group, a worldwide leader in fi nancial protection. Based on available information at December 31, 2014, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €92 billion for the year ended December 31, 2014. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at
The main indicators disclosed in the table are defi ned in the glossary in Section 1.3 “Activity Report”.
Assets backing contracts with fi nancial risk borne by policyholders (Unit-Linked) 181,082 162,186
Gross revenues (a) Years ended December 31, Gross insurance liabilities at December 31, 20142014 2013
Investment & Savings products as well as Protection & Health products marketed to individual and commercial clients. The
Fees and charges relating to investment contracts with no participating features 327 323 35,727
For most Life & Savings products, fees and revenues accrue over time, while costs to the issuing company in the fi rst year are generally higher than costs in subsequent years due to fi rst year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate”, plays an important role in profi tability. The majority of individual Life &
Total surrenders and lapses for 2014 amounted to €28,096 million (2013: €28,296 million) and the ratio of surrenders and lapses was 6.8% (2013: 6.9%).
Business lines since early 2010 to support a new stage of its development. AXA Global Life, as part of its role to defi ne a group-wide strategy has set the following priorities: ■ focus on inforce optimization; ■ increase productivity and effi ciency; ■ reshape the Savings business; and
In addition, the Group announced in December 2014 the creation of a third Global Business line dedicated to Health insurance business with the following priorities: ■ become a health benchmark in up to 11 countries where
AXA’s Property & Casualty segment offers a broad range of products including motor, household property and general liability insurance for both Personal and Commercial customers, targeting mainly small-to medium-sized companies. In certain countries, Health products are classifi ed as Property & Casualty products (1).
(notably Hong Kong, Singapore, Malaysia, China and Thailand), the Middle East and Latin America (Mexico, and Colombia). In addition, AXA operates in Direct insurance mainly in the United
AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, brokers, salaried sales forces, direct sales, banks and other partnerships, including car dealers. In
The split of distribution channels used by AXA’s Property & Casualty operations (excluding Direct), based on gross revenues for the year ended December 31, 2014 and 2013, is presented below: Based on gross revenues in 2014
P&C”) defi nes the Group-wide Property & Casualty strategy and objectives. AXA Global P&C is responsible for managing activities that have been identifi ed as being critical to the profi tability and growth of the Group’s Property & Casualty business: cost control, optimized claims management, creation of a professional family made up of Property & Casualty professionals to build up the quality of technical expertise, dedicated offer to small and medium size entities, excellence in underwriting standards and pricing policy. In addition, AXA
Global P&C provides reinsurance services to AXA’s insurance subsidiaries (see section “International Insurance segment”).
In this market, AXA Corporate Solutions Assurance ranks amongst the main carriers worldwide (1).
(1) Ranking established by AXA based on information available for the year 2014.
Germany, AXA distribution networks offer assistance services among their portfolio of insurance products. AXA Assistance aims at integrating service providers and developing capacities of distribution to fi nal customers.
(2013: €854 million), mainly for Property & Casualty business but also for Life & Savings business.
The development of asset management activities is a key part of AXA’s fi nancial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the management’s belief that its asset management expertise will enable AXA to benefi t in the future from the expected growth in savings-related products in the markets where it operates. For the year ended December 31, 2014, the asset management segment accounted for €3.3 billion (2013: €3.5 billion), or 4% of AXA’s consolidated gross revenues
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on asset management companies only. AXA Group (including insurance companies) assets under management amounted to €1,277 billion as of December 31, 2014.
AllianceBernstein, a 62.7% subsidiary, is a leading global investment management fi rm based in the United States.
Europe and in the US, insurers tended to shift their investment portfolio mix towards higher-risk assets such as equities and less liquid assets such as infrastructure and private equity.
United States Life 18 1.7 14 2.2 LIMRA Life sales as of September 30, 2014 and 2013.
Japan 17 1.8 17 1.9 Life Insurance Association of Japan data base and Insurance Research Institute (exc. Kampo Life). For the 12 months ended September 30, 2014 and 2013 (measured on Gross Written Premiums).
Switzerland 2 28.5 1 30.0 SIA (Swiss Insurance Association) as of December 31, 2014 and 2013; Market share is based on statutory premiums and market estimations by the SIA.
Spain 11 3.2 12 2.4 Spanish Association of Insurance Companies. ICEA as of September 30, 2014 and 2013.
Italy - - 6 4.9 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 2013. 2014 information not available.
Greece - - 7 3.8 Hellenic association of Insurance Companies as of December 2013. 2014 information not available.
Hong Kong 5 8.8 5 8.7 Offi ce of Commissioner statistics as of September 30, 2014 and 2013 (measure on gross written premium individual life in-force business).
Thailand 3 13.5 4 11.5 TLAA statistics report as of September 2014 and November 30, 2013 (measured on APE).
Singapore 8 2.9 10 2.6 LIA statistics report as of September 30, 2014 and 2013 (measured on APE).
Eastern Europe and Latin America. Underwriting profi tability remained globally at a relatively high level, but profi tability was impacted by lower investment yield in most economies.
France 2 15.1 2 14.9 FFSA as of December 31, 2014 and 2013.
United Kingdom - - 4 5.9 Based on 2013 FSA Returns. 2014 information not available.
Switzerland 1 13.0 1 13.0 SIA (Swiss Insurance Association) estimation for 2014 and as of December 31, 2013 for 2013; Market share is based on statutory premiums and market estimations by the SIA.
Belgium 1 18.3 1 18.7 Assuralia (Belgium Professional Union of Insurance companies). Based on September 30, 2014 and 2013. Figures (measured on gross written premiums).
Spain 4 6.3 4 6.6 Spanish Association of Insurance Companies. ICEA as of September 30, 2014 and 2013.
Italy - - 5 4.8 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 31, 2013. 2014 information not available.
Greece - - 9 4.8 Hellenic Association of Insurance Companies as of December 2013. 2014 information not available.
Turkey 2 12.8 1 14.9 Turkish Association of Insurance Companies as of September 30, 2014 and 2013.
Singapore 2 12.1 2 12.0 General Insurance Association as of September 2014 and June 2013.
Malaysia 5 6.8 7 5.0 ISM (Insurance Services Malaysia Berhad) as of end of October 2014 and December 2013.
2014 was marked by a strong performance of fi xed income markets. Sovereign bonds performed very well as (i) interest rate increases in the US and in the UK were further postponed,
+13% at Wall Street while European equities underperformed with a total return of +1% (EUROSTOXX 50 index).
equities, Euro and emerging market bonds, fl exible multi-asset products, while institutional investors continued to pursue the implementation of risk-mitigating strategies as well as the credit diversifi cation of their portfolios.
Stock markets posted mixed performance in 2014 with positive returns in the US, supported by strong economic recovery and low levels of unemployment, while anemic economic growth and fear of defl ation in Europe and Japan weighted on investor sentiment despite intense activity of Central Banks in both areas. Performance in the UK was weak, despite a robust economic recovery, due to growing concerns over falling prices. Emerging markets posted mix results, as good economic results in South-East Asia and improving investor sentiment in India were countered by weak economic data in
Fixed income markets saw government bonds move higher, driven by their status of “safe haven” during regular bouts of uncertainty (including the Ukrainian crisis) and postponement to 2015, at the earliest, of expected interest rate increases in the US and in the UK. Investment grade corporate bonds also performed strongly, supported by solid corporate fundamentals and investors’ hunt for yield. Similarly, high yield credit markets experienced a strong demand despite periods of heightened uncertainty.
In currency markets, the dominant theme over the year remained the US Dollar appreciation against most major currencies. After having completed fi ve successive quarters of gains against the US Dollar, the sterling weakened in the end of the year as falling prices caused concerns, while the Euro lost ground against the US dollar, sterling and yen as a result of the
ECB’s continuous monetary easing policy. The Japanese yen weakened against the US dollar after a rally at the beginning of year. The Russian rouble spiralled downward driven by falling oil prices, the Ukrainian crisis and resulting economic sanctions.
Equity markets had strong performance in 2014 overall refl ecting a signifi cant recovery in all the major economies. The
The FTSE 100 Index in London decreased by 2.7% in 2014.
The EUROSTOXX 50 index in Eurozone increased by 1.2% and the Nikkei index in Tokyo increased by 7.1%.
The MSCI G7 Index increased by 7.9% and the MSCI Emerging
Bund yield decreased by 139 bps to 0.54%. The French 10year government bond yield decreased by 172 bps to 0.84%.
The 10-year government bonds in Eurozone peripheral countries decreased sharply: Italy ended 2014 at 1.88% (a decrease of 225 bps compared to December 31, 2013), Spain ended 2014 at 1.61% (a decrease of 254 bps compared to December 31, 2013), Greece ended 2014 at 9.6% (an increase of 118 bps compared to December 31, 2013), Ireland ended 2014 at 1.24% (a decrease of 223 bps compared to
December 31, 2013), and Portugal ended 2014 at 2.69% (a decrease of 344 bps compared to December 31, 2013).
On April 2, 2014, AXA announced it had completed the acquisition. The acquired operations have been integrated in the scope of the Mediterranean & Latin American Region and fully consolidated since April 2, 2014. Taking into consideration a price adjustment paid by AXA on August 26, 2014, the fi nal acquisition cost was COP 683 billion (or €256 million (3)).
Colpatria Seguros is the #4 (4) insurance player in Colombia (7%
The transaction allowed AXA to enter the attractive Colombian market and benefi t from its strong growth prospects through developed and profi table operations with a well-established local partner. AXA Colpatria Seguros will benefi t from AXA’s strong know-how to accelerate further its development and leverage its competitive advantages in the Colombian market.
On September 12, 2014, AXA announced that it has entered into a partnership with mBank whereby AXA would benefi t from 10-year exclusive distribution agreements with mBank in
mBank is the #4 retail bank (7) in Poland, servicing around 4 million customers. In recent years, it has built a strong competitive advantage by developing a multi-channel approach through its internet and mobile platforms and more than 250 outlets. As the leader in electronic banking innovation in Poland and beyond, mBank was named as top digital model bank in Europe in 2014 by Celent Research. Therefore, mBank represents a unique partner for AXA in Poland as it takes another step further in its digital journey.
(2) The scope of the transaction includes the four insurance companies of Grupo Mercantil Colpatria: Seguros Colpatria S.A. (Property & Casualty),
(4) Based on information furnished by Colpatria and on Superintendencia Financiera de Colombia publicly available information.
(8) AAH is a holding company whose only assets are its shares in Mansard. This consortium was led by DPI, Africinvest, DEG, FMO and
& Savings (#5 with 4% market share) (1). The company is well established in commercial lines (2), which represent nearly two thirds of its revenues, and has been developing successfully its retail business, achieving a growth of ca. 40% per annum on average over the past three years. Mansard has built a strong competitive advantage through its multi-channel approach, with a strong focus on proprietary networks.
Nigerian market through a very reputable local company, led by a talented management team. Moreover, Mansard will be able to capitalize on AXA’s extended distribution knowledge, unique product skills and actuarial know-how, to accelerate further its development and leverage its competitive advantages.
Hong Kong, would allow AXA to continue offering high quality mandatory Pension products to its customers.
AXA’s MPF and ORSO operations in Hong Kong have been successfully developed since 2000 and 1988 respectively. AXA
is the #10 MPF player (5) in Hong Kong. The total Assets under
as of December 31, 2013 and the total fees amounted to
SIF Transilvania is a fi nancial investment company listed on the
On September 19, 2014, the agreement with Astra Asigurari to sell AXA’s Life & Savings insurance operations in Romania, which was announced on November 29, 2013, has lapsed.
(6) EUR 1 = HKD 10.6918 as of December 31, 2013.
For several years, the AXA Group has been offering its employees in and outside France, the opportunity to subscribe to shares issued by way of capital increase reserved for employees. In 2014, employees invested a total of EUR 314 million that led to a total of approximately 19 million newly-issued shares.
Employee shareholders represented 6.66% of the outstanding share capital as of December 31, 2014. As of
December 31, 2014, AXA total share capital amounted to 2,442,276,677 shares.
On January 9, 2014, AXA announced the successful placement of GBP 750 million of Reg S subordinated notes due 2054 to institutional investors. The initial coupon has been set at 5.625% per annum. It will be fi xed until the fi rst call date in
On October 29, 2014, AXA launched a liability management exercise and offered to eligible holders of four series of existing notes the possibility to exchange them for new undated deeply subordinated resettable notes. This transaction was part of
AXA’s active management of its refi nancing program aiming to ensure adequate visibility and optimum terms for the renewal of its outstanding debt maturing in the coming years.
The exchange offer was successfully completed on November 7 with a 58% average take-up rate and resulted in the issuance of €984 million undated deeply subordinated resettable notes
(initial coupon set at 3.941% per annum until the fi rst call date in 2024) and £724 million undated deeply subordinated resettable notes (initial coupon set at 5.453% per annum until the fi rst call date in 2026). Impact was €-105 million post tax on shareholder’s equity in 2014 due to the premium offered to the holders.
On October 15, 2014, S&P reaffi rmed the fi nancial strength ratings on AXA Group core subsidiaries at ‘A+’ with the outlook revised to Positive from Stable.
On November 4, 2014, Fitch reaffi rmed all AXA entities’ Insurer
January 15, 2015 to discontinue the minimum exchange rate of 1.20 franc per euro and lower interest rate on sight deposit balances to -0.75%, the Swiss franc increased sharply against the euro. This appreciation, if durable, is expected to have a mechanical effect on the translation reserve included in the
(c) Excluding (i) net realized capital gains or losses and (ii) change in fair value of assets under fair value and of options and derivatives, net banking revenues and total consolidated revenues would respectively amount to €559 million and €91,982 million for 2014 and €518 million and €91,244 million for 2013.
ABS) purchase programme in order to stimulate the economy by encouraging credit creation and risk taking. This decision is expected to impact sovereign and corporate yields across the Eurozone and foreign currency exchange rates against the
Consolidated gross revenues in 2014 reached €91,988 million, up 3% compared to 2013 on a comparable basis.
The comparable basis mainly consisted in the adjustment of: (i) the alignment of closing dates in Japan (1) (€+1.2 billion or +1.4 points), (ii) the foreign exchange rate movements in 2014 (€+0.5 billion or +0.6 point), mainly Euro appreciation against JPY, (iii) the closed MONY portfolio transaction in 2013 (€+0.2 billion or +0.2 point), (iv) the disposal of AXA
(2) Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premium, in line with EEV methodology. APE is
(3) Hybrid products: savings products allowing clients to invest in both Unit-Linked and General Account funds.
In high growth markets, APE grew by 14% mainly driven by
Central & Eastern Europe (-18% or €-19 million). In mature markets, growth was mainly driven by France (+11% or €+153 million) and AXA MPS (+37% or €+81 million), partly offset by Switzerland (-24% or €-105 million), Belgium (-17% or €-26 million) and Germany (-3% or €-12 million).
following a strong increase in Group business refl ecting positive developments in both international and traditional
(-25% or €-102 million) following the strategic shift from full protection schemes to semi-autonomous employee benefi t solutions, (vii) Germany (-14% or €-29 million) mainly due to the non-repeat of strong sales in Health in 2013 resulting
■ Unit-Linked APE (35% of total) was up 9% (or €+183 million)
mainly as a result of strong sales in the Corporate Pension
mainly due to accelerated sales before the implementation of signifi cant regulatory changes in 2015, (iii) Germany (+60%
(iii) Germany (-23% or €-21 million) as a result of a voluntary shift in business mix towards Unit-Linked products.
(1) Hybrid products: savings products allowing clients to invest in both Unit-Linked and General Account funds.
Personal lines (58% of P&C gross revenues) increased by 1% on a comparable basis.
Direct business and Asia, partly offset by lower volumes in the
(-3%) primarily driven by Turkey (-9%) due to increased competition combined with a decrease in new private car sales and by Spain (-3%) refl ecting tariff decreases and a lower average premium.
Non-Motor revenues increased by €136 million or +2% mainly driven by tariff increases across the board and higher volumes in high growth markets and Direct business, partly offset by lower volumes in mature markets.
■ France (+4%) mainly driven by tariff increases in Household and Property; ■ Mediterranean and Latin American Region (+3%)
Liability; ■ France (+2%) following positive developments in the international Creditor business and tariff increases in
International insurance revenues were up 3% on comparable basis to €3,292 million, mainly driven by (i) AXA Assistance up 9% to €1,155 million driven by higher volumes, (ii) AXA
Asset Management revenues decreased by 4% on reported basis or increased by 4% on a comparable basis to €3,326 million, mainly driven by higher management fees at both AllianceBernstein and AXA IM as a result of higher average
(ii) €+12 billion market appreciation primarily on Fixed Income assets, (iii) €+3 billion net infl ows and (iv) €+2 billion change in scope related to the acquisition of a Danish global equity asset management fi rm (CPH Capital).
(or €-212 million) on a reported basis to €1,151 million following the sale of the private equity business in 2013.
Net banking revenues increased by 8% on a reported basis or by 7% on a comparable basis to €564 million driven by higher net revenues from banking activities.
January 1, 2014, and the comparative information in respect of 2013 has been restated (referred as “restated” in the tables of this document) to refl ect the retrospective application of the new standards which in particular led to the change in consolidation method of a Property & Casualty company
(Natio Assurances reported within the Direct segment) from proportionate consolidation to equity method. This change in consolidation method has no impact on the profi t or loss for the current year or prior year.
Group underlying earnings amounted to €5,060 million, up 7% on a reported basis, and up 8% on a constant exchange rate basis driven by growth across all segments.
Life & Savings underlying earnings amounted to €3,132 million. On a reported basis, Life & Savings underlying earnings increased by €339 million (+12%). On a comparable scope basis (restated for the alignment to Group closing dates in Japan in 2013 and the closed MONY portfolio transaction in 2013) Life & Savings underlying earnings were up €532 million
(€+39 million) mainly resulting from: ■ lower investment margin (€-49 million or -2%) primarily attributable to (i) Japan (€-123 million) mainly due to the nonrepeat of 2013 high dividends from equity and private equity funds following Japanese stock market rally, partly offset by (ii) Germany (€+46 million) due to a change in regulation in Life leading to a change in allocation of policyholders’
(€+66 million) from business mix improvement and inforce growth in G/A Protection & Health, (iii) Mediterranean and
mainly due to a lower share of policyholders’ participation notably in Health, partly offset by (v) the United States
(ii) France (€+131 million) mainly stemming from higher positive prior year reserve developments in the Individual Protection
■ lower expenses (€+226 million or -3%) as a result of: • lower acquisition expenses (€+345 million) primarily driven by (i) the United States (€+421 million) and (ii) France
(€+39 million) both due to lower DAC amortization (partly offset in Unearned Revenues Reserves), partly offset by higher acquisition expenses in (iii) Hong Kong (€-41 million),
primarily in (i) France (€-71 million) mainly due to higher commissions on savings driven by business growth and higher non commission expenses due to the non-repeat of 2013 favorable tax one-offs and (ii) Japan (€-28 million)
driven by the non-repeat of 2013 one-off effects; ■ higher tax expenses and minority interests (€-82 million or +9%) driven by higher pre-tax underlying earnings, partly offset by more favorable tax one-offs (€+115 million vs. 2013 mainly in the United States).
Property & Casualty underlying earnings amounted to €2,158 million. On a constant exchange rate basis and excluding the contribution of Colombia, Property & Casualty underlying earnings increased by €37 million (+2%) mainly attributable to Germany (€+52 million), Direct (€+38 million)
• lower positive prior year reserve developments by 0.6 point to -0.6 point (compared to -1.2 points in 2013),
AXA IM (€+35 million) and AllianceBernstein (€+9 million) , both due to higher revenues mainly refl ecting higher average AUM.
Banking underlying earnings amounted to €106 million. On a constant exchange rate basis, underlying earnings increased by €28 million (+36%) mainly attributable to (i) Belgium
Group net realized capital gains attributable to shareholders amounted to €442 million. On a constant exchange rate basis,
Group net capital gains and losses attributable to shareholders increased by €7 million mainly due to: ■ €-43 million lower realized capital gains to €760 million mainly driven by lower realized gains on equities (€-52 million)
BNP Paribas and on real estate (€-30 million); ■ €+6 million lower impairments to €-296 million mainly driven by real estate (€+85 million), partly offset by higher impairments of equities (€-78 million) mainly on BMPS; ■ €+45 million less unfavorable intrinsic value to €-22 million related to equity hedging derivatives.
As a result, adjusted earnings amounted to €5,503 million. On a constant exchange rate basis, adjusted earnings increased by €386 million (+7%).
(+12%) mainly as a result of: ■ higher adjusted earnings (€+386 million); ■ a favorable change in fair value of fi nancial assets and derivatives in 2014 compared to an unfavorable change in 2013; up €540 million to €225 million which can be analyzed as follows: • €+182 million following foreign exchange rate movements notably driven by a favorable change in fair value of economic hedge derivatives not eligible for hedge accounting under IAS 39,
July 2014 which retroactively corrected the bid-ask spreads applied to retail loans denominated in foreign currency and obliged all banks to compensate clients for past variable interest rate changes; ■ higher negative impact from goodwill and other intangibles (€251 million) to €-345 million mainly refl ecting the impairment of part of the value of Reso (subsidiary consolidated under the equity method) due to deteriorated economic perspectives in Russia (€-251 million).
As of December 31, 2014, consolidated shareholders’ equity totalled €65.2 billion. The movements in shareholders’ equity since
Profi t or loss on fi nancial assets (under FV option) & derivatives 114 (270)
Contribution to consolidated gross revenues 55,345 55,331 o/w. high growth markets 3,209 2,884 o/w. mature markets 52,136 52,447
(b) Mediterranean and Latin American Region includes Italy, Spain, Portugal, Greece, Turkey, Morocco, Mexico and Colombia.
(a) Before intercompany eliminations. Gross Revenues amounted to € 15,121 million net of intercompany eliminations as of December 31, 2014.
APE increased by €153 million (+11%) to €1,584 million: ■ Unit-Linked sales (18% of APE) rose by €10 million (+4%)
mainly driven by Individual Savings (+17%) as a result of increased commercial efforts, partly offset by the non-repeat of exceptional deals in Group Retirement in 2013 (-58%); ■ G/A Savings sales (38% of APE) increased by €79 million
Net technical margin rose by €131 million (+29%) to €586 million mainly due to higher positive prior year reserve developments in the Individual Protection & Health business and favorable one-offs in the Group Retirement and Individual
(€-39 million) driven by business growth and higher average asset base, as well as €-32 million higher non commission expenses mainly due to unfavorable tax one-offs in 2014
As a result, the underlying cost income ratio decreased by 3.0 points to 68.1%.
Income tax expenses increased by €96 million (+41%) to €-328 million driven by the increase in pre-tax underlying earnings combined with lower level of non taxable revenues and a less favorable corporate tax rate mix.
Adjusted earnings decreased by €127 million (-13%) to €876 million, as the increase in underlying earnings was more than offset by lower realized capital gains (€-216 million) mainly due to the sale of a 3.9% equity stake in BNP Paribas in 2013
Net income decreased by €164 million (-16%) to €878 million driven by the decrease in adjusted earnings, an unfavorable change in the fair value of economic hedge derivatives not eligible for hedge accounting mainly as a consequence of the impact of lower interest rates on swaptions (€-61 million), and a negative change in fair value of forex derivatives not eligible to hedge accounting (€-17 million), partly offset by a more favorable change in the fair value of Mutual funds (€+38 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives 19 (301)
APE increased by €33 million (+2%) to €1,355 million. On a comparable basis, APE increased by €39 million (+3%): ■ Variable Annuity sales (56% of APE) increased by €28 million
■ life sales (12% of APE) decreased by €18 million (-10%)
driven by a decrease in G/A Protection products (-20%), partly refl ecting product re-pricing and the adverse interest rate environment impacting the competitiveness of products; ■ Mutual fund sales (33% of APE) increased by €30 million
Investment margin decreased by €9 million (-2%) to €493 million. On a comparable basis, investment margin increased by €11 million (+2%) mainly explained by (i) lower corporate interest expense following the repayment of surplus notes and (ii) higher income from indexed products due to higher balances, partially offset by (iii) lower yields.
refl ecting higher average Separate Account balances, partly offset by the non-repeat of assumption updates that resulted in a favorable impact on Unearned Revenue Reserves in 2013.
Net technical margin decreased by €312 million to €-425 million. On a comparable basis, net technical margin decreased by €242 million primarily due to the non-repeat of one time positive impacts of model and assumption updates including the GMxB buyout in 2013 and unfavorable GMxB
(-22%): ■ expenses excluding DAC amortization increased by €32 million mainly due to higher asset based compensation as a result of higher balances and mutual fund product sales, partially offset by lower general and administrative expenses driven by continued expense management; ■ DAC amortization decreased by €435 million to €153 million, primarily driven by DAC reactivity to a lower margin on the GMxB business and by the non-repeat of unfavorable changes in expected future margins on variable and interestsensitive life products due to updated mortality assumptions in 2013.
On a comparable basis, amortization of VBI decreased by €7 million.
Profi t or loss on fi nancial assets (under FV option) & derivatives 3 (2)
(a) Before intercompany eliminations. Gross Revenues amounted to € 639 million net of intercompany eliminations as of December 31, 2014.
Gross revenues increased by €76 million (+13%) to €645 million. On a comparable basis, gross revenues increased by €42 million (+7%), driven by higher sales of Variable Annuity products (+36%) due to new business growth and higher recurring revenues from the investment business as a result of a 11% growth in funds under management, partially offset by the one-off impact of exiting the Bancassurance channel in 2013.
Investment margin was in line with prior year at €4 million.
On a constant exchange rate basis, net technical margin decreased by €4 million mainly driven by an unfavorable update of lapse assumption.
As a consequence, the underlying cost income ratio improved signifi cantly, decreasing by 10.9 points to 97.2%.
On a constant exchange rate basis, underlying earnings increased by €39 million.
Adjusted earnings increased by €40 million to €29 million. On a constant exchange rate basis, adjusted earnings increased by €39 million mainly due to higher underlying earnings.
Net income increased by €66 million to €28 million. On a constant exchange rate basis, net income increased by €65 million as a result of higher adjusted earnings and lower restructuring costs.
Profi t or loss on fi nancial assets (under FV option) & derivatives (13) (9)
(b) Before intercompany eliminations. Gross Revenues amounted to € 3,801 million net of intercompany eliminations as of December 31, 2014.
Term & Term Rider and Whole Life products (€+73 million), partially offset by a decrease in the in-force run-off portfolio of Increasing Term products (€-42 million);
decreased by €137 million (-17%) mainly due to lower sales of Variable Annuity products (€-131 million) following product redesign in 2013 in line with the strategy.
Linked Protection product (€+13 million) refl ecting client appetite, and increase in Term Rider (€+12 million) refl ecting strong promotion, partly offset by a strong shift of sales from
On a comparable basis, investment margin decreased by €123 million mainly due to the non-repeat of exceptional dividends in 2013 from equity and private equity funds following the Japanese stock market rally.
On a comparable basis, net technical margin increased by €151 million mainly driven by the non-repeat of 2013 unfavorable effect of model and assumption changes notably driven by a change in longevity assumptions.
(+3%) mainly due to the non-repeat of 2013 positive one-off effects.
Income tax expenses decreased by €37 million to €-189 million. On a comparable basis, income tax expenses increased by €32 million (+18%) due to lower positive tax oneoffs (€-16 million) and higher pre-tax underlying earnings (€16 million).
to €358 million or increased by €46 million (+13%) on a comparable basis, due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 19 4
(a) Before intercompany eliminations. Gross Revenues amounted to € 6,640 million net of intercompany eliminations as of December 31, 2014.
Gross revenues increased by €128 million (+2%) to €6,670 million: ■ Life revenues (59% of gross revenues) increased by €34 million (+1%) to €3,953 million driven by Unit-Linked single premiums, due to the successful launch of a new hybrid savings product (1). This was partly offset by lower G/A
regular premiums; ■ Health revenues (41% of gross revenues) increased by €94 million (+4%) to €2,718 million due to tariff increases to cover medical infl ation and the strong new business in prior year.
G/A regular premiums; ■ Health sales (30% of APE) decreased by €24 million (-18%)
to €114 million due to the non-repeat of strong sales in 2013 driven by the introduction of unisex tariffs.
Amortization of VBI decreased by €12 million (-37%) to €-21 million due to negative impact in 2013 from lower interest rate assumptions.
Adjusted earnings increased by €39 million (+28%) to €181 million due to the increase in underlying earnings and higher realized capital gains mainly on equities.
Net income increased by €91 million (+60%) to €242 million due to higher adjusted earnings as well as a favorable change in the fair value of fi xed income securities and economic hedge derivatives not eligible for hedge accounting.
Profi t or loss on fi nancial assets (under FV option) & derivatives 50 (21)
Gross revenues decreased by €342 million (-5%) to €6,726 million. On a comparable basis, gross revenues decreased by €417 million (-6%): ■ Group Life revenues (83% of gross revenues) decreased by €513 million (-8%) to €5,590 million driven by lower single premiums from full protection scheme contracts (€575 million) due to the strategic shift from full protection schemes to semi-autonomous employee benefi t solutions; ■ Individual Life revenues (17% of gross revenues) increased by €98 million (+10%) to €1,136 million mainly due to higher single premiums (€+88 million) as a consequence of strong sales of G/A Protection with Savings products.
(-35%) driven by the strategic shift from full protection schemes to semi-autonomous employee benefi t solutions; ■ Individual Life sales (34% of APE) increased by €9 million
Investment margin decreased by €6 million (-3%) to €187 million. On a constant exchange rate basis, investment margin decreased by €9 million (-4%) mainly due to an increase in the policyholder participation reserve mainly in Individual Life, partially offset by higher fi xed income driven by a higher asset base.
As a result, the underlying cost income ratio decreased by 0.9 point to 42.5%.
Income tax expenses decreased by €7 million (-10%) to €-69 million. On a constant exchange rate basis, income tax expenses decreased by €8 million (-11%) driven by nonrecurring tax charges from participation dividends in previous years, partly offset by an increase in pre-tax underlying earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives 27 (15)
(a) Before intercompany eliminations. Gross Revenues amounted to € 1,813 million net of intercompany eliminations as of December 31, 2014.
Gross revenues decreased by €199 million (-10%) to €1,813 million: ■ G/A Protection & Health revenues (45% of gross revenues)
(€-41 million) and variable annuities (€-21 million); ■ G/A Savings revenues (30% of gross revenues) decreased by €37 million (-6%) mainly due to lower sales of the Oxylife hybrid product (1) (€-20 million) as well as the run-off of the
APE decreased by €26 million (-17%) to €125 million: ■ G/A Protection & Health sales (20% of APE) increased by €3 million (+11%) driven higher sales in Group Life Protection; ■ Unit-Linked sales (37% of APE) decreased by €18 million
(€-8 million) and Oxylife hybrid products (1) (€-8 million); ■ G/A Savings sales (43% of APE) decreased by €10 million
Fees & revenues increased by €7 million (+5%) to €139 million driven by an increase in Unit-Linked fees as a result of higher assets under management.
Net technical margin decreased by €3 million (-14%) to €16 million.
Expenses increased by €19 million (+8%) to €-268 million: ■ acquisition expenses rose by €16 million (+15%) to €-120 million mainly as a result of higher net amortization of deferred acquisition costs, partly offset by lower acquisition overhead costs; ■ administrative expenses increased by €3 million (+2%) to €-148 million mainly as a result of higher overhead costs driven by salary infl ation, partly offset by continued costs management actions.
Amortization of VBI increased by €5 million (+102%) to €-9 million as a result of unfavorable fi nancial assumptions update.
Income tax expenses decreased by €5 million (-7%) to €-64 million due to the decrease in pre-tax underlying earnings.
Adjusted earnings increased by €76 million (+40%) to €266 million as lower underlying earnings were more than offset by higher realized capital gains (€+64 million) principally on equities and on fi xed income assets and lower impairments
Net income increased by €119 million (+71%) to €287 million due to (i) higher adjusted earnings (€+76 million), (ii) a favorable change in the fair value of interest rate hedging derivatives not eligible for hedge accounting (€+38 million) and (iii) a favorable change in the fair value of Mutual funds and other assets (€+11 million) mainly driven by a decrease in corporate spreads.
(€-18 million) and (ii) lower Unit-Linked sales (€-2 million) due to diffi cult market conditions, partly offset by higher sales in G/A
Protection & Health in Poland (€+2 million) due to higher infl ows from Bancassurance partnerships.
(€-50 million) on the disposal of the Hungarian Life & Savings operations and of the accelerated amortization of intangible assets in Poland in 2013 (€-33 million).
Net capital gains or losses attributable to shareholders net of income tax 1 0
(a) Before intercompany eliminations. Gross Revenues amounted to € 320 million net of intercompany eliminations as of December 31, 2014.
Net capital gains or losses attributable to shareholders net of income tax 29 17
Profi t or loss on fi nancial assets (under FV option) & derivatives (23) 3
Spain and Italy, partly offset by lower Unit-Linked products sales (€-569 million) mainly due to lower “Protected Unit”
from both hybrid and traditional products at AXA MPS as well as lower competition from bank deposit products in Spain and Italy, and Unit-Linked products (€+32 million) from both traditional and hybrid products (1), partly offset by a decrease of “Protected Unit” product sales at AXA MPS; ■ high growth markets sales (13% of APE) increased by €22 million (+39%) to €73 million mainly driven by new large
Net technical margin rose by €40 million (+25%) to €198 million. Excluding Colombia and on a constant exchange rate basis, net technical margin increased by €17 million
Amortization of VBI decreased by €1 million (-6%) to €-11 million. Excluding Colombia and on a constant exchange rate basis, amortization of VBI decreased by €1 million (-5%).
Gross revenues increased by €123 million (+7%) to €1,972 million. On a comparable basis, gross revenues increased by €133 million (+7%) mainly due to higher revenues from G/A Protection & Health products (€+136 million) driven by strong new business sales from agency channel, and Unit-
APE increased by €72 million (+16%) to €515 million. On a comparable basis, APE increased by €74 million (+17%) due to
Net technical margin rose by €27 million (+60%) to €70 million. On a constant exchange rate basis, net technical margin increased by €27 million (+61%) driven by better claims experience for G/A Protection & Health products and higher surrender margin from Unit-Linked products driven by a strong portfolio growth in recent years.
On a constant exchange rate basis, expenses increased by €38 million (+14%) mainly driven by higher DAC amortization in line with the volume growth as well as assumption changes.
As a result, the underlying cost income ratio decreased by 0.1 point to 51.1%.
On a constant exchange rate basis, income tax expenses increased by €13 million mainly due to the non-repeat of 2013 tax benefi ts (€10 million) from the change in the tax base for a block of insurance business in the context of the merger of two insurance entities.
Profi t or loss on fi nancial assets (under FV option) & derivatives 2 (1)
2014 fi gures have been compared to the same scope for 2013 i.e. adjusted for alignment of reporting period with Group calendar year in India and Philippines since full year 2013.
APE increased by €3 million (+1%) to €466 million. On a comparable basis, APE increased by €66 million (+16%) mainly driven by: ■ strong performance in Thailand (€+42 million), in particular from G/A Protection & Health products; ■ China (€+20 million) with continued momentum in G/A
Protection & Health business; ■ higher sales in Singapore (€+10 million) and Philippines
Underlying earnings increased by €27 million (+29%) to €119 million. On a comparable basis, underlying earnings increased by €39 million (+43%) mainly due to: ■ inforce portfolio growth and higher investment earnings in
Health business as well as continuous expense management in India (€+6 million); ■ business growth in China (€+3 million), Singapore (€+2 million)
Net realized capital gains or losses attributable to shareholders 0 0
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 1 0
Underlying earnings as well as adjusted earnings and net income reached €-34 million in 2014 mainly due to higher direct marketing expenditures and FTE increase associated with business growth.
Underlying earnings as well as adjusted earnings decreased by €1 million (-9%) to €-18 million.
Net income from investments in affi liates and associates 47 29 37
Profi t or loss on fi nancial assets (under FV option) & derivatives (128) 46 46
Underlying earnings 2,158 2,105 o/w. high growth markets 199 225 o/w. mature markets 1,835 1,796
(b) Mediterranean and Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region, Mexico, Lebanon and Colombia.
Net technical result decreased by €153 million (-9%) to €1,557 million: ■ the current accident year loss ratio increased by 0.4 point to 74.1% mainly driven by a higher claims ratio due to higher NatCat charge (€140 million or +2.3 points including participation to the Group pool related to Ela hailstorm and
As a result, the enlarged expense ratio was stable at 29.4%
Income tax expenses decreased by €20 million (-7%) to €-284 million mainly due to lower pre-tax underlying earnings
Net income decreased by €146 million (-24%) to €458 million driven by lower adjusted earnings (€-36 million), a negative change in the fair value of Mutual funds (€-78 million), a negative change in the fair value of foreign exchange rate hedging derivatives not eligible for hedge accounting (€-39 million)
and the non-repeat of the integration of AXA Caraibes into the scope of consolidation in 2013 (€-24 million), partly offset by a more favorable change in the fair value of interest rates strategies (€+28 million).
Britain (GB). Non-Motor was down 2% to €1,390 million: Property was down 6% to €465 million due to unfavorable market conditions and exiting of unprofi table schemes within
Asia business to the local AXA entity (fully offset at Group level). Other was up 13% at €366 million due to higher new business sales and strong retention in Liability and Workers
Net technical result increased by €20 million (+2%) to €1,284 million. On a constant exchange rate basis, net technical result decreased by €31 million (-2%).
refl ecting a decrease in commission ratio, as well as a 0.4 point decrease in the administrative ratio to 8.8% refl ecting savings from cost effi ciency programmes.
As a consequence, the combined ratio was down 0.1 point to 98.4%.
to €223 million. On a constant exchange rate basis, net investment result increased by €6 million (+3%) due to an increase in income from Mutual funds, alternative assets and real estate assets.
On a constant exchange rate basis, net income decreased by €13 million (-6%) as higher adjusted earnings were more than offset by an unfavourable change in the fair value of foreign exchange hedging derivatives.
Net capital gains or losses attributable to shareholders net of income tax 8 24
Gross revenues increased by €17 million (0%) to €3,824 million: ■ Personal lines (57% of gross revenues) were up 1% to €2,175 million driven by tariff increases partly offset by lower volumes; ■ Commercial lines (34% of gross revenues) were down 1%
to €1,305 million, due to selective underwriting in Motor whereas the development in Property and Liability was stable; ■ Other lines (9% of gross revenues) were stable at €344 million.
Net technical result increased by €96 million (+8%) to €1,274 million: ■ the current accident year loss ratio decreased by 3.5 points to 66.8% refl ecting improved attritional claims experience resulting from tariff increases and a mild winter, as well as a lower impact of large losses and Nat Cat events as 2014 was impacted by Ela hailstorm (€-64 million) and Odile hurricane in Mexico (€-30 million) including participation to the Group pool, while 2013 was impacted by fl oods in Bavaria and
and Andreas (€29 million); ■ the all accident year loss ratio decreased by 2.3 points to 66.7% as the decrease in current accident year loss ratio was partly offset by reserve strengthening in Commercial
Expense ratio decreased by 0.3 point to 28.9% with an acquisition expense ratio down by 0.2 point refl ecting an improved business mix and an administrative expense ratio down by 0.1 point as a result of the cost savings program.
As a result, the combined ratio was down by 2.6 points to 95.6%.
to €326 million mainly due to a lower reinvestment yield on fi xed income assets as well as the non-repeat of exceptional distributions from credit funds in 2013.
Adjusted earnings increased by €36 million (+11%) to €356 million as the increase in underlying earnings was partly offset by lower net realized capital gains mainly on equities.
Gross revenues increased by €81 million (+3%) to €2,795 million. On a constant exchange rate basis, gross revenues increased by €50 million (+2%): ■ Personal lines (55% of gross revenues) were up 3% to €1,540 million as a consequence of volume growth in all major business lines and tariff increases in Household and
As a result, the combined ratio was up by 0.1 point to 89.1%.
Net investment result decreased by €12 million (-6%) to €196 million. On a constant exchange rate basis, net investment result decreased by €14 million (-7%) mainly driven by lower income from loans as well as lower reinvestment yields on fi xed income assets.
Underlying earnings decreased by €8 million (-2%) to €397 million. On a constant exchange rate basis, underlying earnings decreased by €12 million (-3%).
Net income from investments in affi liates and associates - -
Net capital gains or losses attributable to shareholders net of income tax 34 44
(a) Before intercompany eliminations. Gross Revenues amounted to € 2,026 million net of intercompany eliminations as of December 31, 2014.
Gross revenues increased by €1 million (0%) to €2,051 million: ■ Personal lines (50% of gross revenues) were down €4 million to €1,025 million driven by negative net new contracts, partially offset by tariff increases in both Motor and
Household; ■ Commercial lines (49% of gross revenues) were up €3 million to €996 million mainly due to an increase in Workers’
As a result, the combined ratio was up by 0.1 point to 93.8%.
PROPERTY & CASUALTY OPERATIONS – CENTRAL & EASTERN EUROPE AND LUXEMBOURG
Net realized capital gains or losses attributable to shareholders 5 1
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 3 15
(a) Reso accounted for using the equity method. AXA’s share of profi t is recognized in income statement.
On a constant exchange rate basis, gross revenues decreased by €2 million (-3%) mainly driven by the political unrest in
Ukraine and its consequences on the economic environment in the country.
Underlying earnings and adjusted earnings decreased by €2 million to €0 million due to lower technical result and lower net investment result. As a result, the combined ratio deteriorated by 3.2 points to 110%.
Net income decreased by €252 million to €-218 million. On a constant exchange rate basis, net income decreased by €284 million as higher adjusted earnings were more than offset by a €-251 million (or €-288 million on a constant exchange rate basis) impairment of part of the value of Reso
(subsidiary consolidated under the equity-method) due to deteriorated economic perspectives in Russia, as well as an unfavorable change in the fair value of hedging derivatives.
(a) Before intercompany eliminations. Gross Revenues amounted to € 7,440 million net of intercompany eliminations as of December 31, 2014.
mainly refl ecting a decline in Turkey (€-60 million) refl ecting increased market competition and change in mix towards lower average premium products, Spain (€-21 million) and
Italy (€-16 million) from average premium decrease, partly offset by Health (+8% or €+48 million) predominantly from high growth markets (€+35 million) mainly driven by tariff increases in Mexico; ■ Commercial lines (44% of gross revenues) were up 1% to €3,309 million driven by (i) Health (+14% or €+87 million)
(€+22 million) mainly in Colombia from volume effect, partly offset by (iii) Motor (-7% or €-82 million) mainly due to Mexico
Net technical result increased by €22 million (+1%) to €1,924 million. Excluding Colombia and on a constant exchange rate basis, net technical result decreased by €42 million (-2%)
driven by high growth markets (€-53 million), partly offset by mature markets (€+12 million): ■ the current accident year loss ratio increased by 1.0 point to 73.6% including a higher Nat Cat charge (+0.8 point)
Ela hailstorm (€-23 million) including contribution to Group pool. Excluding Nat Cat charge, loss ratio in high growth markets remained stable while it deteriorated by 0.2 point in mature markets. In high growth markets, the lower large losses impact was offset mainly by a premium adjustment in Morocco and higher average claims cost in Property in
Income tax expenses decreased by €16 million (-11%) to €-134 million. On a constant exchange rate basis, income tax expenses decreased by €16 million (-11%) mainly from the non-repeat of additional corporate income tax in Italy in 2013 as well as a positive country mix.
Adjusted earnings increased by €6 million (+2%) to €277 million. On a constant exchange rate basis, adjusted earnings increased by €10 million (+4%) mainly driven by a favorable change in intrinsic value of equity hedging derivatives.
Net capital gains or losses attributable to shareholders net of income tax (3) 3 3
Profi t or loss on fi nancial assets (under FV option) & derivatives 6 7 7
(+5%) to €2,033 million mainly driven by improved retention in the UK (+8% or €+32 million) and in South Korea (+7% or €+27 million) as well as new business growth in Japan (+9%
or €+27 million) and France (+6% or €+20 million), partly offset by Spain (-8% or €-15 million) following tariff increases and selective underwriting to improve the profi tability; ■ Personal Non-Motor (14% of gross revenues) was up €23 million (+7%) to €335 million mainly supported by higher new business in Household in France and Health in South
following unfavorable weather conditions in France, Belgium and Japan, (ii) a deterioration of the attritional and large loss ratio (+0.4 point) mainly driven by South Korea due to higher frequency in line with market trends; ■ the all accident year loss ratio decreased by 0.6 point to 76.7% mainly as a result of favorable prior year reserve developments in France, South Korea and the UK.
Income tax expenses increased by €5 million (+15%) to €-41 million. On a constant exchange rate basis, income tax expenses increased by €6 million (+16%) refl ecting higher pretax underlying earnings, partly offset by a positive country mix effect and a positive tax one-off in the UK.
Underlying earnings increased by €39 million (+47%) to €124 million. On a constant exchange rate basis, underlying earnings increased by €38 million (+45%).
Adjusted earnings increased by €34 million (+39%) to €121 million. On a constant exchange rate basis, adjusted earnings increased by €33 million (+38%) due to higher underlying earnings and realized capital gains, partly offset by impairment of BMPS.
On a constant exchange rate basis, net income increased by €33 million (+39%) mainly due to higher adjusted earnings.
Net income from investments in affi liates and associates 10 7
China, India and Thailand are consolidated through equity method. China is consolidated for the fi rst time in Full Year 2014 as of February 20th, 2014.
On a comparable basis, gross revenues increased by €57 million (+7%): ■ Personal lines (48% of gross revenues) were up €19 million
(i) Commercial Health driven by favorable portfolio mix and improved reinsurance result in Malaysia and tariff increases in Singapore, (ii) Personal Motor from lower frequency in
Expense ratio deteriorated by 0.6 point to 27.7%. On a comparable basis, expense ratio deteriorated by 0.6 point mainly driven by higher acquisition expenses (+0.5 point)
refl ecting an increase in both commissions in Singapore and non-commission expenses in Malaysia.
Net investment result increased by €4 million (+20%) to €23 million. On a comparable basis, the net investment result increased by €4 million benefi tting mainly from a better asset mix in Singapore as well as a higher yield on fi xed income assets in Malaysia.
On a comparable basis, underlying earnings increased by €7 million, including a €7 million increase from investments in affi liates and associates, mainly driven by AXA Tian Ping, with an improvement in the current accident year loss ratio and a higher investment income. Overall, the contribution from AXA
Adjusted earnings increased by €8 million to €63 million. On a comparable basis, adjusted earnings increased by €11 million driven by higher underlying earnings and higher net realized capital gains.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 23 (7)
Profi t or loss on fi nancial assets (under FV option) & derivatives 24 (11)
(-10%) primarily driven by the continuing decrease of market tariffs and Marine (-3%). These negative developments were partly offset by Motor (+12%) and Property (+4%), mainly due to higher new business sales.
Expense ratio rose by 0.7 point to 16.5% due to a higher acquisition expense ratio resulting from a higher commission rate following a change in portfolio mix and to a higher administrative expense ratio due to investments in growth initiatives and non-recurrent expenses.
Income tax expenses decreased by €14 million (-16%) to €-76 million. On a constant exchange rate basis, income tax expenses decreased by €15 million (-16%) driven by lower taxes on prior year reserve developments.
to €147 million. On a constant exchange rate basis, underlying earnings decreased by €4 million (-3%).
On a constant exchange rate basis, net income increased by €50 million (+33%) mainly driven by higher adjusted earnings and a positive foreign exchange rate impact (versus a negative impact in 2013).
Underlying earnings decreased by €17 million to €-1 million mainly due to lower technical result in AXA Global P&C and higher expenses related to the development of AXA Global Life.
Adjusted earnings decreased by €17 million to €-1 million mainly as a result of lower underlying earnings.
Net income decreased by €18 million to €2 million mainly due to lower adjusted earnings.
Adjusted earnings increased by €3 million (+17%) to €24 million mainly driven by higher underlying earnings.
Adjusted earnings increased by €12 million to €43 million. On a constant exchange rate basis, adjusted earnings increased by €11 million driven by higher underlying earnings, partly offset by lower net realized capital gains on corporate debt instruments and on real estate.
Net income increased by €7 million to €40 million. On a constant exchange rate basis, net income increased by €7 million driven by higher adjusted earnings.
Net realized capital gains or losses attributable to shareholders - (1)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 25 13
(a) Before intercompany eliminations. Gross Revenues amounted to € 2,175 million net of intercompany eliminations as of December 31, 2014.
Assets under Management (“AUM”) increased by €67 billion from year-end 2013 to €413 billion at December 31, 2014 as a result of €50 billion favorable foreign exchange rate impact, €12 billion market appreciation, net infl ows of €3 billion (mainly from Institutional clients), and change in scope of €2 billion. The positive change in scope related to an increase in AUM from the acquisition in June 2014 of CPH Capital Fondsmaeglerselskab
General expenses increased by €52 million (+3%) to €-1,771 million. On a constant exchange rate basis, general expenses increased by €59 million (+3%) due to higher employee compensation expenses resulting from increased revenues.
Income tax expenses increased by €2 million (+2%) to €-116 million. On a constant exchange rate basis, income tax expenses increased by €3 million (+2%) due to higher pre-tax underlying earnings, partly offset by a more favourable country mix.
(+4%) to €193 million. On a constant exchange rate basis, underlying and adjusted earnings increased by €9 million
On a constant exchange rate basis, net income increased by €13 million (+7%) due to the increase in adjusted earnings and lower restructuring costs.
Profi t or loss on fi nancial assets (under FV option) & derivatives 27 12
Private Equity (“AXA PE”) on September 30, 2013, comments are based on restated fi gures with all P&L aggregates from revenues to net income excluding AXA PE contribution in 2013 as well as other transaction-related impacts.
December 2014, mainly as a result of €58 billion combined market and foreign exchange rate impact and €19 billion net infl ows. Net infl ows of €19 billion were driven by infl ows both on (i) Third party (€+14 billion) mainly from Asian Joint Ventures and (ii) Main Fund (€+4 billion) mainly from Real Estate.
Net investment result remained stable at €-12 million. On a comparable basis, net investment result also remained stable.
Income tax expenses decreased by €11 million (-9%) to €-108 million. On a comparable basis, income tax expenses increased by €6 million (+6%) mainly due to higher pre-tax underlying earnings.
Net realized capital gains or losses attributable to shareholders 0 1
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (19) (35)
Underlying earnings increased by €19 million (+24%) to €99 million mainly due to a strong commercial activity and the fi rst results of the transformation plan implementation, with higher operating net banking revenues (€+11 million), lower administrative costs (€+8 million), lower distribution commissions (€+4 million) and lower loan loss provisions
(€+3 million), partially offset by a regulatory increase of levy rate on retail savings (€-8 million).
Net income increased by €46 million (+148%) to €77 million due to an increase in adjusted earnings (€+18 million), the positive change in the fair value of own debt (€+41 million), and lower restructuring costs (€+5 million), partly offset by the negative change in the fair value of interest rate derivatives (€19 million).
(1) Before intercompany eliminations and before realized capital gains/losses or changes in fair value of fair value option assets and of hedging instruments.
Underlying earnings and adjusted earnings increased by €3 million to €4 million, thanks to (i) a decrease in administrative expenses and (ii) a slight improvement in cost of risk.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 210 (64)
(+14%) to €-19 million in line with the increase in underlying earnings.
Adjusted earnings decreased by €4 million to €-12 million driven by underlying earnings evolution.
Net income decreased by €32 million to €-46 million mainly due to an increase in costs linked to the restructuring of the participation in Bharti AXA General Insurance.
Adjusted earnings increased by €23 million (+14%) to €-144 million. On a constant exchange rate basis, adjusted earnings increased by €22 million (+13%), in line with underlying earnings evolution.
Adjusted Earnings decreased by €9 million to €-13 million. On a constant exchange rate basis, adjusted earnings decreased by €8 million refl ecting the decrease in underlying earnings, partially offset by realized capital gains related to the reduction in investment portfolio.
Underlying earnings decreased by €15 million to €-23 million due to higher interest on tax charges and higher administrative expenses related to pensions.
Underlying earnings and Adjusted earnings increased by €4 million (+8%) to €-40 million. On a constant exchange rate basis, underlying earnings and adjusted earnings increased by €4 million (+8%).
On a constant exchange rate basis, net income decreased by €13 million (-29%) mainly due to integration costs related to the acquisitions in Colombia and Nigeria as well as an unfavorable change in the fair value of hedging derivatives not eligible for hedge accounting, partly offset by the non-repeat of 2013 unfavorable one-offs.
Ambition AXA is an important milestone on our long-term journey towards becoming an even more customer-centric organization, and consequently more digitally orientated. AXA
These elements should enable AXA to continue creating lasting shareholder value and offering an attractive return.
On a comparable basis means that the data for the current period were restated using the prevailing foreign currency exchange rates for the same period of prior year (constant exchange rate basis). It also means that data in one of the two periods being compared were restated for the results of acquisitions, disposals and business transfers (constant structural basis) and for changes in accounting principles
Derivatives related to invested assets: ■ include all foreign exchange derivatives, except the ones related to currency options in earnings hedging strategies which are included in underlying earnings; ■ exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy; ■ and also exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing General Account and shareholders’
Underlying Investment margin includes the following items: ■ net investment income; ■ interests and bonuses credited to policyholders and unallocated policyholder bonuses (and the change in specifi c reserves purely linked to invested assets returns) related to the net investment income.
Underlying Fees & Revenues include: ■ revenues derived from mutual fund sales (which are part of consolidated revenues); ■ loadings charged to policyholders on premiums/deposits and fees on funds under management for separate account
(Unit-Linked) business; ■ loadings on (or contractual charges included in) premiums/
deposits received on all General Account product lines; ■ deferral income such as capitalization net of amortization of
Underlying Net Technical margin includes the following components: ■ mortality/morbidity margin: The amount charged to the policyholder in respect of mortality/morbidity for the related period less benefi ts and claims. It is equal to the difference between income for assuming risk and the actual cost of benefi ts. This margin does not include the claims handling costs and change in claims handling cost reserves; ■ surrender margin: The difference between the benefi t reserve and the surrender value paid to the policyholder in the event of early contract termination; ■ GMxB (Variable Annuity guarantees) active fi nancial risk management is the net result from GMxB lines corresponding to explicit charges related to these types of guarantees less cost of hedge. It also includes the unhedged business result; ■ policyholder bonuses if the policyholder participates in the risk margin; ■ ceded reinsurance result; ■ other changes in insurance reserves are all the reserves strengthening or release coming from changes in valuation assumptions, additional reserves for mortality risk and other technical impacts such as premium defi ciency net of derivative if any.
Over the past several years, AXA has expanded its core operations (insurance and asset management) through a combination of organic growth, direct investments and acquisitions. This expansion has been funded primarily through a combination of (i) dividends received from operating subsidiaries, (ii) proceeds from debt instruments issuance
Company (or other Group companies) must therefore take into account these constraints as well as potential future regulatory changes. Cash positions also fl uctuate as a result of cashsettled margin calls from counterparties relating to collateral agreements on derivatives, and the Company’s statutory
(parent only) results may be signifi cantly impacted by unrealized gains and losses on derivatives used to hedge notably currency and interest rate risks. The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating needs during each of the next three years.
In 2014, AXA continued to manage its liquidity risk carefully and conservatively. At year-end 2014, AXA has: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
As of December 31, 2014, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €21.6 billion, net of bank overdrafts of €0.4 billion; ■ broad access to various markets via standardized debt programs: for example, at the end of 2014, this included a maximum envelope of €6 billion of French commercial paper, $2 billion of US commercial paper, €15 billion under an Euro Medium Term Note (“EMTN”) program (of which €13.1bn issued) and €1.5bn of French Bons à moyen terme négociables (“BMTN”); ■ a debt profi le characterized by (i) a debt being mostly subordinated, with a long maturity profi le and partly fi nanced through the EMTN program. €2.5 billion of debt repayments (1) are expected over the next two years out of a total net fi nancing debt (2) of €13.5 billion at year-end 2014, of which €1.0 billion senior debt was reimbursed in
January 2015; and (ii) stable debt ratios (debt gearing (3): 24% at year-end 2014 and 2013; interest coverage (4): 9.9x at year-end 2014, versus 10.2x at year-end 2013).
AXA has a robust liquidity risk management framework that it reviews on a regular basis. Its assessment is performed through a quarterly monitoring of liquidity and solvency requirements in stressed environments both at local and Group level. At yearend 2014, Group entities held altogether more than €130 billion government bonds issued by Eurozone countries, which enables them to address any local liquidity need through highly liquid assets. The Group also held €12.8 billion of committed undrawn credit lines at year-end 2014. The Group has its own liquidity requirements which are mainly coming from solvency needs of Group entities under severe stress scenarios and collateralized derivatives held by AXA SA. The derivatives book is monitored and managed on a daily basis by the AXA Group
(3) Total net fi nancing debt/shareholders’ equity excluding undated subordinated debt and excluding unrealized gains & losses recorded through shareholders’ equity + total net fi nancing debt.
(TSS/TSDI, which are included in shareholders’ equity, as described in Note 1.13.2 of Part 4 – “Consolidated Financial
Statements”), compared to €7,986 million at December 31, 2013. The decrease was €840 million, or €861 million on a constant exchange rate basis.
Under this arrangement, one call option is automatically exercised upon each conversion of a convertible bond.
(which ordinary share AXA intends to cancel in order to avoid any increase in the number of its outstanding shares and/or dilution).
At December 31, 2014, the amount of debt owed by AXA
December 31, 2014 versus €853 million at the end of 2013.
As a holding company, AXA is not subject to legal restrictions on dividend payments, provided that its accumulated profi ts are suffi cient to cover them and that the Group solvency ratio does not decrease below 100% after dividend payment in cash. However, many Group subsidiaries, particularly AXA’s insurance subsidiaries, are subject to restrictions on the amount of dividends they can pay to their shareholders. For more information on these restrictions, see Note 29.4 of Part 4
Dividends paid to AXA SA’s shareholders in 2014 in respect of the 2013 fi nancial year totaled €1,960 million, or €0.81 per share, versus €0.72 per share paid in 2013 in respect of the 2012 fi nancial year (€1,720 million in total). These dividends were paid in cash.
The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries monitor compliance with these requirements on a continuous basis and are in compliance with the applicable solvency requirements as of December 31, 2014.
December 12, 2004, which introduced the notion of fi nancial conglomerate into the French Insurance Code. According to Article 20 of the Insurance Code, the provisions of this ordinance applied for the fi rst time to periods starting on or after January 1, 2005.
(€24.2 billion at December 31, 2013); ■ admitted subordinated debt: €12.6 billion (€11.8 billion at
December 31, 2013); ■ locally admitted assets: €2.5 billion (€2.4 billion at
December 31, 2013); ■ less intangible assets (excluding goodwill on AllianceBernstein as it is part of its net consolidated book value) of €22.7 billion
On May 9, 2014, Moody’s reaffirmed the Aa3 rating for counterparty credit and financial strength on AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, revising the outlook to stable from negative.
On November 4, 2014, Fitch reaffirmed the AA- financial strength ratings of AXA’s principal insurance subsidiaries and the A- rating for counterparty credit on the Company, maintaining a stable outlook. Management closely monitors the Group’s ratings and currently expects that these ratings should remain at levels suffi cient for the Company and its insurance subsidiaries to compete effectively. However, given continuing high volatility and uncertainty in fi nancial markets and general economic conditions, management cannot predict with any degree of certainty the timing and/or magnitude of future ratings actions.
Transactions involving Company securities completed in 2014 by the members of the Board of Directors 138
Code and its implementation guide are fully in line with AXA’s corporate governance approach. The Company also carefully follows the evolutions of corporate governance practices, in France and abroad, as well as the recommendations and standards of shareholders, regulators, proxy adviso rs, rating agencies and other stakeholders.
Chairman & Chief Executive Offi cer and Mr. Denis Duverne as
Deputy Chief Executive Offi cer. The Board considered these appointments to be in the best interest of AXA, its shareholders and other stakeholders and that having two executives on the
Offi cer to focus on management of the Group’s operational activities helps ensure that the Chairman & Chief Executive
When the Board of Directors decided to unify the positions of
Director of AXA in April 2010. The Lead Independent Director has a number of specifi c powers including the power to convene meetings of the directors without the Chairman &
Chairmen of the Board’s three Committees are also actively involved in the preparation of the Committee meetings they chair.
Independent Director and the other independent directors, have resulted in a well-balanced governance dynamic within the Board and its Committees and proven to be effi cient and effective over the past years.
According to AXA’s Charter, this appointment is mandatory when the positions of Chairman of the Board of Directors and Chief Executive Offi cer are combined; ■ reviews and sets (arrête) the Company’s half-year and annual fi nancial results; ■ approves the r eport of its Chairman on the composition of the Board including gender balance, the conditions of preparation and organization of the Board of Directors’
Training sessions are provided to new and existing members of the Board of Directors in order to familiarize them with the
In this context, he: ■ maintained regular dialogue with the members of the Board of Directors, in particular the independent members, and with Executive Management including frequent meetings with the Chairman & Chief Executive Offi cer, the Deputy
Chief Executive Offi cer, members of the Management and Executive Committee and more generally the main executives of the Group; ■ was actively involved in the preparation of Board meetings, working closely with Executive Management and other
Board members. In particular, he examined the frequency and the dates of the meetings, ensured the quality of the information delivered to the members of the Board and
Committees before their meetings as well as the relevance of the agendas; and
Board and Committees, the organization of the periodic self-assessment of the Board as well as the work of the
On December 31, 2014, the Board of Directors was comprised of fourteen members: four nationals of countries other than
The proportion of women within the Board of Directors was 36 % at December 31, 2014. The Board’s composition therefore complies with the provisions of law n° 2011-103 of
Company is currently in compliance with applicable regulatory requirements and market practices, the Compensation
More generally, the Board of Directors pays particular attention to the level of diversity among its members. Criteria set in connection with the selection process of future directors include the defi nition of an appropriate mix within the Board of technical skills and professional experience as well as diversity in terms of age, nationality and culture.
A member of the Board of Directors (currently Mrs. Doina Palici-
This representative is appointed by S hareholders every four years from a list of candidates selected by the Group’s employee S hareholders, following an internal selection process (Article L.225-23 of the French Commercial Code).
Each year, the Board of Directors assesses the independence of all of its members on the basis of the recommendations contained in the Afep-Medef Code. On February 24, 2015, the Board of
Directors determined that, on December 31, 2014, eleven of the fourteen Board members were independent after assessing the criteria of the Afep-Medef Code: Mmes. Isabelle Kocher,
Henri de Castries (60) Chairman & Chief Executive Offi cer of AXA 25, avenue Matignon - 75008 Paris - France French nationality
Chairman & Chief Executive Offi cer April 2010/2018 Annual Shareholders’ Meeting
Denis Duverne (61) Director, Deputy Chief Executive Offi cer of AXA in charge of Finance, Strategy and Operations 25, avenue Matignon - 75008 Paris - France French nationality
Jean-Pierre Clamadieu (56) Chairman of the Executive Committee and director of Solvay (Belgium) Rue de Ransbeek 310 - 1120 Brussels - Belgium French nationality
Paul Hermelin (62) Chairman & Chief Executive Offi cer of Capgemini 11, rue de Tilsitt – 75017 Paris - France French nationality
Mrs. Isabelle Kocher (48) Director, Deputy Chief Executive Offi cer and Chief Operating Offi cer of GDF SUEZ Tour T1 – 1, place Samuel de Champlain - Faubourg de l’Arche - 92400 Courbevoie – France French nationality
Ramon de Oliveira (60) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue - New York - NY 10065 - United States French nationality
Mrs. Deanna Oppenheimer (56) Founder of CameoWorks (United States) 1215 – 4th Avenue, Suite 935 – Seattle – WA 98161 – United States American and British nationalities
Board of Directors whose term of offi ce will end (Messrs. Jean-
In this context, the Board of Directors proposed, based on the recommendation of its Compensation & Governance
Subject to the Shareholders’ Meeting approval, the Board of Directors would therefore be comprised, following the
In 2014, the Board met nine times and the average attendance rate was 97.6 %. The Board meetings had an average duration of three and a half hours.
Hautes Études Commerciales (HEC) and obtained a law degree before completing preparatory studies at the École
Department for the French Ministry of Finance in 1986. In 1988, he became Deputy Assistant Secretary for Tax Policy for the
Supérieure des Mines of Paris and i ngénieur du Corps des
Mines. He began his care er in various positions within the
Mr. Clamadieu has been Chairman of the Executive Committee and member of the Board of Directors of Solvay.
Mr. Jean-Martin Folz is a graduate of the École Polytechnique and ingénieur du Corps des Mines. Between 1975 and 1978, he has held various French government cabinet positions, his last position being head of cabinet of the Secretary of
State for Industry. In 1978, he joined Rhône-Poulenc to run the Saint-Fons plant, and was then promoted to Senior
Vice-President and then Chairman & Chief Executive Offi cer of Jeumont-Schneider (a Schneider subsidiary). In 1987, he was appointed Chief Executive Offi cer of Péchiney and
Chairman of the Management Board in 1997. He left PSA in
Mr. Paul Hermelin is a graduate of the École Polytechnique and École Nationale d’ Administration (ENA). Mr. Paul Hermelin spent the fi rst fi fteen years of his professional life in the French government, primarily in the Ministry of Finance. He held a number of positions in the Budget Offi ce and on various ministry staffs, including that of Finance Minister Jacques
Delors. He was chief of staff of the Minister of Industry and
Executive Offi cer of Cap Gemini France. In May 2000, following the merger between Cap Gemini and Ernst & Young Consulting
Offi cer of Lyonnaise des Eaux. From 2009 to September 2011,
Studies, a member of the Advisory Board to the Law School at Singapore Management University where she also chairs the
Re, he turned to other activities. In 2011, Mr. Stefan Lippe co-founded Acqupart Holding AG of which he serves as
October 2013, Mr. Stefan Lippe was elected as Chairman of the Board of Directors of CelsiusPro AG. Since May 2014,
Institut d’Études Politiques de Paris. Mr. François Martineau has been an Attorney since 1976. In 1981, he was “Secrétaire de la Conférence”. In 1985, he was a lecturer at the University
Barclays, she was given the additional title of Vice Chair, Global
From 1980 to 1983, she was a teacher for foreign languages in Romania. From 1983 to 1990, she was subject Matter
Reinsurance of AXA Global P&C in Paris (France). From 2010 to March 2013, she was Chief Executive Offi cer of AXA
(Singapore). Since April 2012, Mrs. Doina Palici-Chehab has been the employee shareholder representative to the AXA
March 2014, Mrs. Dominique Reiniche was Chairman Europe of The Coca-Cola Company.
Mrs. Doina Palici-Chehab, who is the employee shareholder representative to the AXA Board of Directors, is currently an employee of AXA Insurance Singapore Pte Ltd, which is one of
Executive Offi cer do not currently exercise any professional activity or hold any directorship outside the AXA Group that substantially interfere with or impede in any material way their availability to focus on the Group and its business. Certain members of the Board of Directors, however, are corporate offi cers and/or executives of companies that may have agreements or enter into transactions from time to time with the
The Lead Independent Director was also actively involved in this assessment and, in particular, in examining the conclusions of this assessment and defi ning areas for improvement. The
Directors which in turn examined and approved them during its meeting of December 17, 2014.
Board and indicated that the recommendations from the prior review had been broadly acted upon. The main areas for improvements identifi ed during the 2014 self-assessment were: (1) the presentation by the Chairmen of the Committees of their reports to the Board of Directors in a way to encourage questions from the Board members, (2) the identifi cation by the Lead Independent Director of topics to be discussed in executive sessions of the Board and (3) the information provided to Board members between Board meetings. For the future, the Board also underlined the importance of analyzing ex post the implementation of material transactions . Actions have already been decided and implemented in this regard.
Each Committee issues opinions, proposals or recommendations to the Board of Directors on matters within the scope of its responsibilities. Nevertheless, under French law, Board Committees do not have any formal decision making power.
The Committees may request external consulting expertise if necessary. They may also invite external participants to attend their meetings. Committee Chairmen report to the Board of
Composition on December 31, 2014: Stefan Lippe, Chairman Isabelle Kocher Ramon de Oliveira Deanna Oppenheimer
The Audit Committee assists the oversight of the: ■ adequacy and effectiveness of the internal control and risk management frameworks; ■ fi nancial reporting process and the integrity of the publicly reported results and disclosures made in the fi nancial statements; ■ effectiveness, performance and independence of the internal and external auditors.
The Committee meets during specifi c sessions (1) the Statutory Auditors and the Group Head of Audit, (2) the Deputy Chief Executive Offi cer and the Group Chief Financial Offi cer and (3) the Group Chief Risk Offi cer.
The Audit Committee met fi ve times in 2014. The average attendance rate was 95%.
The Committee focused, in particular, on the following issues: ■ the full year fi nancial statements for 2013; ■ the 2013 Annual Report (Document de
Composition on December 31, 2014: Ramon de Oliveira, Chairman Suet Fern Lee Stefan Lippe Doina Palici-Chehab
• fi nancing operations that might substantially change the Company’s fi nancial structure; ■ to examine any plan to perform a fi nancial operation of signifi cant size for the AXA Group, except for M&A transactions that shall be discussed directly at the Board level; ■ to examine any subject relating to the fi nancial management of the AXA Group: • policy on fi nancial risk management, • liquidity and fi nancing of the Group, • capital and solvency; ■ to examine the impact on capital and solvency at Group level of the main orientations and limits of the Asset-Liability Management policy; and
The Committee focused, in particular, on the following issues: ■ fi nancial risk management; ■ liquidity and fi nancing; ■ capital and solvency; ■ risk appetite and asset allocation; ■ interest rates exposure; ■ Systemic Risk Management Plan; ■ Liquidity Risk Management Plan; ■ Recovery plan; ■ review of the fi nancial authorizations
(guarantees); and ■ review of the proposed capital increase reserved for the employees of the AXA Group (“SharePlan 2014”).
• the number of Company stock options or performance shares to be granted to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee; ■ to formulate an opinion on the proposals of the Chairman & Chief Executive Offi cer concerning: • the principles and conditions for the determination of the compensation of the executives of the AXA Group,
The Committee focused, in particular, on the following issues: ■ Compensation issues: • the compensation paid to the
• the directors’ fees amount and allocation; ■ Governance issues: • the process of selection of the future directors and corporate offi cers; • the composition of the Board and its
Committees; • the independence of the members of the Board; • the self-assessment of the Board of
Executive Offi cer by the Board of Directors of April 23, 2014, for the duration of his term of offi ce as director, i.e. four years.
Shareholders’ Meetings and to the Board of Directors. In addition, the Bylaws of the Board of Directors provide for specifi c limitations of the powers of the Chairman & Chief
AXA’s Management Committee comprised ten members as of March 1st 2015. It generally meets once a week to discuss
Thomas Buberl (1) Chief Executive Offi cer of AXA Konzern AG (Germany) and Chief Executive Offi cer of the global business line for the Health business
(1) As of March 1st, 2015, Mr. Thomas Buberl, in addition to his position of Chief Executive Offi cer of AXA Konzern AG, became Chief Executive Offi cer of the global business line for the Health business and joined the Management Committee.
Management Committee as well as other key senior executives from across the Group selected on the basis of their role in the organization (central or local).
The Executive Committee holds quarterly meetings to assess the status of Group transversal projects and monitor the implementation of the strategic plan “Ambition AXA”.
On March 1st, 2015, the Executive Committee was comprised of the following nineteen members, including eleven non-French nationals: Name Principal function within AXA
Denis Duverne Deputy Chief Executive Offi cer of AXA in charge of Finance, Strategy and Operations
Jacques de Peretti (3) Chief Executive Offi cer of AXA Japan
(3) Mr. Jacques de Peretti joined the Executive Committee as of March 1st, 2015 and was appointed Chief Executive Offi cer of AXA Japan, replacing Mr. Jean- Louis Laurent Josi who was appointed Chief Executive Offi cer of AXA Asia.
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: Salaried employees (full time equivalent) At December 31, 2012 At December 31, 2013 At December 31, 2014
AXA Technology, AXA Group Solutions, AXA Business Services (l) 6,602 6,952 7,356
In addition, the employees of insurance and fi nancial services activities in France are included in the cadre de convention of four not consolidated mutuelles.
(k) In 2014, the increase by 156 in AXA Investment Managers mainly refl ected business growth.
(l) In 2014, the increase by 404 was mainly driven by AXA Business Services following business growth.
AXA’s overall policy on executive compensation focuses on the variable part of the compensation package, which is the compensation at risk for benefi ciaries. The structure of
Committee of AXA’s Board of Directors is to formulate propositions to the Board regarding, in particular, (1) the
Company’s compensation policy and principles, (2) the determination of the Chairman & Chief Executive Offi cer’s and the Deputy Chief Executive Offi cer’s compensation and performance assessment, and (3) the allotment of AXA stock options or performance shares to the Chairman & Chief
The Compensation & Governance Committee is exclusively composed of independent members. Their independence is assessed annually by the Board in accordance with the criteria set forth in the Afep-Medef Code. While not a member of this
The Committee meets frequently with the Group executives and the internal departments of the Company including
■ achievement of the Group’s overall fi nancial and operational results over the short, medium and long term as well as execution against medium and long term strategic objectives.
Each year, AXA, with the assistance of specialized fi rms, conducts compensation reviews in order to ensure the competitiveness and consistency of executive compensation
AXA Group (insurance and banks) which are principally based in the main European markets (Belgium, France,
Chairman & Chief Executive Offi cer, Mr. Henri de Castries, at €3.3 million (amount unchanged since 2008), and of the Deputy
The determination of the variable compensation to be paid to the Chairman & Chief Executive Offi cer was based, in 2014, on the following two metrics: ■ Group performance for 50%. This metric is measured based on underlying earnings per share, return on equity (adjusted
Return on Equity - ROE) and customer scope index. The relative weight of these three indicators is, respectively, 65%, 20% and 15%; and
Mr. de Castries’ individual performance on the execution of major strategic initiatives critical to the Group’s long-term success.
Offi cer is assessed on the basis of various indicators and qualitative objectives set by the Board of Directors through a written target letter established at the beginning of each calendar year before the performance measurement period. It includes detailed objectives with regards to the Group’s progress in achieving its “Ambition AXA” strategic plan (which covers the 2011-2015 period) as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives and/or relating to certain geographic areas, and the evolution of certain investments contributing to the transformation of the Group’s operations.
Mansard Insurance in Nigeria); (v) the implementation of new joint ventures and strategic partnerships to develop new growth opportunities (mBank in Poland, Colpatria in Columbia); and (vi) the reinforcement of the management teams with key executive movements and recruitments designed to accelerate the Group’s development and transformation.
variable target compensation, i.e. 371% of his fi xed annual compensation.
ROE), and customer satisfaction index; ■ performance of their business unit or functional area of responsibility, measured against objectives set at the beginning of the year; and
The variable compensation of Mr. Denis Duverne, who is a member of the Management Committee and Deputy Chief
Mr. Duverne’s overall variable payout refl ects performance against three distinct components that are not fungible.
Mr. Duverne’s individual performance on the execution of major strategic initiatives critical to the Group’s long-term success.
The individual performance of the Deputy Chief Executive Offi cer is assessed on the basis of various indicators and qualitative objectives set by the Board of Directors through a written target letter established at the beginning of each calendar year before the performance measurement period. It includes detailed objectives with regards to the Group’s progress in achieving its “Ambition AXA” strategic plan (which covers the 2011-2015 period) as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives and/or relating to certain geographic areas, and the evolution of certain investments contributing to the transformation of the Group’s operations.
The variable compensations paid to the Management Committee members for 2012, 2013 and 2014 were : VARIABLE COMPENSATIONS PAID TO MANAGEMENT COMMITTEE MEMBERS
ROE ) which are slightly higher than targets, and (iii) a customer scope index in line with the target.
of their variable compensation over two years. Under this mechanism, the deferred amount of variable compensation for the 2014 fi scal year, will be paid out in two tranches, in 2016 and 2017. The amount of the payout will vary depending on the AXA share price evolution over the deferral period and will be subject to a fl oor at 80% of the deferred amount and a cap at 120% of the deferred amount; provided, however that no variable compensation would be paid in the event (1) that the
These LTIs represent an important part of their global variable compensation in order to associate the Group executives to the creation of long term value. In this context, the number
(a) This amount includes the part of the variable compensation with respect to 2013 and 2014 which has been deferred in accordance with the mechanism described on page 118 . The total amount paid will depend on performance conditions and may then vary.
IFRS standards. This is a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 of the 2014 “Consolidated Financial Statements” included in
Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options and performance shares/units, nor the actual amounts that may be paid to benefi ciaries if and when the options are exercised or the performance shares/units are acquired.
On March 24, 2014, the fair value of one option was €1.78 for options with performance conditions, and the fair value of one performance share/unit was €12.71 (€12.03 for the Chairman &
Committee and the Board of Directors however ensure that the stock options and the performance shares/units granted to the executives and valued in accordance with IFRS standards are not disproportionate compared to the aggregate compensation, options and shares granted to the said executives.
share price between 2013 and 2014, decided to reduce the number of stock options and performance shares granted to the Chairman & Chief Executive Offi cer and the Deputy Chief
(a) This amount does not include the part of the variable compensation with respect to 2013 and 2014 which has been deferred in accordance with the mechanism described on page 118.
(a) This amount does not include the part of variable compensation with respect to 2012 and 2013 which has been deferred in accordance with the mechanism described on page 118.
Executive Offi cer do not receive directors’ fees from AXA SA.
Company to be closer to the amounts paid by its international peers while not creating a gap with the French market practice.
Shareholders’ Meeting, in accordance with applicable laws, and apportioned by the Board of Directors to its members in accordance with its Bylaws: ■ in accordance with the recommendations of Afep-Medef
■ a fi rst part equivalent to half of the remaining amount is then distributed among the members of the Board of Directors in proportion to their actual attendance at the meetings of the
SGD 533,000 paid by AXA Singapore General Insurance in connection with her position as Chief Executive Offi cer. This compensation consists of SGD 342,000 of fi xed compensation and SGD 191,000 of variable compensation.
Mrs. Suet Fern Lee and Mr. Ramon de Oliveira received in 2014, as non executive director of several companies of the
Pursuant to the stock option plan rules, benefi ciaries who resign from the Group lose their right to exercise the options.
Each year, the Board of Directors, acting upon the recommendation of its Compensation & Governance
December 22, 2010 that the total number of options granted to the E xecutive O ffi cers of the Company (Chairman & Chief
Deputy Chief Executive Offi cer) represented 10% of the total number of options granted.
Committee. Since 2014, this condition was extended to all options granted to the members of the Executive Committee, which is currently composed of 19 members. This performance condition also applies to the last tranche of each option grant
On December 31, 2014, this index included 39 companies of the sector.
Date of the Shareholders’ meeting 03/05/2002 21/05/2002 (c) 03/05/2002 03/05/2002 03/05/2002 03/05/2002 03/05/2002 20/04/2005 20/04/2005 20/04/2005
Expiry date of options 26/03/2014 14/04/2014 29/03/2015 29/03/2015 06/06/2015 27/06/2015 01/07/2015 21/09/2015 31/03/2016 31/03/2016
Subscription or purchase price of options (a) 16.90 15.00 19.70 19.95 19.02 19.32 19.91 20.97 27.75 27.93
Number of options exercised at 31/12/2014 8,153,897 496,049 336,754 116,969 2,748 3,357 0 0 2,877 0
(c) Options that were initially granted by FINAXA that merged into AXA on December 16, 2005.
Total number of shares to be subscribed (a) 1,223,253 53,733 22,805 7,409 6,818,804 1,815,676 1,312,233 10,681 12,587 4,689 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 31/03/2010 25/09/2008 25/09/2010 13/11/2010 10/05/2009 10/05/2009 10/05/2011 24/09/2009 24/09/2011 19/11/2009
Date of the Shareholders’ meeting 24/04/2005 20/04/2005 20/04/2005 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008
Expiry date of options 19/11/2017 01/04/2018 01/04/2018 19/05/2018 19/05/2018 22/09/2018 22/09/2018 24/11/2018 20/03/2019 20/03/2019
Subscription or purchase price of options (a) 28.53 21.00 21.00 23.42 23.42 21.19 21.19 13.89 9.76 9.76
Date of the Shareholders’ meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008
Grant date (Board of Directors or Management Board) 02/04/2009 10/06/2009 10/06/2009 21/09/2009 08/12/2009 08/12/2009 19/03/2010 19/03/2010 18/08/2010 18/08/2010
Expiry date of options 02/04/2019 10/06/2019 10/06/2019 21/09/2019 08/12/2019 08/12/2019 19/03/2020 19/03/2020 18/08/2020 18/08/2020
Grant date (Board of Directors or Management Board) 13/10/2010 13/10/2010 22/12/2010 18/03/2011 18/03/2011 04/04/2011 16/03/2012 13/06/2012 22/03/2013 24/03/2014
Total number of shares to be subscribed (a) 4,274 27,772 12,758 8,598,469 154,705 375,988 4,508,380 76,089 3,480,637 3,100,000 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 13/10/2012 13/10/2014 22/12/2014 18/03/2013 18/03/2015 04/04/2013 16/03/2014 13/06/2014 22/03/2015 24/03/2017
Subscription or purchase price of options (a) 13.01 13.01 12.22 14.73 14.73 14.73 12.22 9.36 13.81 18.68
Chairman & Chief Executive Offi cer 24/03/2014 subscription or purchase 24/03/2024 100% of options: SXIP index
included in Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options, nor the actual proceeds if and when the options are exercised. On March 24, 2014, the fair value of one option was €2.03 for options without performance conditions, €1.78 for options with performance conditions.
AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance units, restricted shares or similar events. In accordance with the recommendations of the Afep-Medef Code, the executive offi cers of the Company make a formal commitment to not resort to such hedging transactions.
Stock options on AXA or any eligible AXA Group’s subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who exercised the highest number of stock options (aggregate information)
Henri de Castries Chairman & Chief Executive Offi cer 3,136,261 -
Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant.
Group together with an independent compensation consulting fi rm. Furthermore, the grant to AXA executive offi cers shall depend on the level of achievement of the strategic objectives previously defi ned by the Board of Directors.
Executive Offi cer and Deputy Chief Executive Offi cer) each year may not exceed 10% of the aggregate number of Performance
Directors, depending on the evolution of the Group’s strategic objectives and after consideration of market practices. Thus , during the last few years, the performance criteria used for this purpose have been linked to (i) the underlying earnings and the net income to measure the operational entities’ performance, and (ii) the net income per share to measure the AXA Group performance.
For benefi ciaries in operating entities or business units, the performance of the operational entity and/or business unit is weighted at 2/3 of the total performance while the AXA
A global performance rate is then calculated as follows: 1/3 performance rate (Net Income Per Share) + 2/3 performance rate [average (Net Income + Underlying Earnings)].
A performance achievement of 100% (“target”) is achieved only in the event of a global performance corresponding to a 5%
weighted-compound annual growth rate of the indicators. In this case, the number of units/shares defi nitively granted at the end of the acquisition period shall be equal to the number of
Between these minimal and maximal performance levels, the number of shares defi nitively granted to benefi ciaries is calculated on a linear basis depending on the performance of each indicator.
(Net Income Per Share) reach 80%, the Net Income ROE would remain at 10.3%, i.e. a level above the cost of capital, which would justify a delivery of 50% of the shares initially granted.
Furthermore, should no dividend be paid by the Company during any fi scal year of the acquisition period, the number of Units/Shares defi nitively granted would be automatically divided by 2.
(International Performance Shares) are expensed each year under the variable accounting method. They do not create any dilution for shareholders since no new shares are issued.
Total number of benefi ciaries 3,972 5,059 215 5,039 1 5,162 5,101
Number of Performance Units acquired at 31/12/2014 2,829,352 (a) 3,429,914 (b) 229,374 (c) 41,623 (d) 71,790 2,500 (e) -
(b) The 3,429,914 units acquired of the March 18, 2011 plan have been settled as €64.6 million.
(c) The 229,374 units acquired of the April 4, 2011 plan have been settled as €4.3 million.
(e) 2,500 units of the March 22, 2013 plan acquired by anticipation.
(f) 50% of shares to be acquired at March 24, 2017 and 50% at March 24, 2018.
Grant date (Board of Directors or Management Board) 19/03/2010 18/03/2011 16/03/2012 22/03/2013 24/03/2014
(c) 50% of shares to be acquired at March 24, 2016, 50% at March 24, 2017, except for the Chairman & CEO, and the Deputy CEO, 100% of shares to be acquired at March 24, 2017.
Chairman & Chief Executive Offi cer earning - net income per share
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations earning - net income per share
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2014 “Consolidated
AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance units, restricted shares or similar events. In accordance with the recommendations of the Afep-Medef Code, the executive offi cers of the Company make a formal commitment to not resort to hedging transactions.
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 19/03/2010 2,475 19/03/2014
(fi xed salary plus annual variable compensation) received for his/her functions within the Group: ■ the Chairman & Chief Executive Offi cer is required to hold the equivalent of his total annual cash compensation multiplied by 3; ■ the Deputy Chief Executive Offi cer is required to hold the equivalent of his total annual cash compensation multiplied by 2; ■ Management Committee members are required to hold the equivalent of their total annual cash compensation multiplied by 1.5; ■ Executive Committee members are required to hold the equivalent of their total annual cash compensation multiplied by 1.
Degroof on behalf of the relevant executives in application of the annual instruction will be notifi ed pursuant to the provisions of Article L.621-18-2 of the French Monetary and Financial
On December 31, 2014, based on the AXA share value (€19.21) and on the AllianceBernstein share value (€19.39) on that date, the
I Transactions involving Company securities completed in 2014 by the members of the Board of Directors
Sale of units of AXA Group Mutual funds invested in AXA shares (Number)
AXA Group Mutual funds invested in AXA shares to other AXA Group
Subscription to units of AXA Group Mutual funds invested in AXA shares
Doina Palici- * Transaction performed by an independent fi nancial intermediary pursuant to a discretionary mandate.
Under this scheme, a supplementary pension is paid to senior executives who retire immediately upon leaving the AXA Group, and who have a minimum length of service of 10 years, of which at least 5 years as a senior executive. Senior executives whose employment is terminated by the Company (except in the case of gross or willful misconduct) after the age of 55 may also benefi t from the scheme provided that they do not resume any professional activity before retiring. In case of voluntary departure from the AXA Group before retirement, no supplementary pension is paid.
The amount of the supplementary pension is designed, for a minimum executive seniority of 20 years within the AXA Group, to achieve a global pension (including the amounts paid with respect to compulsory schemes) equivalent to 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual social security ceilings (1).
The escalation of the rights depending on the seniority is thus lower than the 5% per additional year of the benefi ciary’s compensation limit set by the Afep-Medef Code.
Mr. Henri de Castries decided in 2010, on an individual and voluntary basis and in consultation with the Board of Directors, to limit the compensation to be taken into account in order to calculate his global pension. For information purposes, as of today considering his length of service within the Group (more than 25 years on the date of this Annual Report), the part of his global pension that would be paid under the supplementary pension scheme would represent approximately 32% of his current annual target compensation (i.e. a supplementary pension annual gross amount of one million euros, before taxes and social security charges).
(health insurance, life insurance, disability insurance, retirement, etc.) to which Messrs. de Castries and Duverne were entitled as employees of AXA. In this context, the
Group (for 25 years and 19 years, respectively on the date of this Annual Report) and had the same social benefi ts as all other director-level employees of AXA in France (with no special benefi ts or arrangement designed specifi cally for them), and (ii) was concerned that the decision of Messrs. de Castries and Duverne to renounce their employment contracts in accordance with the recommendations of the Afep-Medef
Company’s control or strategy that has not been initiated by the benefi ciary. The payment of the severance benefi t would be subject to the three following performance conditions as determined by the Board of Directors during its February 20, 2014 meeting: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target, (2) evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce, and (3) the average consolidated adjusted
ROE over the 3 preceding years higher than or equal to 5%.
The initial amount of the severance benefi t was equal to 19 months of the average compensation (fi xed and variable)
Mr. Henri de Castries, and equal to 12 months of this average for Mr. Denis Duverne. For each benefi ciary, one month should then be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
On December 31, 2014, AXA’s fully paid up and issued share capital amounted to €5,592,813,590.33 divided into 2,442,276,677 ordinary shares, each with a par value of €2.29 and eligible for dividends as of January 1st, 2014.
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and related voting rights on December 31, 2014: Number of shares % of capital ownership % of voting rights (a)
Treasury shares held by Company subsidiaries (directly or indirectly) (d) 533,576 0.02% [0.02%] (c)
(b) AXA Assurances IARD Mutuelle (11.18% of capital ownership and 18.81% of voting rights) and AXA Assurances Vie Mutuelle (2.86% of capital ownership and 4.80% of voting rights).
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights on December 31, 2014 except as indicated in the table above.
December 31, 2014, 461,523,534 shares entitled their holders to double voting rights as of that date.
Signifi cant changes in the Company’s share capital ownership between December 31, 2012 and December 31, 2014 are set forth in the table below: On December 31, 2014 (a) On December 31, 2013 (a) On December 31, 2012 (a)
Treasury shares held by Company subsidiaries (directly and indirectly) (d) 533,576 0.02% [540,724] (c) [0.02%] (c) 3,836,408 0.16% [6,774,024] (c) [0.23%] (c) 16,448,654 0.69% [30,906,564] (c) [1.07%] (c)
On December 31, 2014, to the best of the Company’s knowledge based on the information available to it, the
Company had 10,910 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
In connection with the share repurchase programs approved by AXA’s shareholders during their Shareholders’ Meetings held on April 30, 2013 (resolution 11) and April 23, 2014
(resolution 15) and p ursuant to Article L.225-209 of the French
(for purposes of hedging of the grant of free shares to employees of the Group) for an average weighted gross unit price per share of €18.65, and (ii) no AXA shares were sold between January 1st and December 31, 2014.
(or 0.002% of AXA’s share capital at that date). These shares were acquired for an aggregate purchase price of €945,580.76
Furthermore, we were advised of the following agreements and commitments concluded in the past fi scal year and which were previously approved by your Shareholders’ Meeting of April 23, 2014 upon the special report of the Statutory Auditors of March 17, 2014.
On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Henri de Castries of his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management
■ The Supervisory Board authorized that Mr. de Castries be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the Afep-Medef recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Henri de Castries as employee.
The amount of the severance benefit to be paid to the beneficiary would be adjusted in accordance with the level of achievement against these performance conditions as follows: 100% of the severance benefit shall be paid if at least 2 of the 3 performance conditions are met; 40% of the severance benefit shall be paid if only 1 performance condition is met; and no severance benefit shall be paid if none of the performance conditions are met. Notwithstanding the foregoing, if only 2 of the 3 performance conditions are met, the amount of severance benefit will be reduced by 50% if performance condition (1) is not met or if AXA’s consolidated net income for the preceding fiscal year was negative.
The initial amount of the severance benefit would be equal to 19 months of the average compensation (fixed and variable) paid during the 24-month period preceding termination for Mr. Henri de Castries. One month will be added to the initial amount of the severance benefit for each additional year of future service up to a maximum cap of 24 months.
These commitments are in force upon the effective renunciation by Mr. Henri de Castries of his employment contract. They shall last for the duration of his current position as an executive officer of AXA (i.e. since April 23, 2014), including under renewed mandates.
The severance benefi t would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal, nonrenewal or resignation within 12 months following a change in the Company’s control or strategy that has not been initiated by the benefi ciary.
These commitments are in force upon the effective renunciation by Mr. Denis Duverne of his employment contract. They shall last for the duration of his current position as an executive officer of AXA (i.e. since April 23, 2014), including under renewed mandates.
In accordance with Article R.225-30 of the French Commercial Code, we were advised of the following commitments and regulated agreements, approved during previous fi scal years, which remained in force during the past fi scal year.
The amount of the supplementary pension is calculated at the time of retirement and comes in addition to the total amount of retirement pensions paid under mandatory schemes (Social Security, ARRCO, AGIRC) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris. Since the delisting of ADS
(American Depositary Shares, each representing one AXA ordinary share) from the New York Stock Exchange on March 26, 2010, the Company’s ADSs are traded on the U.S. over-the-counter market and listed on the OTC QX platform under the symbol AXAHY.
(Paris time), with a fi xing of the closing price at 5:35 p.m.
The table below sets forth, for the periods indicated, the reported high and low prices (intraday) in Euro for the Company’s ordinary shares on Euronext Paris: Calendar Period Intraday High
des m archés f inanciers (“AMF”), which is the French financial market regulator, and the Autorité de C ontrôle P rudentiel et de
Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer.
(the “Commission”), jointly with Member States, has undertaken a fundamental review of the regulatory capital regime for the insurance industry for the purpose of the implementation of the 2009 European Directive on the taking-up and pursuit of the business of insurance and reinsurance (“Solvency II”), as amended in 2014 by the 2014/51/EU Directive (“Omnibus II”).
Due to come into effect on January 1st, 2016, Solvency II was designed to implement solvency requirements that would better refl ect the risks that insurance companies face and deliver a supervisory system that is consistent across all European member States. The Solvency II framework is based on three main pillars: (1) Pillar 1 consists of the quantitative requirements around own funds, valuation rules for assets and liabilities and
capital requirements, (2) Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers including the requirement for insurers to submit an Own Risk and Solvency Assessment
framework will cover, among other matters, valuation of assets and liabilities, the treatment of insurance groups, the definition of capital and the overall level of required capital. A key aspect of Solvency II is that assessment of the Group’s risks and capital requirements would be aligned more closely with economic capital methodologies and, if approved by the ACPR, will use the Group’s internal economic capital models for this purpose which is intended to enable a better understanding of risks and risk management.
While the Group currently expects to be able to obtain ACPR’s approval for use of its internal Group economic capital models on a timely basis, discussions with ACPR are on-going and, consequently, there is a risk that ACPR may not approve these models on a timely basis (or otherwise) and/or may impose conditions or require modifications which could have multiple adverse consequences for the Group including increasing the levels of required regulatory capital. In addition, there is a risk that local supervisors may impose capital add-ons which may negatively impact the fongibility of capital within the Group.
set several prescriptive guidelines for derivatives which impact operations, liquidity and credit risk management for derivatives.
In the countries where it operates (1), AXA is both a taxpayer and a tax collector, given that many specifi c taxes are levied on insurance policies and collected from our customers as part of the insurance and asset management revenues and remitted to the various state and federal administrations around the world.
is operating. In addition to the Group Tax Department based in France, all key operational entities/countries/region have a tax team in charge of ensuring the tax regulations are well understood and satisfi ed by the entities. In this respect, a biannual tax review process of each key entity formalized within the internal “Finance Professional Family Policies Manual” is performed by Group Tax Department in connection with each local team.
Group is subject to various tax regimes and regulations and is taking into account any changes in tax law. AXA is specifi cally vigilant about the changes that could result in higher tax expenses and payments, higher compliance costs or that may affect AXA Group’s tax liability, return on investments and business operations.
The Group policies and procedures with respect to business in or with countries that are “tax havens”, subject to international sanctions or embargoes, or are otherwise identifi ed as high corruption or high political risk are formalized in an internal policy drafted by the Group Compliance Department (entitled
The consolidated fi nancial statements are prepared in compliance with IFRS standards (as disclosed in Note 1 of
The present report discloses the reconciliation between the theoretical tax charge and the effective tax charge under IFRS .
operates, the income and capital gains on savings products, including when they are included inside life insurance contracts, benefi t from a favourable tax treatment. This leads to a lower effective tax rate for life insurance companies. Over the last several years, and notably following the fi nancial crisis, this difference has trended down.
“Consolidated underlying earnings, adjusted earnings and net income” in Section 1.3 “ Activity R eport”).
According to these internal standards, local senior management must appreciate the tax implications of the activities in their entity. The main considerations are: ■ compliance regarding taxation of employees in the territory in which they are employed; ■ compliance regarding taxation of business undertaken in the territory (including levies and sales taxes); and
(1) The list of the Group’s main subsidiaries and participating interests are available in Appendix V “AXA parent Company Financial Statements” of this Annual Report. We also make public the detailed legal organizational chart of the Group on the Company’s website (www.axa.com).
AXA’s products are not designed to allow or encourage tax evasion. The Group has set up a validation framework to ensure that new products undergo a thorough approval process before they go to market.
The local decision to launch a new product must result from a documented approval process that complies with AXA
Moreover, AXA has established strict policies regarding its cross-border activities and knowledge of its customers, in order to ensure that our products and services are not misused for money laundering or tax evasion purposes. Cross-border tax issues are addressed with a specifi c “Cross Border Business
While all AXA entities must obviously comply with local regulation, the Tax Department can veto a product if this product is not compliant with internal rules.
and other regulatory bodies. Certain of these proposals have been embodied in regulation or legislation while others remain best practice recommendations.
In 2009, the FSB published implementation standards for its Principles of Sound Compensation Practices. Among the matters covered in these standards and principles are a variety of mechanisms (including minimum recommended deferrals of cash bonuses, greater use of long-term equity grants rather than cash as a form of compensation, minimum vesting/ deferral periods, and performance criteria for vesting of long-term awards) that are designed to ensure an appropriate alignment of interests between (i) Executive Management and certain employees (such as traders) who can have a potentially significant impact on the nature and duration of risks incurred,
Policyholders liabilities and related assets are currently accounted for according to IFRS 4 phase I which generally allows the continuation of accounting policies applied prior to the conversion to IFRS. The IASB issued a new Exposure Draft on June 20, 2013 in order to defi ne principles to be applied for
IFRS 4 phase II. These new principles (that will apply in parallel of the IFRS 9 requirements on fi nancial instruments issued on
Requirement” (“BCR”) applicable to all GSIIs activities (ii) an additional level of capital, called “Higher Loss Absorbency”
(“HLA”) capacities to be requested from GSIIs in relation to their systemic activities, (2) greater regulatory oversight over holding companies, (3) various measures to promote the structural and fi nancial “self-suffi ciency” of Group companies and reduce Group interdependencies, and (4) in general, a greater level of regulatory scrutiny for GSIIs (including a requirement to establish a Systemic Risk Management Plan (“SRMP”), a
and Resolution Plan (“RRP”)) which may entail signifi cant new processes, reporting and compliance burdens (and costs)
as well as potential reorganizations of certain businesses or activities. In its July 2013 report, the FSB noted that the group of G-SIIs would be updated annually based on new data and published by the FSB each November. In November 2014, the FSB confi rmed the same list of nine GSIIs including the
Insurance-based Investment Products (“PRIIPS”). Similar initiatives are under review (or in the course of implementation)
These events and the continuing market volatility, have had and may continue to have an adverse effect on our revenues and results of operations in part because we have a large investment portfolio. Our investment income is an important factor in our profi tability, and our sales of insurance and asset management products (as well as level of surrenders and lapses) are dependent upon fi nancial market performance, customer behavior and confi dence as well as other related factors.
Factors such as consumer spending, business investment, government spending, regulation, the volatility and strength of the capital markets, and infl ation all affect the business and economic environment and, ultimately, our activities and the profi tability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of lapses or surrenders on certain types of policies, lower surrender rates than anticipated on other types of products, such as certain v ariable a nnuities, with in-the-money guarantees, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could have a material adverse effect on our business, results of operations and fi nancial condition.
has put in place a liquidity risk management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, if our internal sources of liquidity prove to be insuffi cient or if our liquidity requirements change so as to require a need for additional funding, we may not be able to successfully obtain additional fi nancing (whether on favorable terms or otherwise).
(taking into account the dividend payment of €0.95 per share proposed at the Shareholders’ Meeting of April 30, 2015)
which represented a €42.1 billion capital surplus at that date: (i) €25.3 billion of required capital (1), versus (ii) €67.4 billion of available capital (2). The Company’s consolidated solvency margin ratio is sensitive to capital market conditions (including the level of interest rates, the level of equity markets and foreign exchange impacts) as well as a variety of other factors.
In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or putting a company into rehabilitation or insolvency proceedings. A failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements and/or a reduction in the level of their regulatory capital that may negatively impact their competitive position, may also result in the Company deciding to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position. Regulatory restrictions that inhibit the Company’s ability to freely move excess capital among its subsidiaries or which otherwise restrict fungibility of the Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the capital position of the Company’s operating insurance subsidiaries which may have a consequent negative impact on the
Company and the perception of its fi nancial strength. Additional regulatory developments regarding solvency requirements, including the proposed “Solvency II” regime, may further effect changes in the insurance industry’s solvency framework and prudential regime as well as associated costs. At this stage, there is continuing uncertainty regarding the fi nal outcome of the implementation process of Solvency II as well as the fi nal calibration of AXA’s internal model which is currently under discussion with the French Autorité de C ontrôle P rudentiel et de R ésolution (“ACPR”), and it is diffi cult to predict the ultimate outcome of these matters and how they could affect our results of operations, fi nancial condition and liquidity and the insurance industry more generally. For further information on the implementation of Solvency II , please refer to the
Rating agencies also take into account the Company’s consolidated solvency margin and the regulatory capital
position of its insurance subsidiaries in assessing AXA’s fi nancial strength and credit ratings. Rating agencies may make changes to their internal models from time to time that may increase or decrease the amount of capital the Company must hold in order to maintain its current ratings.
Market conditions, changes in accounting policy and/or other factors could adversely affect the carrying value of our goodwill, cause us to accelerate amortization of our DAC, VBI and other intangibles and/ or to reduce deferred tax assets and deferred policyholders participation assets which could have a material adverse effect on our consolidated results of operations and fi nancial statements
Losses due to defaults by fi nancial institution counterparties, reinsurers and/ or other third parties including potential sovereign debt defaults or restructurings, impairment of our investment assets and unrealized losses could negatively affect the value of our investments and reduce our profi tability
fi nancial institutions. Many of our transactions with these third parties expose us to credit risk in the event of default of our counterparty.
While we evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound by the time their fi nancial obligation becomes due.
The reinsurance market has become increasingly concentrated following recent mergers and acquisitions, which have reduced the number of major reinsurance providers. The inability of any reinsurer to meet its fi nancial obligations to us could negatively impact our results of operations. In addition, the availability, amount and cost of reinsurance depend on general market conditions and may fl uctuate signifi cantly. Reinsurance may not be available to us in the future at commercially reasonable rates and any decrease in the amount of our reinsurance will increase our risk of loss.
Our accounting principles and policy with respect to valuation of our investments are set forth in Note 9.10 “Investments/Fair
Our exposure to credit spreads primarily relates to market price and cash fl ow variability associated with changes in credit spreads. A widening of credit spreads will generally reduce the value of fi xed income securities we hold (including credit derivatives where we assume credit exposure) and increase our investment income associated with purchases of new fi xed income securities in our investment portfolios. Conversely, credit spread tightening will generally increase the value of fi xed income securities we hold and reduce our investment income associated with new purchases of fi xed income securities in our investment portfolios.
Changes in prevailing interest rates may also negatively affect our business. Our exposure to interest rate risk relates primarily to the market price and cash fl ow variability associated with changes in interest rates. Changes in the interest rates may negatively affect the value of our assets and our ability to realize gains or avoid losses from the sale of those assets, all of which also ultimately affect earnings. In particular, negative interest rates and the low level of interest rates generally may negatively impact our net interest income and the profi tability of our Life
Accordingly, during periods of declining interest rates or a prolonged period of low interest rates, our profi tability may suffer as the result of a decrease in the spread between interest rates credited to insurance policyholders and annuity contract owners and the rates we are able to earn on our fi xed-income investment portfolio. An extended period of declining interest rates or a prolonged period of low interest rates may also cause us to change our long-term view of the interest rates that we can earn on our investments. In addition, certain statutory capital and reserve requirements are based on formulas and models that consider interest rates, and an extended period of low interest rates may increase the statutory capital we are required to hold and the amount of assets we must maintain to support statutory reserves.
Conversely, in periods of increasing interest rates: ■ surrenders of life insurance policies and fi xed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns; ■ obtaining cash to satisfy these obligations following such surrenders may require us to liquidate fi xed maturity investments at a time when market prices for those assets are depressed because of increases in interest rates which may result in realized investment losses and decrease our net income; ■ accelerated surrenders may also cause us to accelerate amortization of deferred policy acquisition costs, which would reduce our net income; ■ our fee income may decrease due to a decline in the value of v ariable a nnuity account balances invested in fi xed income funds; ■ there may be a decrease in the estimated fair value of certain fi xed income securities we hold in our investment portfolios, resulting in reduced levels of unrealized capital gains available to us, which could negatively impact our solvency margin position and net income; and
■ we may be required, as an issuer of securities, to pay higher interest rates on debt securities we issue in the fi nancial markets from time to time to fi nance our operations, which would increase our interest expenses and reduce our results of operations.
For the year ended December 31, 2014, a signifi cant portion of AXA’s insurance gross premiums and fi nancial services revenues, as well as AXA’s benefi ts, claims and other deductions were denominated in currencies other than the Euro, primarily
In recent years, the risk of low infl ation and even defl ation
(i.e., a continued period with negative rates of infl ation) in the
The Group is regularly monitoring its exposure to infl ation and defl ation risk, and has taken steps to mitigate it through fi nancial instruments for which value and/or return is linked to the evolution of infl ation and defl ation (index-linked bonds, infl ation swaps, etc.).
Annual Report. See also “Risks relating to the fi nancial markets, our fi nancial strength ratings and fi nancial condition, the valuation of our assets and related matters – Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position”.
Funds” or “Asset Transfer Programs”). These rebalancing mechanisms within the Unit-Linked funds are designed to reduce policyholders’ investment in higher risk assets at times of increased equity or interest rate volatility to protect their portfolio returns.
and AXA RE Arizona may not be able to transfer assets from the trust to satisfy these obligations. Management believes that
AXA RE Arizona has adequate liquidity and credit facilities to deal with a range of market scenarios and increasing reserve but there can be no assurance that AXA RE Arizona will have suffi cient liquidity in all scenarios. In the event AXA RE Arizona were not able to post required collateral or cash to settle such
hedges when due, it may be required to reduce the size of its hedging program which could ultimately impact its ability to perform under the reinsurance arrangements and AXA
There can be no assurance, however, that these initiatives will succeed in meeting their objective or that the re-designed and re-priced products will continue to be attractive to their target markets which, in either case, could have an adverse impact on AXA’s business, competitive position, results of operations and fi nancial condition.
calculations are done on a market consistent basis, which is more conservative in many respects than traditional NBV and
to interest rate movements and, consequently, an adverse evolution of interest rates may have a signifi cant impact on our
NBV and a corresponding impact on the trading price of our securities.
The Property & Casualty insurance business is cyclical. Although no two cycles are identical, these cycles have typically lasted for periods ranging from two to six years. Periods of intense price competition due to excessive underwriting capacity, periods of shortages of underwriting capacity permitting more favorable rates, consequent fl uctuations in underwriting results and the occurrence of other losses characterize the conditions in these cycles. Historically, Property & Casualty insurers have experienced signifi cant fl uctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency or severity of catastrophic events, levels of capacity, general economic conditions and other factors. This may cause a decline in revenues during certain cycles if we choose not to reduce our Property & Casualty product prices in order to maintain our profi tability. We may therefore experience the effects of such cyclicality, changes in customer expectations for appropriate premium levels, the frequency or severity of claims or other loss events, or other factors affecting the Property & Casualty insurance business, which could have an adverse effect on our results of operations and fi nancial condition.
fi res, explosions, freezes and fl oods) and, together with manmade disasters and core infrastructure failures (including acts of terrorism, military actions, power grid and telephone/internet infrastructure failures), created additional uncertainty as to future trends and exposures. We follow the evolution of these risks closely and generally seek to manage our exposure to them through individual risk selection, monitoring risk accumulation, purchase of reinsurance and use of available data in estimating potential catastrophic risks. However, we have experienced in the past and could experience in the future material losses from these types of risks.
Operational risk is inherent in our business and can manifest itself in various ways, including business interruption, poor vendor performance or default (including under signifi cant outsourcing arrangements), information systems malfunctions or failures, hacking incidents and/or other unauthorized intrusions into our websites and/or information systems, regulatory breaches, human errors, employee misconduct, and external fraud. We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other fi nancial intermediaries we use to facilitate our securities transactions.
Notwithstanding these measures, operational risk is part of the business environment in which we operate and we may incur losses from time to time due to these types of risks.
We may also, from time to time and in the course of our business provide guarantees and enter into derivative and other types of off-balance sheet transactions that could result in income statement charges.
RISKS RELATING TO THE EVOLVING REGULATORY AND COMPETITIVE ENVIRONMENT IN WHICH WE OPERATE
Designation of the AXA Group as a Global Systemically Important Insurer (“GSII”) may adversely impact our capital requirements, profi tability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position
systemic activities, (2) greater regulatory oversight over holding companies, (3) various measures to promote the structural and fi nancial “self-suffi ciency” of Group companies and reduce
(and costs) as well as potential reorganizations of certain businesses or activities. In its July 2013 report, the FSB noted that the group of G-SIIs would be updated annually based on new data and published by the FSB each November. In
RRP and the development and implementation of the BCR in 2014, while other measures are to be phased in more gradually, such as the HLA, which is to be developed by the end of 2015 and applied as from 2019. On October 23, 2014, the IAIS
announced the development of the BCR and its endorsement by the FSB. Beginning in 2015, this BCR, which is lower than the Solvency Capital Requirement (“SCR”) required under
The AXA Group operates in more than 50 countries around the world and our operations are subject to a wide variety of insurance and other laws and regulations. We are faced with signifi cant compliance challenges due to the fact that our regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and aggressive role in interpreting and enforcing regulations in the jurisdictions where we do business. The fi nancial turmoil over the past several years gave rise to numerous legislative and regulatory initiatives (many of which focus on the fi nancial services industry) across many of the principal jurisdictions where the Group does business. While management cannot predict whether or when future legislative or regulatory proposals may ultimately be enacted and the fi nal form they will take, certain of these proposals, if enacted, could have a material adverse impact on our business activities, results of operations and fi nancial conditions. We expect that the multitude of new laws and regulations will increase our legal and compliance costs. In recent years there has been an increase in the number of legislative/regulatory initiatives and enforcement actions in the areas of fi nancial crime compliance
(i.e. anti-money laundering, international trade sanctions and anti-bribery) as well as numerous consumer protection related initiatives, including IMD2, MiFID II and PRIIPS, focused on a variety of matters including, in particular, distribution (e.g.
compensation of intermediaries and disclosure of distribution costs), suitability, misselling and avoiding potential confl icts of interest. A number of global fi nancial institutions have been
the subject of well publicized enforcement actions that have resulted in very signifi cant monetary and other sanctions in these areas. These are complex areas of law that evolve on a continuing basis and which carry signifi cant fi nancial and reputational risk for non-compliance. In addition, as a global company operating in several countries, we are subject to various tax regimes and regulations. Changes in tax laws, including the US Foreign Account Tax Compliance Act
In addition, we have been named as defendants in numerous lawsuits (both class actions and individual lawsuits) and involved in various regulatory investigations and examinations and may be involved in such proceedings in the future. Certain of these lawsuits and investigations seek signifi cant or unspecifi ed amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these proceedings have substantial powers over the conduct and operations of our business. During 2014, the litigation environment continued to evolve with the introduction of a class action system in France and certain other European jurisdictions which is likely to increase litigation risks and costs. Due to the nature of certain of these lawsuits and investigations, we cannot estimate the potential losses or predict with any certainty the potential impact of these suits or investigations on our business, fi nancial condition or results of operations. Please see Part 4 – Note 31
In order to raise capital to fund future growth or for solvency purposes, we may, in the future, offer rights, warrants or similar securities at prices below the then-current market price which
The Mutuelles AXA, which comprise two French mutual insurance companies, collectively held 14.03% of the
Company’s outstanding shares and 23.61% of its voting rights on December 31, 2014. The Mutuelles AXA have stated their intention to collectively vote their shares in AXA and may have interests confl icting with other shareholders’ interests. For example, even though the Mutuelles AXA do not hold a majority of the total voting power in AXA, efforts by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may fi nd attractive, may prevent other shareholders from realizing a premium for their AXA ordinary shares or ADS. The Mutuelles AXA may decide to increase their interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.
Risk Offi cers (CRO), implement GRM standards and guidelines within each operational entity.
Management is responsible for the defi nition and the deployment of the Enterprise Risk Management (ERM)
Local Chief Risk Offi cers head the local Risk Management teams within each operational entity and report both to a member of their Executive Committee (CEO or CFO) and to the Group CRO. Chief Risk Offi cers are independent from operations and Internal Audit Departments.
Local Chief Risk Offi cers have a regular reporting to the Board of Directors (or to a sub-committee) on risk management matters.
Internal Audit performs, as part of its role, an assessment of risks and governance processes on a periodic basis to provide independent opinion on the effectiveness of the system of internal control (third line of defense).
In order to effi ciently manage local and global risks, the decision process within the risk governance structure is divided into 2 main levels: 1. the Group Management Committee defi nes business objectives and capital allocation with respect to investment return and risk. It also defi nes the Group appetite for risks in terms of impact on its key fi nancial indicators. The Group
CFO and the Group COO, and where GRM is in charge of its secretariat,
A wide variety of risk management techniques are used to control and mitigate the market risks to which the AXA Group’s operating units and the Group itself are exposed. These techniques include: ■ Asset- Liability Management (ALM), i.e. defi ning an optimal strategic asset allocation with respect to the liabilities’
Unrealized capital gains projected in VIF & other stat-GAAP adjustments (8,585) - (8,585) (6,151) - (6,151)
The Group EV is not an estimate of AXA’s «fair value» as it does not include the value of the new business to be sold in the future, nor does include any value for future profi ts from existing business of other-than-life businesses (Property &
equity on the following main adjustments: ■ addition of unrealized capital gains/losses not included in
Adding the Life & Savings VIF to the Life & Savings ANAV
and AXA follows a strict effi ciency plan; ■ projected expenses are adjusted for non-recurring expenses and one-time strategic spending; ■ some benefi t from future mortality improvement on Life business is included, while A nnuity business does have an allowance for the costs of longevity increasing in all markets; ■ the cost of non-fi nancial risks is allowed for through the cost of holding hard capital at entity level and corresponding to that required to meet the Group target capital; ■ a weighted average tax rate of 28.6% was assumed in 2014
Where the shift of 100 basis points would drop rates below 0%, they are fl oored at zero;
Downward shift of 100 bps in risk-free rates (4,904) -10% 1,499 3% (3,405) -7% (3,736) -9% 1,605 4% (2,132) -5%
2014 interest rate sensitivities (% of Group EV) for other-thanlife businesses of -3% to upward 100 bps and 3% to downward 100 bps (2013: -3% and 4%) 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.
& Savings business of 3% to 10% higher value and -4% to 10% lower value (2013: 3% and -4%) are more symmetrical.
Yield Fund (€465 million versus €443 million in 2013) and in
Exchange-rate risk exposure is hedged using foreign exchange forwards for a notional amount of €5,466 million (notional amount of €3,992 million in 2013) and currency swaps for a notional amount of €375 million (notional amount of €461 million in 2013).
Swiss market. A major portion of the exposure is hedged back into Swiss Francs with foreign exchange swaps, options and forwards. At the end of 2014, Switzerland foreign exchange exposure amounted to €27,226 million (€23,100 million in 2013) which represented circa 38% of total assets (circa 35%
AXA Hong Kong holds investments denominated in foreign currencies €8,197 million (€6,545 million in 2013), both in directly and indirectly through investment funds. These investments are mainly in US Dollar €7,864 million (€6,323 million in 2013), in order to take advantage of the US bond market which is more developed than the HK bond one notably in terms of liquidity and available maturities. Exchange-rate risk exposure is hedged using foreign exchange forwards for a notional amount of €2,624 million.
both directly and indirectly through investment funds with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments were mainly denominated in US Dollars (€1,394 million versus €1,206 million in 2013) including the US Short Duration High
AXA Germany controls and limits its exchange-rate risk by using foreign exchange forwards for a notional amount of €1,425 million (notional €1,180 million in 2013), currency swaps for a notional amount of €146 million (notional €188 million in 2013) and congruent coverage (matching assets and liabilities denominated in the same currency) for €54 million (€38 million in 2013).
US Dollar totaling €527 million, totally hedged with foreign exchange forwards. Net exposure is nil.
AXA Ireland also operates in Northern Ireland, and therefore manages a portfolio of Pound Sterling policies for an amount of €272 million (€276 million in 2013), hedged with investments in the same currency of €263 million (€280 million in 2013).
In Switzerland, foreign exchange exposure amounted to €6,129 million (circa 44% of total assets) at the end of 2014, of which €4,145 million were hedged with foreign exchange derivatives.
At December 31, 2014, the main hedging positions of AXA SA were as follows: Foreign currency hedging
In respect of the US activities, in the form of debt and derivatives
In respect of the UK activities, in the form of debt and derivatives
shareholders’ equity. The Group’s operating subsidiaries must comply with local regulations in the various countries where they operate, including minimum solvency requirements and restrictions on related party transactions. These regulations impose a variety of restrictions and may limit the ability of the Company’s operating subsidiaries to pay dividends to the Company or other Group companies, reduce their shareholders’ equity, incur debt, engage in certain types of transactions with affi liates (including loans, sales of assets and other fi nancial transactions) or take certain other actions. As a result, internal cash fl ow projections (including dividend payouts ) must take into account these constraints and possible future regulatory changes.
AXA Group concentration risk is monitored by different analyses performed at Group level by issuer, sector and geographic region, in addition to local procedures and by a set of Group and local issuer limits.
AXA Group exposure on these issuers through debt securities, equity, derivatives and reinsurance counterparty risk.
At December 31, 2013, the breakdown of the debt security portfolio (€372.2 billion) by credit rating was: 15% in AAA, 34%
Rating changes versus 2013 were mainly driven by debt market evolution in 2014 leading to rating upgrades.
At December 31, 2014, the economic breakdown of the total value of ABS (€9.5 billion excluding assets held for sale as well as CMOs and agency pool ABS) was as follows: Prime Residential
(a) Mainly consumer loan ABS (plus some leases and operating ABS assets).
Consumer ABS, 19% in CDO, 9% in Commercial MBS, 7% in
Prime Residential, 7% in US Subprime & Alt-A, and 1% in Non conforming RMBS. At December 31, 2013, AXA’s invested assets included a net exposure to US subprime residential and Alt-A mortgage loans of approximately €0.7 billion (6%
protection on the same name (negative basis trade strategy) mostly in corporate bonds mainly in Japan (€1.8 billion), Switzerland (€1.0 billion) and France (€0.4 billion); iii. €9.5 billion of CDS protections sold as an alternative to the direct purchase of a corporate bond mainly by holding government bonds and at the same time selling protection on very good quality names. This type of ALM strategy is often implemented to compensate for the lack of depth or liquidity in some markets in order to take synthetic credit risk.
(1) This fi gure represents an accounting view i.e.100% of assets held directly and in consolidated investment funds “Core Investment Portfolios”, and excluding credit derivatives in Non consolidated investment funds, in line with Note 20 of the notes to the consolidated fi nancial statements. The
Group holds €27 .9 billion (notional amount) of credit derivatives as total exposure including consolidated investment funds “Satellite Investment
At December 31, 2013, the breakdown of reserves ceded to reinsurers (€17.8 billion) by reinsurer rating was: 63% in AA, 12% in A, 14% in BBB/BB/B, and 11% in others.
Germany, are mostly limited to retail banking activities, distributing simple investment and credit products.
Credit risks in the banks may be split between: ■ retail credit risk, resulting from the commercial activity – sales of mortgages and other type of loans to retail clients and small enterprises. Credit risk management is done through careful risk selection (e.g. in Belgium ‘Internal Rating Based’
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; ■ 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 underwriting rules to ensure that no risks are taken outside the Group tolerances and that value is created by adequately pricing the risk.
(mortality, longevity, morbidity…) and uses the results of this work to optimize its product design and its reinsurance coverage. These exposure analyses are supported by expert risk models in Life & Savings.
P&C, AXA Global Life and GRM to optimize the quality and cost of reinsurance cover. They measure frequency risks as well as specifi c severity risks in P&C (natural catastrophes, storms, fl oods, earthquakes) and Life (mortality, geographical concentration risk); ■ estimates of P&C catastrophic risks are carried out through the use of several catastrophe modeling software available in the market. Even if these software are key to foster discussions with reinsurers, they are regularly assessed within GRM and adjusted to the specifi c features of AXA’s portfolio. Major Natural Catastrophes perils are modeled to a very large extent within the Internal Model of AXA Group: up to 94% of AXA’s exposure to earthquakes, windstorms and
Floods are covered by the internal model. From an economic capital modeling perspective, climate risks borned by the
As opposed to the other internal pools where the risk is retained within AXA Global P&C, 95% of the Property Pool year-end fi nancial result net of external reinsurance protections is retroceded back to local entities.
• biometric risks (e.g. longevity/mortality) and policyholder behaviours (notably lapses and annuity election rates), are regularly monitored. The hedging programmes embed dynamic policyholder behaviours to a range of possible market situations; ■ 14% at the end of 2014 (13% at the end of 2013) cover savings products without guaranteed cash values upon surrender; ■ 20% at the end of 2014 (21% at the end of 2013) are related to savings products offering one-year guaranteed rates that are updated every year. The risks arising from a sustained fall in interest rates in the fi nancial markets are limited for these types of products. Hedging programs have been implemented to cover long-term fi xed maturities from the risk of an increase in interest rates; ■ 31% at the end of 2014 (32% at the end of 2013) cover other products like Protection and Health. These reserves cover surrender guarantees and, in some cases, a guaranteed long-term rate. Related risks are managed in the following ways: • products that are not surrender-sensitive are usually backed by fi xed-income investments with maturities and interest rates generally suffi cient to cover guaranteed benefi ts, so as to reduce as much as possible the reinvestment risk,
Guided by the principles set forth by the Basel Committee on banking supervision, AXA defi nes operational risk as the risk of loss resulting from inadequate or failed processes, people or systems. This inadequacy or failure may come from internal or external causes. Legal impacts are included but Reputation risks & risks arising from strategic decisions are excluded.
The implementation of the Operational risk framework is not limited to insurance activities but encompasses all AXA entities, including insurance companies, banking activities, AXA asset managers and internal service providers.
AXA is fi rmly committed to combating money laundering and terrorist fi nancing. This commitment is embodied in a specifi c
AXA Global P&C, however, is mandated to buy certain types of Group-wide insurance programs for risks shared by all AXA
liability, professional liability, fraud and cyber Risks and are: ■ Group-wide insurance programs covering all AXA Group entities with the exception of AXA Financial and its subsidiaries, which traditionally arrange cover within local market; ■ reviewed and approved annually by the Management
Investment and ALM Committee whose terms of reference are approved by the local Board.
ALM studies are performed by Investment & ALM Department with the support of internal asset managers and local Risk
Committee. The strategic asset allocation allows for taking a tactical stance within a given leeway.
The market risks arising from derivatives are regularly monitored taking into account the Group’s various constraints
AllianceBernstein. Local CIOs continuously monitor, analyse, and challenge asset managers’ performances; ■ in order to benefi t from a more asset specifi c expertise and/
NOTE 10 Investments in joint ventures and associates accounted for using the equity method 257
Assets backing contracts where the fi nancial risk is borne by policyholders (e) 181,082 162,186 147,162 9 Investments from insurance activities 680,651 605,976 605,754 9 Investments from banking and other activities 39,535 35,790 33,298 10 Investments accounted for using the equity method 1,842 1,428 1,347 14 Reinsurers’ share in insurance and investment contracts liabilities 18,895 17,808 10,620 14 Deferred policyholders’ participation assets - - 4
Receivables arising from direct insurance and inward reinsurance operations 14,688 14,096 14,926
Receivables – current tax 1,511 1,885 1,855 5 Assets held for sale 1,181 164 181 12 Cash and cash equivalents 22,048 21,455 30,375
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders (f) 142,042 125,593 113,921
Liabilities arising from investment contracts with discretionary participating features 33,669 33,850 36,350
Liabilities arising from investment contracts with discretionary participating features and where the fi nancial risk is borne by policyholders 4,053 4,243 4,080
Liabilities arising from policyholders’ participation and other obligations 48,491 26,271 31,357
Derivative instruments relating to insurance and investment contracts (2,837) (1,086) (2,053)
Other debt instruments issued, notes and bank overdrafts (e) 1,993 2,550 3,123
Collateral debts relating to investments under a lending agreement or equivalent 21,331 20,909 24,397 5 Liabilities held for sale 946 - -
(d) AXA Life Japan aligned its closing date with the Group calendar year starting with 2013 annual accounts. Therefore, its contribution to the AXA consolidated result for the 2013 annual accounts exceptionally covered a period of fi fteen months.
(f) Includes liabilities arising from contracts where the fi nancial risk is borne by policyholders with Guaranteed Minimum features.
Fees and charges relating to investment contracts with no participating features 327 323
Net realized gains and losses and change in fair value of investments at fair value through profi t and loss (f) 12,325 20,621 of which change in fair value of assets with fi nancial risk borne by policyholders (g) 9,520 22,180
Amortization of the value of purchased business in force (228) (409)
Change in goodwill impairment and other intangible assets impairment (118) (157)
Reserves relating to changes in fair value through shareholders’ equity 7,131 (2,339)
Items that may be reclassifi ed subsequently to Profi t or Loss 9,756 (4,791)
Net gains and losses recognized directly through shareholders’ equity 8,517 (4,066)
Others reserves – transaction on treasury shares - - - - -
Reserves relating to changes in fair value through shareholders’ equity - - - - -
(b) As described in Note 1.2.1, comparative information related as of January 1, 2014 was retrospectively restated for the implementation of IFRS 10 and 11.
Capital in excess of nominal value - - - 375 -
Financial expenses – Undated subordinated debt - - - - -
Reserves relating to the change in fair value of fi nancial instruments available for sale
Change in goodwill impairment and other intangible assets impairment (c) 19 51
Net increase/(write back) in impairment on investments, tangible and other intangible assets 619 777
Adjustment of non cash balances included in the operating income before tax 6,418 (9,363)
Investment income & expense recorded in profi t or loss during the period (f) (14,143) (9,340)
Net cash provided by other assets and liabilities (g) (1,267) 1,983
Purchase of subsidiaries and affi liated companies, net of cash acquired (482) (13)
Net cash related to changes in scope of consolidation (442) 352
Sales of equity instruments and non consolidated investment funds (g) (h) 21,367 25,447
Sales and/or repayment of loans and other assets (g) (i) 27,860 22,988
Purchases of investment properties held direct or not (g) (2,089) (2,142)
Net cash impact of assets lending/borrowing collateral receivables and payables 1,310 (2,692)
Acquisition/sale of interests in subsidiaries without change in control (55) (120)
Net interest margin of hedging derivatives on fi nancing debt (221) 27
CASH AND CASH EQUIVALENT AS OF JANUARY 1 (k) 20,477 29,930
CASH AND CASH EQUIVALENT AS OF DECEMBER 31 (k) (m) 21,631 20,477
(h) Includes equity instruments held directly or by consolidated investment funds as well as non consolidated investment funds.
(m) Reso Garantia is accounted for using the equity method in the Group consolidated fi nancial statements on the basis of a closing at September 30. Given signifi cant movements in the Russian ruble exchange rate between September 30, 2014 and December 31, 2014, the balance sheet used as a basis of the equity method has been translated using December 31 exchange rate.
operates principally in Europe, Americas and Asia. The list of the main entities included in the scope of the AXA’s consolidated fi nancial statements is provided in Note 2 of the notes to the consolidated fi nancial statements.
Union before the balance sheet date with a compulsory date of January 1, 2014. The Group does not use the “carve out”
A package of fi ve new and revised standards was published on
■ IFRS 10 – Consolidated Financial Statements replaces the consolidation guidance in IAS 27 – Consolidation and
Entities, by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee.
Investments from banking and other activities (a) 37,360 35,790 (1,570) 35,199 33,298 (1,901)
Assets held for sale including discountinued operations 164 164 - 181 181 -
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 757,143 755,441 (1,702) 761,862 759,762 (2,100)
(a) Changes mainly relate to the Investments in real estate properties resulting from the changes in the consolidation method of some real estate companies.
(b) Changes in minority interests relate to the change in consolidation method of some real estate companies.
(c) Changes mainly relate to Other debt instruments issued, notes and bank overdrafts (€-1,163 million as of December 31, 2013 and €-1,387 million as of January 1, 2013) and Other payables (€-822 million as of December 31, 2013 and €-850 million as of January 1, 2013).
Additionally, the application of the amendments and interpretation below as of January 1, 2014 had no material impact on the
■ The amendments to IAS 32 – Financial Instruments: Presentation published on December 16, 2011, provide clarifi cations of the application of the offsetting rules. The amendments to IAS 32 clarify that in order to result in an offset of a fi nancial asset and a fi nancial liability, a right to setoff must be available immediately 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.
Disclosures for Non-Financial Assets, published on May 29, 2013, address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.
IFRS 9 – Financial Instruments, published on July 24, 2014, will replace IAS 39. The published effective date of IFRS 9 is
the asset is held within a business model whose objective is to hold assets in order to collect contractual cash fl ows and for sale and b) the contractual terms of cash fl ows are
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
November 21, 2013 July 1, 2014 * Clarifi cation of requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, practical expedient of valuation is allowed if the amount of the contributions is independent of the number of years of service.
IFRS 10 and IAS 28 September 11, 2014 January 1, 2016 Guidance regarding the sale or contribution of assets between an investor and its associate or joint venture. A consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business and a partial gain or loss is recognized when a transaction involves assets that do not constitute a business.
December 18, 2014 January 1, 2016 * Clarifi cation of the requirements when accounting for investment entities.
The major options elected in accordance with IFRS 1 were the following: PURCHASE ACCOUNTING, GOODWILL AND OTHER INTANGIBLES RELATED TO PAST BUSINESS COMBINATIONS PERFORMED PRIOR TO JANUARY 1, 2004
All cumulative past actuarial gains and losses on all employee benefi t plans were recognized in retained earnings as of
Companies in which AXA exercises control are known as subsidiaries. They are fully consolidated from the date on which control is transferred to AXA. Under IFRS 10, AXA controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Only substantive rights (i.e. the holder must have the practicability to exercise them) and rights that are not protective shall be considered. AXA can have power with less than a majority of the voting rights of an investee, in particular through: ■ the proportion of ownership with regards to the other investors; ■ potential voting rights; ■ a contractual arrangement between the investor and other vote holders; ■ rights arising from other contractual arrangements; or
Companies in which AXA exercises signifi cant infl uence are accounted for under the equity method. Under IAS 28, signifi cant infl uence is presumed when AXA directly or indirectly holds 20% or more of the voting rights. Signifi cant infl uence can also be exercised through an agreement with other shareholders.
In accordance with the option made available by IFRS 1 – Firsttime adoption of IFRS, business combinations prior to 2004 were not restated with respect to French accounting principles in force at the time.
Upon fi rst consolidation, all assets, liabilities and contingent liabilities (unless they are not present obligations) of the acquired company are estimated at their fair value. However, in compliance with an exemption permitted by IFRS 4, liabilities related to life insurance contracts or investment contracts with discretionary participating features are maintained at the carrying value prior to the acquisition date to the extent that this measurement basis is consistent with AXA’s accounting principles. The fair value of acquired business in force relating to life insurance contracts and investment contracts with discretionary participating features is recognized as an
To the extent that these other intangible assets can be estimated separately, they can also be measured by looking at the purchased marketing resources that will allow them to generate these future cash fl ows.
receivables and gains/losses on intra-group transactions are eliminated: ■ in full for controlled subsidiaries; and
As mentioned in paragraph 1.3.2, goodwill arising on the acquisition of a foreign entity is recorded in the local currency of the acquired entity and is translated into Euro at the closing date.
Fair values of assets and liabilities traded on active markets are determined using quoted market prices when available.
The fair values of assets and liabilities that are not traded in an active market are estimated: ■ using external and independent pricing services; or
External pricing services may be fund asset managers in the case of non consolidated investments in funds or brokers. To the extent possible, the Group collects quotes from external pricing providers as inputs to measure fair value. Prices received may form tight clusters or dispersed quotes which may then lead to the use of valuation techniques. The dispersion of quotes received may be an indication of the large range of assumptions used by external pricing providers given the limited number of transactions to be observed or refl ect the existence of distress transactions. In addition, given current market conditions since the fi nancial crisis and the persistency of complete inactivity of some markets since then, many fi nancial institutions closed their desks dedicated to structured assets deals and are no longer in a position to deliver meaningful quotes.
• cost approach: The consideration of amounts that would currently be required to construct or replace the service capacity of an asset.
Black & Scholes models, etc.) based on quoted market prices for similar instruments or underlyings (index, credit spread, etc.)
Valuation techniques may be used when there is little observation of transaction prices as an inherent characteristic of the market, when quotes made available by external pricing providers are too dispersed or when market conditions are so dislocated that observed data cannot be used or need signifi cant adjustments. Internal mark to model valuations are therefore normal market practices for certain assets and liabilities inherently scarcely traded or exceptional processes implemented due to specifi c market conditions.
The dislocation of certain markets may be evidenced by various factors, such as very large widening of bid ask spreads which may be 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).
AXA performs an impairment test of goodwill at least annually based on cash generating units, using a multi-criteria analysis with parameters such as the value of assets, future operating profi ts and market share, in order to determine any signifi cant adverse changes. It also considers the interdependence of transactions within sub-groups. Within each cash generating unit, a comparison is made between net book value and the recoverable value (equal to the higher of fair value less costs to sell and value in use). Value in use consists of the net assets and expected future earnings from existing and new business, taking into account the cash generating units’ future cash fl ows. The value of future expected earnings is estimated on the basis of the life insurance and investment contracts embedded value models or similar calculations for other activities. Fair values less costs to sell are based on the IFRS 13 fair value as described in Note 1.5 using various valuation multiples.
The value of purchased insurance contracts and investment contracts with discretionary participating features recognized in a business combination (see paragraph 1.3.2) is amortized as profi ts emerge over the life of the contracts’
portfolio. In conjunction with the liability adequacy test (see paragraph 1.14.2), VBI is subject to annual recoverability testing based on actual experience and expected changes in the main assumptions.
DAC are also tested through the liability adequacy test (see paragraph 1.14.2).
DAC and DOC are reported gross of unearned revenues and fees reserves. These unearned revenues and fees reserves are separately recognized as liabilities and are amortized over the contract term using the same amortization approach used for
is recognized at cost. The properties components are depreciated over their estimated useful lives, also considering their residual value if it may be reliably estimated.
“available for sale”, an impairment based respectively on future cash fl ows discounted using the initial effective interest rate or on fair value is recorded through the income statement if future cash fl ows may not be fully recoverable due to a credit event relating to the instrument issuer. A downgrade of an entity’s credit rating is not, of itself, evidence of impairment. If the credit risk is eliminated or improves, the impairment may be released.
The amount of the reversal is also recognized in the income statement.
(average cost, fi rst-in fi rst-out, etc.) depend on local Assets and
Undated subordinated debt and any related interest charges are classifi ed either in shareholders’ equity (in the “other reserves” aggregate) or as liabilities depending on contract clauses without taking into consideration the prospect of redemption under economic constraints (e.g. step up clauses or shareholders’ expectations).
Any fi nancial instrument issued by the Group with an equity component (for example certain options granted to convert the debt instrument into an equity instrument of the Company) and a liability component (a contractual obligation to deliver cash)
Insurance contracts, including assumed reinsurance contracts, are contracts that carry signifi cant insurance risks. Such contracts may also transfer fi nancial risk from the policyholders to the insurer. Investment contracts are contracts that carry fi nancial risk with no signifi cant insurance risk.
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, 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.
■ such tests are based on the intention and capacity of entities to hold fi nancial assets according to various sets of scenarios, excluding the value of new business; ■ they include projections of future investments sales according to estimated surrender patterns; and
DPA, DAC and VBI. For non-life insurance contracts, an unexpired risk provision is recognized for contracts on which the premiums are expected to be insuffi cient to cover expected future claims and claims expenses.
The current income tax expense (benefi t) is recorded in the income statement on the basis of local tax regulations.
(in terms of amounts or timing) relating to the carry forwards of unused tax credits. The recoverability of deferred tax assets recognized in previous periods is re-assessed at each closing.
In particular, a deferred tax liability is recognized for any taxable temporary difference relating to the value of shares in a consolidated company held, unless the Group controls at what date the temporary difference will reverse and it is probable that the temporary difference will not reverse in the foreseeable future. If a group company decides to sell its stake in another consolidated entity, the difference between the carrying value and the tax value of these shares for the company that holds them leads to the recognition of deferred tax (including as part of a business combination when the Group as the buyer intends to sell or carry out internal restructuring of the shares following the acquisition). The same approach applies to dividend payments that have been voted or deemed likely, to the extent that a tax on dividends will be due.
Pensions and other post-retirement benefits include the benefi ts payable to AXA Group employees after they retire
Defined benefit plans: an actuarial assessment of the commitments based on each plan’s internal rules is performed.
(Autorité des normes comptables). The cost of the leveraged formula plan is valued by taking into account the fi ve-year lock-up period for the employees (as in the traditional plan) but adding the value of the advantage granted to the employees by enabling them to benefi t from an institutional derivatives-based pricing instead of a retail pricing.
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. Provisions are not recognized for future operating losses. The same applies to contingent liabilities, except if identifi ed at the time of a business combination (see paragraph 1.3.2).
No such situation currently exists within the Group. In accordance with IFRS 4, the Group continues to use the accounting principles previously applied by AXA to insurance contracts and investment contracts with discretionary participating features. According to these principles, rights and obligations related to contracts are recognized in all situations.
Net revenues from banking activities include all revenues and expenses from banking operations, including interest expenses not related to fi nancing, banking fees, capital gains and losses on sales of fi nancial assets, changes in the fair value of assets under the fair value option and related derivatives.
■ the change in impairment of investments (excluding releases of impairment following sales).
AXA Affi n General Insurance Berhad (a) Minority interest buyout 43.63 43.63 42.48 42.48
AXA Aurora Vida, S.A. de Seguros (Spain) Minority interest buyout 99.97 99.81 99.96 99.78
AXA Seguros S.A. de C.V. (Mexico) Minority interest buyout 100.00 100.00 99.97 99.97
As of December 31, 2014, investment funds represented a total of €98,458 million invested assets (€92,280 million at the end of 2013), corresponding to 261 investment funds mainly in France, Japan, Germany and Belgium and mainly relating to the Life & Savings segment.
In most investment funds (particularly open-ended investment funds), minority interests are presented as liabilities under
2.1.2. Main investments in companies accounted for using the equity method
(a) Before the retrospective application of IFRS 11 on January 1, 2014 (see Note 1.2), Natio Assurances was proportionately consolidated.
As of December 31, 2014, real estate companies accounted for using the equity method amounted to €243 million invested assets (€280 million at the end of 2013) and investment funds accounted for using the equity method amounted to €4,324 million invested assets (€3,076 million at the end of 2013), mainly in the United States, United Kingdom, Ireland,
Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when relevant activities are directed by means of contractual arrangements. Structured entities often have a narrow and well-defi ned objective or restricted activities.
The Group does not hold signifi cant interests in unconsolidated insurance/reinsurance structured entities.
Note 2.1). Other funds are not consolidated because they are not controlled or under signifi cant infl uence. By nature, and notably because of the power of decision usually given to the asset managers (internal or external to AXA), most of these funds are structured entities.
As investor, AXA interests in unconsolidated funds are limited to the investments held. These ones are fully recognized in the consolidated balance sheet. Depending on the nature of its investment, AXA receive interests or dividends and can realize capital gains or losses in case of sale. These investments are subject to impairment testing as usual fi nancial assets.
The Group’s asset manager companies also receive fees for the services they provide when they manage investment funds. Some unconsolidated funds managed by the Group are partially or fully held by external investors.
• Note 22 – Net investment result excluding fi nancing expenses.
segment includes all non-operational activities. The fi nancial information relating to AXA’s business segments and holding
Protection & Health products marketed to individual and commercial clients. The Life & Savings products offered by
AXA include Term life, Whole life, Universal life, endowment, deferred annuities, immediate annuities, and other investmentbased products. The Health products offered include critical illness and permanent health insurance products. The types and specifi cities of the products offered by AXA vary from market to market. The Life & Savings segment aggregates ten geographic operating components: France, the United States, the United Kingdom, Japan, Germany, Switzerland, Belgium, the Mediterranean and Latin American Region, Asia (excluding
In this document, “Insurance” covers the three insurance segments: Life & Savings, Property & Casualty and International
Net revenues from banking activities - - - - 533 - 26 559
Net realized gains and losses relating to investments at cost and at fair value through shareholders’equity 1,447 398 60 - - 16 4 1,924
Net result from outward reinsurance 233 (542) (433) - - - (20) (762)
(a) Includes gains/losses from derivatives hedging variable annuities within Life & Savings and International Insurance segments.
Amortization of the value of purchased business in force (228) - - - - - - (228)
Change in goodwill impairment and other intangible assets impairment (16) (100) - (3) - - - (118)
Income from operating activities before tax 4,527 2,815 398 859 (43) (133 ) (713) 7,710
Income (net of impairment) from investment accounted for using the equity method 120 (200) 1 1 - 5 - (73)
(b) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’ equity.
Net revenues from banking activities - - - - 507 - 11 518
Change in unearned premiums net of unearned revenues and fees 3 (267) (19) - - - 35 (248)
Technical charges relating to insurance activities (75,377) (19,498) (1,947) - - - 304 (96,519)
Net result from outward reinsurance (85) (670) (516) - - - 114 (1,156)
Change in goodwill impairment and other intangible assets impairment (69) (87) - - - - - (157)
Income from operating activities before tax 3,536 2,951 321 1,038 3 (274) (847) 6,727
Income from investment accounted for using the equity method 85 52 - - - 2 - 139
Net income from operating activities before tax 3,499 2,997 318 1,005 (13) (1,558) - 6,249
Net consolidated income after tax 2,703 2,125 186 749 (7) (969) - 4,786
(c) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’ equity.
Please refer to pages 171 to 172 of the “Quantitative and
Please refer to pages 173 to 179 of the “Quantitative and
Please refer to pages 179 to 182 of the “Quantitative and
Please refer to pages 87 to 92 , of the “Liquidity and Capital
An analysis of goodwill by cash generating unit is presented in the table below: (In Euro million)
Mediterranean and Latin America Region 959 - 959 883 - 883
Mediterranean and Latin America Region 1,506 - 1,506 1,327 - 1,327
Asset Management: includes the Capital Fondsmaeglerselskab acquisition in Denmark by AllianceBernstein.
International insurance: includes the disposal of ADHAP service at AXA Assistance.
International insurance: includes the disposal of Cours Legendre at AXA Assistance.
In these tests, for all segments, discount rates used in non-risk neutral approaches range from 6.0% to 10.8%, compared to range from 5.6% to 11.9% in 2013, and growth rates, where applicable, from 2% to 4% beyond the strategic plan horizon, which corresponds to the same growth rates as in 2013.
American Region cash-generating units both in Life & Savings and Property & Casualty.
For all cash-generating units, to the extent that securities valuations and interest rates levels remain depressed for prolonged periods of time, volatility and other market conditions stagnate or worsen, new business volumes and profi tability together with the in force portfolio value would likely be negatively affected. In addition, the future cash fl ow expectations from both the in force and new business and other assumptions underlying management’s current business plans could be negatively impacted by other risks to which the
Hong Kong Life & Savings. In conjunction, The Principal would enter into an exclusive distribution agreement with AXA
The assets and liabilities of the MPF and ORSO businesses are classifi ed as held for sale separately from other assets and liabilities in the consolidated statements of fi nancial positions as of December 31, 2014.
(amounts are presented net of intercompany balances with other AXA entities): (In Euro million) December 31, 2014
As of December 31, 2014 comprehensive income amounted to €66 million.
On April 2, 2014, AXA announced it had completed the acquisition. The acquired operations have been in the scope of the Mediterranean and Latin American Region and fully consolidated since April 2, 2014. Taking into consideration a price adjustment paid by AXA on August 26, 2014, the fi nal acquisition cost was COP 683 billion (or €256 million (3)).
Colpatria´s activities between April 2, 2014 and December 31, 2014 contributed to the Group consolidated income amounting €621 million for revenues and €13 million for total net income
In accordance with IFRS 3 Business Combinations, adjustments to the initial accounting for the assets, liabilities and minority interests can be made within twelve months of the acquisition date if new information becomes available to complete the initial accounting.
On June 3, 2014, AXA announced it has completed the sale of its Life & Savings operations in Hungary (1) to Vienna Insurance
These transactions led to recognize a €-50 million exceptional loss (net of tax and group share) in AXA consolidated fi nancial statements as of December 31, 2013.
In AXA consolidated fi nancial statements as of December 31, 2014 an exceptional gain of €26 million (net of tax and group share) has been recognized following the re-evaluation of the transaction as part of the terms of the agreement.
Managers had completed the sale of a majority stake in AXA
I Note 7 Deferred acquisition costs and equivalent 7.1. BREAKDOWN OF DEFERRED ACQUISITION COSTS (DAC) AND EQUIVALENT
Deferred acquisition costs relating to Life & Savings (b) 19,888 17,418
Deferred acquisition costs and equivalent relating to Life & Savings 19,299 17,577
Deferred acquisition costs and equivalent relating to Property & Casualty and International Insurance 1,819 1,768
Acquisitions and disposals of subsidiaries and portfolios (c) (18) - (13) -
Life & Savings deferred acquisition costs and equivalent net carrying value as of December 31 18,174 1,125 16,634 943
(c) In 2014 includes the classifi cation as held for sale of MPF portfolio in Hong Kong Life & Savings. In 2013 includes the sale of MONY portfolio in the United States.
Other intangible assets represented €3,149 million net value as of December 31, 2014 and mainly included: (In Euro million)
Intangible assets recognized in business combinations mainly include value of distribution agreements and customer related intangibles, including €1,447 million (net carrying value) assets with indefi nite useful life.
(a) In 2014, includes €23 million in Greece due to the extension of the distribution agreement with Alpha Bank to Emporiki bank.
In 2013, includes €41 million from the 10 years distribution agreement signed with HSBC in Mexico and €16 million from the acquisition of W.P. Stewart by AllianceBernstein.
Assets backing contracts where the fi nancial risk is borne by policyholders 181,082 181,082 26.60%
(b) Includes assets measured at fair value notably under the fair value option.
Fair value Carrying value balance sheet) Fair value Carrying value balance sheet)
Investment in real estate properties at amortized cost 21,754 16,446 2.71%
Debt instruments designated as at fair value through profi t or loss (c) 34,263 34,263 5.65%
Assets backing contracts where the fi nancial risk is borne by policyholders 162,186 162,186 26.76%
(d) Eligible to the IAS 39 Loans and Receivables measurement category.
Debt instruments available for sale 310,952 363,619 363,619 53,424 757 297,303 320,110 320,110 25,277 2,469
Debt instruments (at cost) that are not quoted in an active market 1,952 1,952 1,952 - - 1,275 1,275 1,275 - -
Equity instruments available for sale 12,971 16,516 16,516 3,637 91 14,133 17,421 17,421 3,395 108
Non consolidated investment funds available for sale 5,980 6,959 6,959 1,000 21 5,389 6,283 6,283 906 11
(b) Includes debt instruments issued by companies in which a State holds interests.
Additional information on the credit risk associated with debt instruments is provided in Note 4 “Financial and insurance risks management”.
Total Financial investments exposed to interest rate risk 35,685 130,095 304,153 469,932 29,367 122,115 262,634 414,116
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 as of December 31, 2014 7,246 6,753 970 1,395 2,526 988 1,352 3,844 25,076
Equity instruments as of December 31, 2013 Restated (a) 7,416 6,466 1,335 1,432 2,755 1,254 1,369 2,387 24,412
(a) As described in Note 1.2.1, comparative information related to previous periods was retrospectively restated for the implementation of IFRS 10 and 11.
The breakdown of transferred fi nancial assets/liabilities not qualifying for derecognition was as follows: (In Euro million)
Non consolidated investment funds mainly holding debt instruments 4,336 256 4,591 3,683 217 3,900
Derivatives related to non consolidated investment funds (182) - (182) 6 - 6
CONSOLIDATED FINANCIAL STATEMENTS 4 4.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Each investment item is presented net of the effect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges).
Debt instruments (at cost) that are not quoted in an active market (e) 6,953 - 6,953 (61) 6,891 7,694 - 7,694 (9) 7,685
Impairment – Non consolidated investment funds 1,029 49 (100) - (29) 950
(b) As described in Note 1.2.1, comparative information related to previous periods was retrospectively restated for the implementation of IFRS 10 and 11.
Financial investments and loans available for sale 268,075 125,832 3,456 397,363 233,637 116,344 3,458 353,440
Investments in real estate properties - 1,023 - 1,023 - 1,033 - 1,033
TOTAL FINANCIAL INVESTMENTS AND LOANS ACCOUNTED FOR AT FAIR VALUE 297,940 153,472 10,917 462,329 259,020 138,936 10,215 408,171
Note: this table excludes assets backing contracts where the fi nancial risk is borne by policyholders with guaranteed minimum features.
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: (i) are readily available including last transaction prices but relate to assets for which the market is not always active, or
Level 2 was €5,557 million. This amount was comprised of €9,476 million transferred investments from Level 2 to Level 1 and €3,919 million transferred from Level 1 to Level 2.
b) Fair values of assets not quoted in an active market – no active markets (level 2 and level 3)
The identifi cation of level 3 assets among assets not quoted in an active market involves a signifi cant level of judgment. The following are considered as observable: inputs provided by external pricing services, information observable obtained from specialized data providers, rating agencies, external surveys.
Transfer in and out of the level 3 category and other movements