CERTAIN PRELIMINARY INFORMATION ABOUT THIS ANNUAL REPORT 1 Chairman’s Message 4 Chief Executive Off icer’s Message 5
THE AXA GROUP 13 1.1 Key figures 15 1.3 Business overview 22
ACTIVITY REPORT AND CAPITAL MANAGEMENT 31 2.1 Market Environment 32 2.2 Operating Highlights 37 2.3 Activity Report 45 2.4 Liquidity and capital resources 90 2.5 Events subsequent to December 31, 2018 96
This Registration Document includes (i) all the components of the Annual Financial Report (Rapport Financier Annuel) referred to in paragraph I of Article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) as well as in Article 222-3 of the AMF General Regulation (Règlement Général de l’AMF) (please refer to the cross-reference table on page 486 of this Registration Document which indicates the relevant sections of this Registration Document corresponding to the items referred to in Article 222-3 of the AMF General Regulation), (ii) all disclosure matters required to be included in the Board of Directors’ Report to AXA’s Shareholders’ Meeting to be held on April 24, 2019, established pursuant to Articles L.225-100 et seq. of the French Commercial Code (Code de commerce) (the relevant sections of this Registration Document corresponding to such required disclosures have been approved by AXA’s Board of Directors and are referred to in the cross-reference table on page 480 of this Registration Document), and (iii) all the elements required to be included in the corporate governance report established pursuant to Articles L.225-37 et seq. of the French Commercial Code (Code de commerce) (the relevant sections of this Registration Document corresponding to such required disclosures have been approved by AXA’s Board of Directors and are referred to in the cross- reference table on page 481 of this Registration Document) (the “Annual Report”).
The Company’s ordinary shares are referred to in this Annual Report as “shares”, “ordinary shares”, “AXA shares” or “AXA ordinary shares”. The principal trading market for AXA’s ordinary shares is the regulated market of Euronext in Paris (Compartment A), which we refer to in this Annual Report as “Euronext Paris”.
In 2018, thanks to the IPO of our US life insurance and asset management businesses and the acquisition of the XL Group, a global leader in P&C Commercial lines insurance and reinsurance, we were able to deeply transform our Group’s profile. These two operations have contributed to the objective of reducing our financial risks and striking a balance between insurance and financial risks.
The acquisition of the XL Group has enabled AXA to become the global leader in P&C Commercial lines insurance and to extend its range of solutions and services to a greater number of clients. It is expected to result in significant long-term value creation for all stakeholders, thanks to better risk diversification, increased potential for cash flow back to the Group and improved growth prospects.
We also continued to implement our strategy aiming to transition from insurance provider to partner of our clients (Payer-to-Partner). In this context, in 2018 we acquired Maestro Health, Inc., a US digital health benefit administration company. This investment will accelerate innovation, and reflects our desire to gradually build our profile as a trusted partner, empowering our clients to live a better life.
AXA’s strategic positioning is clear, its balance sheet is strong and the growth of its preferred segments (Health, Protection and P&C Commercial lines) accelerated in 2018. The Board of Directors and I are more committed than ever to assist Thomas Buberl and his management team in the roll-out of the Ambition 2020 strategic plan, which we fully support.
Our parametric insurance products, which are based on an independent parameter that is correlated to the client’s losses and enable an automatic claims payment, were also developed. Based on data from satellites, weather stations and other high-quality data sources, they are now available in over 40 countries, covering a range of risks, mainly climatic and natural disasters, in many areas, including large companies and the public sector.
As 2018 ends, our Group is better positioned than ever before to deal with these new challenges. This was the objective of the major transactions we carried out during the year, which enhance our ability to protect our clients and position us well for the future. The transformation of our Swiss group life business, the disposal of AXA Life Europe and most importantly the successful IPO of AXA Equitable Holdings, Inc. reduce our exposure to financial markets’ volatility. Through the acquisition of XL Group, AXA became the world’s leading P&C Commercial lines insurer, capable of protecting companies of all sizes, anywhere in the world, and against all types of risks. Thanks to the combination of these transactions, we have initiated a shift in our risk profile, moving away from financial risks towards technical risks, which lie at the heart of our business and mission.
In 2018, we also presented a new strategy for Asia, a market characterised by strong growth and a booming middle-class. In China, we announced our acquisition of the remaining 50% stake in AXA Tianping to accelerate our growth, thus becoming the number one foreign P&C insurer of the country. The international presence of our brand has been strengthened by the global partnership we signed with Liverpool FC, and more recently, by the off icial unveiling of our new global brand positioning: “Know you can”. It perfectly embodies our faith in our strategy and in our capacity to better serve our clients.
To better fulfil our promise to empower people to live a better life and become a trusted partner of our customers, we must pursue our innovation and simplification eff orts. This will allow us to get closer to the end customer and better cater to their evolving needs. When it comes to innovation, 2018 was an intense year, concluded by the inauguration of AXA Next, a new entity dedicated to building new services and business models designed to enhance insurance coverage and off er additional services to our clients.
I would like to sincerely thank our more than 100 million clients; their enduring trust honours us and their satisfaction is our daily purpose and the object of our energy, expertise and passion.
WE COMMIT to customers, partners and investors by reinvesting part of our profits in our business, human resources and communities.
The insurance sector has been undergoing a profound change over the last few years: a challenging financial environment with continued low interest rates, increasing competition from new competitors across markets, and marked changes in terms of customer expectations. In parallel, the need for insurance and associated services are growing, driven by today’s societal behavioural changes, climate change, as well as the evolution of technology, amongst others.
In order to respond to these developments and seize these new opportunities, AXA is constantly rethinking and expanding its value chain with the ambition of becoming a true partner for its clients. Moving from an approach based on risk hedging to a logic relying on ecosystems, the Group is progressively diversifying towards a world of services: thus, off ering increasing complementary services in addition to insurance coverage, enabling clients to gain more from their relationship with their insurer.
With a clear vision and strategy for Asia, AXA reaffirmed its ambitions in this key region. Through the announced acquisition of 100% stake in AXA Tianping, AXA confirmed its conviction in the Chinese market as a growth platform for the future. With this acquisition, AXA will become the first foreign insurer to own 100% of a leading P&C insurance company in China. Apart from China, the Group further outlined key strategic priorities for Asia to accelerate growth: focus on transforming agency distribution, developing insurance and service propositions towards health segment, recruiting talents with strong track record of execution in the region, and building local brand recognition through launch of new partnerships such as that with the Liverpool football club.
AXA SA is the holding company of the AXA Group, a worldwide leader in insurance and A sset M anagement. In 2018, AXA remained the 1st global insurance brand for the 10th consecutive year (1) and AXA Group was one of the world’s largest insurance groups (2) with total assets of €931 billion and the world’s 11th largest asset manager (3) with total assets under management of €1,424 billion for the year ended December 31, 2018.
* For the full list of countries, refer to the Glossary set forth in Appendix V of this Annual Report.
Following the completion of the acquisition of XL Group on September 12, 2018, the financial reporting has been aligned and retroactively restated in this report under the seven following segments: ■ France (insurance and banking activities, and holdings); ■ Europe, consisting of: • Switzerland (insurance activities),
• Asia – Direct, consisting of: • AXA Global Direct Japan,
Assets backing contracts with financial risk borne by policyholders (Unit-Linked) 160,176 175,003 175,292
For additional information on AXA’s segments, see Section 2.3 “Activity Report” and Note 3 “Consolidated statement of income by segment” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
AXA determines its dividend policy on the basis of its adjusted earnings net of financial charges related to undated subordinated debt, preferred shares and equity components of mandatory exchangeable bonds into shares of AXA Equitable Holdings, Inc. In 2018, AXA indicated that it targets to pay aggregate dividends in a general range of 50% to 60% of this amount (representing an increase from the prior indicative range of 45% to 55%). The dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors (as noted above) which may have an impact on this target from one year to another. In assessing the dividend to be paid in any given year, Management tries to strike the appropriate balance between (i) prudent capital management, (ii) reinvestment of previous results to support business development and (iii) an attractive dividend for shareholders.
A dividend of €1.34 per share for the 2018 fiscal year will be proposed to the Shareholders’ Meeting to be held on April 24, 2019.
The following table sets forth information on the dividends declared and paid in respect of the last five fiscal years: Fiscal year Distribution
AXA’s principal insurance subsidiaries Outlook Senior debt of the Company Outlook
S&P Global Ratings July 10, 2018 AA- Stable A Stable A-1
Moody’s Investors Service March 7, 2018 Aa3 Negative A2 Negative P-1
AXA’s social, societal, environmental and governance performance is rated by a number of specialists, including investors, brokers and rating agencies that focus specifically on the SRI market, as well as specialist organizations focused on single sustainability themes. The Group generally ranks amongst the top performers in its industry and is also included in the main international sustainability indices: ■ DJSI World and DJSI Europe (based on RobecoSAM research); ■ Euronext Vigeo, World 120, Eurozone 120 and France 20 (based on Vigeo Eiris research); ■ FTSE4GOOD (based on FTSE Russell research).
Vigeo Eiris is an ESG (Environmental, Social and Governance) rating agency. Its methodology leverages a number of sustainability criteria based on international standards. com/ about-us/methodology-quality-assurance/
Sustainalytics is an ESG (Environmental, Social and Governance) rating agency covering 9,000 companies. The agency focuses on corporate governance, material ESG issues, and controversies.
The CDP (formerly known as the Carbon Disclosure Project) runs a global disclosure system that enables companies, cities, states and regions to report on their environmental impacts. The CDP also transforms this data into analysis on critical environmental risks, opportunities and impacts.
AXA originated from several French regional mutual insurance companies: “Les Mutuelles Unies”.
Transfer of the insurance businesses to Compagnie du Midi (which subsequently changed its name to AXA Midi and then AXA).
Acquisition of a controlling interest in The Equitable Companies Incorporated (United States), which subsequently changed its name to AXA Financial, Inc. (“AXA Financial”).
Acquisition of a majority interest in National Mutual Holdings (Australia), which subsequently changed its name to AXA Asia Pacific Holdings Ltd. (“AXA APH”).
Acquisition of (i) Sanford C. Bernstein (United States) by AXA’s asset management subsidiary Alliance Capital, which subsequently changed its name to AllianceBernstein (now AB); (ii) the minority interest in AXA Financial; and (iii) Japanese life insurance company, Nippon Dantaï Life Insurance Company; and
Sale of Donaldson, Lufkin & Jenrette (United States) to Credit Suisse Group.
Acquisition of (i) 7% of African Reinsurance Corporation (“Africa Re”); (ii) BRE Insurance, mBank’s Property & Casualty subsidiary in Poland; (iii) the P&C large commercial risks insurance subsidiary of SulAmérica in Brazil; (iv) Commercial International Life, the Life & Savings joint-venture between Commercial International Bank (“CIB”) and Legal & General in Egypt and conclusion of an exclusive Life & Savings distribution partnership with CIB; and (v) Genworth Lifestyle Protection Insurance; Launch of (i) AXA Strategic Ventures, a venture capital fund dedicated to emerging strategic innovations in insurance and financial services; and (ii) Kamet, an InsurTech incubator dedicated to conceptualizing, launching and accompanying disruptive InsurTech products and services; and
Sale of AXA’s (i) Portuguese operations to Ageas; (ii) UK off shore investment bonds business based in the Isle of Man to Life Company Consolidation Group; (iii) UK (non-platform) investment and pensions businesses and its direct protection businesses to Phoenix Group Holdings; (iv) UK wrap platform business Elevate to Standard Life plc; (v) Hungarian banking operations to OTP bank plc. and (vi) Life & Savings and Property & Casualty operations in Serbia to Vienna Insurance Group and exit from the Serbian market.
Sale of (i) the Property & Casualty commercial broker in the UK, Bluefin Insurance Group Ltd, to Marsh, (ii) the Life & Savings insurance operations in Romania to Vienna Insurance Group and (iii) AXA Life Europe Limited’s off shore investment bonds business to Harcourt Life International dac (recently renamed to Utmost Ireland dac), a subsidiary of the Life Company Consolidation Group.
Exclusivity agreement entered into with Cinven for the potential disposal of AXA Life Europe (“ALE”), a specialized platform which designed, manufactured and distributed AXA’s Variable Annuity products across Europe.
AXA operates in seven segments (France, Europe, Asia, AXA XL, the US, International and Transversal & Central Holdings) and off ers a broad range of Life & Savings, Property & Casualty, Health, Asset Management and Banking products and expertises.
The nature and level of competition vary among the countries where AXA operates. AXA competes with insurance companies and also with banks, a sset m anagement companies, investment advisers and other financial institutions.
For additional information on markets, see Section 2.1 “Market environment – Market conditions” of this Annual Report.
The table set out below presents AXA gross revenues (aft er intersegment eliminations) by line of business.
The tables below summarize AXA gross revenues (aft er inter-segment eliminations) by segment for the indicated periods.
In Health, a teleconsultation service was launched, in partnership with the public sector, in order to provide healthcare to a wider range of patients.
In Europe (excluding France), AXA operates in seven countries (Switzerland, Germany, Belgium, the United Kingdom & Ireland, Spain and Italy).
Except for the United Kingdom and Ireland (where AXA operates only in Property & Casualty and Health), AXA off ers a full range of insurance products, including Life & Savings, Property & Casualty and Health. In each country, its off ering covers a broad range of products including m otor, h ousehold, property and general liability insurance, term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investmentbased products for both Personal/Individual and Commercial/ Group customers.
Types and specificities of the products off ered by AXA vary from market to market.
AXA in Europe aims at becoming a partner to customers by providing innovative solutions along customer journeys around the need for protection, peace of mind and ease of doing business. In 2018, several innovative off ers around the core insurance products have been launched, with a focus on Health and SME.
Moreover, further innovative solutions in areas such as Mobility have been launched, for example UpTo, a new, transparent and flexible car online subscription solution in Switzerland.
(a) Net of intercompany eliminations. (b) Include fees and charges related to investment contracts with no participating features, net revenues from banking activities and revenues from other activities.
AXA off ers a full range of insurance products, including Life & Savings, Property & Casualty as well as Health. Types and specificities of the products off ered by AXA vary depending on geographies: ■ in Japan, AXA primarily off ers savings, p rotection & h ealth products, notably including whole life insurance, with or without medical cover, term life insurance as well as other p rotection and h ealth products (such as disability, cancer); ■ in Hong Kong, AXA distributes individual life insurance (notably traditional whole of life and investment-linked), as well as p rotection and h ealth products (including critical illness). In Property & Casualty, product off er includes traditional general insurance products such as m otor, h ousehold, group medical, as well as commercial insurance; ■ in Asia High Potentials,
• in China, AXA primarily distributes m otor insurance as well as other general insurance products, and covers the whole range of Life & Savings products; ■ in Asia – Direct, Direct business focuses on m otor insurance as well as casualty insurance in South Korea and on m otor insurance as well as other personal insurance products in Japan.
• in the Philippines, AXA launched a new Protection with Savings product in order to address the growing market of high net worth customers, including a simpler and more customer-transparent fee structure,
■ in China, AXA launched Motor Third-Party Liability insurance with doubled coverage on legal holidays, in order to provide tailor-made protection for customers using their car primarily on weekends; ■ in Asia – Direct, AXA Global Direct Japan introduced a specific tariff for advanced safety vehicles equipped with autonomous emergency braking and AXA Global Direct South Korea launched new Protection products and a partnership with SoCar, a car sharing service, for short term m otor insurance.
AXA distributes its products through different distribution channels, in particular exclusive and non-exclusive agents, brokers and partnerships. AXA has been developing strong bancassurance partnerships with large international and local financial institutions.
AXA XL, through its operating subsidiaries, is a leading provider of Property & Casualty insurance and reinsurance coverages to industrial, commercial and professional firms, insurance companies and other enterprises on a worldwide basis: ■ through its insurance operations, AXA XL off ers a broad range of coverages, including property, primary and excess casualty, excess and surplus lines, environmental liability, professional liability, construction, marine, energy, aviation & satellite, fine art & specie, equine, livestock & aquaculture, accident & health and crisis management, among other risks; ■ through its reinsurance operations, AXA XL provides casualty, property risk, property catastrophe, specialty, and other reinsurance lines on a global basis with business being written on both a proportional and non-proportional treaty basis, and also on a facultative basis.
The majority of AXA XL business originates via a large number of international, national and regional producers, acting as the brokers and representatives of current and prospective policyholders. This channel is supported by client and country management teams, which include sales and distribution representatives in key markets throughout the world.
AXA also provides, through AB, diversified investment management and related services to individual investors, private clients and to a variety of institutional clients (including AXA and its insurance subsidiaries). AB’s off ering includes (i) diversified investment management services through separately managed accounts, hedge funds, m utual funds, and other investment vehicles to private clients (such as high net worth individuals and families, trusts and estates, and charitable foundations), (ii) management of retail m utual funds for individual investors, (iii) management of investments on behalf of institutional clients, and (iv) fundamental research, quantitative services and brokerage-related services in equities and listed options for institutional investors.
Furthermore, in Protection, the following new products were introduced: Life Indexed Unit-Linked Protect and Employee Benefits Group Life.
AXA off ers insurance products, including Life & Savings, Property & Casualty, Health, as well as banking products off ered by AXA Bank Belgium. Types and specificities of the products off ered by AXA vary depending on geographies and cover a broad range of products including m otor, h ousehold, property and general liability insurance, term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products for both Personal/Individual and Commercial/Group customers.
International m arkets continued to strengthen its move from Payer to Partner. We have introduced several innovations to provide a superior customer experience, e.g. in Morocco (onsite m otor claims inspection and cash payment), in Poland (fully digitalized claims process) and in Colombia (health tele underwriting). In addition, International m arkets has broadened its services beyond insurance, particularly in Health, e.g. in the Gulf Region (“Health-on-Track” program off ering prevention and care coordination services).
This segment includes the main transversal entities and the non-operating activities conducted by the central holding companies within the Group.
(a) Net of intercompany eliminations. (b) Restated: as per the new governance. (c) Others include AXA Liabilities Managers, AXA Global Re and AXA Life Europe. (d) Include fees and charges related to investment contracts with no participating features and revenues from other activities.
Through its operating entities located in more than 20 countries, AXA Investment Managers (“AXA IM”) provides its clients with a wide range of global products and expertises, in the Asset Management area, principally via Mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom m utual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and Unit-Linked fund backing insurance products. AXA IM’s expertise include (i) Fixed Income, (ii) Framlington and Rosenberg Equities, (iii) Multi-Asset Client Solutions, (iv) Structured Finance, (v) Real Assets and (vi) absolute return strategy managed by Chorus.
AXA IM has added a whole set of innovative m utual funds to its off ering in 2018, including but not limited to specialty investment strategies encompassing a broad range of asset classes (AXA WF Framlington Clean Economy, AXA WF Framlington Fintech, AXA WF Global Multi Credit, and AXA IM Andante Opera III), the expansion of its Responsible Investment off ering all across the spectrum, and the building of brand new structured a sset m anagement strategies such as AXA IM Conviction Autocalls.
In 2018, financial markets started the year on an upbeat note, supported by an increase in both global manufacturing and trade throughout 2017. Markets then suff ered a setback in the second half of the year, mostly in reaction to several political decisions combined with disappointing economic indicators.
In Europe, the rise of populist and anti-establishment parties and disappointing economic indicators published in the second semester gave rise to concerns about a slowdown of the economy. The expectations of a looming trade war between China and the United States as well as the slowdown of Asian demand negatively impacted exports. In Italy, discussions around the budget draft ed by the coalition of the League and the Five Star Movement led to a significant tightening of financial conditions, with the rise in sovereign yields (back to the level of mid-2014) spilling over to Italian banks and non-financial corporates. Meanwhile, the European Central Bank tapered then stopped its net asset purchases, whilst indicating that interest rates would stay at their current level until at least the summer 2019. In respect to financial markets, the Stoxx 600 closed the year 10% lower than its end 2017 levels, mostly in relation to a general slowdown of the activity in Europe, as observed during the last quarter.
In the United States, GDP growth peaked in 2018 at 2.9% and core inflation moderately increased, from 1.8% at the end of 2017 to 2.2% at the end of 2018, supported by an acceleration of wage increases and a historically low unemployment rate (3.9%). This environment pushed the 10 year US Treasury yields from 2.4% at the end of 2017 to a seven year high of 3.24% in November. In a context of higher US Treasury yields and lower growth expectations, financial markets turned to a risk-off mode in the fourth quarter of 2018, with the S&P500 index finishing the year 6.2% lower than its end 2017 level. The US monetary policy remained unchanged during the year, with the Fed raising its benchmark interest rates four times during the year, the last one in December bringing the Federal Funds rate to 2.50%.
The S&P 500 implied volatility index (VIX) increased from 11.0% on December 31, 2017, to 25.4% on December 31, 2018.
Government bond yields increased since December 31, 2017, in some mature economies: the 10-year US T-bond yield increased by 28 bps to 2.69%, the 10-year Belgium government bond yield increased by 13 bps to 0.77%, the UK 10-year government bond yield increased by 8 bps to 1.27%, while the 10-year German Bund yield decreased by 18 bps to 0.25%, the French 10-year government bond yield decreased by 7 bps to 0.71%, the 10-year Japan government bond yield decreased by 5 bps to 0.00% and the 10-year Swiss government bond yield decreased by 2 bps to -0.17%.
In the Eurozone peripheral countries, the 10-year government bond yields increased in most countries: +78 bps to 2.77% in Italy, +26 bps to 4.38% in Greece and +23 bps to 0.91% in Ireland, while it decreased by 21 bps to 1.72% in Portugal and by 15 bps to 1.42% in Spain.
The French insurance market experienced a deep transformation in 2018, with both new French and European regulations coming into force. First, several tax reforms on Life insurance products were enacted including a flat tax rate of 30% on investment income and a decrease of the corporate tax rate (“Loi de Finances 2018”). Additionally, several regulations were implemented with a view to increase the transparency of dealings with policyholders and ultimately improve the relationship with the client base, including the PRIIPS (Packaged Retail Investment and Insurance-based Products) Regulation that will enhance protection standards for individual investors and increase transparency in the market by providing a pre-contractual document prior to any transaction and MIFID II (Markets in Financial Instruments Directive) that aims to improve market transparency by introducing specific disclosures from Financial Services players. These changes brought operational as well as organizational changes to the entire insurance industry. The French Savings insurance market grew by 4% to reach €140 billion premiums, of which UnitLinked contracts represented 28%. The French Protection & complementary Health insurance market grew by 6% to reach €24 billion worth of premiums. The market experienced deep changes and significant innovations including but not limited to strategic partnerships, the broad development of telemedicine solutions and real time underwriting. In the context of an ever more competitive industry, with strong pricing pressures and an increasing market concentration, the French Property & Casualty insurance market continued to grow steadily in 2018, mainly in Motor and Property lines of business, due to both an atypical natural events charge combined with an increase of h ouseholds’ disposable income.
In Japan, the Life & Savings insurance market recovered from a sharp decline last year to a slight growth supported by single premiums foreign denominated products and by the SME market with the development of tax-eff icient savings products, while Protection and Annuity markets remained at lower level due to tariff s increase as a consequence of the low interest rates environment. The Health insurance market slightly increased and new innovative products continued to be developed.
In Hong Kong, the Life & Savings insurance market recorded a stable growth and remained dominated by Savings products, with sales contribution from Unit-Linked staying low in a context of stringent regulatory environment. The Property & Casualty insurance market experienced an improved growth mainly driven by General L iability and Property products. The Health insurance market continued to grow and remained competitive.
In International markets, the Property & Casualty business benefited from market growth in Latin America with positive trends in Mexico and Brazil. The Health and the Life & Savings insurance businesses both experienced a strong growth in Mexico.
Ireland (Republic of Ireland) Motor 1 25.0 n/a n/a Insurance Ireland P&C Statistics 2017 as of December 31, 2017.
Belgium 1 19.7 5 8.0 Assuralia (Belgium Professional Union of Insurance companies) based on gross written premium as of September 30, 2018.
Spain 5 6.2 11 2.3 Spanish Association of Insurance Companies. ICEA as of September 30, 2018.
Hong Kong (incl. Health) 1 7.7 6 4.8 Insurance Authority statistics based on gross written premiums as of September 30, 2018.
XL (Lloyd’ s) 1 7.8 n/a n/a Lloyd’s Annual Report 2017 as of December 31, 2017.
United States Variable Annuity n/a n/a 3 10.5 Morningstar VARDS as of September 30, 2018.
Brazil 18 1.9 n/a n/a SUSEP (Superintendência de Seguros Privados) as of December 31 , 2018.
Mexico Health 2 16.3 n/a n/a AMIS (Asociacion Mexicana de Instituciones de Seguros) as of September 30, 2018.
China (incl. Health) 16 0.5 16 1.3 CBIRC (China Banking and Insurance Regulatory Commission) as of December 31, 2018 .
28 1.0 4 10.9 TLAA (Thai Life Assurance Association) statistics report as of November 30, 2018 and TGIA (Thai General Insurance Association) as of October 31, 2018.
As 2018 saw the resurgence of volatility in equity markets and slowly-increasing yields on fixed income assets, investors were incentivized to look to alternative asset classes in the hunt for yields: institutional investors therefore accelerated their shift .
In the context of price compression, the need to better align fees with performance grows bigger. No fee fund, zero-commission platforms, performance fees based models, new pricing models have emerged.
In this context, AXA Investment Managers ranked 19th (1) and AB 34th (1) based on volume of assets under management. On a combined basis, AXA ranked 11th (1).
(1) Ranking established by AXA based on information available as of September 30, 2018.
Re-appointment of Messrs. Denis Duverne and Thomas Buberl as Chairman of the Board of Directors and Chief Executive Off icer
On April 25, 2018, AXA’s Shareholders’ Meeting renewed Messrs. Denis Duverne and Thomas Buberl’s directorships as members of AXA’s Board of Directors.
The Board of Directors held at the end of the Shareholders’ Meeting confirmed the renewal of Messrs. Denis Duverne and Thomas Buberl as Chairman of the Board of Directors and Chief Executive Off icer respectively, for the duration of their directorships as members of the Board.
This acquisition reflects AXA’s continued strong focus on the health business and supports its “Payer-to-Partner” strategy, in line with Ambition 2020, and represents an important step towards building a comprehensive and long-term population health management solution to provide better care at lower cost.
On September 12, 2018, AXA announced that it had completed the acquisition of XL Group Ltd, following the announcement on March 5, 2018, that AXA had entered into an agreement to acquire XL Group Ltd. The completion of the transaction followed the fulfilment of customary closing conditions, including approval by XL Group shareholders and receipt of all necessary regulatory approvals.
The opportunity to acquire XL Group has led AXA to announce its intention to fully exit from its existing US operations. Together with the initial public off ering (“IPO”) of AXA’s US operations (1) and intended subsequent sell-downs, this transaction will gear AXA further towards technical margins less sensitive to financial markets.
The strong complementarities between AXA and XL Group provide opportunities for significant value creation, off setting over time the earnings dilution resulting from the US IPO and the intended subsequent sell-downs. It will also allow for material capital diversification benefits under the Solvency II framework and a strong return on investment. In this context, AXA also reaff irmed its Ambition 2020 targets.
AXA Tianping has developed a national footprint with 25 branches and 93 sub-branches, covering 20 provinces which together generate over 85% of China’s GDP (9).
On February 21, 2018, AXA announced it had entered into an agreement with Mr. Elkhan Garibli to sell all its insurance operations in Azerbaijan. Under the terms of the agreement, Mr. Elkhan Garibli would acquire 100% of the non-life entity (AXA MBask Insurance Company OJSC).
(1) NYSE listing of AXA Equitable Holdings, Inc., consisting of the AXA US Life & Savings business and the AXA Group’s interest in AllianceBernstein LP and AllianceBernstein Holding LP (“AB”), which was successfully completed on May 14, 2018. AXA America Corporate Solutions Inc. was not part of the IPO.
(2) Following the closing of the merger and the delisting of XL Group’s securities, XL Group’s reporting obligations under the Securities Exchange Act of 1934 were suspended.
(7) EUR 1 = RMB 7.6191 average exchange rate as of December 31, 2017 (s ource: Bloomberg).
(9) Source: Provincial Bureau of Statistics of China as of FY17.
The total cash proceeds generated for AXA Group would be €1,165 million, which includes €925 million (representing an implied 1.0x BV multiple (1)) from the potential sale of ALE shares to be fully paid in cash at closing, and a capital distribution from ALE to AXA SA of €240 million, prior to the transaction, in June 2018.
This transaction is expected to result in a positive impact on AXA Group Solvency II ratio of ca. 2 points. The Underlying Earnings generated from the business under consideration were €19 million in FY17.
Uber and AXA joined forces to set a new standard for protection of independent drivers and couriers
Uber and AXA shared the belief that everyone, including independent workers, should have the option of benefitting from optimum protection for themselves and their families.
For ING, this is a continued step towards delivering the “Think Forward” strategy and empowering around 13 million ING customers stay a step ahead in life. For AXA, the partnership is another step in its “Payer-to-Partner” strategy, in growing in its preferred segments and towards its vision to empower people to live a better life.
AXA became Off icial Global Insurance Partner of Liverpool Football Club
The multi-year partnership with English Premier League legends Liverpool Football Club (“Liverpool FC”) sees AXA become the club’s Off icial Global Insurance Partner.
On March 7, 2018, Moody’s Investors Service aff irmed the insurance financial strength rating of AXA’s principle insurance subsidiaries at “Aa3”, changing the outlook to negative from stable.
On July 10, 2018, S&P Global Ratings aff irmed the long-term financial strength rating of AXA’s core operating subsidiaries at “AA-” with a stable outlook, removing the ratings from CreditWatch negative.
AXA announced the successful placement of €2 billion dated subordinated notes due 2049
On March 22, 2018, AXA announced the successful placement of €2 billion of Reg S subordinated notes due 2049 to institutional investors. The net proceeds of the issue of the Notes were used for the financing of part of AXA’s acquisition of XL Group Ltd.
The initial coupon has been set at 3.25% per annum. It will be fixed until the first call date in May 2029 and floating thereaft er with a margin including a 100 basis points step-up.
On April 10, 2018, AXA Switzerland (“AXA”), the largest insurer of SMEs in the Swiss market, announced that it had entered into an agreement with its main occupational benefits foundations (1) (“Foundations”) to convert their business model from a full-value insurance (2) model to a semi-autonomous model (3), on January 1, 2019, (“Model Transformation”). Under the semi-autonomous model, death and disability provisions and administration services continue to be covered by AXA, while the responsibility of asset allocation and investment returns to policyholders is with the Foundations. AXA Group, as a globally renowned asset manager, will continue to off er investment management services to the Foundations.
Ongoing low interest rates in recent years and strong regulatory requirements in Switzerland have resulted in full-value insurance becoming increasingly lower value for money for corporate clients and their employees. Swiss life insurers who off er fullvalue insurance must maintain capital coverage for their entire pension obligations, including the minimum interest guarantees. This framework necessitates a very cautious investment strategy, leading to lower investment return opportunities for its clients’ employees, as compared to the semi-autonomous model.
(1) Collective group pension schemes, which are managed by an independent board.
AXA and the responsible trustees informed the relevant Swiss supervisory authorities, i.e. the Swiss Financial Market Supervisory Authority (FINMA) and the Berufliche Vorsorge (BVG) and Foundation Supervision of the Canton of Zurich (BVS), on the Model Transformation. The transaction has been finalized on January 1, 2019.
On April 25, 2018, AXA announced that AXA Equitable Holdings, Inc. had successfully completed its pre-IPO reorganization transactions, including the repayment of all internal loans provided by AXA Group and the purchase of AllianceBernstein units previously owned by AXA SA and its aff iliates.
AXA successfully completed the IPO of AXA Equitable Holdings, Inc. and secured the financing of the acquisition of XL Group
Overall proceeds amounted to USD 4.0 billion, with the sale of 24.5% of AEH’s outstanding shares at USD 20 per share and the issuance of USD 750 million of mandatory exchangeable bonds for AEH shares, combined with the exercise of the over-allotment options granted to underwriters, resulting in the purchase by the underwriters of an additional 20.6 million AEH shares (3.7% of AEH’s outstanding shares) and USD 112.5 million mandatory exchangeable bonds (7).
(5) EUR 1 = CHF 1.1550 average exchange rate as of December 31, 2018. (6) The assets and liabilities transferred to the Foundations were classified as “held for sale” in AXA Group’s 1H18 consolidated financial statements. (7) The mandatory exchangeable bonds (including the exercise of the over-allotment option) will be exchanged at maturity into a minimum of 6.5% of AEH’s outstanding shares (subject to anti-dilution adjustments) if the AEH share price is greater than or equal to USD 23.50 per share, and a maximum of 7.7% of AEH’s outstanding shares (subject to anti-dilution adjustments) if the AEH share price does not exceed the IPO price.
The details of the overall proceeds from the AEH share transactions are the following: ■ S ale of AEH shares: • AXA sold 137.25 million AEH shares at USD 20 per share,
• T he bonds will mature on May 15, 2021, unless exchanged earlier at the option of AXA (2 ) (3 ),
For additional information on the accounting-related impacts of the AEH IPO, the Secondary Off ering and the Share Buyback, see in Part 5.6 – Note 5.3 “Other information relating to goodwill, acquisitions and disposals of subsidiaries” of this Annual Report.
(1) EUR 1 = USD 1.23 as of March 2, 2018 (source: Bloomberg), as announced at the time of the acquisition of XL Group Ltd on March 5, 2018. (2) The mandatory exchangeable bonds (including the exercise of the over-allotment option) will be exchanged at maturity into a minimum of 6.5% of AEH’s outstanding shares (subject to anti-dilution adjustments) if the AEH share price is greater than or equal to USD 23.50 per share, and a maximum of 7.7% of AEH’s outstanding shares (subject to anti-dilution adjustments) if the AEH share price does not exceed the IPO price.
• 8% to 12% New Business Value (1) (NBV) CAGR (2) 2018-2020; ■ AXA XL: • C ombined ratio (3) at ca. 95% by 2020, assuming normalized natural catastrophes of ca. 4 points,
• U pdated share buyback guidance: additional flexibility on share buyback even within the Solvency II ratio (6 ) target range; ■ I ncreased Ambition 2020 Adjusted ROE (4 ) target: 14% - 16%, previously 12% - 14%; ■ D ebt gearing (4) target range of 25%-28% by 2020 reaff irmed; ■ A mbition 2020 underlying e arnings per share (UEPS) (4 ) CAGR reaff irmed at 3% - 7%; ■ A mbition 2020 cumu lative Operating Free Cash Flows (1 ) reaff irmed at Euro 28-32 billion.
(1) APE, NBV and O perating F ree C ash F lows are non-GAAP fina ncial measures and are defined in Appendix V Glossary of this Annual Report. (2) On a comparable basis. (3) Consistent with AXA’s definition, combined ratio is based on gross earned premiums. Combined ratio is an alternative performance measure. For further information, please refer to “Cautionary statement regarding forward-looking statements and the use of non-GAAP financial measures” on page 3 of this Annual Report.
(4) Underlying earnings, underlying earnings per share, adjusted ROE a nd debt gearing are alternative performance measures. For further information, please refer to “Cautionary statement regarding forward-looking statements and the use of non-GAAP financial measures” on page 3 of this Annual Report.
(6) The Solvency II ratio is estimated primarily using AXA’s internal model calibrated based on an adverse 1/200 years shock and assuming equivalence for AXA Equitable Holdings, Inc. in the US. For further information on AXA’s internal model and Solvency II disclosures, please refer to AXA Group’s SFCR for FY 2017, available on AXA’s website (www.axa.com). As in previous disclosures all AXA US entities are taken into account assuming US equivalence. The contribution to the AXA Group Solvency II ratio from the entities that were part of the XL Group (“XL entities”) as at December 31, 2018, was calculated in accordance with the equivalence regime, based on the Bermudian Standard Formula SCR, plus a 5% add-on required by the AXA’s lead supervisor (ACPR), as a transitional measure. Furthermore, in compliance with the decision from ACPR, XL entities will be fully consolidated for Solvency II purposes (as per the consolidationbased method set forth in the Solvency II Directive) and their contribution to the Group’s solvency capital requirement will be calculated using the Solvency II standard formula from March 31, 2019. Subject to the prior approval of the ACPR, the Group intends as soon as FY 2020 to extend its i nternal m odel to XL entities.
On July 11, 2018, following the announcement of the acquisition of XL Group Ltd by AXA SA on March 5, 2018, the two companies presented a new step in the planning process for combining XL Group operations, AXA Corporate Solutions and AXA Art into the new division of the AXA Group dedicated to large P&C Commercial lines and S pecialty risks.
Under the AXA brand, the new off erings will present an exciting new proposition to clients and brokers around the world.
AXA Group unveils its new global brand positioning: “Know you can”
In order to meet its obligation to deliver shares and to eliminate the dilutive eff ect of certain share-based compensation schemes (2), as of December 31, 2018, AXA had bought back 7,482,568 shares. These shares will be delivered to the beneficiaries of share-based compensation schemes or cancelled, all in accordance with the share repurchase program (3).
The aggregate proceeds from the off ering amount to approximately €330 million, for a total of over 15 million newly-issued shares, subscribed at a price of €18.56 for the classic plan and €21.83 for the leveraged plan. The new shares are created with full rights as of January 1, 2018.
(1) AXA is the Global Insurance Partner of Liverpool Football Club. (2) Stock-options plans and performance shares plans.
(3) AXA share repurchase program was authorized by the Shareholder’s Meeting of April 25, 2018.
(c) Net of intercompany eliminations. (d) Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premiums, in line with EEV methodology. APE is Group share. (e) New Business Value (NBV) Margin is the ratio of (i) New Business Value representing the value of newly issued contracts during the current year to (ii) APE.
Consolidated gross revenues amounted to €102,874 million as at December 31, 2018, up 4.4% on a reported basis and up 3.6% on a comparable basis compared to December 31, 2017.
■ Property & Casualty (€-103 million or -1%) to €7,061 million mainly driven by a decrease in Commercial lines from lower volumes in the Credit & Lifestyle Protection business due to an increased selectivity, partly off set by a growth supported by tariff increases mainly in Motor and Construction; ■ Health (€+479 million or +12%) to €4,356 million mainly driven by higher volumes in Group business stemming from the international market; ■ Other (€+76 million or +55%) to €215 million driven by AXA Banque France mainly due to a favorable change in the fair value of the loans hedged through internal interest rates swaps with AXA Bank Belgium (neutral at Group level).
Europe gross revenues were up 3% (or €+1,195 million) on a comparable basis to €36,738 million: ■ Switzerland (€+106 million or +1%) to €9,531 million mainly from (i) Life & Savings driven by Group Life due to higher single premiums from in-force clients, and (ii) Property & Casualty driven by Commercial lines due to higher volumes and tariff increases in Workers’ Compensation; ■ Germany (€+104 million or +1%) to €10,738 million from (i) Property & Casualty driven by Personal lines as a consequence of tariff increases in Property and Motor, as well as new business from SMEs in Commercial Non-Motor, and (ii) Health mainly due to continued growth in the civil service segment and tariff increases in full benefit insurance, partly off set by (iii) Life & Savings mainly in Protection with Savings and traditional G/A Savings in line with the strategy, partly off set by a continued growth in G/A capital light products and in Pure Protection; ■ Belgium (€+49 million or +1%) to €3,359 million from (i) Property & Casualty mainly driven by tariff increase in Commercial lines, (ii) Life & Savings mainly in G/A Savings from higher sales in capital light pension products for self-employed, as well as in Protection notably from Group business, and (iii) Health due to new large contracts in Group business; ■ The United Kingdom & Ireland (€+76 million or +1%) to €5,166 million from (i) Health mainly driven by tariff increases and volume growth, and (ii) Property & Casualty driven by Commercial lines mainly due to higher new business and tariff increases, partly off set by Personal lines mainly reflecting lower volumes following tariff increases and the exit of a scheme in Property; ■ Spain (€+161 million or +7%) to €2,525 million from (i) Life & Savings driven by strong sales in Unit-Linked, G/A capital light products and Protection, (ii) Property & Casualty driven by both Commercial lines Non-Motor and Personal Motor from higher volumes and tariff increases, and (iii) Health driven by higher volumes and tariff increases; ■ Italy (€+699 million or +15%) to €5,418 million mainly from (i) Life & Savings driven by strong sales from G/A capital light and Protection products notably due to the recovery in sales from Banca Monte dei Paschi di Siena, and (ii) Property & Casualty driven by higher new business in Personal Property and higher volumes from the agency channel in Commercial lines.
AXA XL gross revenues were up 10% (or €+598 million) on a comparable basis to €6,287 million: ■ Property & Casualty Insurance (€+395 million or +13%) to €3,354 million driven by strong business growth and rate increases in North America Casualty and in Property; ■ Property & Casualty Specialty (€+55 million or +3%) to €1,794 million mainly driven by new business in Political Risks; ■ Property & Casualty Reinsurance (€+155 million or +16%) to €1,093 million driven by an increased share written on a large multi-line quota share treaty; ■ Life & Savings (€-6 million or -12%) to €45 million as the underlying business is in run-off .
The United States gross revenues were up 2% (or €+319 million) on a comparable basis to €16,483 million: ■ The United States Life & Savings (€+191 million or +1%) to €13,723 million mainly in Unit-Linked following higher sales of non-GMxB Variable Annuity products notably in 2H18 and Mutual Funds & Other reflecting higher advisory sales from favorable equity market conditions through the first nine months of 2018; ■ AB (€+129 million or +5%) to €2,706 million driven by higher management fees due to both higher average AUM and higher average management fee bps, higher performance fees, and higher distribution fees mainly from retail m utual funds.
International gross revenues were up 4% (or €+249 million) on a comparable basis to €6,535 million: ■ Mexico (€+148 million or +9%) to €1,704 million mainly driven by (i) Health stemming from volume and tariff increases, and (ii) Property & Casualty from higher new business in Motor; ■ The Gulf Region (€-14 million or -2%) to €770 million from (i) Property & Casualty mainly driven by a reduction of the size of a large Commercial Motor fleet, partly off set by (ii) Health from volume and tariff increases; ■ Colombia (€+47 million or +7%) to €700 million from (i) Property & Casualty mainly driven by new business in Personal Accident, Workers’ Compensation, Commercial Property and Personal Motor, partly off set by (ii) Life & Savings mainly driven by lower sales in G/A Savings; ■ Poland (€+13 million or +2%) to €585 million notably from Property & Casualty mainly due to new business in Commercial Non-Motor; ■ Turkey (€+110 million or +16%) to €569 million notably from Property & Casualty mainly in Commercial Motor and Commercial Property; ■ AXA Bank Belgium (€-89 million or -28%) to €233 million mainly due to an unfavorable change in the fair value of the loans hedged through internal interest rates swaps (neutral at Group level) with AXA Banque France, lower realized capital gains and lower commercial margin.
Asia (€1,520 million, 23% of total) up €70 million (+5%) on a comparable basis from (i) Japan (€+121 million) mainly due to the success of Follow-up Life Protection product launched in 1Q18, (ii) Hong Kong (€+23 million) mainly driven by higher sales in G/A Savings due to the successful launch of a new product in 1Q18, and (iii) the Philippines (€+7 million) driven by the strong performance in both bancassurance and agency channels, partly off set by (iv) China (€-49 million) due to lower sales of traditional G/A Savings products, partly off set by increased sales of higher margin Protection products, (v) Thailand (€-22 million) mainly driven by Protection due to lower sales of low margin products, and (vi) Indonesia (€-10 million) driven by lower new business in both agency and telemarketing channels.
Annuity products notably in 2H18, and Protection (€+14 million) following higher sales in employee benefit products.
New Business Value Margin stood at 39.3%, decreasing by 3.8 points. On a comparable basis, New Business Value Margin decreased by 4.2 points mainly driven by higher sales in Group Health in France, and higher sales in G/A Savings combined with the redesign of a Protection product in Hong Kong with a focus on profitable volume growth.
(1) New Business Value (NBV) Margin is the ratio of (i) New Business Value representing the value of newly issued contracts during the current year to (ii) APE.
(in Euro million, except percentages) December 31, 2018 France Europe Asia AXA XL United States International
Amortization of value of purchased life business in-force (55) - (23) (29) - (1) (3) -
Net capital gains or losses attributable to shareholders net of income tax 307 131 266 (34) (27) (11) (4) (13)
Goodwill and other related intangible impacts (3,102) - (39) (18) (10) (3,006) (29) (1)
2017 restated (a) France Europe Asia AXA XL United States International
Income from aff iliates and associates 297 20 7 166 - - 86 18
Goodwill and other related intangible impacts (90) - (44) (16) - (2) (27) (1)
Adjusted Earnings, Underlying Earnings, Adjusted Return on Equity, Underlying Earnings per share, Underlying Combined Ratio and Debt Gearing are Alternative Performance Measures (“APMs” ) as defined in ESMA’s guidelines and the AMF’s related position statement issued in 2015. A reconciliation from Adjusted Earnings, Underlying Earnings and Underlying Combined Ratio to the most directly reconcilable line item, subtotal or total in the financial statements of the corresponding period is provided in the above tables. Adjusted Return on Equity and Underlying Earnings per share are reconciled to the financial statements in the table set forth on page 56 of this Annual Report, and Debt Gearing is reconciled to the financial statements in the table set forth on page 55 of this Annual Report.
For further information on any of the above-mentioned APMs, see Glossary set forth in Appendix V to this Annual Report.
Underlying Earnings correspond to Adjusted Earnings without the following elements net of policyholder participation, deferred acquisition costs, VBI, taxes and minority interests: ■ realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); and
Underlying Earnings per share corresponds to Underlying Earnings (net of financial charges related to undated subordinated debts and preferred shares recorded through shareholders’ equity – Group share, and mandatory exchangeable bonds recorded through shareholders’ equity – Minority interests as disclosed in Part 5.4 – “Consolidated Statement of Changes in Equity” and financial debt as disclosed in Part 5.6 – Note 17 “Financing Debt” of this Annual Report), divided by the weighted average number of outstanding ordinary shares.
Underlying earnings amounted to €6,182 million, up €180 million (+3%) versus 2017 on a reported basis. On a constant exchange rate basis, underlying earnings increased by €335 million (+6%).
On a constant exchange rate basis, underlying earnings before tax from insurance activities increased by €962 million (+12%) to €8,547 million. On a constant exchange rate basis and excluding the contribution of XL Group , underlying earnings before tax from insurance activities increased by €1,356 million (+17%) to €8,937 million.
■ O n a constant exchange rate basis and excluding the contribution of XL Group , investment margin increased by €158 million (+3%) due to (i) the United States Life & Savings (€+127 million) driven by a higher average asset base of non-Variable GMxB Annuity products, (ii) International (€+99 million) from Turkey (€+74 million) as a result of higher average assets as well as higher income from inflation-linked bonds, partly off set by (iii) Switzerland (€-53 million), and (iv) France (€-37 million) mainly due to lower income from fixed income assets.
■ O n a constant exchange rate basis and excluding the contribution of XL Group , fees & revenues increased by €533 million (+7%) due to (i) the United States Life & Savings (€+324 million) driven by higher Unit-Linked and Mutual funds fees combined with the non-repeat of an unfavorable impact on Unearned Revenue Reserve amortization due to model changes in 2017, (ii) Asia (€+137 million) mainly from Hong Kong (€+91 million) driven by higher Unearned Revenue Reserve amortization due to the non-repeat of an accounting mismatch more than off set in D eferred A cquisition C osts, and (iii) France (€+105 million) driven by strong sales in Group Protection and Health.
XL Group net technical margin in the fourth quarter 2018 amounted to €414 million, negatively impacted by California Wildfires (€-335 million) and Hurricane Michael (€-261 million).
On a constant exchange rate basis and excluding the contribution of XL Group , underlying earnings before tax from other activities decreased by €5 million to €-33 million mainly due to (i) Transversal & Central Holdings (€-46 million or -7%) mainly driven by higher financial charges and hedging costs in the context of the acquisition of XL Group, and (ii) the United States (€-37 million or -7%) mainly due to higher financial charges mostly from debt restructuring in the context of the IPO of AXA Equitable Holdings, Inc., partly off set by AB mainly due to higher revenues combined with the non-repeat of 2017 one-off charges linked to the reduction of real estate footprint, partly off set by (iii) Europe (€+84 million) mainly driven by an exceptional distribution from an investment fund and lower pension costs in Germany Holdings.
On a constant exchange rate basis and excluding the contribution of XL Group , income tax expenses increased by €387 million (+23%) to €-2,014 million driven by higher pre-tax underlying earnings across geographies combined with lower positive tax one-off s in the United States.
On a constant exchange rate basis and excluding the contribution of XL Group , income from affiliates & associates increased by €40 million (+13%) to €318 million mainly driven by Reso from an improved net technical margin and China from a favorable change in business mix, as well as the impact of a less unfavorable update of financial assumptions on the net technical margin, partly off set by Thailand due to the impact of unfavorable assumptions updates on technical reserves.
XL Group minority interests in the fourth quarter 2018 amounted to €+20 million.
XL Group Property & Casualty Combined Ratio in the fourth quarter 2018 amounted to 116.2%, negatively impacted by California Wildfires (€-335 million) and Hurricane Michael (€- 261 million).
On a constant exchange rate basis, the Health Combined Ratio improved by 0.4 point to 94.4% mainly driven by claims management measures in the United Kingdom & Ireland as well as an improved expense ratio mainly from France and the United Kingdom & Ireland.
On a constant exchange rate basis, the Protection Combined Ratio improved by 1.3 points to 95.6% mainly driven by an improved loss ratio mainly in the United States Life & Savings, Switzerland and Asia.
Net realized capital gains and losses attributable to shareholders amounted to €307 million.
■ €-3 million unfavorable change in intrinsic value at €-94 million related to equity hedging derivatives.
• the impact on the net deferred tax liability position (€- 288 million) following the decrease in the corporate tax rate from 35% to 21% in the United States, partly off set by: • the regulatory change on annuity legal indexation in France (€+206 million), and
• the partial write down of net deferred tax asset position in France (€+191 million) due to the progressive decrease in the corporate tax rate from 34% to 26% from 2018 and onwards; ■ a more unfavorable change in the fair value of financial assets and derivatives net of foreign exchange impacts, down €324 million to €-463 million driven by: • the change in the fair value of assets accounted for under fair value option, down €551 million to €-326 million, driven by the impact of adverse market conditions at the end of 2018 on m utual funds, partly off set by: • the change in the fair value of equity, interest rates and credit derivatives not eligible for hedge accounting under IAS 39, up €67 million to €-138 million, mainly driven by equity hedging instruments reflecting adverse market conditions at the end of 2018, as well as a less unfavorable impact from interest rates derivatives, and
• the change in the fair value of foreign exchange derivatives not eligible for hedge accounting under IAS 39 net of foreign exchange rate movements on assets and liabilities denominated in foreign currencies, up €161 million to €1 million; ■ higher integration and restructuring costs (€-189 million) to €-332 million mainly due to the integration of XL Group (€- 76 million) and restructuring costs in the United States incurred in connection with the IPO and the Secondary Off ering of AXA Equitable Holdings, Inc. (€-50 million) and higher voluntary leave and pre-retirement plans costs in AXA IM, Belgium, Spain, Italy and AXA Bank Belgium.
Weighted average number of shares 2,383 2,389 2,395 2,404 Net income (Euro per Ordinary Share) 0.79 0.79 2.50 2.49 ( 68.4%) ( 68.4%)
(a) Including an adjustment to reflect net financial charges related to undated subordinated debt (recorded through shareholders’ equity), preferred shares and equity components of mandatory exchangeable bonds into shares of AXA Equitable Holdings, Inc.
Net capital gains or losses attributable to shareholders net of income tax 131 237
Profit or loss on financial assets (under fair value option) and derivatives (91) 31
Gross revenues increased by €700 million (+3%) to €25,175 million. On a comparable basis, gross revenues increased by €845 million (+3%): ■ Life & Savings (€+391 million or +3%) to €13,542 million. On a comparable basis, Life & Savings gross revenues increased by €392 million (+3%) mainly driven by Protection (€+201 million or +5%) mainly due to higher sales in Group business. Savings gross revenues increased by €191 million (+2%) mainly from Individual Savings driven by higher sales of both capital light products sold through the bancassurance channel and discretionary mandates through the proprietary channel, partly off set by lower sales in Group Pension. Unit-Linked gross revenues contributed to 38.9% of total Individual Savings, compared to 29.5% on average for the market; ■ Property & Casualty (€-246 million or -3%) to €7,061 million. On a comparable basis, Property & Casualty gross revenues decreased by €103 million (-1%) mainly driven by a decrease in Commercial lines (€-76 million) with lower volumes in the Credit & Lifestyle Protection business (€-145 million) due to an increased selectivity, partly off set by a growth supported by tariff increases mainly in Motor and Construction (€+69 million);
■ Health (€+479 million or +12%) to €4,356 million. On a comparable basis, Health gross revenues increased by €479 million (+12%) driven by higher volumes in Group business (€+459 million) stemming from the international market as well as in Individual business (€+20 million); ■ Other (€+76 million or +55%) to €215 million. On a comparable basis, Other gross revenues increased by €76 million driven by AXA Banque France mainly due to a favorable change in the fair value of the loans hedged through internal interest rates swaps with AXA Bank Belgium (neutral at Group level). Operating net banking revenues slightly increased (€+2 million).
APE increased by €383 million (+21%) to €2,232 million. On a comparable basis, APE increased by €384 million (+21%) mainly stemming from Group Health (€+365 million or +86%) due to the strong development of the international market and Protection (€+34 million or +9%), partly off set by Group Pension (€-53 million or -33%).
NBV Margin decreased by 5.0 points to 29.5% mainly driven by higher sales in Group Health.
Underlying earnings before tax increased by €302 million (+15%) to €2,313 million: ■ Life & Savings (€+136 million or +13%) to €1,143 million mainly driven by a higher net technical margin (€+72 million) due to an improvement of mortality assumptions and a favorable development on receivables, lower general expenses (€+35 million) and higher Unit-Lin ked management fees (€+21 million); ■ Property & Casualty (€+113 million o r +12%) to €1,022 million mainly driven by a decrease in expenses (€+109 million) from lower commissions in line with lower revenues in the Credit & Lifestyle Protection business and a higher net technical margin (€+40 million) mainly driven by favorable prior year reserve developments, partly off set by higher Nat Cat charges. Net investment income decreased by €36 million; ■ Health (€+46 million or +45%) to €149 million mainly driven by higher volumes, partly off set by higher acquisition expenses; ■ Other (€+7 million) to €0 million mainly from AXA France Holding.
Income tax expenses increased by €157 million (+26%) to €-755 million in line with higher pre-tax underlying earnings combined with negative tax one-off s (€-61 million).
Adjusted earnings increased by €38 million (+2%) to €1,704 million driven by higher underlying earnings, partly off set by lower net realized capital gains.
Net income increased by €215 million (+15%) to €1,635 million driven by higher adjusted earnings as well as the gain relating to the discontinuation of the partnership with BNP Paribas (Natio), the non-repeat of regulatory changes on annuity legal indexation (€+206 million) and the partial write-off of the net deferred tax asset position due to the decrease in the corporate tax rate from 34% to 26% enacted in 2017 and eff ective in the coming years (€+52 million), partly off set by an unfavorable change in the fair value of both m utual funds and derivatives not eligible to hedge accounting driven by adverse market conditions late 2018.
Net capital gains or losses attributable to shareholders net of income tax 81 55
Profit or loss on financial assets (under fair value option) and derivatives (5) (43)
Gross revenues decreased by €266 million (-3%) to €9,531 million. On a comparable basis, gross revenues increased by €106 million (+1%): ■ Life & Savings (€-193 million or -3%) to €6,534 million. On a comparable basis, Life & Savings gross revenues increased by €62 million (+1%) driven by Group Life due to higher single premiums from in-force clients; ■ Property & Casualty (€-78 million or -3%) to €2,992 million. On a comparable basis, Property & Casualty gross revenues increased by €39 million (+1%) mainly driven by Commercial lines due to higher volumes and tariff increases in Workers’ Compensation; ■ Health (€+5 million) to €5 million. On a comparable basis, Health gross revenues increased by €5 million due to the launch of the business line in 2H17.
APE increased by €80 million (+31%) to €340 million. On a comparable basis, APE increased by €15 million (+4%) in Protection due to higher Group Life sales in both semi-autonomous and autonomous businesses.
Underlying earnings before tax decreased by €71 million (-7%) to €943 million. On a constant exchange rate basis, underlying earnings before tax decreased by €34 million (-3%): ■ Property & Casualty (€-51 million or -8%) to €555 million. On a constant exchange rate basis, Property & Casualty underlying earnings before tax decreased by €30 million (-5%) as the improvement in the current year combined ratio (-0.3 point) from a lower expense ratio was more than off set by less favorable prior year reserve developments (+1.5 points); ■ Life & Savings (€-15 million or -4%) to €404 million. On a constant exchange rate basis, Life & Savings underlying earnings before tax remained stable mainly due to a higher net technical margin (€+76 million) driven by improved disability and mortality margins from lower policyholder bonus allocation in Group Life and an exceptional release of reserves in annuity in Individual Life, partly off set by a lower investment margin (€-51 million) mainly due to lower income from fixed-income assets combined with higher expenses (€-40 million) notably driven by project costs in the context of the transformation of the in-force Group Life business (€-16 million); ■ Health (€-5 million or -42%) to €-16 million. On a constant exchange rate basis, Health underlying earnings before tax decreased by €5 million (-48%) due to further investments following the launch of the business line in 2H17.
Income tax expenses decreased by €25 million (-12%) to €-177 million. On a constant exchange rate basis, income tax expenses decreased by €18 million (-9%) in line with lower pre-tax underlying earnings combined with a decrease in the corporate tax rate from 21% to 20%.
Adjusted earnings decreased by €21 million (-2%) to €843 million. On a constant exchange rate basis, adjusted earnings increased by €12 million (+1%) as lower underlying earnings were more than off set by higher net realized capital gains.
Net income decreased by €401 million (-51%) to €391 million. On a constant exchange rate basis, net income decreased by €386 million (-49%) as higher adjusted earnings were more than off set by the one-time negative impact linked to the transformation of the in-force Group Life business to a semi-autonomous model (€-428 million).
(in Euro million, except percentages) December 31, 2018 December 31, 2017
Net capital gains or losses attributable to shareholders net of income tax 127 109
Profit or loss on financial assets (under fair value option) and derivatives (50) 46
(a) Net of intercompany eliminations. (b) Other corresponds to banking activities and holdings.
Gross revenues increased by €65 million (+1%) to €10,738 million. On a comparable basis, gross revenues increased by €104 million (+1%): ■ Property & Casualty (€+128 million or +3%) to €4,006 million. On a comparable basis, Property & Casualty gross revenues increased by €76 million (+2%) driven by Personal lines (€+63 million) mainly due to tariff increases in Property and Motor, and Commercial lines (€+16 million) mainly from new business in SME in Non-Motor; ■ Life & Savings (€-136 million or -4%) to €3,559 million. On a comparable basis, Life & Savings gross revenues decreased by €46 million (-1%) mainly in Protection with Savings (€-58 million) and traditional G/A Savings (€-32 million) reflecting the decrease in the legacy business in line with the strategy and in UnitLinked (€-31 million). This was partly off set by the continued growth in G/A capital light products (€+48 million) and in Pure Protection (€+28 million);
■ Health (€+72 million or +2%) to €3,131 million. On a comparable basis, Health gross revenues increased by €72 million (+2%) mainly due to the continued growth in the civil service segment and tariff increases in full benefit insurance.
NBV Margin decreased by 5.2 points to 53.0% mainly reflecting a lower share of new business and model updates in Health, partly off set by an improvement of the profitability and a higher share of Pure Protection and G/A capital light products sales.
Income from affiliates and associates decreased by €5 million to €2 million.
Adjusted earnings increased by €74 million (+11%) to €738 million driven by higher underlying earnings and higher net realized capital gains mainly from equities.
Net income increased by €86 million (+14%) to €708 million driven by higher adjusted earnings and the non-repeat of the negative impact in 2017 related to the disposal of a part of the occupational pension business, partly off set by an unfavorable change in the fair value of m utual funds mainly driven by higher corporate yields and adverse equity market conditions late 2018 as well as foreign exchange derivatives not eligible for hedge accounting.
Net capital gains or losses attributable to shareholders net of income tax 50 49
Gross revenues increased by €49 million (+1%) to €3,359 million. On a comparable basis, gross revenues increased by €49 million (+1%): ■ Property & Casualty (€+17 million or +1%) to €2,061 million. On a comparable basis, Property & Casualty gross revenues increased by €17 million (+1%) from Commercial lines (€+21 million) in SME and Mid-Market segments mainly due to tariff increases, partly off set by Personal lines (€-4 million) as tariff increases were more than off set by lower volumes; ■ Life & Savings (€+16 million or +1%) to €1,195 million. On a comparable basis, Life & Savings gross revenues increased by €16 million (+1%) driven by G/A Savings (€+14 million) from higher sales in capital light pension products for self-employed clients, as well as Protection (€+9 million) notably from Group business, partly off set by Unit-Linked (€-6 million) in line with the strategy to exit the Individual Savings business; ■ Health (€+16 million or +18%) to €103 million. On a comparable basis, Health gross revenues increased by €16 million (+18%) due to new large contracts in Group business.
APE increased by €8 million (+14%) to €64 million. On a comparable basis, APE increased by €8 million (+14%) mainly driven by G/A Savings due to higher sales in capital light pension products for self-employed clients.
Income tax expenses decreased by €50 million (-28%) to €-125 million driven by a decrease in the corporate tax rate from 34% to 30% combined with a positive tax one-off in 2018 (€+14 million) and the non-repeat of an exceptional dividend paid to the Group in 2017 (€+13 million).
Net income decreased by €102 million (-21%) to €373 million as higher adjusted earnings were more than off set by higher restructuring costs in relation to pre-retirement and voluntary leave plans, an unfavorable change in the fair value of m utual funds in a context of adverse market conditions, and the non-repeat of the impact of the reduction of the net deferred tax liability position resulting from the decrease in corporate tax rate enacted in 2017.
Net capital gains or losses attributable to shareholders net of income tax (6) 13
Gross revenues increased by €36 million (+1%) to €5,166 million. On a comparable basis, gross revenues increased by €76 million (+1%): ■ Property & Casualty (€-3 million or 0%) to €3,369 million. On a comparable basis, Property & Casualty gross revenues increased by €21 million (+1%) from Commercial lines (€+85 million) mainly due to higher new business and tariff increases, partly off set by Personal lines (€-64 million) mainly in Property reflecting lower volumes following tariff increases and the exit of a scheme; ■ Health (€+39 million or +2%) to €1,740 million. On a comparable basis, Health gross revenues increased by €55 million (+3%) mainly driven by tariff increases and volume growth in international business and in the United Kingdom; ■ Life & Savings – Architas remained stable at €57 million. On a comparable basis, Life & Savings – Architas gross revenues remained stable.
Underlying earnings increased by €99 million (+35%) to €381 million. On a constant exchange rate basis, underlying earnings increased by €102 million (+36%).
Adjusted earnings increased by €80 million (+27%) to €375 million. On a constant exchange rate basis, adjusted earnings increased by €83 million (+28%) driven by higher underlying earnings, partly off set by lower net realized capital gains due to higher impairments of equity securities reflecting adverse market conditions late 2018.
Net income increased by €122 million (+50%) to €366 million. On a constant exchange rate basis, net income increased by €125 million (+51%) mainly driven by higher adjusted earnings, lower restructuring costs, a realized gain relating to the sale of a non-consolidated subsidiary, and a favorable change in the fair value of derivatives not eligible for hedge accounting.
Profit or loss on financial assets (under fair value option) and derivatives (5) (2)
Gross revenues increased by €161 million (+7%) to €2,525 million. On a comparable basis, gross revenues increased by €161 million (+7%): ■ Property & Casualty (€+37 million or +2%) to €1,644 million. On a comparable basis, Property & Casualty gross revenues increased by €37 million (+2%) driven by Commercial lines (€+22 million) from higher volumes and tariff increases in Non-Motor, and Personal lines (€+16 million) due to higher volumes in Motor; ■ Life & Savings (€+109 million or +19%) to €680 million. On a comparable basis, Life & Savings gross revenues increased by €109 million (+19%) driven by strong sales in Unit-Linked
APE increased by €15 million (+20%) to €88 million. On a comparable basis, APE increased by €15 million (+20%) driven by Unit-Linked (€+8 million), Protection (€+5 million), and G/A capital light products (€+3 million).
Underlying earnings before tax increased by €38 million (+18%) to €245 million: ■ Property & Casualty (€+21 million or +16%) to €152 million driven by higher volumes combined with favorable prior year reserve developments; ■ Life & Savings (€+10 million or +16%) to €71 million mainly driven by a higher net technical margin in G/A Savings Group annuities; ■ Health (€+7 million or +51%) to €22 million mainly driven by an improved claims experience.
Income tax expenses increased by €12 million (+25%) to €-59 million in line with higher pre-tax underlying earnings.
Adjusted earnings increased by €28 million (+17%) to €192 million mainly driven by higher underlying earnings.
Profit or loss on financial assets (under fair value option) and derivatives (9) 13
Gross revenues increased by €699 million (+15%) to €5,418 million. On a comparable basis, gross revenues increased by €699 million (+15%): ■ Life & Savings (€+668 million or +22%) to €3,653 million. On a comparable basis, Life & Savings gross revenues increased by €668 million (+22%) driven by strong sales of G/A capital light products (€+518 million) and Protection (€+107 million) notably due to the recovery in sales from Banca Monte dei Paschi di Siena; ■ Property & Casualty (€+25 million or +2%) to €1,688 million. On a comparable basis, Property & Casualty gross revenues increased by €25 million (+2%) from Personal lines (€+13 million) from higher new business in Property, and from Commercial lines (€+12 million) mainly due to higher volumes from the agency channel; ■ Health (€+6 million or +9%) to €77 million. On a comparable basis, Health gross revenues increased by €6 million (+9%) as a result of strong commercial focus.
NBV Margin decreased by 4.2 points to 30.7% mainly due to the decrease in the future investment margin of G/A Savings products resulting from the widening of spreads of Italian government bonds.
Underlying earnings before tax increased by €22 million (+7%) to €364 million: ■ Property & Casualty (€+37 million or +24%) to €193 million mainly due to an improvement of the current year combined ratio (-1.0 point) driven by lower large losses and Nat Cat charges, as well as the impact of the cost savings program, combined with more favorable prior year reserve developments (-1.1 points); ■ Life & Savings (€-11 million or -6%) to €169 million mainly due to the decrease in investment yields, partly off set by a decrease in minimum guaranteed rates; ■ Health (€-4 million) to €1 million.
Profit or loss on financial assets (under fair value option) and derivatives (53) (59)
Underlying earnings before tax 695 719 Life & Savings 300 298
NBV Margin decreased by 14.3 points to 97.8% mainly as a consequence of higher new business in Protection.
Underlying earnings before tax decreased by €24 million (-3%) to €695 million. On a constant exchange rate basis, underlying earnings before tax decreased by €5 million (-1%): ■ Health (€-26 million or -6%) to €395 million. On a constant exchange rate basis, Health underlying earnings before tax decreased by €15 million (-3%) mainly due to higher administrative expenses (€-18 million);
Income tax expenses decreased by €26 million (-12%) to €-189 million. On a constant exchange rate basis, income tax expenses decreased by €21 million (-10%) driven by positive tax one-off s (€+18 million) and lower pre-tax underlying earnings.
Underlying earnings increased by €2 million (0%) to €499 million. On a constant exchange rate basis, underlying earnings increased by €16 million (+3%).
Adjusted earnings increased by €1 million (0%) to €507 million. On a constant exchange rate basis, adjusted earnings increased by €15 million (+3%) mainly driven by higher underlying earnings.
Net income decreased by €27 million (-5%) to €471 million. On a constant exchange rate basis, net income decreased by €13 million (-3%) as higher adjusted earnings combined with a favorable change in the fair value of interest rate hedging derivatives not eligible for hedge accounting were more than off set by an unfavorable change in the fair value of m utual funds, mainly driven by adverse equity market conditions late 2018.
APE remained stable at €456 million. On a comparable basis, APE increased by €23 million (+5%) driven by higher sales in G/A Savings (€+23 million) mainly due to the successful launch of a new product in 1Q18, and Health (€+6 million) from Group business, partly off set by lower sales in Unit-Linked (€-4 million).
NBV Margin decreased by 16.6 points to 47.2% mainly driven by higher sales in G/A Savings combined with the redesign of a Protection product to focus on volumes for profitable growth.
Underlying earnings remained stable at €391 million. On a constant exchange rate basis, underlying earnings increased by €20 million (+5%).
Scope: (i) The Property & Casualty subsidiary in Thailand and the non-bancassurance Life & Savings subsidiary in Indonesia are fully consolidated; (ii) China, Thailand Life & Savings, the Philippines and the bancassurance Life & Savings subsidiary in Indonesia are consolidated under the equity method and contribute only to the underlying earnings, adjusted earnings and net income.
Gross revenues decreased by €26 million (-15%) to €153 million. On a comparable basis, gross revenues decreased by €17 million (-10%): ■ Property & Casualty (€-14 million or -20%) to €58 million. On a comparable basis, Property & Casualty gross revenues decreased by €14 million (-20%) in Thailand driven by lower revenues from Commercial Property and Personal Motor both following the decision to reduce the volume of unprofitable portfolios; ■ Life & Savings (€-9 million or -14%) to €56 million. On a comparable basis, Life & Savings gross revenues decreased by €3 million (-4%) in Indonesia driven by Protection (€-3 million) mainly due to lower new business; ■ Health (€-3 million or -7%) to €39 million. On a comparable basis, Health gross revenues remained stable as lower revenues in Thailand (€-3 million) due to the pruning of unprofitable contracts were offset by higher revenues in Indonesia (€+3 million) from in-force growth.
■ Thailand (€-22 million or -13%) to €140 million. On a comparable basis, APE decreased by €22 million (-14%) driven by Protection (€-21 million) due to lower sales of low margin products combined with lower sales of traditional G/A Savings products (€-5 million) following the non-repeat of sales of a product launched in 1H17, partly off set by higher Unit-Linked sales (€+7 million) following successful marketing campaigns; ■ Indonesia (€-22 million or -17%) to €111 million. On a comparable basis, APE decreased by €10 million (-7%) driven by lower new business in both agency and telemarketing channels; ■ The Philippines (€+2 million or +4%) to €52 million. On a comparable basis, APE increased by €7 million (+13%) mainly from Protection (€+6 million) driven by the strong performance in both bancassurance and agency channels.
Underlying earnings before tax increased by €2 million to €6 million. On a constant exchange rate basis, underlying earnings before tax increased by €3 million: ■ Life & Savings (€-6 million) to €8 million. On a constant exchange rate basis, Life & Savings underlying earnings before tax decreased by €5 million in Indonesia mainly due to less favorable assumptions updates; ■ Health (€+6 million) to €6 million. On a constant exchange rate basis, Health underlying earnings before tax increased by €6 million mainly driven by Indonesia (€+5 million) following the discontinuation of unprofitable products combined with a favorable portfolio growth; ■ Property & Casualty (€+2 million) to €-8 million. On a constant exchange rate basis, Property & Casualty underlying earnings before tax increased by €2 million in Thailand.
Income tax expenses increased by €2 million to €-2 million. On a constant exchange rate basis, income tax expenses increased by €2 million driven by Indonesia (€-1 million) and Thailand (€-1 million) in line with higher pre-tax underlying earnings.
Adjusted earnings decreased by €49 million (-26%) to €136 million. On a constant exchange rate basis, adjusted earnings decreased by €41 million (-22%) as higher underlying earnings were more than off set by higher net realized capital losses in China mainly due to the negative equity market performance.
Net income decreased by €3 million (-2%) to €126 million. On a constant exchange rate basis, net income increased by €5 million (+4%) as lower adjusted earnings were more than off set by a favorable change in the fair value of fixed income assets in China and a less unfavorable change in the fair value of financial assets in Thailand and Indonesia.
The XL Group acquisition was closed on September 12, 2018, and was fully consolidated starting from October 1, 2018.
Gross revenues increased by €3,774 million (+150%) to €6,287 million. On a comparable basis, gross revenues increased by €598 million (+10%): ■ Property & Casualty Insurance (€+1,726 million or +106%) to €3,354 million. On a comparable basis, Property & Casualty Insurance gross revenues increased by €395 million (+13%) driven by strong business growth and rate increases in North America Casualty (€+203 million or +106%) and Property (€+168 million or +19%); ■ Property & Casualty Specialty (€+910 million or +103%) to €1,794 million. On a comparable basis, Property & Casualty Specialty gross revenues increased by €55 million (+3%) mainly driven by new business in Political Risks (€+42 million or +63%); ■ Property & Casualty Reinsurance (€+1,093 million or +100%) to €1,093 million. On a comparable basis, Property & Casualty Reinsurance gross revenues increased by €155 million (+16%) driven by an increased share written on a large multi-line quota share treaty; ■ Life & Savings (€+45 million or +100%) to €45 million. On a comparable basis, Life & Savings gross revenues decreased by €6 million (-12%) as the underlying business is in run-off .
Underlying earnings before tax reported were €-178 million: ■ Property & Casualty reported earnings were €-174 million, impacted by significant Nat Cat charges in 4Q18, notably from California Wildfires (€-335 million) and Hurricane Michael (€-261 million) in the United States as well as other events (€120 million). Excluding charges linked to California Wildfires and Hurricane Michael, underlying earnings before tax would have been €+422 million, including €+346 million of net investment income;
Income tax expenses reported were €-70 million, reflecting positive pre-tax underlying earnings from AXA XL entities based outside of the United States.
Income tax expenses/benefits (272) (7) Minority interests (500) (250) Income from aff iliates and associates - Underlying earnings Group share 1,125 1,135
Net capital gains or losses attributable to shareholders net of income tax (11) (60) Adjusted earnings Group share 1,114 1,075
Profit or loss on financial assets (under fair value option) and derivatives (82) 96 Exceptional operations (including discontinued operations) 16 268 Goodwill and other related intangible impacts (3,006) (2) Integration and restructuring costs (27) (21) NET INCOME GROUP SHARE (1,986) 1,415
Net capital gains or losses attributable to shareholders net of income tax (11) (60)
Gross revenues decreased by €434 million (-3%) to €13,777 million. On a comparable basis, gross revenues increased by €190 million (+1%): ■ Life & Savings (€-431 million or -3%) to €13,723 million. On a comparable basis, Life & Savings gross revenues increased by €191 million (+1%) mainly in Unit-Linked (€+120 million) following higher sales of non-GMxB Variable Annuity products notably in 2H18 and Mutual Funds & Other (€+69 million) reflecting higher advisory sales from favorable equity market conditions through the first nine months of 2018; ■ Health (€-3 million or -6%) to €54 million. On a comparable basis, Health gross revenues decreased by €1 million (-1%).
Underlying earnings before tax increased by €499 million (+71%) to €1,206 million. On a constant exchange rate basis, underlying earnings before tax increased by €553 million (+78%): ■ Life & Savings (€+568 million or +66%) to €1,431 million. On a constant exchange rate basis, Life & Savings underlying earnings before tax increased by €0.6 billion (+73%) mainly driven by a favorable impact from model and assumption updates in 2018 (€+0.3 billion) combined with the non-repeat of 2017 unfavorable model and assumption changes (€+0.1 billion), a higher net investment margin (€+0.1 billion) driven by non-GMxB Variable Annuity from higher average asset base, and higher Unit-Linked management fees (€+0.1 billion) mostly reflecting higher average separate account balances; ■ Other (€-66 million or -51%) to €-195 million. On a constant exchange rate basis, Other underlying earnings before tax decreased by €74 million (-58%) mainly driven by higher financial charges mostly from debt restructuring in the context of the IPO of AXA Equitable Holdings, Inc.;
■ Health (€-3 million or -12%) to €-30 million. On a constant exchange rate basis, Health underlying earnings before tax decreased by €5 million (-17%).
Income tax expenses increased by €294 million to €-149 million. On a constant exchange rate basis, income tax expenses increased by €301 million mainly driven by lower positive tax one-off s (€+37 million in 2018 versus €+202 million in 2017) and higher pre-tax underlying earnings.
Profit or loss on financial assets (under Fair Value option) and derivatives - -
The underlying cost income ratio decreased by 1.0 point to 70.8%.
Minority interests increased by €47 million (+19%) to €-297 million. On a constant exchange rate basis, minority interests increased by €60 million (+24%) driven by higher pre-tax underlying earnings and a decrease in AXA Group average ownership over the period from 65.2% on December 31, 2017, to 52.6% on December 31, 2018, as a consequence of the IPO of AXA Equitable Holdings, Inc. completed in May 2018, the Secondary Off ering and related Share Buyback completed in November 2018.
Underlying earnings and adjusted earnings decreased by €12 million (-4%) to €271 million. On a constant exchange rate basis, underlying earnings and adjusted earnings remained stable.
(a) Net of intercompany eliminations. (b) Other corresponds to AXA Bank Belgium and holdings.
Scope: (i) Mexico, the Gulf Region, Colombia, Poland, Turkey, Singapore, Morocco, Luxembourg, Malaysia Property & Casualty, AXA Bank Belgium, the Czech Republic Life & Savings, the Slovak Republic Life & Savings, Greece and Brazil are fully consolidated; (ii) Russia (Reso), India, Nigeria and Lebanon are consolidated under the equity method and contribute only to the underlying earnings, adjusted earnings and net income.
• Colombia (€+64 million or +15%) to €468 million mainly driven by new business in Personal Accident, Workers’ Compensation, Commercial Property and Personal Motor,
• The Gulf Region (€-37 million or -7%) to €455 million mainly driven by a reduction of the size of a large Commercial Motor fleet,
• Poland (€+17 million or +4%) to €439 million mainly due to new business in Commercial Non-Motor,
• Morocco (€+7 million or +3%) to €256 million mainly due to new business in Commercial Property and Personal Motor,
• Malaysia (€+9 million or +4%) to €253 million mainly in Motor,
• Mexico (€+8 million or +3%) to €240 million mainly due to higher sales in Protection,
• Colombia (€-22 million or -11%) to €171 million mainly driven by lower sales in G/A Savings; ■ Other (€-89 million or -28%) to €233 million. On a comparable basis, Other gross revenues decreased by €89 million (-28%) at AXA Bank Belgium mainly due to an unfavorable change in the fair value of the loans hedged through internal interest rates swaps (neutral at Group level) with AXA Banque France , lower realized capital gains and lower commercial margin.
NBV Margin increased by 8.5 points to 36.5%. On a comparable basis, NBV Margin increased by 7.9 points mainly driven by a favorable product mix within Protection and Unit-Linked in Singapore as well as favorable actuarial assumptions updates and business mix in Poland.
Underlying earnings before tax increased by €57 million (+15%) to €435 million. On a constant exchange rate basis, underlying earnings before tax increased by €87 million (+23%): ■ Property & Casualty (€+70 million or +30%) to €305 million. On a constant exchange rate basis, Property & Casualty underlying earnings before tax increased by €97 million (+41%) mainly driven by (i) Mexico (€+34 million) driven by a higher net technical margin (€+40 million) stemming from a more favorable claims experience, (ii) Turkey (€+22 million) driven by a higher investment income as a result of higher average assets as well as higher income from inflation-linked bonds, partly off set by a lower net technical margin from Motor, (iii) Colombia (€+20 million) mainly driven by a higher investment income due to a higher asset base combined with more favorable prior year reserve developments, (iv) the Gulf Region (€+12 million) from Protection, and (v) Poland (€+10 million) from a higher net technical margin (€+12 million) driven by volume growth in Commercial lines combined with less unfavorable prior year reserve developments, partly off set by (vi) Brazil (€-10 million) mainly due to higher expenses; ■ Life & Savings (€-25 million or -27%) to €67 million. On a constant exchange rate basis, Life & Savings underlying earnings before tax decreased by €23 million (-26%) largely driven by Singapore (€-24 million) mainly due to the reclassification of policyholder share of income tax to net technical margin (€-9 million) and the non-repeat of a one-off positive regulatory change relating to mortality tables in 1H17; ■ Other (€-11 million) to €39 million. On a constant exchange rate basis, Other underlying earnings before tax decreased by €10 million from Holdings (€-24 million) due to a lower investment margin, partly offset by AXA Bank Belgium (€+14 million to €81 million) mainly driven by lower commissions with the positive eff ect of a new commission scheme; ■ Health (€+22 million) to €25 million. On a constant exchange rate basis, Health underlying earnings before tax increased by €24 million mainly from Mexico (€+17 million) driven by a higher net technical margin as a result of volume growth and an improved profitability.
Income tax expenses increased by €1 million (+1%) to €-92 million. On a constant exchange rate basis, income tax expenses increased by €9 million (+10%) driven by higher pre-tax underlying earnings, partly off set by positive tax one-off s (€11 million) as well as the above-mentioned reclassification in Singapore.
Income from affiliates and associates increased by €18 million (+21%) to €104 million. On a constant exchange rate basis, income from aff iliates and associates increased by €29 million (+34%) mainly driven by higher earnings at Reso (€+18 million) and in India (€+13 million).
Underlying earnings increased by €64 million (+19%) to €400 million. On a constant exchange rate basis, underlying earnings increased by €94 million (+28%).
Adjusted earnings increased by €66 million (+20%) to €396 million. On a constant exchange rate basis, adjusted earnings increased by €95 million mainly driven by higher underlying earnings.
Net income increased by €79 million (+28%) to €355 million. On a constant exchange rate basis, net income increased by €115 million (+42%) driven by higher adjusted earnings and favorable foreign exchange impacts, partly off set by higher restructuring costs.
Net capital gains or losses attributable to shareholders net of income tax (13) (7)
Profit or loss on financial assets (under fair value option) and derivatives (79) (175)
(a) Restated: as per new governance. (b) Net of intercompany eliminations. (c) Other corresponds to asset management activities and holdings.
(a) Net of intercompany eliminations. Gross Revenues amounted to €1,564 million before intercompany eliminations as of December 31, 2018.
Assets under Management (“AUM”) decreased by €16 billion from December 31, 2017, to €730 billion at the end of December 31, 2018, mainly driven by €-12 billion negative market eff ects, €-6 billion net outflows mainly from Asian Joint ventures (€-7 billion), partly off set by inflows from Third-Party clients (€+3 billion), €-4 billion negative scope impact mainly related to the disposal of a part of AXA Germany occupational pension business, partly off set by €+6 billion positive foreign exchange rate impact.
Gross revenues decreased by €32 million (-3%) to €1,243 million. On a comparable basis, gross revenues decreased by €25 million (-2%) mainly driven by lower management fees (€-18 million) and other fees (€-12 million), partly off set by higher performance fees including realized carried interest (€+5 million) and transaction fees (€+3 million).
Underlying earnings before tax decreased by €9 million (-3%) to €343 million. On a constant exchange rate basis, underlying earnings before tax decreased by €7 million (-2%) as a result of lower gross revenues, partly off set by higher underlying financial results.
Income tax expenses decreased by €19 million (-19%) to €-85 million. On a constant exchange rate basis, income tax expenses decreased by €19 million (-18%) in line with lower pre-tax underlying earnings combined with a favorable change in business mix with a low tax regime on realized carried interests.
Underlying earnings and adjusted earnings increased by €13 million (+5%) to €270 million. On a constant exchange rate basis, underlying earnings and adjusted earnings increased by €15 million (+6%).
Profit or loss on financial assets (under fair value option) and derivatives (7) (7)
Underlying earnings before tax decreased by €23 million (-54%) to €20 million: ■ Property & Casualty (€+16 million or +81%) to €36 million mainly driven by a reclassification of a Travel product from Health, an improved all accident year loss ratio due to favorable prior year reserve developments, partly off set by a higher current year loss ratio; ■ Health (€-39 million) to €-17 million mainly driven by a reclassification of a Travel product to Property & Casualty, higher claims related to an increase in service usage mainly in Telemedicine, as well as higher general expenses.
Adjusted earnings decreased by €25 million to €2 million mainly driven by lower underlying earnings.
Over the past several years, the Group has expanded its core operations ((re)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 (mainly subordinated debt) and borrowings (including debt issued by subsidiaries), (iii) the issuance of ordinary shares and (iv) proceeds from the sale of non-core businesses and assets, including equity participations.
The Company anticipates that cash dividends received from its operating subsidiaries and other financing sources available to the Company will continue to cover going forward its operating expenses (including interest payments on its outstanding debt and borrowings) and dividend payments . AXA expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash flow remaining aft er payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses as well as future issues of debt and/or equity instruments.
As a holding company, AXA is not subject to legal restrictions on dividend payments, provided that its accumulated profits are suff icient to cover distributions and that the Group Solvency II ratio is in line with the level defined in the Group Target Capital framework. However, many Group subsidiaries, particularly AXA’s (re)insurance subsidiaries, are subject to local regulatory restrictions on the amount of dividends they can pay to their shareholders. For more information on these restrictions, see Note 29.4 “Other items: restrictions on dividend payments to shareholders” in Part 5 – “Consolidated Financial Statements” and paragraph “The Group’s or its (re)insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position” in Section 4.1 “Risk Factors” (1) of this Annual Report.
In 2018, AXA continued to follow a prudent approach to manage its liquidity risk. At year-end 2018, AXA had: ■ a large cash position across all business lines (information on cash flows from operations is provided in Note 12 “Cash and cash equivalents” in Part 5 – “Consolidated Financial Statements” of this Annual Report). As of December 31, 2018, AXA’s consolidated statement of financial position included cash and cash equivalents of €30.5 billion, net of bank overdraft s of €0.8 billion; ■ broad access to various markets via standardized debt programs: for example, at the end of 2018, this included a maximum capacity of €6.0 billion of French commercial paper, $2.0 billion of US commercial paper, €18.0 billion under a Euro Medium Term Note (“EMTN”) program (of which €15.6 billion have already been issued) and €1.5 billion of French titres négociables à moyen terme;
On a consolidated basis, subordinated debt that qualifies as financing debt (excluding derivative instruments) amounted to €11,200 million as of December 31, 2018 (€10,876 million including derivatives) aft er taking into account all intra-group eliminations and excluding undated subordinated debt that qualifies as equity (TSS/TSDI, which are included in shareholders’ equity, as described in Note 1.13.2 “Undated subordinated debt” in Part 5 – “Consolidated Financial Statements” of this Annual
Report) and excluding preferred shares issued by XL Group (€1,025 million) which are included in minority interests, compared to €7,741 million as of December 31, 2017 (€7,086 million including derivatives), thus showing an increase of €3,459 million excluding the impact of derivatives.
At December 31, 2018, other debt instruments issued were equal to €505 million, down from €1,608 million at the end of 2017. The decrease of €1,103 million mainly reflects the cancellation of commercial paper issued by AXA Financial, Inc.
(5) This information is not required under IFRS and as such is not part of the Consolidated Financial Statements. Therefore, it is not covered by the report of the Statutory Auditors on the Consolidated Financial Statements.
At December 31, 2018, other debt owed to credit institutions was equal to €2,233 million (including €773 million of bank overdraft s), an increase of €798 million compared to €1,435 million at the end of 2017 (including €702 million of bank overdraft s).
Debt (other than financing debt) owed to credit institutions is described in Note 18 “Payables” in Part 5 – “Consolidated Financial Statements” of this Annual Report.
Newly issued shares arising from long term incentive plans (stock options) amounted to 2.62 million shares in 2018. To eliminate the dilutive impact of the newly issued shares, AXA bought back the equivalent number of such shares to cancel them.
Dividends received by the Company from its subsidiaries amounted to €3,973 million in 2018 (€4,990 million in 2017), of which €796 million were denominated in currencies other than the Euro (€1,045 million in 2017).
Dividends paid to AXA SA’s shareholders in 2018 in respect of the 2017 financial year amounted to €2,999 million, or €1.26 per share, versus €1.16 per share paid in 2017 in respect of the 2016 financial year (€2,808 million in total). Those dividends were paid in cash.
The Group’s operations are subject to a wide variety of insurance and other laws and regulations in the jurisdictions in which it operates, including regulatory capital and solvency requirements. For additional information, please refer to Section 6.3 “General Information—Regulation and Supervision” (1) of this Annual Report.
In the event that the Group or any of its (re)insurance subsidiaries fail to meet applicable regulatory capital requirements, insurance regulators would have broad authority to require or take various regulatory actions. A failure of the Group and/or any of its (re) insurance subsidiaries to meet its regulatory capital requirements and/or a deterioration of its solvency position may also result in the need for significant amounts of new capital, which could adversely aff ect the Group’s liquidity position. For additional information, see paragraph “The Group’s or its (re)insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position” in Section 4.1 “Risk Factors” (2 ) of this Annual Report.
The Group was in compliance with the applicable solvency requirements as of December 31, 2018 and monitors compliance with such requirements on a continuous basis.
The AXA Group defined a clear framework for its capital management policy around a central regulatory Solvency II ratio target range: ■ the central target range is between 170% and 220%. Within this central range, AXA intends to (i) pay dividends for an amount representing a pay-out (1) ratio within 50% to 60% target range, (ii) buy back shares to neutralize dilution at least resulting from employee share off erings and stock options exercise, (iii) maintain investments in business growth, and (iv) maintain current investment risk appetite; ■ above 220% and as solvency increases, excess capital could be returned to our shareholders, or used to add flexibility within the dividend pay out range, invest in business growth or increase the Group’s appetite for investment risk; ■ below 170%, the AXA Group may become more conservative gradually, selectively de-risking the investment portfolio, increasing selectivity in growth initiatives, allowing for dilution resulting from employee shares off ering and stock options exercise; and potentially reviewing the dividend payout ratio; ■ below 140%, the AXA Group may restrict its growth initiatives, further reduce its appetite for investment risk and reduce the dividend payout ratio below its target range.
The AXA Group has defined and implemented capital management standards aimed at ensuring that the Company and its subsidiaries are well positioned from a competitive point of view and maintain an adequate solvency ratio in accordance with local regulation requirements. The Management has developed various contingency plans. These plans may involve use of reinsurance, sales of investment portfolios and/or other assets, measures to reduce capital strain of new business or other measures. There can be no assurance, however, that these plans will be eff ective and achieve their objectives.
Resources under Solvency II represent Eligible Own Funds (“EOF”) to the Company before the impact of any tiering eligibility restrictions and aft er consideration of the potential non-availability of certain elements of capital.
For compliance with the SCR, the following quantitative limits apply: (a) the eligible amount of Tier 1 items must be at least one half of the SCR, (b) the eligible amount of Tier 3 items must be less than 15% of the SCR, (c) the sum of the eligible amounts of Tier 2 and Tier 3 items must not exceed 50% of the SCR.
Dated and undated subordinated notes issued by the Company qualify as EOF.
Subordinated notes issued by the Company since January 18 , 2015 have been structured to be eligible as own funds regulatory capital under Solvency II regulations. Subordinated notes issued prior to January 18 , 2015 mostly benefit from the transitional provisions set forth in Directive 2014/51/EU (Omnibus II), which amended the Solvency II Directive, as they were previously eligible under the Solvency I regime and were issued prior to the entry into force of Delegated Regulation EU 2015/35 of October 10, 2014.
Certain TSR include clauses which permit or force the Company to defer interest payments. In addition, redemption at maturity is subject to (i) the prior approval by the Autorité de contrôle prudentiel et de résolution (the“ACPR”), (ii) the absence of any event (a) making the own funds of the Company and/or the Group insuff icient to cover its regulatory capital requirements or (b) pursuant to which the Company would have to take specified action in relation to payments under the notes due to its financial condition or (c) having an adverse eff ect on its insurance subsidiaries claim payments ability.
In particular, most of the Company’s TSS include loss absorption mechanisms which provide that under certain circumstances where the Company does not meet its regulatory capital requirements, the principal amount of each of the relevant TSS will be written down. In such event, interest will become payable on the reduced principal amount only. The principal may be reinstated when the Company returns to financial health, as defined under the terms and conditions of the TSS.
In addition, for most of the Company’s TSS, upon the occurrence of certain events relating to the Company’s consolidated net earnings and shareholders’ equity, the Company is required to defer payment of interest. In such events, the Company may choose to pay such deferred interest by way of alternative coupon settlement mechanisms within five years (such as, issuance of new shares or other securities including TSS or preference shares, sale of treasury shares, or an increase in the principal amount of the relevant notes, subject to applicable limits), failing which the interest is forfeited. However, the settlement of deferred interest becomes due, on a best eff orts basis, in certain circumstances including redemption of the notes, liquidation of the Company, payment of a dividend or interest on any other TSS, any share buyback outside the Company’s buy-back program, or any redemption or repurchase of other TSS.
In assessing whether certain fungibility restrictions on capital held by AXA subsidiaries may limit the cover of the Group SCR, the Group considers the following elements: ■ whether the own funds items are subject to legal or regulatory requirements that restrict the ability of such items to absorb all types of losses wherever they arise in the Group; ■ whether there are legal or regulatory requirements that restrict the transferability of assets to another insurance or reinsurance undertaking; and
I Subsequent events aft er December 31, 2018 impacting AXA’s liquidity
A dividend per share of €1.34 will be proposed to the Shareholders’ Meeting to be held on April 24, 2019. Subject to the Shareholders’ Meeting approval, the dividend will be payable on May 6, 2019 with an ex-dividend date of May 2, 2019.
On February 14, 2019, AXA announced that it had completed the sale of both its non-life entity (AXA Insurance (1)) and life entity (AXA Insurance Life) in Ukraine to Fairfax Financial Holdings Limited (2).
Board of Directors 101 The Board Committees 121 Executive Management 125 Other information 126 3.2 EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 128 Corporate off icers’ and executives’ compensation 129 Stock options 137 Performance shares and international performance shares 143 Share ownership policy for executives of the Group 148 Transactions involving Company securities completed in 2018 by the members of the Board of Directors 151 Commitments made to executive off icers 152 Report of the Board of Directors on the compensation policy of the Company’s corporate off icers (Ordinary and Extraordinary Shareholders’ Meeting of April 24, 2019) 154 3.3 CORPORATE GOVERNANCE CODE OF REFERENCE 158 3.4 RELATED- PARTY TRANSACTIONS 159 Special report of the Statutory Auditors on regulated agreements and commitments 160
The Board has adopted internal terms of reference (the “Board’s Terms of Reference”) which detail in particular the role and responsibilities of the Board and its Committees, as well as matters reserved for Board decisions. The Board’s Terms of Reference include corporate governance requirements which, in certain instances, go beyond French regulatory requirements notably in relation to the role of the independent directors on the Board Committees.
Following Mr. Henri de Castries’ decision to step down from his positions of Chairman and Chief Executive Off icer announced on March 21, 2016, the Board of Directors decided to separate the positions of Chairman and Chief Executive Off icer, appointing Mr. Denis Duverne, former Deputy Chief Executive Officer and member of the Board, as non-executive Chairman and Mr. Thomas Buberl as Chief Executive Off icer on September 1, 2016.
Assists the Chief Executive Officer in the operational management of the
The Board of Directors determines the strategic orientations of the Company
Assists the Chief Executive Officer and the Management Committee to develop and implement key strategic inititiatives
The following policy defines the approach to diversity adopted by AXA in the composition of its Board of Directors as required by Article L.225-37-4, 6° of the French Commercial Code (Code de commerce).
POLICY STATEMENT In an increasingly complex and highly competitive global environment, it is important for AXA to have directors with varied and complementary profiles, skills and experience to drive its current and future strategy and development. AXA believes that in order for it to tackle the challenges ahead and create long-term value for the Group, its shareholders and all its stakeholders, AXA’s Board of Directors should consist of high calibre men and women from diverse backgrounds.
The members of the Board of Directors are appointed for a four year term by the Shareholders’ Meeting. On December 31, 2018, the Board of Directors comprised sixteen members - eight women and eight men. An overview of the Board of Directors and the profile, experience and expertise of each director is provided on pages 106 to 115 of this Annual Report.
The objective of this diversity policy is to ensure that, over time, the Board maintains a diverse Board composition to support the Group’s Management in the development of its strategic plan and the definition of its long-term objectives.
In this context, the Compensation & Governance Committee regularly calls upon external consultants to assist it in identifying and interviewing candidates meeting defined selection criteria. It then submits its recommendations to the Board of Directors.
RESULTS OBTAINED IN THE PAST YEAR In 2018, the Board of Directors took into account these diversity criteria when selecting new members, which led to an improvement in both gender balance and the diversity of its members’ profiles and expertise.
Gender balance At least 40% of directors of each gender (Target met)
Representation of women on the Board: ■ 8 women (2 more than in 2017) and 8 men (stable compared to 2017) ■ 5 women joined the Board of Directors in 2018
Nationality of directors Balanced and complementary composition in terms of nationalities (at least four nationalities represented on the Board) (Target met)
■ At December 31, 2018, the directors’ average age was 61 years old ■ 1 director out of 16 is over the age of 70 > 70 years 60-69 years 40-49 years 50-59 years
At December 31, 2018, 10 out of 16 directors were independent, i.e. 62.5% of members of the Board of Directors (71% at December 31, 2017).
The Board of Directors pays special attention, in the selection of its members, to their respective areas of expertise and experience, including their knowledge of the diff erent regions where the Group is present.
Chairman of the Board of Directors 1,576,337 April 2010/2022 Annual Shareholders’ Meeting
Thomas Buberl (45) Director and Chief Executive Off icer of AXA 25, avenue Matignon – 75008 Paris – France German and Swiss nationalities
Director and Chief Executive Off icer 206,986 September 2016/2022 Annual Shareholders’ Meeting
Patricia Barbizet (63) Chairman of Temaris & Associés 40, rue François 1er – 75008 Paris - France French nationality
Bettina Cramm (55) Director of AXA representing the employees AXA Konzern AG - Gustav-Stresemann-Ring 12-16 – 65189 Wiesbaden - Germany German nationality
Director representing the employees Member of the Compensation & Governance Committee 106 June 2018/2022 Annual Shareholders’ Meeting
Rachel Duan (48) Senior Vice President of GE and President & Chief Executive Off icer of GE China and GE Global Markets (China) GE China - 8F 1 Building 1 Huatuo Road - Zhangjiang High Tech Park - Shanghai 201203 – China Chinese nationality
Jean-Martin Folz (71) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France French nationality
Senior Independent director Chairman of the Compensation & Governance Committee 12,084 May 2007/2019 Annual Shareholders’ Meeting
Angelien Kemna (61) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France Dutch nationality
(b) AXA shares which could be indirectly held through Mutual funds are not taken into account. (c) Until March 1, 2019.
Ramon de Oliveira (64) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue – New York – NY 10065 – United States French and Argentinian nationalities
Director representing the employee shareholders Member of the Finance Committee 11,903 April 2012/2020 Annual Shareholders’ Meeting
Independent director Member of the Audit Committee 2,000 May 2018/2021 Annual Shareholders’ Meeting
(a) For further information on the expertise, experience and directorships of the members of the Board of Directors, please refer to Section “Information on current members of the Board of Directors” below.
(b) AXA shares which could be indirectly held through Mutual funds are not taken into account.
Changes within the membership of the Board of Directors and its Committees in 2018
Board of Directors Isabelle Kocher (04/25/2018) Suet Fern Lee (04/25/2018) Deanna Oppenheimer (05/24/2018)
Mr. Jean-Martin Folz, member of the Board of Directors for twelve years, informed the Board of his decision not to run for a new term.
Subject to the approval of the Shareholders’ Meeting of April 24, 2019, the Board of Directors will consequently comprise fift een members including eight women (53% (1)) and nine members considered independent (60%) by the Board of Directors in accordance with the criteria of the Afep-Medef Code.
The composition of the Board Committees will be reviewed during the Board of Directors’ meeting following the Shareholders’ Meeting of April 24, 2019.
(1) Or a rate of 46% of women (excluding directors representing the employees) in accordance with legal requirements.
Directorships held during the last five years Deputy Chief Executive Officer: AXA Chairman & Chief Executive Officer: AXA America Holdings, Inc. (United States) Chairman of the Board of Directors: AXA Holdings Belgium (Belgium), AXA Financial, Inc. (United States) Director or member of the Management Committee: AXA ASIA (SAS), AXA Assicurazioni S.p.A. (Italy), AXA Belgium SA (Belgium), AXA Equitable Life Insurance Company (United States), AXA Italia S.p.A. (Italy), AXA MPS Assicurazioni Danni S.p.A. (Italy), AXA MPS Assicurazioni Vita S.p.A. (Italy), AXA UK plc (United Kingdom), MONY Life Insurance Company (United States), MONY Life Insurance Company of America (United States)
Expertise and experience Mr. Thomas Buberl holds a Master of Economics degree from WHU Koblenz (Germany), a MBA from Lancaster University (UK) and a Ph.D. in Economics from the University of St. Gallen (Switzerland). In 2008 he was nominated as a Young Global Leader by the World Economic Forum. From 2000 to 2005, Mr. Thomas Buberl worked at the Boston Consulting Group as a consultant for the banking & insurance sector in Germany and abroad. From 2005 to 2008, he had worked for the Winterthur Group as member of the Management Board of Winterthur in Switzerland, first as Chief Operating Off icer and then as Chief Marketing and Distribution Off icer. Then, he joined Zurich Financial Services where he had been Chief Executive Off icer for Switzerland. From 2012 to April 2016, he was Chief Executive Off icer of AXA Konzern AG (Germany). In 2012, he has been member of the AXA Executive Committee. In March 2015, he became Chief Executive Off icer of the Global Business Line for the Health Business and joined the AXA Management Committee. In January 2016, Mr. Thomas Buberl was also appointed Chief Executive Officer of the global business line Life & Savings. From March 21, 2016 to August 31, 2016, Mr. Thomas Buberl was Deputy Chief Executive Off icer (Directeur Général Adjoint) of AXA. Since September 1, 2016, Mr. Thomas Buberl has been Chief Executive Officer and Member of the Board of Directors of AXA.
Directorships held within the AXA Group Director and Chief Executive Officer: AXA* Chairman of the Board of Directors: AXA Equitable Holdings, Inc.* (United States), XL Group Ltd (Bermuda) Director: AXA Equitable Life Insurance Company (United States), MONY Life Insurance Company of America (United States)
Member of the Supervisory Board: Bertelsmann SE & Co. KGaA (Germany)
Directorships held during the last five years Chairman of the Management Board: AXA Konzern AG (Germany), AXA Krankenversicherung AG (Germany), AXA Lebensversicherung AG (Germany), AXA Versicherung AG (Germany), DBV Deutsche Beamtenversicherung AG (Germany) Chairman of the Board of Directors: AXA Financial, Inc. (United States), AXA Leben AG (Switzerland), AXA Versicherungen AG (Switzerland) Chairman of the Supervisory Board: AXA Konzern AG (Germany), AXA Krankenversicherung AG (Germany), AXA Lebensversicherung AG (Germany), AXA Versicherung AG (Germany), Deutsche Ärzteversicherung AG (Germany) Deputy Chairman of the Supervisory Board: Roland Rechtsschutz-Versicherungs-AG (Germany) Managing Director and Chief Executive Officer: Vinci B.V. (The Netherlands) Director or member of the Management Committee or member of the Supervisory Board: AXA ASIA (SAS), AXA ART Versicherung AG (Germany), AXA Life Insurance Co. Ltd (Japan), Tertia GmbH (Germany)
(2) Mr. Thomas Buberl requested the Board of Directors’ approval before accepting new directorships in companies outside the AXA Group.
Expertise and experience Mrs. Patricia Barbizet graduated from ESCP-Europe Business School in 1976. Mrs. Patricia Barbizet started her career as International Treasurer in Renault Véhicules Industriels, and then as Chief Financial Off icer of Renault Crédit International. In 1989, she joined the Groupe Pinault as Chief Financial Officer. She was Chief Executive Officer of Artémis, the investment company of the Pinault family, from 1992 to 2018. She was Chief Executive Off icer and Chairwoman of Christie’s International from 2014 to 2016. Mrs. Patricia Barbizet is Lead Independent Director of the Board of Total and Pernod Ricard. She also served as a qualified independent member on the Boards of Bouygues, Air France-KLM, Kering and PSA PeugeotCitroen as well as Chairwoman of the Fonds Stratégique d’Investissement Investment Committee until 2013. Since April 2018, Mrs. Patricia Barbizet has been Chairman of Temaris & Associés.
Patricia Barbizet Member of the Board of Directors of AXA (independent)
Directorship held outside the AXA Group Director: Caisse de retraite du personnel de l’UAP (CRUAP)
Martine Bièvre Member of the Board of Directors of AXA representing the employees
Directorships held during the last five years Director and Chairman of the Executive Committee: Solvay (Belgium) Chairman: Cytec Industries Inc (United States) Director: Faurecia, SNCF
Expertise and experience Mrs. Irene Dorner graduated with a Master of Arts in Jurisprudence from St. Anne’s College, Oxford (United Kingdom) and qualified as a Barrister-at-Law (College of Law, London) and then became in-house counsel for Citibank N.A. In 1986, she joined Samuel Montagu as Head of the Legal Department and, following the HSBC acquisition of Midland Bank in 1992, became Head of Strategic Planning at Midland Bank. She then held various senior front line and support function roles in Midland Global Markets and HSBC Bank. In early 2007, she became Deputy Chairman & Chief Executive Off icer of HSBC in Malaysia. From 2010 to 2014, she was Chief Executive Off icer & President of HSBC USA. Whilst in this role, American Banker elected her the first most powerful woman in the banking sector. She was also Group Managing Director of HSBC Holdings (United Kingdom) and member of the HSBC Group Management Board. In 2014, Mrs. Irene Dorner retired from HSBC. From March 1, 2018 to October 15, 2018, Mrs. Irene Dorner was Chairwoman of Virgin Money (United Kingdom).
Expertise and experience Mrs. Rachel Duan holds a bachelor’s degree in Economics and International business from Shanghai International Studies University and a MBA from the University of Wisconsin (Madison – United States). Mrs. Rachel Duan joined General Electric (GE) in 1996 as Corporate Audit Staff . During her four years on Corporate Audit Staff, she progressed to Senior Audit Manager and led audits in multiple GE industrial and capital businesses worldwide. In 2000, Mrs. Rachel Duan was appointed as Six Sigma Quality Leader for GE Plastics Asia Pacific based in Tokyo. In late 2001, she moved to China and became the Lexan Commercial Director for GE Plastics China. From 2003 to 2005, Mrs. Rachel Duan served as Marketing Director first for China, and then for Asia Pacific. In 2005, she was promoted to General Manager for Polymer business in the Asia Pacific region. In 2006, Mrs. Rachel Duan became the President & Chief Executive Off icer of GE Advance Materials China. She served as President & Chief Executive Off icer for Asia Pacific of Momentive Performance Materials (previously known as GE Advance Materials which was formed upon GE divesture at the end of 2006). In 2010, Mrs. Rachel Duan rejoined GE and was named as President & Chief Executive Officer of GE Healthcare China, the role she still assumes today. In July 2014, Mrs. Rachel Duan was appointed President & Chief Executive Off icer of GE China, becoming the first native-Chinese ever to take this role in GE’s largest single country market outside US. Since January 24, 2019, Mrs. Rachel Duan has been President & Chief Executive Off icer of GE Global Markets. She is also a Senior Vice President of General Electric Company (GE).
Directorships held outside the AXA Group President and Chief Executive Officer: GE China, GE Global Markets, GE Healthcare China
Senior Vice President of GE and President & Chief Executive Off icer of GE China and GE Global Markets (China) Born on July 25, 1970 Chinese nationality Appointed on
Directorships held during the last five years Chairman of the Board of Directors: Eutelsat Communications Director, member of the Supervisory Board or member of the Management Committee: Alstom, AXA Millésimes (SAS), Compagnie de Saint-Gobain, Société Générale, Solvay (Belgium)
Expertise and experience Mr. André François-Poncet graduated from École des Hautes Etudes Commerciales (HEC) and holds a Master in Business Administration (MBA) from the Harvard Business School. He began his career, in 1984, at Morgan Stanley in New York and then in London and in Paris, where he was in charge of the opening of Morgan Stanley French off ice. Aft er a sixteen-year career at Morgan Stanley, he joined, in 2000, BC Partners (Paris and London) as Managing Partner until December 2014 and then as Senior Advisor until December 2015. From September 2016 to December 2017, Mr. André FrançoisPoncet was a Partner at the French asset manager CIAM in Paris. Since January 1, 2018, Mr. André François-Poncet has been Chairman of the Management Board of Wendel SE.
Directorships held outside the AXA Group Chairman of the Management Board: Wendel SE* ** Chairman and director: Harvard Business School Club de France, Trief Corporation** (Luxembourg) Vice-Chairman of the Board of Directors and director: Bureau Veritas* ** Director: Winvest Conseil** (Luxembourg) Member of the bureau: Club des Trente Member of the European Advisory Board: Harvard Business School
Chairman of the Management Board of Wendel SE Born on June 6, 1959 French nationality Appointed on
Member of the AXA Compensation & Governance Committee Member of the AXA Finance Committee
Angelien Kemna Member of the Board of Directors of AXA (independent)
Expertise and experience Mr. Stefan Lippe is a graduate in mathematics and business administration from the University of Mannheim. He obtained his doctorate in 1982 being awarded the Kurt Hamann foundation prize for his thesis. In October 1983, he joined Bavarian Re (a former Swiss Re subsidiary). From 1985, he was involved in the casualty department’s operations in the German-speaking area. In 1986, he became Head of the nonproportional underwriting department. He was appointed member of the Management Board in 1988 when he assumed responsibility for the company’s casualty line of business in the German-speaking area. In 1993, he became Chairman of the Management Board of Bavarian Re. Mr. Stefan Lippe was appointed a member of Swiss Re’s Executive Board in 1995, as Head of the Bavarian Re Group. In 2001, he was assigned the role of Head of the Property & Casualty Business Group and appointed a member of Swiss Re’s Executive Committee. Beginning in 2005, he led Swiss Re’s Property & Casualty and Life & Health Underwriting activities; and in September 2008, he took over as Chief Operating Off icer of Swiss Re and was also appointed Deputy Chief Executive Off icer of Swiss Re. In 2009, he was appointed Chief Executive Off icer of Swiss Re and stayed in this function until January 2012. Mr. Stefan Lippe was named Reinsurance CEO of the year 2011 by the leading industry publication, Reaction, and he was recognized at the Worldwide Reinsurance Awards 2013 ceremony with the “Lifetime Achievement Award”. Aft er nearly 30 years with Swiss Re, he turned to other activities. In 2011, Mr. Stefan Lippe co-founded Acqupart Holding AG of which he serves as Vice-Chairman of the Board of Directors, and Acqufin AG. In May 2013, he co-founded Paperless Inc. renamed as yes. com AG in 2018 and currently serves as Chairman of the Board of Directors of this company. In October 2013, Mr. Stefan Lippe was elected as Chairman of the Board of Directors of CelsiusPro AG. From May 2014 to May 2018, Mr. Stefan Lippe was a member of the Supervisory Board of Commerzbank AG.
Stefan Lippe Member of the Board of Directors of AXA (independent)
Expertise and experience Mr. François Martineau is a graduate of the University Paris IV (Philosophy Degree), University Paris I (Law Master), and of the Institut d’Études Politiques of 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 Paris I (Civil Procedure). In 1995, he was a Professor at the Paris Bar School (EFB) and since 1998, he is Honorary Professor at the Law and Political Sciences School of Lima (Peru). In 1996, he became an Expert at the Council of Europe and fulfilled various missions in Eastern Europe countries regarding the reform of the Code of the Judicial Organization, the reform of the magistrates’ and lawyers’ training and the revision of the Code of Civil Procedure. He also taught professionals at the Ecole Nationale de la Magistrature (ENM). Since 1987, Mr. François Martineau has been a Partner of the law firm Lussan / Société d’avocats and co-Managing Partner.
Directorships held within the AXA Group Director or member of the Management Committee: AXA*, AXA Millésimes (SAS)
Attorney at law Born on June 11, 1951 French nationality Appointed on
Directorship held outside the AXA Group Managing Director: Investment Audit Practice, LLC (United States)
Directorships held during the last five years Chairman of the Board of Directors: Friends of Education (non-profit organization) (United States) Trustee and Chairman of the Investment Committee: Fondation Kaufman (United States) Chairman of the Investment Committee: Fonds de Dotation du Musée du Louvre Vice-Chairman: JACCAR Holdings SA (Luxembourg) Director or member of the Supervisory Board: American Century Companies Inc. (United States), AXA Equitable Life Insurance Company (United States), AXA Financial, Inc. (United States), JP Morgan Switzerland (Switzerland), MONY Life Insurance Company (United States), MONY Life Insurance Company of America (United States), Quilvest (Luxembourg), SunGard Data Systems (United States), Taittinger-Kobrand USA (United States) Member of the Investment Committee: La Croix Rouge (United States)
Ramon de Oliveira Member of the Board of Directors of AXA (independent)
Managing Director of Investment Audit Practice, LLC (United States) Born on September 9, 1954 French and Argentinian nationalities Appointed on
Chairman of the AXA Finance Committee Member of the AXA Audit Committee
Executive Chairman of AXA Corporate Solutions, AXA Matrix Risk Consultants and AXA ART Born on November 4, 1957 German and French nationalities Appointed on
Elaine Sarsynski Member of the Board of Directors of AXA (independent)
Companies‘ directors Born on April 21, 1955 American nationality Appointed on
One member of the Board of Directors (currently Mrs. Doina Palici-Chehab) is the AXA employee shareholders’ representative.
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✔ ✔ ✔ ✔ ✔ ✔ ✔ 0 ** ✔ ✔ ✔
In accordance with French law, the Chairman’s role is to organize and oversee the work of the Board of Directors. In this context, he sets the agenda of the Board meetings, holds regular discussions with the Chief Executive Off icer and the directors, requests any document or information necessary to help the Board of Directors for the preparation of its meetings, verifies the quality of the information provided and more generally, ensures that Board members are in a position to fulfill their role. Prior to each meeting, Board members receive documentation concerning matters to be reviewed, generally eight days in advance of Board meetings.
The Chairman convenes the members of the Board without directors who are members of the Executive Management being present, in particular to allow debates on the performance and compensation of the Executive Management and succession planning.
While the Chairman acts in close collaboration with the Chief Executive Off icer, his role is contributory in nature and does not confer any executive power. Under French law, it is the Chief Executive Off icer who is solely responsible for the Company’s operational leadership and management.
(1) For this purpose, AXA shares are valued using the closing price of the AXA share on December 31 of the preceding fiscal year. (2) The role of the Chairman is set out in the Board’s Terms of Reference which are available on AXA’s website.
He reported on his activities at the Shareholders’ Meeting of April 25, 2018.
In March 2018, the Board of Directors held its annual two-day off - site strategy session with presentations by Group senior executives on a variety of key strategic topics related to the implementation of the Group’s 2020 Strategic Plan.
In October 2018, the Board of Directors went to Shanghai (China), where it reviewed the Group’s Asian strategy and met with the Group’s main external partners in China.
The Compensation & Governance Committee reviewed in detail the conclusions of the Board self-assessment, the principal areas identified for improvement and made recommendations to the Board of Directors which were examined and approved at the Board meeting of December 13, 2018.
The 2018 Board self-assessment demonstrated that for a majority of the directors, the functioning of the Board had either improved or remained unchanged at a high level thanks to the maturity of its processes and the eff iciency of the team made of the Chairman and the Chief Executive Off icer.
Whilst the results of this assessment were positive, the members of the Board of Directors identified the following areas of improvement: ■ closely monitor the selection of future Board members with the objective of (i) appointing directors with predefined critical skills (insurance and financial competencies, digital, technology, human resources , marketing/branding skills), and (ii) appointing an additional seasoned and active or former Chief Executive Off icer of a large company; ■ reduce the number of directors sitting on the Board; ■ maintain a combined position of Senior Independent Director/ Chairman of the Compensation and Governance Committee since the two roles are intimately linked; ■ maintain regular interviews between the Chairman (and the Chief Executive Off icer) and each director on significant matters as it contributes to an eff icient decision process; ■ pursue and develop the practice consisting in having the Chief Executive Off icer send short information notes on insurance sector-related news or public announcements made by the Company to the directors; ■ involve the directors in the choice of the training sessions’ topics; ■ keep the Board informed of the succession process of the members of the Executive Management.
All Committees are composed of members with expertise in the relevant areas, and their composition is regularly reviewed by the Board of Directors.
In accordance with the Afep-Medef recommendations, the Audit Committee members are notably competent in the areas of finance and/or accounting.
The scope of the Audit Committee’s responsibilities is set out in its Terms of Reference which are reviewed and approved each year by the Board of Directors. The principal missions of the Committee are to: ■ monitor the financial reporting process and the integrity of the publicly reported results and disclosures made in the financial statements; ■ monitor the adequacy and eff ectiveness of the internal control and risk management frameworks; ■ form an opinion on the effectiveness, performance and independence of the Group’s internal auditors; ■ consider the appointment and oversee the process for selecting Statutory Auditors, monitor the Statutory Auditors’ audits and review of the Group’s consolidated financial statements, as well as the auditors’ independence and the breakdown of their fees and make recommendations to the Board as to the appointment of the Statutory Auditors to provide non-audit services.
The review of financial statements by the Audit Committee is accompanied by a report from the Statutory Auditors on the main results of the statutory audit and the accounting methods chosen in this regard. The Committee also receives presentations from the Group Chief Risk Off icer, the Group General Secretary, the Group General Counsel and the Group Chief Financial Off icer describing the Company’s principal risk exposures and where applicable the material off -balance-sheet commitments. The Committee examines and issues an opinion on documents required by the Solvency II. The Committee regularly meets the Statutory Auditors and the Global Head of Internal Audit during ad hoc sessions.
The Chief Executive Off icer, the Group Deputy Chief Executive Off icer (Directeur Général Adjoint) & Chief Financial Off icer, the Global Head of Internal Audit, the Group Chief Risk Off icer, the Group Chief Accounting Off icer, the Group Deputy Chief Executive Off icer (Directeur Général Adjoint) & General Secretary as well as the Statutory Auditors attend each Audit Committee meeting.
ORSA, SFCR and RSR reports; ■ the results of internal and external audit work; ■ the review of Management’s draft response to requests sent by the ACPR; ■ the review, for recommendation to the Board, of the non-audit services provided by the Statutory Auditors; ■ the review of IFRS 17 and its expected impacts; and ■ the internal and external audit plans and resources.
The principal missions of the Committee are: ■ to examine and issue an opinion on any plan to sell some or all ownership interests held by the Company, or any acquisition or strategic partnership, whatever form they may take, when their immediate or deferred value exceeds the €500 million threshold; ■ to examine and issue an opinion on any sureties, guarantees, endorsements and warrantees in favor of third parties which exceed the delegations of power granted to the Chief Executive Off icer by the Board of Directors; ■ to examine and issue an opinion on any of the following: – securities issuances giving a claim, whether directly or indirectly, to the Company’s share capital, – share repurchase programs proposed to the Ordinary
The Committee focused, in particular, on the following issues: ■ macroeconomic environment; ■ capital and solvency; ■ debt and liquidity; ■ financial r isk m anagement; ■ risk appetite and asset allocation; ■ review of the 2018 investment strategy; ■ the Systemic Risk Management Plan; ■ the Liquidity Risk Management Plan; ■ the Recovery Plan; ■ review of the financial authorizations (guarantees); and ■ review of the proposed capital increase reserved for the employees of the AXA Group (Shareplan 2018).
– the composition of the Board Committees, – the appointment of the Chairman, the Senior Independent
Director, the members of the Executive Management and the persons who eff ectively run the Company (dirigeants eff ectifs) as defined under the Solvency II.
– the number of Company stock options or performance shares to be granted to the Chief Executive Off icer and the other members of the Management Committee; ■ to formulate an opinion on the proposals of the Chief Executive Off icer concerning: – the principles and conditions for the determination of the compensation of the main executives of the AXA Group, – the overall annual allocation of Company stock options or performance shares to employees of the AXA Group.
Governance issues: ■ the process of selection of future directors; ■ the composition of the Board and its Committees; ■ the independence of the members of the Board; ■ the self-assessment of the Board of Directors; ■ the changes in the Board’s Terms of Reference; ■ the review of the terms of appointment of the directors representing the employees; ■ the succession plan (including the emergency succession plan) of the
Executive Management and the Chairman of the Board of Directors; and ■ the Talent Review and succession plans.
Corporate Responsability issues: ■ the review of the Company’s Corporate Responsibility strategy and the Group’s environmental policy; ■ the Diversity & Inclusion strategy; and ■ the AXA Compliance & Ethics Code.
(2) All members of the Compensation & Governance Committee are independent directors, with the exception of the director representing the employees who sits on the Committee pursuant to the Afep-Medef recommendations.
Gérald Harlin Group Deputy Chief Executive Off icer (Directeur Général Adjoint) & Chief Financial Off icer
Alban de Mailly Nesle Group Chief Risk Off icer and Head of Group Insurance Off ice
Mrs. Martine Bièvre, who is an employee representative on AXA’s Board of Directors, is currently an employee of AXA France IARD, which is one of AXA’s main French subsidiaries.
The Chairman of the Board of Directors and the Chief Executive Off icer do not currently carry out any professional activity or hold any directorship outside the AXA Group that the Board believes substantially interfere with or impede in any material way their availability to focus on the Group and its business. Certain members of the Board of Directors, however, are corporate off icers and/or executives of companies that may have agreements or enter into transactions from time to time with the AXA Group including furnishing services or goods, providing credit facilities, purchases of securities (for their own account or for third parties), and/or underwriting of securities, and/or product and service providing. These agreements or deals are systematically negotiated and performed at arm’s length terms and conditions. Consequently, AXA does not believe that any of these agreements or transactions give rise to any conflicts of interests between (i) the director’s duties towards AXA and (ii) their private interests and/other duties.
France (b) (c) 16,385 15,926 16,570 Europe (including AXA Bank Belgium) 29,853 29,604 30,534 Of which Switzerland (d) 3,765 3,890 4,028
Of which Belgium (including AXA Bank Belgium) (f) (g) 4,193 4,019 3,881
Employees of non-consolidated companies or companies accounted for using the equity method are not included in the above table. (a) Restated: as per the new governance.
(i) In 2018, the decrease by 132 in Spain was mainly due to restructuring measures. ( j) In 2018, the increase by 70 in Japan was mainly due to the internalization of the customer service department. (k) In 2018, the increase by 80 in Hong Kong was mainly due to the internalization of IT staff and the filing up of vacant positions. (l) In 2018, the increase by 174 in Asia - Direct was mainly driven by South Korea due to recruitments in call centers. (m) In 2018, the decrease by 87 in Thailand reflected reorganization and eff iciency measures. (n) In 2018, the decrease by 78 in Indonesia was mainly due to restructuring measures.
AXA’s global executive compensation policy is designed to align the interests of the executives with those of the Company and its shareholders while establishing a clear and straightforward link between performance and compensation. In this context, its main objective is to encourage the achievement of ambitious objectives and the creation of long-term value by setting challenging performance criteria as shown in the diagram below.
AXA’s executive compensation structure is based on an in-depth analysis of market practices in France and abroad, within the financial services sector (insurance companies, banks, asset managers, etc.) and compared to the compensation practices of other international groups.
(1) The information in this section is presented in accordance with recommendation No. 2009-16 of the AMF, as modified on April 13, 2015, and with the recommendations of the Afep-Medef Code.
Solvency II regulations came into force on January 1, 2016 and include a number of specific compensation and governance requirements applicable to European insurers and reinsurers. In this context, AXA has undertaken a comprehensive review of its existing compensation policies and practices against the requirements of Solvency II and has adopted a Remuneration Policy applicable to all AXA employees as of January 1, 2016. This Remuneration Policy is designed to support the Group’s longterm business strategy and to align the interests of its employees with those of other stakeholders by (i) establishing a clear link between performance and remuneration over the short, medium and long term, (ii) ensuring that the Group can off er competitive compensation arrangements across the multiple markets in which it operates while avoiding potential conflicts of interest that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance with Solvency II regulations and any other applicable regulatory requirements.
It follows three main guiding principles: ■ competitiveness and market consistency of the remuneration practices; ■ internal equity, based on individual and collective performance, in order to ensure fair and balanced remuneration reflecting employee’s individual quantitative and qualitative achievements and impact; and
AXA applies a pay-for-performance approach which (i) promotes long-term sustainable performance by incorporating risk adjustment mechanisms in variable compensation schemes and (ii) recognises employees who bring the greatest value to the firm on the basis of financial results while demonstrating individual leadership and behaviours. The intent of this approach is to attract and retain the best skills and talents, to foster employee engagement and to strengthen AXA’s leadership.
In this context, the overall remuneration structure is based on the following components, which are designed to provide balance and avoid excessive risk taking for short-term financial gain: ■ a fixed component which comprises guaranteed elements, such as base salary and any other fixed allowances. It takes into account the job content, responsibilities, experience, market practices, technical skills and leadership competencies, and also sustained individual performance and criticality or scarcity of skills; ■ a variable component which comprises an upfront cash element (Short-Term Incentive) and a deferred element which is awarded through equity based instruments (or equivalents), such as stock options and/or performance shares (Long-Term Incentive). This variable component depends on the AXA Group’s global performance, on the beneficiary’s operating business performance, and on the achievement of the executive’s individual objectives including demonstrated abilities for leadership. The variable portion is designed to represent a substantial component of the executive’s global compensation and, where an executive attains or exceeds the set objectives, to position the compensation levels of AXA executives between the median and the third quartile (or, in certain cases, beyond the third quartile) of the market reference.
Each year, AXA, with the assistance of specialized firms, conducts compensation reviews in order to ensure the competitiveness and consistency of executives’ compensation and to measure the suitability of the global remuneration policies. In this context, three markets are used as a reference: ■ a first market composed of 12 companies in the French CAC 40 index (companies selected to form the panel, which may vary from year-to-year, are comparable to AXA in terms of stock capitalization, revenues, sector, number of employees and/ or geographic coverage); ■ a second market composed exclusively of international financial companies comparable in size and scope to the AXA Group (insurance companies and banks) which are principally based in the main European markets (France, Germany, Italy, the Netherlands, the United Kingdom, Spain and Switzerland), and in the United States; ■ a third market composed exclusively of international financial companies comparable in size and scope to the AXA Group (insurance companies and banks) which are principally based in Asia.
The Board of Directors, upon proposal of its Compensation & Governance Committee, has decided to maintain unchanged in 2018 the fixed annual compensation of the Chairman of the Board, Mr. Denis Duverne, at €1,200,000.
The Board of Directors also took into account the extensive duties that it entrusted Mr. Denis Duverne with as Chairman of the Board of Directors as described in Section 3.1 of this Annual Report.
Furthermore, Mr. Denis Duverne, who claimed his rights to pension as of September 1, 2016, has decided to waive payment, for his entire term of off ice as Chairman of the Board of Directors, of the annuities which he would have received as from September 1, 2016 under the complementary pension scheme for Group executive off icers in France, amounting to circa €750,000 per year. Mr. Denis Duverne has decided not to receive payment of these annuities until termination of his term of off ice as Chairman of the Board without retroactive payment.
Finally, no variable compensation is paid to him nor does he receive directors’ fees, stock options or performance shares or any other long-term incentive during his term of off ice.
The variable annual compensation is entirely subject to performance conditions and no minimum payment is guaranteed.
The determination of the variable compensation to be paid to the Chief Executive Off icer, Mr. Thomas Buberl, was based in 2018 on the following two metrics: ■ Group performance for 50%. This metric is measured based on (i) underlying earnings per share, (ii) return on equity (adjusted Return on Equity – RoE), (iii) gross revenues in both Commercial Property & Casualty and Protection & Health and (iv) Net Promoter Score (customer recommendation index). The relative weight of each indicator is, respectively, 55%, 15%, 15% and 15%.
Each of these two metrics is evaluated separately so that overall variable payout reflects performance against two distinct components (each capped at a 150% achievement rate) assessed independently.
The proportion allocated to individual performance reflects the Board of Directors’ desire to place more weight on the Chief Executive Off icer’s individual performance on the execution of major strategic initiatives that are critical to the Group’s longterm success.
The determination of the actual amount of variable compensation to be paid to the Chief Executive Officer is based on the following formula: Variable compensation due = Variable target compensation x Group Performance x Individual Performance.
(1) The score of 113% results from the average between (i) a strict application of the formula defined by the Board of Directors at the beginning of 2018 to assess the Group performance score (137%), including a neutralization of the impact of: (a) M&A transactions that have taken place in 2018 (including the IPO of the US company AXA Equitable Holdings, Inc. and the XL Group acquisition) and (b) share buy backs in excess of volumes required to off set the dilution arising from annual equity grants to Group employees and (ii) the published Group performance score (89%), i.e. without neutralization. Indeed, considering the very high Group performance score when neutralized by the above mentioned elements, the Board of Directors, upon recommendation of its Compensation & Governance Committee, decided to also take into account the Group performance score including the two M&A transactions mentioned above and thus consider the average of both Group performance scores, with and without neutralization, to set the overall Group performance score at 113%.
In order to evaluate Mr. Thomas Buberl’s individual performance in 2018, the Board of Directors assessed the achievement of the following objectives set in his target letter: ■ execution of the Initial Public Off ering (IPO) of AXA Equitable Holdings, Inc. and implementation of strategic options for capital redeployment (20%); ■ continue to deliver Ambition 2020 targets and pursue the implementation of AXA’s growth strategy (35%): • delivery of UEPS growth and Solvency II ratio within committed target range,
• increase employee engagement and support of the strategy and leadership of the Group;
■ acceleration of the Innovation strategy (20%): • further roll-out the Payer- to- Partner strategy in entities (with a focus on care coordination and cyber off er),
Pursuant to Articles L.225-37-2 and L.225-100 of the French Commercial Code, the payment of the Chief Executive Off icer’s 2018 variable compensation is withheld until the approval of the Shareholders’ Meeting on April 24, 2019.
For the members of the Management Committee, their variable compensation is also determined on the basis of an individual predefined target which is entirely based on the following formulas.
The variable compensation of the members of the Management Committee with Group responsibilities is determined according to the following metrics: Group performance (100%) x individual performance (100%).
The performance of operating businesses is determined on the basis of the following performance indicators: ■ U nderlying earnings; ■ Property & Casualty current year combined ratio; ■ Protection & Health current year/all year combined ratio ; ■ Commercial Property & Casualty gross revenues; ■ Protection & Health gross revenues; ■ Unit-Linked gross revenues; ■ Life & Savings Annual Premium Equivalent; ■ Net Promoter Score.
Performance indicators that measure the Group performance are defined at the beginning of the year with: ■ a predefined target, aligned with the strategic plan (budget), the completion of which will result in 100% achievement; ■ a floor (at which the STIC pay-out is 25%), which defines the threshold below which no variable compensation for that component will be paid; ■ a cap (at a STIC pay-out of 175%), which defines the threshold above which the variable compensation for that component is capped.
In the tables of this section, compensation not paid in Euro was converted into Euro on the basis of the following yearly average exchange rates for 2018: 1 USD = 0.8468 EUR; 1 HKD = 0.1080 EUR and 1 CHF = 0.8658 EUR.
The variable compensations paid to the Management Committee members for 2016, 2017 and 2018 were: VARIABLE COMPENSATIONS PAID TO MANAGEMENT COMMITTEE MEMBERS
(b) Amount before deduction of 70% of directors’ fees. (c) Please note that Mr. Thomas Buberl received a variable compensation of 592,850 e uros in respect of his employee position within the AXA Group for the period from January 1st to August 31st, 2016.
At the end of February 2019, (i) the second tranche of Mr. Thomas Buberl’s deferred variable compensation for the 2016 fiscal year, i.e. an amount of €81,410 and (ii) the first tranche of Mr. Thomas Buberl’s deferred variable compensation for the 2017 fiscal year i.e. an amount of €243,303 were paid.
These LTIs are integrally subject to performance conditions (please refer to pages 137 as well as 143 and following) and therefore do not guarantee any grant or minimal gain for the beneficiaries.
SUMMA RY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES GRANTED TO MANAGEMENT COMMITTEE MEMBERS
(a) This amount includes the part of the variable compensation with respect to 2017 and 2018 which has been deferred in accordance with the mechanism described on page 133 . The total amount paid will depend on performance conditions and may then vary.
(b) This amount includes the payment of the Chief Executive Off icer’s 2018 variable compensation which will be withheld until the approval of the Shareholders’ Meeting on April 24, 2019.
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2017
The corporate off icers do not receive Board fees from AXA SA.
(Gross amounts in Euro) Directors’ fees paid in 2019 for 2018 Directors’ fees paid in 2018 for 2017
(1) Mmes Martine Bièvre and Bettina Cramm, members of the Board of Directors representing the employees, are employed by subsidiaries of the Company and as such, receive a compensation that has no link with their directorship. Their compensation as employees is therefore not published.
No directors’ fees are paid by the Company to the corporate off icers (i.e. Chairman of the Board of Directors and Chief Executive Off icer).
■ the remaining 35% shall be allocated by the Board of Directors to the Board Committees as follows: 25% to the Finance Committee, 25% to the Compensation & Governance Committee and 50% to the Audit Committee. Each Committee shall then allocate such amount to its members as follows: 40% shall be divided equally among members and paid as a fixed fee and 60% shall be paid according to Committee attendance, with the Chairman of the Committee receiving in each case a double fee.
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2018 an annual gross cash compensation of €1,627,691 (1) in connection with her position as interim Chief Executive Off icer of AXA Asia and Executive Chairman of AXA Corporate Solutions, AXA Matrix Risk Consultants and AXA ART. This compensation consists of €615,165 of fixed compensation and €1,012,526 of variable compensation.
Mr. Ramon de Oliveira received in 2018, as Non-Executive Director of several companies of the Group, directors’ fees for a gross amount of USD 107,179.07. He also received a grant of AXA Equitable Holdings, Inc. performance shares in 2018 (4,844 AEH shares).
Pursuant to the stock option plan rules, beneficiaries who resign from the Group lose the right to exercise their options.
Within the global limit authorized by the Shareholders’ Meetings, the Board of Directors approves all stock option programs prior to their implementation. For the last few years, the choice was systematically made to grant purchase options.
Stock options are designed to align long-term interest of Group senior executives with shareholders through the performance of the AXA share price.
Individual grants are determined taking into account the (i) criticality of the position within the organization, (ii) criticality of the individual in the current position and potential for future, (iii) sustainability of the individual contribution and (iv) specificity of compensation arrangements due to regulatory frameworks. The recommendations for individual grants of options are made by the Executive Management of the operating business and by the Group’s functional department heads. These recommendations are reviewed by the Group Executive Management to ensure a global coherence. Individual grants of options are then decided by the Board of Directors, provided that individual grants to the Chief Executive Off icer and the other members of the Management Committee are preceded by a proposal of the Compensation & Governance Committee which especially takes into consideration the aggregate elements of compensation of the executive as well as the market studies carried out by the Group with an independent compensation-consulting firm. Furthermore, the level of allotment of options to the executive off icers also depends on the level of achievement of the strategic objectives defined by the Board of Directors.
On December 31, 2018, approximately 3,400 AXA employees held a total of 19,954,302 outstanding options, representing 0.82% of the Company’s share capital on the same date.
As from the 2019 grant, the Board of Directors, upon recommendation of its Compensation & Governance Committee, decided that stock options would from now on be exclusively granted to members of the Management Committee.
Furthermore, since 2017, the Board of Directors decided that a new performance condition would apply to all the options granted, pursuant to which beneficiaries would not be able to exercise their stock options in the event the net income of the Group share is negative, and for as long as it remains.
Grant date (Board of Directors or Management Board) 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 13/10/2010
or purchased, from which to be subscribed corporate off icers: Start date of exercise 10/06/2013 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012 19/03/2012 18/08/2012 18/08/2014 13/10/2012 Expiry date of options 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 13/10/2020 Subscription or purchase price of options (a) 13.03 15.47 15.88 16.60 16.60 15.43 15.43 13.89 13.89 13.01 Exercise schedule of options 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y Number of options exercised at 31/12/18 3,508 1,580,861 38,424 0 3,656 4,762,869 139,071 15,846 6,458 3,274
Number of options exercised at 31/12/18 0 0 0 Options cancelled at 31/12/18 426,735 98,193 31,566 Options outstanding at 31/12/18 2,896,524 2,972,204 2,698,651
Representative of employee shareholders to the Board of Directors 27/06/2018 subscription or purchase 27/06/2028
STOCK OPTIONS HELD BY CORPORATE OFFICERS THAT BECAME EXERCISABLE DURING 2018
Chief Executive Off icer 24/03/2014 subscription or purchase 16,267 18.68 24/03/2024 100% of options: SXIP index
Chairman of the Board of Directors 24/03/2014 subscription or purchase 51,667 18.68 24/03/2024 100% of options: SXIP index
Representative of employee shareholders to the Board of Directors 24/03/2014 subscription or purchase 4,704 18.68 24/03/2024 Last third of options: SXIP Index 19/06/2015 subscription or purchase 4,487 22.90 19/06/2025 Last third of options: SXIP Index
(a) Stock options vested (according to the vesting calendar) for which the performance conditions have been met during the year or no performance condition is applicable.
STOCK OPTIONS HELD BY CORPORATE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS OF DECEMBER 31, 2018)
Performance shares are usually granted to beneficiaries residing in France while i nternational p erformance s hares are generally granted to beneficiaries residing outside of France.
Each year, the Board of Directors, acting upon recommendation of its Compensation & Governance Committee, approves a global performance share pool to be granted. The annual grants of performance shares are generally made simultaneously with the grants of stock options.
Each beneficiary receives an initial, preliminary allocation of performance shares that is used as a reference to calculate the actual number of shares that will be definitely granted at the end of a 3-year performance period.
Between these minimal and maximal performance levels, the number of shares definitely granted shall be calculated on a linear basis depending on the performance achieved.
Operating Business Peformance (50%) Average (Adjusted e arnings + Underlying e arnings) Capped at 130%
Total number of International Performance Shares granted 5,795,117 5,737,538 6,324,271 5,759,830 4,531,764 from which granted to: Corporate off icers: Acquisition date of the International Performance Shares 24/03/2017 (b) 19/06/2019 06/06/2020 21/06/2021 27/06/2022
Number of International Performance Shares acquired at 31/12/18 5,091,338 8,110 (c) 421 (d) 4,528 (e) 0
(e) 4,528 units of the June 21, 2017 plan acquired by anticipation.
(b) 26 employees have chosen the 4+0 vesting calendar (acquisition at June 19, 2019 with no restricted period), based on the plan rules as he has moved out of France during the acquisition period.
(c) One employee has chosen the 4+0 vesting calendar (acquisition at June 21, 2021 with no restricted period), based on the plan rules as he has moved out of France during the acquisition period.
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 “Share based compensation instruments issued by the Group” in Part 5 “Consolidated Financial Statements” of the Annual Report. This value does not represent a current market value, a current valuation of these performance shares or the actual proceeds if and when the performance shares are acquired.
Chief Executive Off icer 27/06/2018 Performance Shares 112,211 0.005% 1,577,687 27/06/2021 27/06/2023 adjusted earnings per share adjusted earnings underlying earnings
Representative of employee shareholders to the Board of Directors 24/03/2014 International Performance
(a) The performance rate of 108% is composed of: 1/3 x 109% (Net income per share) + 2/3 x 108% (Net income and Underlying earnings, 50% of Norcee Region score at 93% and 50% of Germany score at 122%).
PERFORMANCE SHARES/INTERNATIONAL PERFORMANCE SHARES BECOMING UNRESTRICTED DURING 2018 FOR EACH CORPORATE OFFICER
AXA implemented a shareholding policy applicable to the main senior executives of the Group. This policy imposes that each executive hold, during the entire duration of his/her functions, a minimum number of AXA shares (the “Minimum Shareholding Requirement”) representing a multiple of the annual fixed compensation received for his/her functions within the Group: ■ the Chief Executive Off icer is required to hold the equivalent of his annual fixed compensation multiplied by 3; ■ Management Committee members are required to hold the equivalent of their annual fixed compensation multiplied by 2; ■ Partners group are required to hold the equivalent of their annual fixed compensation multiplied by 1.
Each concerned senior executive is required to meet this Minimum Shareholding Requirement within a period of 5 years as from the date of her/his first appointment.
Committee members are still within the 5-year time following their nomination date allowing them to comply with their minimal shareholding requirement.
To the best knowledge of the Company and based on information reported to it, each AXA Board of Directors member held, on December 31, 2018, the number of AXA shares or ADS AXA indicated in the table below.
Denis Duverne – Chairman of the Board of Directors 1,576,337 18,734
(1) AXA shares which could be indirectly held through Mutual funds are not taken into account. (2) The holding of AXA shares by directors representing the employees (Mmes Martine Bièvre and Bettina Cramm) is not mandatory.
I Transactions involving Company securities completed in 2018 by the members of the Board of Directors
Subscription and sale of stock options Sale of units of AXA Group m utual funds invested in AXA shares
AXA Group m utual funds invested in AXA shares to other AXA Group m utual funds
This collective defined benefits pension scheme has been closed to any new beneficiary as of December 31, 2016. As a result, no executive employees (directeurs) or executive off icer appointed aft er this date shall benefit from it.
Mr. Thomas Buberl, AXA’s Chief Executive Off icer does not benefit from the collective defined benefits pension scheme described above.
Thomas Buberl Chief Executive Off icer Beginning of current mandate: 25/04/18 Term of off ice: 2022
As a result, on August 2, 2016, the Board of Directors took the following decisions: ■ the Board of Directors authorized that, following the termination of his employment contract, Mr. Thomas Buberl would continue to have social benefits (health insurance, life insurance, disability insurance, etc.) on terms equivalent to those of all other Group senior employees of the AXA Group in France; ■ the Board of Directors authorized a contractual severance benefit for Mr. Thomas Buberl designed to replicate the benefits to which he would have been entitled as AXA employee under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of performance conditions in accordance with the Afep-Medef recommendations. A severance benefit would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal or non-renewal further to the Board of Directors’ decision. The payment of the severance benefit would be subject to the three following performance conditions as determined by the Board of Directors during its August 2, 2016 meeting: (1) achievement, for at least 2 of the 3 preceding fiscal years, of the objectives set for the beneficiary’s variable compensation and corresponding to the payment of at least 60% 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 off ice, and (3) the average consolidated adjusted ROE over the 3 preceding years higher than or equal to 5%.
These commitments were approved by AXA’ Shareholders’ Meeting of April 25, 2018. They took eff ect upon Mr. Thomas Buberl’s eff ective renunciation of his employment contract on September 1, 2016 and will continue as such for the duration of his mandate and under any potential renewed mandates.
The Compensation & Governance Committee is mostly composed of independent members who exchange frequently with the Group’s M anagement and the Internal d epartments of the Company including Group Human Resources and Group Legal. The Committee is also empowered to undertake or commission specific reviews by external experts when deemed appropriate. Such reviews allow the Committee to benefit from a technical expertise and independent insights in comparing AXA’s compensation practices with general market practice.
GUIDING PRINCIPLES OF AXA’S COMPENSATION POLICY AXA’s compensation policy is designed to support the Group’s long-term business strategy and to align the interests of its M anagement with those of its shareholders and all other stakeholders by (i) establishing a close relation between performance and compensation over the short, medium and long term, (ii) ensuring that the Group can off er competitive compensation that is consistent with the various markets in which it operates while avoiding potential conflicts of interests that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance of the Company’s practices with all applicable regulatory requirements.
STRUCTURE AND CRITERIA FOR DETERMINATION OF THE CHIEF EXECUTIVE OFFICER’S COMPENSATION In this context, the compensation policy for the Chief Executive Off icer is based on a pay-for-performance approach which (i) requires the achievement of challenging financial and operational targets that are defined and aligned with the Group’s strategy, (ii) promotes long-term sustainable performance while incorporating risk adjustment measures in performance metrics, and (iii) determines the eff ective amount of the actual individual compensation on the basis of both financial results and demonstrated individual leadership competencies.
Thus, the “at-risk” portion of the Chief Executive Off icer’s total compensation (variable compensation and share-based compensation) represents a significant component of his compensation structure, with a view to aligning his compensation more directly with the operational strategy of the Group and the interests of the shareholders.
The Board of Directors, relying in particular on a study carried out by an external advisory firm (Willis Towers Watson) regarding compensation practices for similar functions in a sample of CAC 40 companies and in the main European companies in the financial sector (insurance companies, banks), and upon recommendation of its Compensation & Governance Committee, decided to maintain unchanged, for 2019, the amount of the Chief Executive Off icer’s fixed annual compensation, at €1.45 million.
The evaluation of the Chief Executive Off icer’s individual performance with respect to the 2019 fiscal year will be based on the following two components, each of them capped at a 150% achievement rate: ■ the Group’s performance, as assessed based on underlying earnings per share, return on equity (adjusted Return on Equity – ROE), gross revenues in both Commercial Property & Casualty and in Protection & Health and Net Promoter Score (customer recommendation index). The relative weight of each indicator is, respectively, 55%, 15%, 15% and 15%. The indicators selected to measure the Group’s performance reflect objectives in terms of growth, profitability, capital management, operational eff iciency and proximity with clients that have been disclosed both internally and externally. Thus, indicators which are directly linked to the strategic orientations of the Group include both financial and operating indicators and rely on achievement of a predefined budget or target figure; ■ individual performance, assessed on the basis of various indicators and qualitative and quantifiable objectives determined by the Board of Directors in a target letter drawn up at the beginning of each relevant year, as well as on the basis of demonstrated leadership abilities by the Chief Executive Off icer. The target letter includes detailed objectives with regards to the Group’s progress in the elaboration of its strategic plan as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives or relating to certain geographic areas, as well as progress on certain investments that are expected to contribute to the development of the Group’s operations.
Each of these two components will be evaluated separately so that the Chief Executive Off icer’s overall variable pay-out reflects his performance against two distinct components assessed independently.
Pursuant to the provisions of Article L.225-37-2 of the French Commercial Code, payment of the Chief Executive Off icer’s variable cash compensation for 2019 is subject to the approval by the Shareholders’ Meeting to be held in 2020 of the compensation elements paid or granted to the Chief Executive Off icer for the 2019 fiscal year.
Each year, the Board of Directors, upon recommendation of its Compensation & Governance Committee, decides to grant Long-Term Incentives (LTI) to the Chief Executive Off icer in the form of stock options and performance shares.
The LTIs granted to the Chief Executive Off icer are entirely subject to demanding internal and external performance conditions (the details of which are presented in Section 3.2 of this Annual Report), which are assessed over a minimum period of three years, and do not guarantee any minimum grant or gain. Moreover, the LTI plan rules provide that in the event the Chief Executive Off icer leaves his position (1) at any time before the end of the performance period, any instruments initially granted are irremediably lost, unless otherwise decided by the Board of Directors in a motivated decision disclosed at the time of the off icer’s departure (in such case, the vesting calendar and LTI performance conditions set at the grant date would remain unchanged).
The Board of Directors does not contemplate granting any exceptional compensation to the Chief Executive Off icer.
The Chief Executive Off icer does not participate in any pension schemes with defined benefits.
The performance shares granted under such plan are subject to (i) a vesting period of three years and (ii) an undertaking not to transfer the performance shares before the date on which the beneficiary retires, subject to the option off ered to the beneficiaries, for diversification purposes, to transfer their shares (aft er the end of the acquisition period of three years) as long as the proceeds of such transfer are invested in a long-term savings plan until the beneficiary retires.
Acquisition of the performance shares is subject to the satisfaction of a performance condition (the details of which are set out in Section 3.2. of this Annual Report), linked to the average AXA Group Solvency II ratio calculated over the vesting period. Therefore, no minimum grant or gain is guaranteed to the Chief Executive Off icer under this scheme.
The Board of Directors, upon recommendation of its Compensation & Governance Committee, has decided that the total value of the retirement performance shares to be granted to the Chief Executive Off icer during 2019 shall not exceed 15% of his cash fixed and target annual variable compensation.
In addition, the Board of Directors has taken into account the fact that Mr. Denis Duverne, who claimed his pension rights on September 1, 2016, has decided to waive, for the duration of his term of off ice as Chairman of the Board of Directors, payment of his benefits (approximately €750,000 per year) under the supplementary pension scheme for executives within the AXA Group in France, to which he was entitled as from September 1, 2016. Mr. Denis Duverne has decided that he would claim such benefits only aft er the end of his term of off ice, without application of any retroactive payment.
These recommendations were consolidated in a Corporate Governance Code of Listed Corporations published by the Afep (Association française des entreprises privées) and the Medef (Mouvement des entreprises de France) in April 2010 and revised in June 2018 (hereaft er the “Afep-Medef Code”), which is available at AXA’s registered off ice or on its website (www.axa.com) under the “Corporate governance” Section.
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was given to us, to inform you, the shareholders, of the main features of those agreements and commitments of which we have been informed and the reasons for the Company’s interest in those. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to Article R. 225-31 of the French Commercial Code (Code de commerce), you are being asked to form an opinion on the relevance of such agreements and commitments for the purpose of approving them.
Nature, purpose and modalities On August 2, 2016, the Board of Directors acknowledged the eff ective renunciation by Mr. Thomas Buberl, in accordance with the Afep-Medef recommendations, of his employment contract from September 1, 2016, the date on which he became Chief Executive Off icer of AXA.
Consequently, the Board of Directors proceeded to a full review of the future social status of Mr. Thomas Buberl, once the renunciation of his employment contract will be eff ective in accordance with the Afep-Medef recommendations. In this context, the Board of Directors, in view of the seniority of Mr. Thomas Buberl in his employee status and from the significance of his services provided to the Company, confirmed its wish to maintain social benefits, as an e xecutive d irector, in the same conditions than the ones applicable to AXA Group director-level employees in France, took the following decisions: ■ the Board of Directors confirmed that, as a corporate off icer, Mr. Thomas Buberl will continue to have social benefits (health and disability insurance, etc.) on terms equivalent to those of all other Group director-level employees of the AXA Group in France; ■ the Board of Directors authorized a contractual severance benefit for Mr. Thomas Buberl in the event of termination of his directorship as corporate off icer in the terms described below.
This benefit, subject to performance conditions in accordance with the Afep-Medef recommendations and applicable laws, is designed to replicate the benefits to which he would have been entitled as AXA employee, in case of employment termination, under the March 3, 1993 collective agreement covering director-level employees of the insurance sector.
A severance benefit would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal or nonrenewal further to the Board of Directors’ decision. The payment of the severance benefit would be subject to the three following performance conditions as determined by the Board of Directors: (1) achievement, for at least 2 of the 3 preceding fiscal years, of the objectives set for the beneficiary’s variable compensation and corresponding to the payment of at least 60% 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 off ice, and (3) the average consolidated adjusted Return On Equity over the 3 preceding fiscal years higher than or equal to 5%.
• no severance benefit shall be paid if none of the performance conditions are met.
The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations or cash flows.
The Company’s r isk m anagement processes, procedures and controls are described in Section 4.2 “Internal Control and Risk Management” of this Annual Report, which should be read in conjunction with this Section 4.1. While Management devotes very substantial resources to r isk m anagement on an ongoing basis, the Group’s r isk m anagement activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Part 4 or the losses that may be incurred in connection with these risks.
In presenting the risks set forth in this Section 4.1, M anagement has identified the primary categories and the most material risks in a manner that corresponds to M anagement’s current view as to the materiality of such risk factors for the AXA Group, based on the perceived likelihood of the occurrence of such risks and the expected magnitude of their negative impact. As more fully described below, such categories include market-related risks, credit and liquidity-related risks, pricing and underwritingrelated risks, operational-related risks, regulatory-related risks and risks related to the ownership of the Company’s shares. Further, there can be no assurance that M anagement’s assessment of the relative importance of such risk factors may not change over time, whether to reflect new information, events, circumstances or otherwise.
Negative developments in economic and financial market conditions, whether on a national, regional or global basis, may materially and adversely aff ect our business and profitability
Our businesses, financial position and results of operations are impacted by global financial market fluctuations and economic conditions generally. While financial market results and economic conditions were generally favorable in 2018, there remains a wide variety of factors which could negatively impact economic growth prospects and contribute to high levels of volatility in financial markets. These factors include, among others, concerns over levels of economic growth and consumer confidence generally; current market conditions, including asset valuations and volatility, that may lead to an abrupt and significant repricing in financial markets; the strengthening or weakening of foreign currencies, in particular the US Dollar, against the Euro; the availability and cost of credit; the stability and solvency of certain financial institutions and other companies, including related systemic credit risk concerns; potential ‘trade war’ and other governmental measures, either enacted or being contemplated, relating to tariff s or international trade agreements and policies; continuing concerns over certain sovereign debt issuers; inflation or deflation in certain markets; uncertainty regarding central bank intervention in the financial markets, through quantitative easing or similar programs; changes in reference rates, including reforms to and potential changes affecting Libor, Euribor and other indices; volatile energy costs; adverse geopolitical events (including acts of terrorism or military conflicts); recent developments such as recent political events in France, Germany and Italy; continuing uncertainty regarding the United States. Geopolitical risks in various regions, including Russia, Ukraine, Latin America, Syria, Iraq or North Korea, have also contributed to increased economic and market uncertainty generally.
In addition, specific concerns regarding the Eurozone, including the financial condition of certain EU sovereign debt issuers (especially Greece and Italy), uncertainty regarding membership in the European Union, relationships between European institutions and certain Member States, potential structural reforms or other changes made to the Euro, the Eurozone or the European Union, have resulted in significant disruptions in financial markets in recent years and could have similar eff ects in the future. In particular, the decision of the United Kingdom to leave the European Union in accordance with Article 50 of the Treaty on European Union, on March 29, 2017 (“Brexit”), and the resulting negotiations between the United Kingdom and the European Union to reach a withdrawal agreement materially impacted and could have far-reaching and unpredictable eff ects on financial markets and macroeconomic conditions. These eff ects could be amplified by the uncertainty surrounding the terms of the withdrawal agreement, if any, the contingency plans currently being developed at European Union and Member State levels in case no agreement is reached and, more generally, the United Kingdom’s future relationship with the European Union. While the Group actively follows Brexit-related developments and has developed Brexit contingency plans, there can be no assurance that Brexit and its related consequences will not have an adverse eff ect on the Group’s business and financial condition.
Changes in interest rates and credit spreads may adversely aff ect our business, results of operations, solvency and financial condition
Our exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. Changes in interest rates may negatively aff ect the value of our assets (particularly fixed-income investments) and our ability to realize gains or avoid losses from the sale of those assets, all of which also ultimately aff ect earnings. In particular, negative interest rates and low levels of interest rates generally may negatively impact our net interest income and the profitability of our Life & Savings business.
In-force life insurance and annuity products may become comparatively more attractive to customers in a declining interest rate environment, resulting in an increase in our liabilities (in particular in relation to flexible-premium products), assetliability duration mismatches (as more policies and contracts remain in-force from year-to-year) and an increase in provisions for guarantees included in life insurance and annuity products.
Although we take measures, including hedging through derivative instruments, to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities. Accordingly, ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors, could have a material adverse eff ect on our solvency position, and on our results of operations, financial position or cash flows through realized losses, impairments, and changes in unrealized gains and loss positions.
In particular, inflation in relation to medical costs, construction costs and tort issues impacts the Property & Casualty industry. The impact of inflation on loss costs could be more pronounced for those Property & Casualty lines of business that are considered “long tail” such as general liability, worker’s compensation and professional liability, and other specialty lines of our recently acquired XL business, as they require a relatively long period of time to finalize and settle claims for a given accident year. Changes in the level of inflation could also result in an increased level of uncertainty in our estimation of claims reserves, particularly for long tail lines of business.
Business and market conditions as well as accounting rules may impact the amount of goodwill we carry in our consolidated balance sheet, our pattern of DAC, VBI and other intangible assets amortization and the value of our deferred tax assets and deferred participation assets. The value of certain of our businesses including, in particular, the US Variable Life and Variable Annuity businesses operated by AEH and its subsidiaries, is significantly impacted by such factors as the state of the financial markets, particularly equity markets, and ongoing operating performance.
Certain of our investment assets, for which there is no active trading market or other observable market data, are valued using models and methodologies that involve estimates, assumptions and significant M anagement judgment. During periods of market disruption, a larger portion of our investment assets may be valued using these models and methodologies as a result of less frequent trading or less observable market data with respect to certain asset classes that were previously actively traded in liquid markets. There can be no assurance that our valuations on the basis of these models and methodologies represent, for example, the price for which a security may ultimately be sold or sold at any specific point in time. The choice of models, methodologies and/ or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse eff ect on our results of operations and financial condition.
The determination of the amount of allowances and impairments that we recognize with respect to the investment assets we hold varies by investment type, and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. In considering impairments, M anagement considers a wide range of factors, including those described in Note 1.8.2 “Financial instruments classification” in Part 5- “Consolidated Financial Statements” of this Annual Report, and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the investment assets and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, M anagement’s evaluation involves a variety of assumptions and estimates about the operations of the issuer of the instrument and its future earnings potential. Management updates its evaluations regularly and reflects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that M anagement has accurately assessed the level of impairments taken and allowances reflected in our financial statements, and the need for and timing of any additional impairments and/or allowances may have a material adverse eff ect on our results of operations and financial position.
Adverse capital and credit market conditions may significantly aff ect our ability to meet liquidity needs, our access to capital and increase our cost of capital
A downgrade or the potential for a downgrade in our ratings could have an adverse eff ect on us, including (i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our reinsurance cost, (v) triggering termination provisions or collateral delivery requirements, or requiring us to return unearned premiums to cedants, under certain of our reinsurance and retrocessional agreements, (vi) negatively impacting our ability to obtain financing and/or increasing our cost of financing, (vii) harming our relationships with creditors or trading counterparties and/or (viii) adversely aff ecting public confidence in us. Any of these developments could have a material adverse eff ect on our business, liquidity position, results of operations, revenues and financial condition.
The financial condition and conduct of our counterparties could negatively impact us
Under our reinsurance and retrocessional arrangements (including similar protection afforded through risk transfer transactions to capital markets), other insurers, reinsurers or capital market counterparties assume a portion of the losses and related expenses under policies we issue, although we remain liable as the direct (re)insurer on all risks reinsured. While we evaluate periodically the financial condition of our reinsurers, retrocessionaires and capital market counterparties to minimize our exposure to significant losses from reinsurer/ retrocessionaire/capital market counterparty insolvencies, such counterparties may become financially unsound by the time their financial obligations to us become due and force us to recapture the reinsured or retroceded business. For information on the ratings of our reinsurers, please refer to Section 4.4 “Credit r isk-Risk c ontrol and r isk m itigation- Receivables from r einsurers: Rating p rocesses and f actors” of this Annual Report.