THE AXA GROUP 3 1.1 Selected consolidated fi nancial data 4 1.2 Information on the Company 6 1.3 Activity report 20 1.4 Liquidity and capital resources 89
CERTAIN ADDITIONAL INFORMATION 345 5.2 Description of AXA’s share capital 350
APPENDICES 351 Appendix I Chairman of the Board of Directors’ report 352
Appendix II Management’s annual evaluation of Internal Control Over Financial Reporting 362
Appendix III Statement of the person responsible for the Annual Report 365
This Annual Report also 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 Regulations (Règlement Général de l’AMF) (please refer to the table page 418 of this Annual Report which indicates the relevant sections of this Registration Document corresponding to disclosures required under Article 222-3 of the AMF General Regulations), and (ii) all disclosure matters required to be included in the Board of Directors’ Report to AXA’s Shareholders’ Meeting to be held on April 27, 2016, established pursuant to
Articles L.225-100 and L.225-100-2 of the French Commercial Code (Code de commerce) (the relevant sections of this
This Registration Document was fi led with the Autorité des marchés financiers (AMF) on March 31 , 2016, in accordance with the provisions of Article 212-13 of its General Regulations. It may be used in support of a fi nancial transaction if supplemented by an information memorandum approved by the AMF. This document has been prepared by the issuer, and its signatories are responsible for its content.
“AXA” and/or “AXA SA” refer to AXA, a société anonyme organized under the laws of France, which is the publicly traded parent company of the AXA Group, and (ii) “AXA Group”, the “Group”
Table of principal subsidiaries with Group equity interests and voting rights percentages 7
The selected historical consolidated fi nancial data presented below has been derived from AXA’s consolidated fi nancial statements and related notes for the years ended December 31, 2015 and 2014 in accordance with IFRS.
The table of historical data set out below is only a summary.
You should read it in conjunction with the consolidated fi nancial statements and related notes for the years ended December 31, 2015 and 2014 included in Part 4 – “Consolidated Financial
(b) The calculation of net income per share is based on the weighted average number of outstanding shares for each period presented. The calculation of net income per share including from discontinued operations is presented in Note 27 “Net Income per Ordinary Share” to AXA’s consolidated fi nancial statements.
The Company pays dividends in Euro. Future dividends will depend on a variety of factors including AXA’s earnings, consolidated fi nancial condition, applicable capital and solvency requirements, prevailing fi nancial market conditions and the general economic environment. Proposals for dividend payments are made at the discretion of the Board of Directors and are submitted for fi nal approval to the Shareholders’
A dividend of €1.10 per share for the 2015 fi scal year will be proposed to the Shareholders’ Meeting to be held on
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.38 per share for fi scal year 2014.
Référence): (i) the Charter of the Company, (ii) the reports or other documents prepared by any expert at the Company’s request which are (in whole or in part) included or referred to in this Annual Report, and (iii) the parent Company fi nancial statements as well as the consolidated fi nancial statements of the Company for each of the two fi nancial years preceding the publication of this Annual Report.
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
Brazil; (iv) Commercial International Life, the Life & Savings jointventure between Commercial International Bank (“CIB”) and
Legal & General in Egypt and conclusion of an exclusive Life
(2) Source: Finaccord Creditor Insurance in Europe PartnerBASE and market model (2014).
I Table of principal subsidiaries with Group equity interests and voting rights percentages
For information concerning Group subsidiaries (including the Group’s equity interest and voting rights percentages), please see
research); ■ World 120, Europe 120 and France 20 (based on Vigeo research); ■ FTSE4GOOD (based on FTSE ESG research).
(1) Ranking established by AXA based on the information available as of September 30, 2015.
Profi t or loss on fi nancial assets (under fair value option) & derivatives (229) 225
Assets backing contracts with fi nancial risk borne by policyholders (Unit-linked) 194,601 181,082
For additional information on AXA’s revenues by segment and geographic area, see Note 21 “Information by segment”
Years ended December 31, Gross insurance liabilities at December 31, 20152015 2014
Middle East. The products in these markets are offered through various distribution channels, as described in the “Distribution channels” section below.
Fees and charges relating to investment contracts with no participating features 371 327 40,102
AXA believes that the diversifi cation of its distribution channels through the development of new channels improves opportunities for increased penetration and more frequent contacts with AXA’s target customer base.
Global Life, as part of its role to defi ne a group-wide strategy has set the following priorities: ■ focus on inforce optimization; ■ increase productivity and effi ciency; ■ reshape the Savings business; and
dedicated to Health insurance business with the following priorities: ■ become a health benchmark in up to 11 countries where
Property & Casualty professionals to enhance the quality of technical expertise, dedicated offer to small and medium size entities, excellence in underwriting standards and pricing policy.
AXA Assistance is one of the leading worldwide assistance companies (1). In this market where traditional assistance companies are developing their activities outside their home markets, new players are focusing on limited product lines.
AXA Assistance provides services to banking and insurance companies, tour operators, telecommunication operators, gas, water and electricity utilities and automobile manufacturers.
Also, in 2015, approximately €717 million of premiums were placed externally by AXA Global Life and AXA Global
Asset Management segment accounted for €3.8 billion (2014: €3.3 billion), or 4% of AXA’s consolidated gross revenues
AB, a 62.8% subsidiary, is a leading global investment management fi rm based in the United States. AB provides diversifi ed investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA and its insurance subsidiaries
The operations in the Banking segment are conducted primarily in Belgium, France and Germany. For the years ended December 31, 2015 the Banking segment accounted for €621 million (2014: €564 million), or less than 1% of AXA’s consolidated gross revenues (2014: less than 1%).
AXA Bank products and services in Belgium are mainly distributed by a network of 615 exclusive independent (1) bank agents. The bank’s products and offers are linked with insurance business and are primarily focused on retail products.
AXA Banque had approximately 715,000 registered customers (1) at the end of 2015, with a retail banking product offer. Directly linked with the Group’s insurance business, banking products are offered to AXA France clients through its distribution networks. AXA Banque also manages direct clients through internet banking relationships.
AXA Bank targets private customers in retail banking and is an important element of pension and Asset Management business of AXA Germany. The bank had approximately 43,000 clients (1)
(1) Information established by AXA based on data available for the year 2015.
In mature markets, premium income growth slowed down in 2015. Growth decelerated in most countries in Europe and in
In Latin America, growth was driven by Brazil’s large variable life insurance market, while premiums in Central and Eastern
Russia was the main contributor to the decline, with negative premium growth due to the economic recession and high infl ation.
United States Variable Annuities 5 7.1 7 6.8 Morningstar VARDS as of September 30, 2015 and December 31, 2014.
Spain 9 3.0 11 3.0 Spanish Association of Insurance Companies. ICEA as of September 30, 2015 and December 31, 2014.
Portugal 12 1.5 11 1.2 ASF (Autoridade de Supervisão de Seguros e Fundos de Pensões) as of December 31, 2015 and December 31, 2014.
Thailand 3 11.9 3 13.4 TLAA statistics report as of November 30, 2015 and December 31, 2014 (measured on APE).
Singapore 7 4.0 7 3.2 LIA statistics report as of September 30, 2015 and December 31, 2014 (measured on APE).
China 14 1.4 14 1.2 CIRC statistics as of November 30, 2015 and 2014 measured on total premium income.
Motor insurance market environment. In high growth markets, unfavorable economic conditions in Asia resulted in slower growth with the exception of China, which experienced robust growth supported by strong demand in Motor, while markets remained fl at in Latin America and experienced a contraction in Central & Eastern Europe. Underwriting profi tability remained globally at a relatively high level with a stabilizing trend in
Belgium 1 18.1 1 18.6 Assuralia (Belgium Professional Union of Insurance companies). Based on gross written premium as of September 30, 2015 and December 31, 2014.
Italy 6 4.9 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 31, 2014. 2015 information not available.
Morocco 3 14.5 Moroccan Association of Insurance Companies as of December 31, 2014. 2015 information not available.
The Gulf Region 4 4.4 Regulator report as of December 31, 2014. 2015 information not available.
Singapore 2 11.6 2 11.8 General Insurance Association as of September 30, 2015 and December 31, 2014.
Malaysia 5 7.8 5 6.7 ISM (Insurance Services Malaysia Berhad) as of October 31, 2015 and December 31, 2014.
Hong Kong 1 1 11.8 Offi ce of the Commissioner of Insurance (OCI) as of September 30, 2015 and December 31, 2014. Market share not available.
Thailand 17 1.6 17 1.5 TGIA as of October 31, 2015 (based on Direct Premium) and December 31, 2014.
Aviation, Marine and Space insurance, prevention and claims management of large national and multinational corporations, ranks amongst the main carriers worldwide.
Outfl ows by retail investors were observed in the emerging and Asian sectors, mainly from equities and bonds sectors.
In the asset management market, AXA Investment Managers ranked 20th (1) and AB 25th (1) based on volume of assets under management. On a combined basis, AXA ranked 10th (1).
National Bank (SNB) and the ECB which both had signifi cant consequences on the fi nancial markets.
US dollar’s appreciation and, for the energy sector, decline in oil prices. Labour markets normalized further, with the unemployment rate falling from 5.6% in late 2014 to 5.0% at the end of 2015. In spite of low infl ation and concerns about the global economy over the summer, the Fed held its course and eventually raised interest rates by 25 basis points in December.
(0.0% on average in 2015), dragged lower by energy prices, while core infl ation remained subdued. On January 22, the
ECB announced its intention to expand its asset purchase programme to sovereign bonds in order to fulfi l the ECB’s price stability mandate; its deposit rate was cut to -0.3% in
December. Greece experienced another episode of major stress in the fi rst half of the year, as the newly elected Syrizaled government opposed the conditions of the assistance programme offered by European partners. An agreement was eventually found in July, but only after capital controls were put in place in June.
The Japanese economy disappointed again in 2015 with growth of around 0.7%, as both Household and corporate spending remained anaemic. The slowdown in Asian regional trade also weighed on exports. The Bank of Japan strengthened its quantitative easing programme in December by lengthening the maturity of sovereign bonds purchases and increasing the size of its equity ETF purchases.
Emerging markets endured a diffi cult year. China registered a sharp equity market correction over the summer that authorities struggled to contain. Worries about a greater-than-expected slowdown in the economy were only partially reassured by
actual growth landing close to the offi cial target at 6.8%. In
Yuan. Other emerging economies suffered from the Chinese situation, either through trade (Asia) or lower commodity prices
Europe posted gains while the US stocks remained fl at. The
and the S&P 500 index decreased by 0.7% in 2015. The
In most mature economies, government bond yields increased slightly in 2015, as a strong decline in the fi rst part of the year was fully reversed in the latter part of the year: the US 10year T-bond yield increased by 10 bps to 2.27%, the 10-year
Euro depreciated against main currencies compared to 2014, as shown below: End of Period Exchange Rate Average Exchange Rate
AXA completed the acquisition of a 7% stake in Africa Re
On March 17, 2015, AXA announced that it completed the acquisition of a 7.15% stake in African Reinsurance Corporation
AXA expects to benefi t from the extensive knowledge of the local markets and the expertise of Africa Re’s management team.
On March 30, 2015, AXA announced that it had completed the acquisition of 100% of BRE Insurance (5), mBank’s Property &
Casualty subsidiary in Poland. Consequently, AXA and mBank have launched their 10-year exclusive Property & Casualty and
Life Protection distribution agreements in the country. Final consideration amounted to PLN 580 million (or €140 million (6)).
This transaction also allows AXA to widen its distribution reach in Poland through access to mBank’s innovative and fast-growing multi-channel distribution model, while shifting its business mix towards more Property & Casualty and Life
On August 3, 2015, AXA announced that it had completed the acquisition of the private medical insurance business of
market for 13 years. Employing around 400 people in Bristol, it provides health cover for over 200,000 people, individually and through its SME and corporate customers. The acquisition will further strengthen AXA’s presence in the UK healthcare market and clearly evidences its continuing commitment to being the preferred provider in each of its key strategic business areas.
On November 5, 2015, AXA announced that it would expand its existing relationship with GT Capital Holdings, Inc. (“GT
(or €45 million (7)). This would allow AXA Philippines to offer
Property & Casualty insurance products, alongside its current range of Life & Savings products, and distribute them notably through the extensive network of Metrobank branches.
Philippines with GWP of €68 million in 2014 (8) and offers a full range of fi re, Motor, marine, personal accident and engineering insurance products. It is a fast-growing company which realized a 21% annual average growth in GWP between 2011 and 2014, benefi ting from a successful bancassurance agreement creating synergies with Metrobank.
(1) Source: Africa Re Information Memorandum, based on 2013 gross written premiums.
Due to the excellent positioning of Metrobank in the Philippines, this transaction would allow AXA to benefi t from a new promising Property & Casualty market which offers signifi cant potential with a very low insurance penetration rate (0.45% of
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to take place in the fi rst half of 2016.
Insurance Company (“CIL”), a leading Egyptian Life insurance player, for a cash consideration of EGP 763 million (or €92 million (3)). In conjunction with the acquisition, CIL has entered into a 10-year exclusive Life & Savings distribution agreement with Commercial International Bank (“CIB”), focusing in particular on Unit-Linked and Protection & Health insurance. On the basis of materiality, this acquisition is not consolidated in AXA’s Full Year 2015 consolidated fi nancial statements.
628,000 retail and 60,000 corporate customers, relying on an extensive network composed of 166 branches and 10,000 points of sales. It has built a highly reputable brand and a robust market position with a clear ambition to accelerate its presence in the retail Banking segment. Thus, CIB represents a unique partner for AXA to benefi t from the high growth prospects of the Egyptian market.
Thanks to the excellent positioning of CIB in Egypt, this transaction allows AXA to accelerate its development in Egypt, following the grant of its non-life insurance license, and more generally to pursue the strengthening of its footprint in the
AXA strengthened its presence in India by reinforcing its successful partnership with Bharti
in India, and demonstrates the agility and commitment of both parties in further expanding their operations in the country.
4.7 billion (or €70 million (8)) of new business collected premiums, achieving a yearly growth of 28% on average over the past 3 years. In the same fi scal year, Bharti AXA GI recorded
On December 2, 2015, AXA announced that it had completed the acquisition of 100% of Genworth Lifestyle Protection
AXA Creditor and Genworth LPI operations will represent a key pillar of AXA Partners, which has been launched earlier this
(6) CIL’s fi scal year ends on June 30 of each year.
(8) Using average Forex rate from April 1, 2014 to March 31, 2015. EUR 1 = INR 68.05 (source: Bloomberg).
This transaction complements AXA’s credit and lifestyle protection activities presence in key mature markets such as France, Germany and Italy and provides entry into new markets with strong fundamentals, notably the Nordics and
AXA increases its presence in Poland through the acquisition of Liberty Ubezpieczenia
Liberty Ubezpieczenia is a Polish P&C insurer which recorded gross written premiums of PLN 315 million (or €75 million (3)) in 2014. It benefi ts from a distribution mix well balanced between agencies, direct and car dealers.
On December 28, 2015, AXA announced that it had completed the acquisition of SulAmérica Companhia de Seguros Gerais, the Large Industrial and Commercial risks insurance subsidiary of SulAmérica S.A., for a total consideration of BRL 135 million
Marine (#2 player in Hull in Brazil (6)) and a strong footprint over
Termination of the sale and purchase agreement between AXA, Certinvest and SIF Transilvania
Transilvania to sell AXA’s Life & Savings insurance operations in Romania, which was announced on December 18, 2014, lapsed. AXA is reviewing its strategic options considering the interests of its clients and employees in Romania.
(3) EUR 1 = PLN 4.1853 (average 2014 EUR/PLN exchange rate). Source: Bloomberg.
(6) Source: Superintendência de Seguros Privados (SUSEP – Superintendence of Private Insurance).
Seguros y Reaseguros, the Portuguese branch of its direct operations (“Direct business”) (1).
Portuguese operations at €197.5 million, representing an implied 1.2x book value multiple as of June 30, 2015. The net cash consideration received by AXA at completion would amount to €190.8 million.
Finalization of the transaction is expected during the fi rst semester of 2016, subject to required regulatory approvals.
impact of approximately €0.1 billion upon fi nalization, which would be accounted for in Net Income. AXA’s Portuguese operations affected by this proposed transaction are treated as held for sale in AXA’s Full Year 2015 consolidated fi nancial statements.
AXA completed the sale of its retirement schemes business in Hong Kong
On September 1, 2015, AXA announced that it had completed the sale of its Mandatory Provident Fund (MPF)
Principal”). In conjunction with the sale, The Principal has entered into an exclusive distribution agreement with AXA
Approximately 24,000 employees in 36 countries, representing over 20% of the eligible employees, subscribed to
September 22, 2015, AXA undertook a cancellation of its shares on December 17, 2015 in accordance with its share repurchase program as authorized by the Shareholders’
AXA launched a €230 million Venture Capital Fund to f oster i nnovation and i mprove c ustomer e xperience
Kamet, a €100 million InsurTech incubator dedicated to conceptualizing, launching and accompanying disruptive products and services for insurance clients. Selected projects will be led by either AXA employees or external entrepreneurs.
The notes use an index trigger structure specifi c to each covered country. Each country index is based on mortality data published by offi cial statistical agencies and weighted by gender and age bands to closely replicate the risk of the AXA
On December 3, 2015, AXA held an investor conference and announced a Solvency II ratio of 212% as of September 30, 2015, under its approved internal model (1). The resilience of the
Solvency II ratio to a wide range of fi nancial and non-fi nancial shocks was also underlined.
AXA also confi rmed it s remittance ratio (2) target at 75%-85%
and emphasized that Life & Savings new business capital consumption under Solvency II is lower than under Solvency I, which will result in ca. €0.5 billion higher annual operating free cash fl ow.
On October 6, 2015, Fitch reaffi rmed all AXA entities’ Insurer
as of December 31st, 2015). This estimate does not refl ect any potential mitigating actions such as reducing expenses and expanding sales of products unaffected by these rules.
(2) Cash dividends remitted from entities (including debt repayments) to the Group divided by Group Operating Free Cash Flows.
Building upon its existing micro-insurance schemes developed locally across Asia, Africa and Latin America that currently protect over 3 million emerging customers, AXA has decided to allocate dedicated resources and expertise to address this growth segment, and develop offerings encompassing Life
To accelerate the scaling-up of this initiative, AXA has increased to 46% its participation in MicroEnsure, a UK-based leader in the mobile micro-insurance space serving over 20 million emerging customers through partnerships with mobile network operators, banks and microfi nance institutions in 17 countries across Asia and Africa. MicroEnsure will become the platform of choice for
(1) Stock-options plans and performance shares plans (including the AXA Miles plan).
(2) AXA share repurchase program has been authorized by the Shareholders’ Meeting of April 30, 2015.
o/w. gross written premiums 57,376 53,806 o /w. fees and revenues from investment contracts with no participating feature 371 327 -
(b) Excluding (i) net realized capital gains or losses and (ii) change in fair value of assets under fair value and of options and derivatives, net banking revenues and total consolidated revenues would respectively amount to €616 million and €98,529 million as of December 31, 2015 and €559 million and €91,982 million as of December 31, 2014.
and GBP, (ii) the acquisition of Colpatria’s insurance operations in Colombia in 2014 (€-0.2 billion or -0.2 point) and (iii) the acquisition of Simplyhealth in the United Kingdom & Ireland in 2015 (€-0.2 billion or -0.2 point).
Offi cer, and approved the following appointments effective upon Mr. Henri de Castries’ retirement on September 1st: (i) Mr. Denis Duverne as Chairman of the Board of Directors, and (ii) Mr. Thomas Buberl as Chief Executive Offi cer of AXA
CEO of AXA (Directeur Général Adjoint). He will work closely with Messrs. Henri de Castries and Denis Duverne to fi nalize
AXA announced the successful placement of EUR 1.5 billion dated subordinated notes due 2047
On March 24, 2016, AXA announced the successful placement of EUR 1.5 billion of Reg S subordinated notes due 2047 to institutional investors to refi nance, in advance, part of its outstanding debt. The initial spread over swap is 275 basis points. The initial coupon has been set at 3.375% per annum corresponding to a reoffer yield of 3.462%. It will be fi xed until the fi rst call date in July 2027 and fl oating thereafter with a margin including a 100 basis points step-up.
Total Life & Savings New Business APE amounted to €7,376 million, up 14% on a reported basis or up 5% on comparable basis. The increase in Unit-Linked sales was primarily driven by the ongoing success of hybrid products (2 )
India & China, partly offset by the continuing repositioning of the
Savings, in line with the strategic focus on Protection & Health and Unit-Linked products.
Investment business, (ii) France (€+73 million) driven by the commercial success of hybrid products (2 ) and new structured funds offers, (iii) Japan (€+48 million) mainly driven by higher
■ G/A Protection & Health APE (€2,681 million, 36% of total) up 4% (or €+101 million) stemming from (i) France
(€-19 million) in line with the strategy of curtailing sales, partly offset by (v) Hong Kong (€+31 million) driven by the launch of a new generation savings plan.
■ Funds & Other APE (€941 million, 13% of total) up 7%
(2 ) Hybrid products: savings products allowing clients to invest in both Unit-Linked and General Account funds.
Mediterranean & Latin American Region and France. Overall, tariffs increased by 3%.
Personal lines (58% of P&C gross revenues) increased by 2% (or €+346 million) on a comparable basis.
Motor revenues increased by 3% (€+269 million) as a result of higher volumes in Direct and Asia, and tariff increases in mature markets and Direct, partly offset by lower volumes in the Mediterranean & Latin American Region: ■ Direct (+9%) driven by higher new business in the United
Italy following a price re-positioning; ■ United Kingdom & Ireland (+18%) mainly driven by tariff increases (+13%); ■ Germany (+6%) driven by higher volumes and tariff increases; ■ Asia (+6%) driven by a strong increase in car and motorcycle sales in Malaysia; Partly offset by: ■ Mediterranean & Latin American Region (-4%) refl ecting lower volumes in mature markets mainly in Spain following pruning actions.
to €3,615 million driven by (i) AXA Assistance up 18% (or €+183 million) to €1,226 million due to higher new business in the United Kingdom, France and emerging markets and (ii) AXA
AB AUM increased by 10% (or €+42 billion) from year-end 2014 to €455 billion as a result of €47 billion favorable foreign exchange rate impact, €3 billion net infl ows mainly from institutional clients, offset by €7 billion market depreciation.
AXA Investment Managers revenues increased by 8% (or €+91 million) on a reported basis or +4% (or €+51 million) on a comparable basis to €1,242 million, mainly driven by higher management fees (€+41 million or +4%) as a result of higher average assets (+7%) despite lower management fee rates
AXA Investment Managers AUM increased by 7% (or €+46 billion) from year-end 2014 to €669 billion mainly driven by (i) €+42 billion net infl ows mostly from Third party clients
(ii) €+19 billion market appreciation and (iii) €+18 billion favorable foreign exchange rate impact, partly offset by (iv) a €-33 billion negative scope impact mainly related to a partial withdrawal of the Friends Life assets.
Net banking revenues were up 10% (or €+57 million) mainly driven by higher net revenues from banking activities.
Fees and revenues from investment contracts without participating feature 371 327
Change in unearned premium reserves net of unearned revenues and fees (247) (289)
Amortization of value of purchased life business in force (153) (120)
(a) For the periods ended December 31, 2015 and December 31, 2014, “the change in fair value of assets backing contracts with fi nancial risk borne by policyholders” impacted the net investment result for respectively €+1,426 million and €+9,520 million, and benefi ts and claims by the offsetting amounts respectively.
(i) Germany (€+62 million) mainly driven by lower policyholder participation and (ii) Japan (€+34 million) mainly due to exceptional dividends from private equity funds refl ecting the good performance of the Japanese stock market, partly offset by (iii) Belgium (€-24 million) refl ecting lower investment income on fi xed income assets.
Revenues Reserves as a result of lower interest rates assumptions (more than offset in Deferred Acquisition
• Unit-Linked management fees were up €52 million mainly driven by (i) the Mediterranean & Latin American
American Region (€+9 million); ■ lower net technical margin (€-89 million or -12%) mainly attributable to (i) the United States (€-185 million) primarily explained by a reserve strengthening on Variable Annuity
GMxB products for lapses and other policyholder behavior assumption changes, (ii) the Mediterranean & Latin American
Individual Protection and (iv) Switzerland (€+38 million) as a consequence of a favorable development of the disability and mortality claims experience as well as a higher surrender margin; ■ higher expenses (€-112 million or +2%) as a result of: • higher acquisition expenses (€-135 million) mainly in France
(€-229 million) refl ecting higher Deferred Acquisition Costs amortization as a result of lower interest rates assumptions
• lower administrative expenses (€+23 million) mainly due to the effects of cost savings programs, partly offset by the combined effects of infl ation, business growth and investments;
Property & Casualty underlying earnings amounted to €2,230 million. On a reported basis, Property & Casualty underlying earnings were up €72 million (or +3%). Excluding
Colombia and Ukraine and on a constant exchange rate basis, Property & Casualty underlying earnings decreased by €19 million (or -1%) as lower underlying earnings in the
■ higher net technical result (€+189 million or +21%) driven by: • current year loss ratio improved by 0.3 point as a result of lower Nat Cat charges (-1.3 points) mainly in the United
Kingdom & Ireland (€75 million due to Desmond storm) and in France (€33 million due to French Riviera fl oods) while 2014 was notably impacted by ELA hailstorm (€271 million)
(€36 million, not qualifying as Nat Cat event), in Belgium with higher attritional and large losses in Commercial lines, and the United Kingdom & Ireland due to higher attritional claims in both Personal and Commercial Motor as well as higher natural events (of which €34 million due to Eva and
• higher positive prior year reserve developments by 0.4 point to -1.0 point (compared to -0.6 point in 2014) with positive developments in mature markets, partly offset by adverse prior year reserve developments (€-128 million)
in the Mediterranean & Latin American Region, mainly in Turkey (€-179 million), due to the increase in both frequency and average costs of bodily and material claims in Motor and Liability following evolutions in regulation and jurisprudence in 2015,
• higher expense ratio by 0.1 point to 26.1% driven by (i) the acquisition expense ratio up 0.2 point mainly as a consequence of negative volume effects in the Mediterranean & Latin American Region and higher commissions in France, partly offset by (ii) the administrative expenses ratio down 0.1 point as the effects of cost savings programs was partly offset by infl ation and investment costs,
International Insurance underlying earnings amounted to €193 million. On a constant exchange rate basis, underlying earnings decreased by €14 million (or -7%) mainly attributable to (i) AXA Corporate Solutions Life Reinsurance (€-21 million)
(ii) AXA Corporate Solutions Assurance (€-13 million) mainly as a consequence of a lower investment result from fi xed income assets as well as the non-repeat of an exceptional distribution from Mutual funds in 2014 and (iii) AXA Global Life (€-11 million)
Group net realized capital gains attributable to shareholders amounted to €433 million. On a constant exchange rate basis,
Group net realized capital gains and losses attributable to shareholders decreased by €24 million mainly due to: ■ €-64 million lower realized capital gains to €725 million mainly driven by lower realized gains on alternative investments (€-29 million) and real estate (€-19 million); ■ €+31 million lower impairments to €-278 million mainly driven by fi xed income assets (€+43 million); ■ €+9 million less unfavorable intrinsic value to €-14 million related to equity hedging derivatives.
+9%). On a constant exchange rate basis, adjusted earnings increased by €83 million (or +2%).
Net income amounted to €5,617 million (or +12%). On a constant exchange rate basis, net income increased by €160 million (+3%) mainly as a result of: ■ higher adjusted earnings (€+83 million); ■ lower negative impact from exceptional operations and restructuring costs (€+235 million) to €-87 million; ■ lower negative impact from goodwill and other intangibles
(€+277 million) to €-74 million mainly refl ecting the nonrepeat of the impairment of part of the value of Reso
(subsidiary consolidated under the equity method) in 2014, partly offset by; ■ an unfavorable change in the fair value of fi nancial assets and derivatives in 2015 compared to a favorable change in fair value of derivatives net of foreign exchange rate movements in 2014; down €436 million to €-229 million which can be analyzed as follows: • €-212 million from the change in fair value of assets accounted for under fair value option driven by the increase in interest rates and credit spread widening,
Adjusted earnings (Euro per Ordinary Share) 2.35 2.34 2.15 2.14 9% 9%
Underlying earnings (Euro per Ordinary Share) 2.17 2.16 1.96 1.95 10% 10%
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share attributable to AXA’s Life & Savings segment for the periods indicated: LIFE & SAVINGS SEGMENT
Profi t or loss on fi nancial assets (under FV option) & derivatives (121) 114
(b) Mediterranean & Latin American Region includes Italy, Spain, Portugal, Greece, Turkey, Morocco, Mexico and Colombia.
(c) South-East Asia, India & China revenues include Singapore and non bancassurance subsidiaries in Indonesia.
(c) South-East Asia, India & China earnings include Indonesia, Thailand, Philippines, China, India and Singapore.
(a) Before intercompany eliminations. Gross Revenues amounted to €15,994 million net of intercompany eliminations as of December 31, 2015.
increased by €318 million (+4%), driven by a €293 million increase in Group Protection driven by both tariff and volume increases and a €47 million increase in Individual
(ANI) starting on January 1st, 2016; ■ G/A Savings revenues (36% of gross revenues) decreased by €375 million (-6%), in line with the strategy to focus on
(+24%) in Group Protection & Health sales mainly resulting from both an increase in International Employee Benefi ts and traditional French businesses as well as an exceptional sale of a large contract (€60 million). Individual Protection sales increased by €11 million (+15%), refl ecting an increase in volumes and an improved product mix. Individual Health sales were stable, refl ecting an increase in selectivity ahead of the Accord National Interprofessionel (ANI) starting on
Fees & revenues increased by €191 million (+12%) to €1,815 million mainly due to a €134 million opening adjustment in Unearned Revenues Reserves as a result of lower interest rates assumptions (more than offset in Deferred Acquisition
Expenses increased by €205 million (+9%) to €-2,523 million mostly due to the above-mentioned increase in the amortization of Deferred Acquisition Costs (€165 million, mostly offset in Unearned Revenue Reserves) and higher commissions
(€93 million) in line with higher volumes, partly offset by lower general expenses (€52 million).
As a result, the underlying cost income ratio decreased by 0.2 point to 67.8%.
Income tax expenses increased by €51 million (+16%) to €-380 million driven by the increase in pre-tax underlying earnings combined with a lower level of non-taxable revenues.
Net capital gains or losses attributable to shareholders net of income tax (5) (14)
Gross revenues increased by €2,152 million (+19%) to €13,622 million. On a comparable basis, gross revenues decreased by €20 million (0%): ■ Variable Annuity revenues (70% of gross revenues) decreased by €99 million (-1%) due to the non-repeat of premium adjustment in annuity separate account in 2014, partly offset by strong sales of Employer Sponsored products; ■ Life revenues (21% of gross revenues) increased by €62 million (+3%) primarily driven by higher sales of G/A
(+5%) mainly due to higher sales in non-GMxB investmentonly individual product and Employer Sponsored business; ■ Life sales (12% of APE) increased by €10 million (+7%) driven by higher sales in G/A Protection products, refl ecting the strong performance of Indexed Universal Life products; ■ Mutual funds sales (31% of APE) decreased by €9 million
As a result, the underlying cost income ratio improved by 0.6 point to 62.1%.
Income tax expenses increased by €14 million (+17%) to €-67 million. On a constant exchange rate basis, income tax expenses decreased by €25 million (-30%), refl ecting lower pre-tax underlying earnings, partly offset by lower positive tax settlements (€104 million vs. €128 million in 2014).
Underlying earnings increased by €94 million (+12%) to €854 million. On a constant exchange rate basis, underlying earnings decreased by €42 million (-6%).
Adjusted earnings increased by €103 million (+14%) to €849 million. On a constant exchange rate basis, adjusted earnings decreased by €32 million (-4%) driven by lower underlying earnings, partly offset by lower impairments on fi xed income assets.
Profi t or loss on fi nancial assets (under FV option) & derivatives (2) 3
Gross revenues increased by €62 million (+10%) to €706 million. On a comparable basis, gross revenues decreased by €6 million (-1%) driven by the removal of advisor charges from gross revenues following a change in legislation with a corresponding reduction in commission paid
(€-13 million) and lower new business on the Variable Annuity products (€-6 million). This was partly offset by higher revenues from SunLife Protection business (€+16 million).
Investment margin increased by €2 million to €6 million. On a constant exchange rate basis, investment margin increased by €1 million.
Fees & revenues increased by €20 million (+6%) to €336 million.
On a constant exchange rate basis, expenses decreased by €17 million (-5%) mainly due to lower commissions driven by the above-mentioned removal of advisor charges as well as the effects of the cost savings programs.
As a result, the underlying cost income ratio decreased by 5.7 points to 91.5%.
Income tax benefits increased by €25 million to €45 million. On a constant exchange rate basis, income tax benefi t increased by €21 million due to higher positive tax one-offs.
Net income increased by €44 million to €72 million. On a constant exchange rate basis, net income increased by €37 million mainly due to higher adjusted earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives (119) (13)
(€+93 million), partly offset by a decrease in the in-force revenues from the portfolios of Increasing Term products,
(+16%) driven by strong sales of Unit-Linked Protection products (€+52 million) refl ecting client appetite and increased commercial efforts, partly offset by lower G/A
Protection new business sales due to strong competition; ■ Health sales (34% of APE) decreased by €8 million (-5%)
mainly due to lower sales of Medical Whole Life products due to increased competition, partly offset by increased sales of the Cancer Therapy product supported by commercial efforts; ■ Investment & Savings sales (9% of APE) increased by €19 million (+108%) driven by Single Premium Whole Life products launched in the second half of 2015 (€+24 million), partly offset by lower sales of Variable Annuity products through the bancassurance channel following the abovementioned curtailing strategy.
On a constant exchange rate basis, expenses increased by €25 million (+3%) mainly refl ecting higher digital investments, as well as higher commissions in line with APE growth, partly offset by the effects of the cost savings programs.
Amortization of VBI decreased by €26 million (-53%) to €-23 million. On a constant exchange rate basis, amortization of VBI decreased by €26 million (-55%) following assumption changes in 2014.
As a result, the underlying cost income ratio decreased by 0.9 point to 57.4%.
On a constant exchange rate basis, net income decreased by €62 million (-18%) as higher adjusted earnings were more than offset by an unfavorable change in the fair value of Mutual funds and impacts from the widening of credit spreads.
(a) Before intercompany eliminations. Gross Revenues amounted to €6,650 million net of intercompany eliminations as of December 31, 2015.
Gross revenues increased by €14 million (0%) to €6,684 million: ■ Life revenues (58% of gross revenues) decreased by €56 million (-1%) to €3,897 million driven by lower single and regular premiums in G/A Savings. This was partly offset by higher new business from Unit-Linked hybrid (1) savings and
APE remained stable (0%) at €373 million: ■ Life sales (72% of APE) increased by €8 million (+3%) to €268 million due to new business from Unit-Linked hybrid (1)
savings and Pure Protection products, partly offset by the decrease in G/A Savings; ■ Health sales (28% of APE) decreased by €8 million (-7%) to €105 million driven by lower sales of full benefi t insurance products.
Investment margin increased by €62 million (+54%) to €178 million mainly due to a lower policyholder participation.
Fees & revenues decreased by €34 million (-11%) to €269 million mainly due to a higher policyholder participation and lower new business in both Health and G/A Savings, partly offset by higher Unit-Linked asset base.
As a result, the underlying cost income ratio decreased by 1.7 points to 48.5%.
Income tax expenses increased by €16 million (+24%) to €-84 million mainly due to higher pre-tax underlying earnings.
Adjusted earnings increased by €14 million (+7%) to €195 million due to higher net realized capital gains from fi xed income assets.
(a) Before intercompany eliminations. Gross Revenues amounted to €7,170 million net of intercompany eliminations as of December 31, 2015.
Gross revenues increased by €451 million (+7%) to €7,177 million. On a comparable basis, gross revenues decreased by €357 million (-5%): ■ Group Life revenues (85% of gross revenues) decreased by €201 million (-4%) to €6,072 million driven by lower single premiums from full protection scheme contracts (€144 million) due to the strategic shift from full protection schemes to semi-autonomous employee benefi t solutions; ■ Individual Life revenues (15% of gross revenues) decreased by €156 million (-14%) to €1,104 million driven by lower sales of single premium products mainly due to repricing measures.
APE decreased by €16 million (-5%) to €313 million. On a comparable basis, APE decreased by €51 million (-16%): ■ Group Life sales (64% of APE) decreased by €38 million
■ Individual Life sales (36% of APE) decreased by €13 million
Investment margin increased by €18 million (+10%) to €205 million. On a constant exchange rate basis, investment margin decreased by €5 million (-3%) mainly due to lower reinvestment yields on fi xed income assets and higher foreign exchange hedging costs, partly offset by a lower allocation of policyholder participation.
Underlying earnings increased by €21 million (+7%) to €328 million. On a constant exchange rate basis, underlying earnings decreased by €16 million (-5%).
Invest hybrid product (1); ■ G/A Savings revenues (23% of gross revenues) decreased by €141 million (-26%) mainly due to lower sales of the
Life Protection; ■ Unit-Linked sales (46% of APE) decreased by €1 million
Investment margin decreased by €24 million (-7%) to €318 million as a lower investment income was partly offset by lower credited interests.
(1) Hybrid products: Savings product allowing clients to invest in both Unit-Linked and General Account funds.
(a) Before intercompany eliminations. Gross Revenues amounted to €1,715 million net of intercompany eliminations as of December 31, 2015.
Amortization of VBI decreased by €4 million (-45%) to €-5 million as a result of less unfavorable fi nancial assumptions update.
Net income decreased by €113 million (-39%) to €174 million mainly due to lower adjusted earnings, an unfavorable change in the fair value of both consolidated Mutual funds mainly invested in fi xed income assets (€-36 million) and interest rate derivatives not eligible for hedge accounting (€-23 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives (0) (0)
(€-13 million) resulting from a deteriorated environment, partially offset by strong sales in G/A Protection & Health in the Czech
APE decreased by €5 million (-6%) to €78 million. On a comparable basis, APE decreased by €5 million (-6%) mainly driven by Poland (€-5 million) stemming from lower Unit-
Protection & Health (€+1 million) due to higher infl ows from
Adjusted earnings decreased by €8 million (-20%) to €32 million. On a constant exchange rate basis, adjusted earnings decreased by €8 million (-20%) mainly driven by lower underlying earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives 5 (23)
(a) Before intercompany eliminations. Gross Revenues amounted to €5,705 million net of intercompany eliminations as of December 31, 2015.
Morocco, and Colombia are fully consolidated; (ii) Nigeria is consolidated under the equity method and contributes only to the underlying earnings, adjusted earnings and net income in 2015; (iii) Colombia was fully consolidated since April 2, 2014.
Gross revenues decreased by €680 million (-11%) to €5,709 million. On a comparable basis, gross revenues decreased by €717 million (-11%): ■ mature markets were down €744 million (-13%) mainly driven by (i) lower sales of Unit-Linked (€-497 million) mainly due to lower “Protected Unit” product sales at AXA MPS and
MPS and Spain, partly offset by (iii) G/A Protection & Health
Pure G/A Savings and Pension products at AXA MPS and in Spain; ■ high growth markets sales decreased by €20 million (-28%)
to €52 million, mainly driven by the non-repeat of large Group
Fees & revenues increased by €81 million (+16%) to €586 million. Excluding Colombia and on a constant exchange rate basis, fees & revenues increased by €81 million (+16%), mainly driven by higher Unit-Linked management fees following higher sales at AXA MPS, as well as higher loadings on premiums in Mexico (mainly following a reclassifi cation from net technical margin) and at AXA MPS.
Net technical margin decreased by €74 million (-37%) to €124 million. Excluding Colombia and on a constant exchange rate basis, net technical margin decreased by €73 million
Excluding Colombia and on a constant exchange rate basis, expenses increased by €34 million (+6%) mainly driven by AXA
driven by lower underlying earnings and lower net realized capital gains.
(a) Before intercompany eliminations. Gross Revenues amounted to €2,507 million net of intercompany eliminations as of December 31, 2015.
Unit-Linked products (€+41 million) due to strong in-force growth and G/A Savings products (€+36 million) due to the launch of a new generation savings plan.
(-48%) mainly due to the implementation of signifi cant regulatory changes impacting products features and commission levels starting from January 1st, 2015, partly offset by exceptional sales of several large contracts; ■ G/A Savings sales (8% of APE) increased by €31 million mainly driven by the launch of a new generation savings plan; and
■ G/A Protection & Health sales (59% of APE) increased by €6 million (+2%) demonstrating the continued focus on this profi table segment.
Investment margin decreased by €2 million to €0 million. On a constant exchange rate basis, investment margin decreased by €2 million as higher investment income driven by higher average asset base was more than offset by higher interest credited to policyholders.
Net technical margin increased by €29 million (+42%) to €100 million. On a constant exchange rate basis, net technical margin increased by €14 million (+19%) mainly driven by higher surrender margin from G/A Protection & Health products.
As a result, the underlying cost income ratio increased by 1.5 points to 52.6%.
Income tax expenses decreased by €2 million (-13%) to €-16 million. On a constant exchange rate basis, income tax expenses decreased by €5 million mainly due to lower taxable income.
Adjusted earnings increased by €71 million (+25%) to €353 million. On a constant exchange rate basis, adjusted earnings increased by €15 million (+5%) due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 14 (0)
Profi t or loss on fi nancial assets (under FV option) & derivatives 10 2
(a) Before intercompany eliminations. Gross Revenues amounted to €522 million net of intercompany eliminations as of December 31, 2015.
Gross revenues increased by €185 million (+55%) to €522 million. On a comparable basis, gross revenues increased by €141 million (+42%) driven by higher revenues from Unit-
Linked products in Singapore (€+136 million) following the new partnership with SingPost implemented in January 2015. G/A
Protection & Health products; ■ higher sales in Indonesia (€+25 mill ion), Singapore
Unit-Linked products; ■ partly offset by a decrease in Thailand (€-8 million) refl ecting a focus on more profi table products.
Underlying earnings increased by €26 million (+22%) to €145 million. On a comparable basis, underlying earnings increased by €13 million (+11%) mainly due to: ■ in-force portfolio growth in Indonesia (€+7 million) and Thailand
(€+5 million); ■ strong business growth in the Philippines (€+2 million); ■ continuous expense management in India (€+2 million); ■ partly offset by lower investment performance in Singapore
Underlying earnings and adjusted earnings increased by €15 million to €-20 million mainly due to lower expenses following the strategic decision to redeploy insurance portfolios and resources within the Group and to close the entity at the end of 2016.
Underlying earnings, adjusted earnings and net income increased by €10 million (+56%) to €-8 million due to increase in revenues and reduced expenses.
(1) AXA Life Invest Services aim to promote Unit-Linked products with guarantees through third party partnerships.
Net capital gains or losses attributable to shareholders net of income tax 131 142
Profi t or loss on fi nancial assets (under FV option) & derivatives (48) (128)
(c) Direct business in France, Belgium, Spain, Portugal, Italy, Poland, the United Kingdom, South Korea and Japan.
Net capital gains or losses attributable to shareholders net of income tax 44 56
Profi t or loss on fi nancial assets (under FV option) & derivatives (19) (69)
(Hamon law); ■ Commercial lines (43% of gross revenues) were down 1% to €2,561 million as tariff increases in all segments and higher new business in Creditor business were more than offset by lower volumes notably in Construction in a context of selective underwriting.
Expense ratio increased by 0.6 point to 23.6% mainly due to the non-repeat of lower commissions in 2014.
Enlarged expense ratio increased by 0.2 point to 29.5% mainly due to the non-repeat of reduced commissions, partly offset by lower claims handling costs.
As a result, the combined ratio improved by 2 points to 95.3%.
to €503 million mainly due to the non-repeat of exceptional distributions from Mutual funds in 2014 (€-71 million).
(€-7 million) more than offset by a €+12 million non-recurring tax adjustment.
Net income increased by €74 million (+16%) to €532 million driven by higher adjusted earnings, a positive change in the fair value on private equity funds (€+17 million) and a positive change in the fair value of foreign exchange derivatives not eligible to hedge accounting (€+38 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives (32) (9)
Gross revenues increased by €746 million (+18%) to €4,879 million. On a comparable basis, gross revenues increased by €192 million (+5%): ■ Personal lines (46% of gross revenues) were up 3% to €2,225 million. (i) Motor was up 18% to €658 million principally due to tariff increases as well as a new partnership in the Republic of Ireland. (ii) Non-Motor was down 2% to €1,568 million. (a) Health was up 4% to €859 million following strong growth in Great Britain and internationally. (b) Property was down 2% to €497 million due to tariff cuts refl ecting competitive market conditions and the run-off of some partnership agreements. (c) Personal Other was down 20%
to €212 million principally due to the loss of a partnership agreement in Travel; ■ Commercial lines (54% of gross revenues) were up 5%
(c) Liability was up 11% to €230 million driven by an increase in new business volumes and improved retention. (d) Other was down 37% to €47 million due to a reduction in the retrocession of Group pool.
As a result, the combined ratio improved by 1.9 points to 93.6%.
Net investment result decreased by €36 million (-11%) to €290 million driven by lower income from fi xed income assets and alternative investments as well as the non-repeat of an exceptional interest profi t on a tax claim in 2014.
Adjusted earnings increased by €9 million (+3%) to €365 million as the increase in underlying earnings was partly offset by lower net realized capital gains mainly from equities.
Profi t or loss on fi nancial assets (under FV option) & derivatives (19) (0)
Gross revenues increased by €314 million (+11%) to €3,109 million. On a comparable basis, gross revenues decreased by €32 million (-1%): ■ Personal lines (55% of gross revenues) were down 1% to €1,712 million as a consequence of negative price effects in
Income tax expenses increased by €24 million (+24%) to €-124 million. On a constant exchange rate basis, income tax expenses increased by €10 million (+10%) driven by higher pretax underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 37 34
Profi t or loss on fi nancial assets (under FV option) & derivatives 13 (64)
(a) Before intercompany eliminations. Gross Revenues amounted to €2,010 million net of intercompany eliminations as of December 31, 2015.
Net technical result increased by €46 million to €805 million: ■ the current accident year loss ratio increased by 0.1 point to 67.7% driven by an increase in both attritional losses
Cat events (-3.5 points); ■ the all accident year loss ratio decreased by 2.7 points to 60.4% as a result of higher positive prior year reserve developments.
Net investment result decreased by €14 million (-7%) to €178 million mainly due to lower revenues from fi xed income assets.
Adjusted earnings increased by €29 million (+12%) to €278 million mainly due to higher underlying earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 11 3
Underlying earnings increased by €4 million to €31 million. On a constant exchange rate basis, underlying earnings increased by €16 million, driven by higher net technical result due to higher sales and loss ratio improvement, as well as higher investment income, partly offset by higher expenses and taxes.
Adjusted earnings decreased by €5 million to €25 million. On a constant exchange rate basis, adjusted earnings increased by €4 million mainly driven by higher underlying earnings, partly offset by lower net realized capital gains.
Net income increased by €254 million to €36 million. On a constant exchange rate basis, net income increased by €268 million, mainly due to the non-repeat of the €-251 million impairment of part of the value of Reso in 2014 (subsidiary consolidated under the equity-method), as well as a favorable change in fair value of hedging derivatives not eligible for hedge accounting.
Net capital gains or losses attributable to shareholders net of income tax 11 (2)
(a) Before intercompany eliminations. Gross Revenues amounted to €7,496 million net of intercompany eliminations as of December 31, 2015.
Morocco, the Gulf Region and Colombia are fully consolidated; (ii) Nigeria (starting from 2015) and Lebanon are consolidated under the equity method and contribute only to the underlying earnings, adjusted earnings and net income; (iii) Colombia was fully consolidated since April 2, 2014.
to €3,474 million mainly due to (i) Motor from lower volumes refl ecting selective underwriting in Spain and Mexico, the loss of large accounts in Mexico and tariff increases in Turkey, partly offset by (ii) Health driven by tariff increases in Mexico and in the Gulf Region, as well as higher volumes in Turkey; ■ Other lines (0% of gross revenues) were up 155% to €25 million.
Net technical result decreased by €120 million (-6%) to €1,803 million. Excluding Colombia and on a constant exchange rate basis, net technical result decreased by €164 million (-9%): ■ the current accident year loss ratio increased by 0.2 point to 73.9%, mainly due to adverse claims experience in Motor in
Turkey, including €-77 million following evolutions in regulation and jurisprudence, partly offset by improvements in (i) Mexico following tariff increases in Health and lower average costs in Property, (ii) Personal lines in Spain with lower average costs in Motor and lower frequency in Non-Motor, as well as (iii) Portugal from selective underwriting especially in
Nat Cat events which occurred in 2014 (-0.9 point); ■ the all accident year loss ratio increased by 2.0 points to 76.5% with adverse prior year reserve developments (€128 million), mainly in Turkey (€-179 million) due to the increase in both frequency and average costs of bodily and material claims following the above-mentioned evolutions in regulation and jurisprudence in Motor, partly offset by more favorable prior year reserve developments in mature markets
As a result, the combined ratio deteriorated by 3.0 points to 102.8%. Excluding Colombia and on a constant exchange rate basis, the combined ratio increased by 2.8 points.
Net investment result increased by €6 million (+1%) to €462 million. Excluding Colombia and on a constant exchange rate basis, net investment result was stable.
Income tax expenses decreased by €4 million (-3%) to €-130 million. Excluding Colombia and on a constant exchange rate basis, income tax expenses decreased by €14 million
(-11%) mainly driven by lower pre-tax underlying earnings, partly offset by a negative one-off effect in Italy (€-16 million) following the change in tax rate voted in 2015 that will be applicable starting in 2017.
Adjusted earnings decreased by €163 million (-59%) to €114 million. On a constant exchange rate basis, adjusted earnings decreased by €173 million (-65%) mainly driven by lower underlying earnings, partly offset by higher net realized capital gains mainly on fi xed income and real estate.
(a) Before intercompany eliminations. Gross Revenues amounted to €2,732 million net of intercompany eliminations as of December 31, 2015.
(€+34 million or +9%) driven by a change in regulation (Hamon law) and increase in cross selling, tariff increase and business growth in Japan (€+38 million or +12%) and better retention in Spain (€+14 million or +9%) due to the enhanced pricing capabilities; ■ Personal Non-Motor (14% of gross revenues) was up €9 million (+3%) to €392 million mainly supported by a good performance in France on Household, and in Poland mainly due to new synergies achieved through the acquisition and partnership concluded in March 2015.
Net technical result increased by €67 million (+13%) to €607 million. On a constant exchange rate basis, net technical result increased by €41 million (+8%): ■ the current accident year loss ratio decreased by 0.1 point to 78.2% due to (i) a decrease in attritional and large loss ratios
Spain due to above-mentioned enhanced pricing capabilities, partly offset by higher reinsurance costs in Personal Property in the United Kingdom, partly offset by (ii) higher Nat Cat charge (+0.5 point) due to Desmond storm in the United
Kingdom (€6 million) and the French Riviera fl oods during the second half of 2015; ■ the all accident year loss ratio remained stable at 76.9% mainly as a result of unfavorable prior year reserve developments in
South Korea, partly offset by higher prior year reserve releases in the United Kingdom and in France.
Adjusted earnings increased by €11 million (+9%) to €132 million. On a constant exchange rate basis, adjusted earnings increased by €4 million (+3%) mainly due to higher underlying earnings.
(a) Before intercompany eliminations. Gross Revenues amounted to €1,099 million net of intercompany eliminations as of December 31, 2015.
(+8%) to €540 million driven by (i) Non Motor (€+20 million)
from new large accounts and volume increases in Malaysia and Hong Kong as well as volume increases in Thailand and Singapore and (ii) Motor (€+12 million) from new large accounts in Singapore and volume increases in Malaysia.
Expense ratio deteriorated by 1.7 points to 29.3%. On a comparable basis, expense ratio deteriorated by 1.3 points driven by higher acquisition expenses (+0.9 point) mainly in
Enlarged expense ratio deteriorated by 1.1 points on a comparable basis to 32.1%.
As a result, the combined ratio deteriorated by 0.4 point on a comparable basis to 94.0%.
On a comparable basis, underlying earnings decreased by €9 million, including a €13 million decrease from affi liates and associates, driven by India (€-11 million) mainly due to reserves strengthening and Chennai fl ood, and China (€-2 million) mainly due to higher brand promotion and marketing expenses.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 11 23
Net capital gains or losses attributable to shareholders net of income tax 21 31
(a) Before intercompany eliminations. Gross Revenues amounted to €2,255 million net of intercompany eliminations as of December 31, 2015.
Gross revenues increased by €133 mill ion (+6%) to €2,265 million. On a comparable basis, gross revenues increased by €41 million (+2%), notably in Property (+10%) mainly driven by new business and in Liability (+6%) with positive volume impacts and new business, partly offset by negative evolution in premiums in Motor (-7%) due to focus on profi tability, and
Net investment result decreased by €8 million (-4%) to €173 million. On a constant exchange rate basis, net investment result decreased by €8 million (-4%) mainly due to lower income from fi xed income assets in a low interest rates environment and the non-repeat of an exceptional distribution from Mutual funds in 2014.
Income tax expenses decreased by €7 million (-9%) to €-69 million. On a constant exchange rate basis, income tax expenses decreased by €7 million (-9%) mainly due to lower pre-tax underlying earnings.
Underlying earnings increased by €21 million to €21 million mainly driven by an improved technical result in AXA Global P&C, partly offset by higher expenses related to the development of
Net income increased by €25 million to €27 million mainly driven by higher adjusted earnings as well as a favorable change in fair value of fi nancial assets.
Gross revenues increased by €217 million (+19%) to €1,371 million. On a comparable basis, primarily adjusted from the disposal of ADHAP, gross revenues increased by €195 million (+17%) mainly driven by the strong developments in new business & e-Commerce business combined with inforce growth in Motor, Home and Travel activities.
Net income increased by €1 million (+8%) to €19 million mainly driven by higher adjusted earnings.
Underlying earnings decreased by €26 million to €13 million. On a constant exchange rate basis, underlying earnings decreased by €24 million mainly driven by unfavorable developments on run-off portfolios.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 10 25
Profi t or loss on fi nancial assets (under FV option) & derivatives (1) (2)
(a) Before intercompany eliminations. Gross Revenues amounted to €2,580 million net of intercompany eliminations as of December 31, 2015.
General expenses increased by €334 million (+19%) to €-2,105 million. On a constant exchange rate basis, general expenses increased by €2 million as higher compensation expenses resulting from higher revenues were partly offset by lower promotion and servicing expenses.
As a result, underlying cost income ratio decreased by 0.1 point to 75.1%.
Profi t or loss on fi nancial assets (under FV option) & derivatives 11 27
(a) Before intercompany eliminations. Gross Revenues amounted to €1,242 million net of intercompany eliminations as of December 31, 2015.
(€+34 billion) and €37 billion combined market and foreign exchange rate impact. They were partly offset by €-33 billion negative scope impact, mainly related to a partial withdrawal of the Friends Life assets.
(+4%), mainly driven by higher management fees (€+41 million or +4%) as a result of higher average assets (+7%) despite lower management fee bps (-0.5 bp) and higher Real Assets transaction fees (€+4 million or +14%), partly offset by lower performance fees (€-8 million or -14%) mainly due to unfavorable timing effect in 2015.
On a comparable basis, net investment result increased by €16 million due to an exceptional realized capital gain of €16 million in 2015.
The underlying cost income ratio improved by 1.3 points to 69.3%. On a comparable basis, the underlying cost income ratio remained stable.
Income tax expenses increased by €27 million (+25%) to €-135 million. On a comparable basis, income tax expenses increased by €20 million (+18%) driven by higher pre-tax underlying earnings and unfavorable tax one-offs (€-12 million).
Underlying earnings increased by €24 million (+11%) to €234 million. On a comparable basis, underlying earnings increased by €10 million (+5%).
Adjusted earnings increased by €24 million (+11%) to €234 million. On a comparable basis, adjusted earnings increased by €10 million (+5%) in line with higher underlying earnings.
mainly driven by higher adjusted earnings as well as exceptional fees relating to the partial withdrawal of the Friends Life assets.
(a) Of which AXA Bank Europe and its branches: €407 million.
(-3%) as (i) higher commercial results from improved retail commercial margin and strong new credit production, as well as (ii) higher intermediation activities were more than offset by (iii) lower net realized capital gains and (iv) higher level of prepayments and refi nancings.
Underlying earnings decreased by €9 million (-9%) to €90 million mainly driven by lower operating net banking revenues (€-10 million).
Net income increased by €22 million (+29%) to €100 million as lower adjusted earnings (€-9 million) were more than offset by a favorable change in fair value of both own debt (€+19 million)
Operating net banking revenues increased by €6 million to €136 million mainly driven by higher interest income on retail loans, primarily on mortgages as a consequence of growth of inforce business following the strong level of new credit production during the last three years, and by higher commissions due to the increase in early repayment of loans.
Net income increased by €18 million to €15 million, as a result of the increase in adjusted earnings and of a favorable change in fair value of debt instruments driven by credit spread widening.
Net income increased by €58 million to €-67 million. On a constant exchange rate basis, net income increased by €58 million mainly due to the non-repeat of the €101 million one-off provision in 2014, partly offset by a one-off provision of €77 million booked in 2015 in anticipation of the exceptional loss related to the sale of the Hungarian operations announced on February 3rd, 2016.
Net banking revenues increased by €1 million (+4%) to €22 million.
Net realized capital gains or losses attributable to shareholders 9 (27)
Adjusted earnings decreased by €130 million to €-833 million mainly driven by lower underlying earnings, partly offset by lower impairment on equities.
Adjusted earnings and net income increased by €4 million to €-15 million in line with the increase in underlying earnings.
Adjusted earnings increased by €11 million to €-1 million driven by higher underlying earnings.
Net income increased by €44 million to €-3 million mainly due to a decrease in costs linked to the restructuring of the participation in Bharti AXA General Insurance.
(i) lower interest expense following the renegotiation of fi nancing conditions with AXA SA in the context of a lower interest rate environment, (ii) lower debt positions and (iii) positive one-off correction of real estate income, partly offset by (iv) higher sharebased compensation expenses.
Adjusted earnings increased by €126 million (+87%) to €-18 million. On a constant exchange rate basis, adjusted earnings increased by €129 million (+89%), in line with underlying earnings evolution.
Adjusted earnings increased by €11 million to €-2 million. On a constant exchange rate basis, adjusted earnings increased by €12 million mainly due to higher underlying earnings, partly offset by lower net realized capital gains.
Underlying earnings increased by €16 million to €-7 million due to higher investment income from fi xed income assets and participations as well as lower expenses related to pensions.
Underlying earnings and adjusted earnings increased by €3 million to €-6 million.
Underlying earnings increased by €9 million (+22%) to €-31 million. On a constant exchange rate basis, underlying earnings increased by €9 million (+22%).
AXA’s Solvency II position should remain strong and resilient to external shocks.
These elements should enable AXA to continue creating lasting shareholder value and offer an attractive return.
Indonesia, Thailand, Philippines, Malaysia), India, China, and the Mediterranean & Latin American Region (Morocco, Turkey, the Gulf Region, Mexico, Lebanon, Colombia), excluding Direct operations.
■ exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds, for which cost at inception, intrinsic value and pay-off fl ow through adjusted earnings, and only time value fl ows through net income when there is no intention to sell the derivatives in the short term (if not, fl ows through adjusted earnings).
Net capital gains or losses attributable to shareholders include the following elements net of tax: ■ realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); ■ cost at inception, intrinsic value and pay-off of derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds; ■ related impact on policyholder participation (Life & Savings business); and
Diluted earnings per share (diluted EPS) represent AXA’s consolidated earnings (including interest charges related to undated debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares, on a diluted basis (that is to say including the potential impact of all outstanding dilutive stock options being exercised, performance shares, and conversion of existing convertible debt into shares, provided that their impact is not anti-dilutive).
Margin”; ■ policyholders’ interest in participating contracts is refl ected as a change in insurance benefi ts in the Statement of Income.
+ primarily “Investment Margin” and “Net Technical Margin”; ■ the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above) as well as changes in specifi c reserves linked to invested assets’ returns and to exclude the fees on (or contractual charges included in) contracts with the fi nancial risk borne by policyholders, which are included in “Fees and Revenues”; ■ change in URR (Unearned Revenues Reserves – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
“Fees & Revenues” and “Net Technical margin”; ■ change in UFR (Unearned Fees Reserves – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying
Statement of Income, whereas it is located in the line “Fees &
■ interests and bonuses credited to policyholders and unallocated policyholder bonuses (and the change in specifi c reserves purely linked to invested assets returns) related to the net investment income.
Underlying Fees & Revenues include: ■ revenues derived from mutual fund sales (which are part of consolidated revenues); ■ loadings charged to policyholders on premiums/deposits and fees on funds under management for separate account (Unit-
■ other fee revenues, e.g., fees received on fi nancial planning or sales of third party products.
■ other changes in insurance reserves are all the reserves strengthening or release coming from changes in valuation assumptions, additional reserves for mortality risk and other technical impacts such as premium defi ciency net of derivative if any.
■ policyholder bonuses if the policyholder participates in the expenses of the Company.
Underlying net technical result is the sum of the following components: ■ earned premiums, gross of reinsurance; ■ claims charges, gross of reinsurance; ■ change in claims reserves, including claims handling costs reserves, gross of reinsurance, excluding the recurring interests credited to insurance annuity reserves; ■ claims handling costs; and
All accident year loss ratio net of reinsurance is the ratio of: ■ all accident years claims charge gross of reinsurance + claims handling costs + result of reinsurance ceded on all accident years excluding the recurring interests credited to the insurance annuity reserves; to
Underlying expense ratio is the ratio of: ■ underlying expenses (excluding claims handling costs); to
(including commissions) related to acquisition of contracts (with the related acquisition expense ratio) and all other expenses
Net New Money : Infl ows of client money less outfl ows of client money. Net New Money measures the impact of sales efforts, product attractiveness (mainly dependent on performance and innovation), and the general market trend in investment allocation.
Underlying Cost Income ratio : (general expenses net of distribution revenues)/(gross revenues excluding distribution revenues).
Part 4 of this Annual Report which is covered by the Statutory
(i) dividends received from operating subsidiaries, (ii) proceeds from debt instruments issuance (principally 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.
AXA Mediterranean Holding SA, are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio.
The level of internal dividends paid by operating entities must therefore take into account these constraints as well as potential future regulatory changes. Cash positions also fl uctuate as a result of cash-settled margin calls from counterparties related to collateral agreements on derivatives, and the Company’s statutory (parent only) results may be signifi cantly impacted by unrealized gains and losses on derivatives used to hedge notably currency and interest rate risks. The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating expenses and dividend payments during each of the next three years.
Life & Savings and Property & Casualty insurance contracts are disclosed in Note 14.9.1 of Part 4 – “Consolidated Financial
Liquidity needs can be affected by a number of factors including fl uctuations in the level of surrenders, withdrawals, maturities and guarantees to policyholders including guarantees in the form of minimum income benefi ts or death benefi ts, particularly on Variable Annuity business (see Part 1.2 – “Information on the
Insurance net cash flows are generally positive but can be negative in the case of exceptional events. A portion of these cash fl ows is invested in liquid, short-term bonds and other listed securities in order to manage the liquidity risk that may arise from such events.
These subsidiaries’ principal sources of liquidity are operating cash fl ows, proceeds from the issuance of ordinary shares
(where applicable), drawings on credit facilities, repurchase agreements and other borrowings from credit institutions, banking clients or others.
In 2015, AXA continued to manage its liquidity risk carefully and conservatively. At year-end 2015, AXA has: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
are expected over the next two years out of a total net fi nancing debt (2) of €14.3 billion at year-end 2015; and (ii) a decrease in the debt ratios (debt gearing (3): 23% at year-end 2015, versus 24% at year-end 2014; interest coverage (4): 10.7x at year-end 2015, versus 9.9x at year-end 2014).
In addition, as part of its risk control system, AXA remains vigilant regarding contractual provisions, such as rating triggers or restrictive covenants, in fi nancing and other documentation that may give lenders, security holders or other counterparties, rights to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse effect on AXA’s consolidated fi nancial position. At yearend 2015, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
(3 ) Total net fi nancing debt/shareholders’ equity excluding undated subordinated debt and excluding unrealized gains & losses recorded through shareholders’ equity + total net fi nancing debt.
Financial Statements”). To neutralize the dilutive impact of the 2017 convertible bonds, AXA has purchased from a banking counterparty call options on the AXA ordinary share with an automatic exercise feature. Under this arrangement, one call option is automatically exercised upon each conversion of a convertible bond. Consequently, each issuance of a new ordinary share resulting from the conversion of a bond will be offset by the delivery to AXA of an existing ordinary share under the call option (which ordinary share AXA intends to cancel in order to avoid any increase in the number of its outstanding shares and/or dilution).
At December 31, 2015, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
On a consolidated basis, AXA’s total fi nancing debt outstanding amounted to €624 million at December 31, 2015, an decrease of €962 million from €1,586 million at the end of 2014. On a constant exchange rate basis, the decrease was €1,002 million.
Movements in this item are described in Note 17 of Part 4 –
At December 31, 2015, the amount of debt owed by AXA and its subsidiaries to credit institutions was €0 million.
At December 31, 2015, other debt instruments issued totalled €2,612 million, up from €1,164 million at the end of 2014. The increase of €1,448 million mainly resulted from the increase of commercial paper.
Movements in this item are described in Note 18 of Part 4 –
For several years, the AXA Group has been offering to its employees in and outside France, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2015, employees invested a total of €375 million that led to a total of approximately 19 million newly issued shares. Employee shareholders represented 6.15% of the outstanding share capital at December 31, 2015.
Dividends received by the Company from its subsidiaries amounted to €2,552 million in 2015 (€3,342 million in 2014), of which €733 million were in currencies other than the Euro
(€1,128 million in 2014) or €1,132 million after the impact of hedging derivative instruments (€1,158 million in 2014), of which interest on undated subordinated debt of €431 million
Dividends paid to AXA SA’s shareholders in 2015 in respect of the 2014 fi nancial year totaled €2,317 million, or €0.95 per share, versus €0.81 per share paid in 2014 in respect of the 2013 fi nancial year (€1,960 million in total). These dividends were paid in cash.
The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries monitor compliance with these requirements on a continuous basis and are in compliance with the applicable solvency requirements as of December 31, 2015.
A European Directive dated October 27, 1998 requires a consolidated solvency margin calculation effective for periods ending on or after December 31, 2001. France implemented this directive under an ordinance dated August 29, 2001, decreed on March 14, 2002 and applicable from 2002. Additional supervision of credit institutions, investment companies and insurance companies belonging to “fi nancial conglomerates” was introduced by the European Parliament and Council Directive 2002/87/EC of December 16, 2002. France implemented this directive through an ordinance dated December 12, 2004, which introduced the notion of fi nancial conglomerate into the
Code, the provisions of this ordinance applied for the fi rst time to periods starting on or after January 1, 2005.
(€36.2 billion at December 31 , 2014); ■ admitted subordinated debt: €13.6 billion (€12.6 billion at
December 31, 2014); ■ less intangible assets (excluding goodwill on AB as it is part of its net consolidated book value) of €26 billion (€22.7 billion at December 31, 2014) and less the net consolidated book value of its equity interests in credit institutions, investment companies and other financial institutions: €6.6 billion
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 satisfy mandatory deferred interest by way of alternative settlement mechanisms (such as, subject to applicable limits, 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) within fi ve years, failing which the interest is forfeited. However, the settlement of deferred interest becomes due, on a best efforts basis, in certain circumstances including redemption of the notes, liquidation, payment of a dividend or interest on any other TSS, any share buy back outside the Company’s buy-back program, or any redemption or repurchase of other TSS.
December 31, 2015 compared to 266% at the end of 2014. This change resulted mainly from lower unrealized capital gains on fi xed income assets and adverse forex movements, partly offset by the contribution of underlying earnings. This 2015 solvency margin calculation will be reviewed by the ACPR.
A dividend per share of €1.10 will be proposed at AXA’s Annual Shareholders’ Meeting that will be held on April 27, 2016. The dividend will be payable on May 10, 2016 with an ex-dividend date of May 6, 2016.
Please refer to Note 32 of Part 4 – “Consolidated Financial Statements” for other subsequent events.
Transactions involving Company securities completed in 2015 141 by the members of the Board of Directors
Commitments made to executive offi cers 142 2.3 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 145
Governance Code of reference. The Board of Directors believes that the recommendations of the Afep-Medef Code and its accompanying guide are fully in line with AXA’s own corporate governance practice. The Company also carefully follows the evolutions of corporate governance practices, in France and abroad, as well as the recommendations and standards of shareholders, regulators, proxy advisors, rating agencies and other stakeholders.
When the Board of Directors appointed Mr. Henri de Castries as Chairman & Chief Executive Offi cer in 2010, it implemented various measures designed to ensure an appropriate balance of powers within the Board consistent with best governance practices including adopting certain provisions in the Bylaws which go beyond regulatory requirements and market practices, providing that: ■ the Board must be composed of a majority of independent directors; ■ each of the three Committees of the Board must be chaired by an independent director; ■ certain Committees (the Audit Committee and the
Compensation & Governance Committee) must be composed only of independent directors; and
Executive Offi cer); ■ appoints and determines the respective compensation of the
Chief Executive Offi cer are combined; ■ reviews and sets (arrête) the Company’s and the Group’s halfyear and annual fi nancial statements; ■ approves the report of the Company’s Chairman on the composition of the Board including gender balance, the conditions of preparation and organization of the Board of Directors’ work as well as the internal control and Risk
Management procedures set up by the Company; ■ convenes Shareholders’ Meetings; ■ grants stock options and/or performance shares to Group employees and corporate offi cers within the authorizations approved by the Extraordinary Shareholders’ Meeting; ■ authorizes regulated agreements (conventions réglementées).
shares are valued using the closing price of the AXA share on
The guidelines governing the operation, organization and compensation of the Board of Directors and its Committees are set out in the Board’s Bylaws. The Bylaws detail, in particular, the powers, missions and obligations of the Board of Directors and its Committees.
Board members may also meet among themselves without the presence of the Executive Management and these executive sessions are systematically scheduled at each Board of
Directors’ meeting. Prior to each meeting, the Board members receive documentation concerning matters to be reviewed, generally eight days in advance. In accordance with the Board of Directors’ Bylaws, the Chief Executive Offi cer reports to the
Board on a regular basis on the Company’s fi nancial condition as well as on any signifi cant event or transaction involving the
(regardless of whether he is a Committee member), to inform the Chairman and the Board of Directors of any potential confl ict of interests, to report to the Shareholders’ Meeting with respect to all corporate governance related matters, to require the
In this context, he: ■ maintained regular dialogue with the members of the Board of Directors, in particular the independent members, and with the Executive Management, including frequent meetings with the Chairman & Chief Executive Offi cer, the Deputy Chief
The Lead Independent Director also reported on his activities to the shareholders during their meeting of April 30, 2015.
The time spent by the Lead Independent Director on his activities within the AXA Group represented 49 full days of work in 2015.
Pursuant to Article 10 of the Company’s Charter, the members of the Board of Directors are appointed by the Shareholders’
On December 31, 2015, the Board of Directors was comprised of fourteen members: fi ve women and nine men. Four directors were citizens of countries other than France.
April 27, 2016 and subject to the approval of the shareholders, the Board of Directors will be comprised of seven women and nine men , i.e. over 40% of women, which goes beyond the thresholds set in the Afep-Medef Code and the provisions of the January 27, 2011 law.
Board believes that having international experience and profi les is essential for an effective Board of Directors. The Board is currently comprised of 29% of members who are nationals of countries other than France. Following the S hare holder s’
Meeting of April 27, 2016 and subject to the approval of the shareholders, the Board of Directors will be comprised of 38%
This diversity fosters open debates within the Board and brings a broader perspective to Board discussions.
More generally, the Board of Directors pays particular attention to the diversity among its members. Criteria set in connection with the selection process of future directors include the defi nition of an appropriate mix within the Board of technical skills and professional experience as well as diversity in terms of age, nationality and culture.
France and abroad. The Board of Directors does not have any non-voting members (censors).
Dentressangle, Jean-Martin Folz, Paul Hermelin (1), Stefan Lippe, and Ramon de Oliveira. The proportion of independent directors within the Board of Directors was 71% on December 31, 2015.
(1) Mr. Paul Hermelin is Chairman & Chief Executive Offi cer of Capgemini, a company which provides services to the AXA Group in the course of its ordinary business. Considering that (i) the conditions of these services are negotiated at arm’s length, (ii) the revenues for Capgemini generated by these services do not exceed 0.5% of its consolidated total revenues and (iii) Mr. Paul Hermelin does not directly take part in negotiating any of the contracts with AXA, AXA’s Board of Directors considered that these business relationships are not signifi cant either for AXA or for Capgemini and they do not create a situation of economic dependence. Therefore, these relationships are not likely to question Mr. Paul Hermelin’s independence as a member of AXA’s Board of Directors.
Henri de Castries (61) Chairman & Chief Executive Offi cer of AXA 25, avenue Matignon – 75008 Paris – France French nationality
Director Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations
Jean-Pierre Clamadieu (57) Chairman of the Executive Committee and director of Solvay (Belgium) Rue de Ransbeek 310 – 1120 Brussels – Belgium French nationality
Independent director Chairman of the Compensation & Governance Committee Member of the Audit Committee
Paul Hermelin (63) Chairman & Chief Executive Offi cer of Capgemini 11, rue de Tilsitt – 75017 Paris – France French nationality
Mrs. Isabelle Kocher (49) Deputy Chief Executive Offi cer, Chief Operating Offi cer and director of ENGIE 1, place Samuel de Champlain – 92930 Paris la Défense cedex – France French nationality
Ramon de Oliveira (61) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue – New York – NY 10065 – United States French nationality
Independent director Member of the Audit Committee Member of the Compensation & Governance Committee
Mrs. Dominique Reiniche (60) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France French nationality
Chairman of the Board of Directors since April 29, 2010. He does not receive any fees for this directorship.
Board of Directors in particular because of her international profi le as well as her signifi cant experience in the fi nancial industry. Mrs. Irene Dorner worked for nearly thirty years in the banking sector for the HSBC G roup in Europe, Asia and the
The Board of Directors reviewed the situation of Mrs. Doina Palici-
Board members and the succession plan of the executive offi cers.
In 2015, the Board met nine times and the average attendance rate was 96%. The Board meetings had an average duration of three and a half hours.
(SAS), AXA France IARD, AXA France Vie, AXA Œ uvres d’Art
AXA UK plc (United Kingdom), MONY Life Insurance Company of America (United States)
The current directorships held by members of the Board of Directors within companies belonging to the same group are indicated by the following symbol: **.
(2) In accordance with the Afep -Medef recommendations, Mr. Henri de Castries requested the Board of Directors’ advice before accepting a new directorship in a listed company outside the AXA Group.
Dentressangle G roup, a transportation and logistic specialist, and served as Chairman & Chief Executive Offi cer until 1998; then as Chairman of the Supervisory Board until June 2015, date of the disposal of the controlling interests to the company
Norbert Dentressangle SA until June 2015, holds, since its creation in 1988, equity interests in real estate, industrial and business services fi rms. From April 2008 to April 2010,
Mr. Denis Duverne is a graduate of the École des hautes
études commerciales (HEC). After graduating from the École nationale d’administration (ENA), he started his career in 1984 as commercial counsellor for the French Consulate General in
Corporate Secretary of Compagnie Financière IBI. In 1992, he became a member of the Executive Committee of Banque
Colbert, in charge of operations. In 1995, Mr. Denis Duverne joined the AXA Group and assumed responsibility for supervision of AXA’s operations in the US and the UK and managed the reorganization of AXA companies in Belgium and the
Management Board member in charge of Finance, Strategy and Operations. Since April 2010, Mr. Denis Duverne has been director and Deputy Chief Executive Offi cer of AXA, in charge of
Mr. Jean-Pierre Clamadieu is a graduate of the École nationale supérieure des mines of Paris and ingénieur du Corps des
September 2011, further to the combination between the Rhodia and Solvay groups, Mr. Clamadieu became Vice-Chairman of the
Chairman of the Executive Committee and member of the Board of Directors of Solvay.
Mr. Jean-Martin Folz is a graduate of the École polytechnique and ingénieur du Corps des Mines. Between 1975 and 1978, he has held various French Administration cabinet positions, his last position being head of cabinet of the Secretary of State for
Industry. In 1978, he joined Rhône-Poulenc to run the Saint-Fons plant before being promoted Senior Executive Vice-President of Rhône-Poulenc for the Specialty Chemicals business unit.
(in 1988). In 1991, he became Group Chief Executive Offi cer of
Mr. Paul Hermelin is a graduate of the École polytechnique and École nationale d’administration (ENA). Mr. Paul Hermelin spent the fi rst fi fteen years of his professional life in the French government, primarily in the Ministry of Finance. He held a number of positions in the Budget Offi ce and on various ministry staffs, including that of Finance Minister Jacques Delors. He was chief of staff to the Minister of Industry and Foreign Trade, from 1991 to 1993. Mr. Paul Hermelin joined the Capgemini
G roup in May 1993, where he was fi rst in charge of coordinating central functions. In May 1996, he was appointed member of the Management Board of Cap Gemini and Chief Executive
Since May 2012, Mr. Paul Hermelin has been Chairman & Chief
From October 2011 to November 2014, Mrs. Isabelle Kocher was Executive Vice-President, Chief Financial Offi cer of GDF
Law at Gray’s Inn London in 1981. She was admitted to the
Singapore since then. Since 2000, and until its combination in 2015 with the law fi rm Morgan Lewis in the United States, she has been founder and managing partner of Stamford Law
Member of the Accounting Advisory Board: National University of Singapore Business School (Singapore)
Offi cer of Swiss Re and was also appointed Deputy Chief Executive
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”. After 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
Directors of this company. In October 2013, Mr. Stefan Lippe was elected as Chairman of the Board of Directors of CelsiusPro AG.
Since May 2014, Mr. Stefan Lippe has been a member of the
Chairman of the Advisory Board: German Insurance Association for Vocational Training (BWV) (Germany)
Paris IV (Philosophy Degree), University Paris I (Master’s degree in law) and of the Institut d’études politiques de Paris.
School of Lima (Peru). In 1996, he became an Expert at the
Organization, the reform of the magistrates’ and lawyers’ training and the revision of the Civil Procedure Code. He also taught professionals at the École nationale de la magistrature (ENM).
Chairman of the Board of Directors: Friends of Education (nonprofi t organization) (United States)
as UK Banking Chief Operating Offi cer. In December 2005, she became Chief Executive of UK Retail and Business Banking
(UK RBB). In recognition of her importance to retail banking at Barclays, she was given the additional title of Vice Chair,
Global Retail Banking in 2009 where she shared the UK RBB
In 2000, she became Head of Group Reinsurance of AXA Global
P&C in Paris (France). From 2010 to March 2013, she was
(India). Since April 2013, she has been Chief Executive Offi cer of AXA Insurance Singapore (Singapore). Since April 2012,
Mrs. Doina Palici-Chehab has been the employee shareholder representative to the AXA Board of Directors.
Manager in 1983. In 1986, she joined Kraft Jacobs Suchard and was appointed Marketing & Strategy Manager. In 1992, she joined Coca-Cola Beverages as Marketing & Responsible
March 2014, Mrs. Dominique Reiniche was Chairman Europe of The Coca-Cola C ompany.
Executive Offi cer do not currently carry out any professional activity or hold any directorship outside the AXA Group that the Board believes substantially interfere with or impede in any material way their availability to focus on the Group and its business. Certain members of the Board of Directors, however, are corporate offi cers and/or executives of companies that may have agreements or enter into transactions from time to time with the AXA Group including credit facilities, purchases of securities
AXA does not believe that any of these agreements or transactions give rise to confl icts of interests between (i) the
To the best of the Company’s knowledge and based on the information reported to it, none of the members of its Board of Directors have been, during the last fi ve years (i) subject to any conviction in relation to fraudulent offences or to any official public incrimination and/or sanction by statutory or regulatory authorities, (ii) disqualifi ed by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer, or (iii) associated as a member of the administrative, management or supervisory bodies with any company that has declared bankruptcy or been put into receivership or liquidation, provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated affi liated companies in connection with these or similar transactions and certain members of AXA’s Board of Directors may have been associated with other companies that have undertaken similar solvent liquidations.
F or the fi rst year, he also collected each director’s views on each other members’ participation in, and contribution to, the
Board work. The reports on each director’s personal contribution to the Board were shared with the Lead Independent Director who gave individual feedback to the relevant member during a dedicated one-on-one meeting.
Board evaluation, the principal areas identifi ed for improvement and made recommendations to the Board of Directors which in turn examined and approved such recommendations during its meeting of February 24, 2016.
During this assessment, the members of the Board expressed a high level of satisfaction with the Board’s dynamics and performance and noted that the recommendations from the prior reviews had been thoroughly implemented. The report by the consultant also highlighted that AXA’s governance ranks very high when benchmarked against best practices .
The main areas for improvements identifi ed were: (1) enhanced periodical reporting on M&A projects, (2) systematic presentation to the Board of benchmarking on both large traditional competitors’ performance (including outside Europe) and some of the newcomers and disrupters in the insurance industry,
Directors ensures that independent directors have a major role in all Board Committees. In this context: ■ each of the three Committees is chaired by an independent director; ■ all members of the Audit Committee and the Compensation &
Governance Committee are independent directors; ■ AXA’s executive officers cannot be members of the
Committee are set forth in the Board of Directors’ Bylaws and in the Audit Committee Terms of Reference.
Composition on December 31, 2015: Stefan Lippe, Chairman Jean-Martin Folz Ramon de Oliveira Deanna Oppenheimer
The Board of Directors reviewed the qualifi cations of all Audit Committee members in terms of their fi nancial expertise and business experience and believes that all members have the requisite expertise, experience and qualifi cations to fulfi l their assignments as Audit Committee members.
The scope of the Audit Committee’s responsibilities is set out in its Terms of Reference which are reviewed and approved each year by the Board of Directors. The Audit Committee assists the oversight of the: ■ adequacy and effectiveness of the internal control and Risk Management frameworks; ■ financial reporting process and the integrity of the publicly reported results and disclosures made in the fi nancial statements; and
The review of fi nancial statements by the Audit Committee is accompanied by a presentation from the Statutory Auditors stressing the essential points of the results of the statutory audit and the accounting methods chosen. The Committee also receives presentations from the Group Chief Risk Offi cer, the Group General Counsel and the Group Chief Financial Offi cer describing the Company’s principal risk exposures and where applicable the material off-balancesheet commitments.
The Committee focused, in particular, on the following issues: ■ the full year fi nancial statements for 2014; ■ the 2014 Annual Report (Document de
Composition on December 31, 2015: Ramon de Oliveira, Chairman Suet Fern Lee Stefan Lippe Doina Palici-Chehab
• fi nancing operations that might substantially change the Company’s fi nancial structure; ■ To examine any plan to perform a fi nancial operation of signifi cant size for the AXA Group, except for M&A transactions that shall be discussed directly at the Board level; ■ To examine any subject relating to the financial management of the AXA Group: • the policy on fi nancial Risk Management,
• the capital and solvency; ■ To examine the impact on capital and solvency at Group level of the main orientations and limits of the Asset Liability Management policy; and
■ To review the risk appetite framework developed by the Executive Management for fi nancial, insurance and operational exposures.
The Finance Committee met fi ve times in 2015. The average attendance rate was 100%.
The Committee focused, in particular, on the following issues: ■ fi nancial Risk Management; ■ liquidity and fi nancing; ■ capital and solvency; ■ risk appetite and asset allocation; ■ interest rates exposure; ■ Systemic Risk Management Plan; ■ Liquidity Risk Management Plan; ■ Recovery and Resolution plans; ■ review of the financial authorizations
(guarantees); and ■ review of the proposed capital increase reserved for the employees of the AXA Group (“SharePlan 2015”).
Composition on December 31, 2015: Jean-Martin Folz, Chairman Jean-Pierre Clamadieu Deanna Oppenheimer Dominique Reiniche
The Chairman of the Board of Directors, as well as the Vice-Chairman – Lead Independent Director, although not members of the Committee, take part in its work and attend its meetings, except for the Chairman of the Board when his personal situation is at stake.
• the amount of the directors’ fees for members of the Board of Directors to be submitted to the Shareholders’ Meeting and their allocation,
The Compensation & Governance Committee met eight times in 2015. The average attendance rate was 97%.
• the review of the Bylaws of the Board of Directors,
The Chairman & Chief Executive Officer is vested with the broadest powers to act on behalf of the Company and represents the Company vis-à-vis third parties. He exercises these powers within the scope of the corporate purpose and subject to the powers expressly assigned by law to the Shareholders’ Meetings and to the Board of Directors. In addition, the Bylaws of the
Board of Directors determines the scope of the powers vested in the Deputy Chief Executive Offi cer who is specifi cally in charge of Finance, Strategy and Operations of the Group.
January 1st, 2016. It generally meets once a week to discuss
Nicolas Moreau Chairman & Chief Executive Offi cer of AXA France also in charge of overseeing the worldwide operations of AXA Assistance, AXA Global Direct and AXA Partners
(1) On March 21st, 2016, Thomas Buberl was appointed Deputy CEO (Directeur Général Adjoint) of AXA and will be appointed Chief Executive Offi cer and director of AXA on September 1st, 2016.
On March 19, 2016, following a comprehensive succession planning process of the Executive Management led by AXA’s Compensation and Governance Committee, AXA’s Board of Directors unanimously decided to separate the functions of Chairman of the Board of
September 1st: (i) Mr. Denis Duverne as Chairman of the Board of Directors, and (ii) Mr. Thomas Buberl as Chief Executive Offi cer of
AXA and a member of AXA’s Board of Directors coopted to replace Mr. Henri de Castries.
The Executive Committee has no formal decision making authority. The Executive Committee is advisory in nature and serves as an important sounding Board in formulating Group strategy and considering key business issues or strategic initiatives. As a team, the members of the Executive Committee also contribute to shape and disseminate AXA’s management culture.
■ Belgium (including AXA Bank Belgium) (e) 4,549 4,254 4,129 ■ Mediterranean & Latin American Region (f) 11,385 13,985 14,254
In addition, the employees of insurance and fi nancial services activities in France are included in the “ cadre de convention” of four not consolidated “ mutuelles” .
(c) In 2015, the increase by 914 in the United Kingdom and Ireland mainly refl ected the transfer of claims staff from Direct to Non-Direct business (+493) combined with the acquisition of Simplyh ealth business (+375) and business expansion.
(g) In 2015, the decrease by 262 in Direct was mainly driven by the transfer of claims staff from Direct to Non-Direct business in the United Kingdom (-493), partly offset by the inclusion of ‘BRE Insurance’ in Poland (+98) and business growth across countries.
(h) In 2015, the increase by 774 in Asia was driven by a change in consolidation methodology from equity to full consolidation in Thailand (+489) along with business growth across Malaysia (+99), Singapore (+89) and Hong Kong (+71).
(i) In 2015, the decrease by 810 in Central and Eastern Europe refl ected the deconsolidation of Ukraine.
(k) In 2015, the increase by 113 in AB was mainly driven by business growth in both Retail and Derivative activities as well as in Bernstein Research S ervices .
(l) In 2015, the increase by 705 was mainly driven by AXA Business Services following business growth.
AXA’s executive compensation structure is based on an in-depth analysis of market practices in France and abroad, within the fi nancial 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 N o. 2009-16 of the AMF, as modifi ed on April 13, 2015, and with the recommendations of the Afep-Medef Code.
Executive Offi cer’s compensation and performance assessment, and (3) the allotment of AXA stock options or performance shares to the Chairman & Chief Executive Offi cer, the Deputy
Independent Director (Mr. Norbert Dentressangle) is regularly involved in the Committee’s work and presents the compensation policy of the Company each year at the Shareholders’ Meeting.
The Committee meets frequently with the Group executives and the internal departments of the Company including Group H uman
R esources and Group Legal. The Committee is empowered to undertake or commission specifi c reviews and to use external consulting expertise to the extent deemed appropriate. Thus, during the last few years, the Committee worked several times with a compensation consulting fi rm in order to benefi t from an external expertise and an independent overview in order to compare AXA’s variable compensation practices with general market practices.
January 1, 2016. This compensation policy is designed to support the Group’s long-term business strategy and to align the interests of its employees with those of the shareholders by (i) establishing a clear link between performance and remuneration over the short, medium and long term, (ii) ensuring that the Group can offer competitive compensation arrangements across the multiple markets in which it operates while avoiding potential confl icts of interest that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance with Solvency II
The requirements set out in the Group Remuneration policy may be supplemented where necessary in order to comply with local regulatory requirements or identifi ed best practices.
(i) recognises achievement of defi ned fi nancial and operational targets aligned with AXA’s business plan (ii) promotes longterm sustainable performance by incorporating risk adjustment measures in performance metrics (such as cash R eturn-O n-
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 benchmark market reference.
The target level of the executives’ compensation and the structure of the elements which compose such compensation are based on a detailed analysis of market practices as well as potentially applicable national and international regulations, and also take into consideration various other factors including the equity principles within the Group and the previous compensation level of the executive.
Each year, AXA, with the assistance of specialized fi rms, conducts compensation reviews in order to ensure the competitiveness and consistency of executive compensation and to measure the suitability of the global compensation policies. In this context, two markets are used as a reference: ■ a first market composed of 12 companies in the French
Compensation & Governance Committee, decided to maintain unchanged in 2015 the total cash compensation target of the
The variable annual compensation is entirely submitted to performance conditions and no minimum payment is guaranteed.
The determination of the variable compensation to be paid to the Chairman & Chief Executive Offi cer was based, in 2015, on the following two metrics: ■ Group performance for 50%. This metric is measured based on underlying earnings per share, return on equity (adjusted
Board of Directors’ desire to place more weight on Mr. Henri de
The selected indicators to measure the Group performance refl ect objectives widely disclosed internally and externally with respect to growth, profitability, capital management, brand strategy, operational effi ciency and productivity. Thus, these indicators, directly linked to the strategic orientations of the
Officer is assessed on the basis of various indicators and qualitative objectives set by the Board of Directors through a written target letter established at the beginning of each calendar year before the performance measurement period.
It includes detailed objectives with regards to the Group’s progress in 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 and/or relating to certain geographic areas, and the evolution of certain investments contributing to the development of the Group’s operations.
Sul Amé rica in Brazil, CIL in Egypt) and growing presence in high growth markets (reinforcing of partnerships with Bharti in India, with Metrobank in Philippines).
Executive Offi cer may not exceed 150% of his variable target compensation, i.e. 371% of his fi xed annual compensation.
Variable compensation for the year 2000 paid in 2001 €1,750,000 €1,381,373 79%
Variable compensation for the year 2001 paid in 2002 €1,750,000 €719,967 41%
Variable compensation for the year 2002 paid in 2003 €2,000,000 €1,419,277 71%
Variable compensation for the year 2003 paid in 2004 €2,000,000 €1,824,277 91%
Variable compensation for the year 2004 paid in 2005 €2,000,000 €2,304,277 115%
Variable compensation for the year 2008 paid in 2009 €2,700,000 €1,846,304 68%
Variable compensation for the year 2010 paid in 2011 €2,466,667 €2,061,087 84%
Variable compensation for the year 2011 paid in 2012 €2,350,000 €2,034,171 87%
Variable compensation for the year 2012 paid in 2013 €2,350,000 €2,270,153 (a) (b) 97%
Variable compensation for the year 2014 paid in 2015 €2,350,000 €2,538,000 (a) (b) 108%
Variable compensation for the year 2015 paid in 2016 €2,350,000 €2,690,750 (a) (b) 114.5%
(a) A mount includes the part of the variable compensation with respect to 2012, 2013 , 2014 and 2015 which has been deferred in accordance with the mechanism described on page 120 . The total amount paid will depend on performance conditions and may then vary.
Return on Equity – ROE) and customer scope index. The relative weight of these three indicators is, respectively, 65%, 15% and 20%; and
In order to assess Mr. Denis Duverne’s individual performance in 2015, the Board of Directors in particular considered the following achievements: (i) the acceleration of the Group’s digital transformation and the successful implementation of various strategic partnerships with leading actors of the digital industry as well as the successful launch of a “big data” research project; (ii) the growing presence of the Group in emerging markets; (iii) the achievement of the Group’s effi ciency/cost reduction targets; (iv) the ranking, for the 7th consecutive year, of the AXA
brand as the number one insurance brand worldwide according to Interbrand; (v) the steering of in-depth strategic reviews of certain Group companies and the implementation of targeted action plans; and (vi) the active promotion, through specifi c measures, of diversity and integration as a key element of the
For the other members of the Management Committee who benefit from a variable part (in 2015, Mrs. Véronique Weill,
Vaucleroy), their variable compensation is also determined on the basis of an individual predefi ned target which was based, in 2015, on three metrics: ■ Group performance (representing 20%), as measured by the underlying earnings per share, return on equity (adjusted
and (ii) qualitative factors, including leadership abilities demonstrated by the members of the Management Committee measured against AXA’s Leadership Framework (the “how”).
The variable compensations paid to the Management Committee members for 2013, 2014 and 2015 were: VARIABLE COMPENSATIONS PAID TO MANAGEMENT COMMITTEE MEMBERS
Target Actual (b) % Target Target Actual (b) % Target Target Actual (b) % Target
Return on Equity - ROE) which are higher than targets, and (iii)
of their variable compensation over two years. Under this mechanism, the deferred amount of variable compensation for the 2015 fi scal year, will be paid out in two tranches, in 2017 and 2018. The amount of the payout will vary depending on the AXA share price evolution over the deferral period and will be subject to a fl oor at 80% of the deferred amount and a cap at 120% of the deferred amount; provided, however that no variable compensation would be paid in the event (1) that the
Group’s underlying earnings are negative for the year ending immediately prior to the year of scheduled payout, or (2) of resignation or dismissal, for gross or willful misconduct prior to the payout date (clawback provision).
In February 2016, (i) the second tranche of their deferred variable compensation with respect to the fi scal year 2013 i.e.
SUMMARY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES GRANTED TO MANAGEMENT COMMITTEE MEMBERS
(please refer to pages 125 as well as 134 and following) and therefore do not guarantee any grant or minimal gain for the benefi ciaries.
Compensation & Governance Committee, after taking into account the increase of the fair estimated value of the LTIs, which was strongly linked to the performance of the AXA share price between 2014 and 2015, decided to reduce the number of stock options and performance shares granted to the Chairman
IFRS standards. This is a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 of the 2015 “Consolidated Financial Statements” included in
(a) This amount does not include the part of the variable compensation with respect to 2015 which has been deferred in accordance with the mechanism described on page120 .
fees paid to each AXA Board member is indicated in the table below.
Directors as a fi xed fee): ■ a fi xed amount determined by the Board of Directors shall be paid annually to the Vice-Chairman (set to €150,000);
■ 65% of the remaining amount shall be allocated to the
Board as follows: 40% shall be divided equally among Board members and paid as a fi xed fee and 60% shall be paid according to Board attendance, with the Chairman receiving in each case a double fee; ■ the remaining 35% shall be allocated by the Board of Directors to the Board Committees as follows: 25% to the Finance
Committee and 50% to the Audit Committee. Each Committee shall then allocate such amount to its members as follows: 40% shall be divided equally among members and paid as a fi xed fee and 60% shall be paid according to Committee attendance, with the Chairman receiving in each case a double fee.
SGD 517,800 paid by AXA Singapore Insurance in connection with her position as Chief Executive Offi cer. This compensation consists of SGD 357,400 of fixed compensation and
Mrs. Suet Fern Lee and Mr. Ramon de Oliveira received in 2015, as Non-Executive Director of several companies of the Group, directors’ fees for a gross amount of EUR 11,231 for Mrs. Suet
Each year, the Board of Directors, acting upon the recommendation of its Compensation & Governance Committee, approves the grant of a global option pool. The pool of options allocated to each business unit is essentially determined on the basis of their contribution to the Group’s fi nancial results during the previous year and with consideration for specifi c local needs
Stock options are designed to align long term interest of Group
Senior Executives with shareholders through the performance of the AXA share price.
The recommendations for individual grants of options are made by the Chief Executive Offi cers of the local entities or business units and by the Group functional department heads. These recommendations are reviewed by the Executive Management to ensure a global coherence. Individual grants of options are then decided by the Board of Directors, provided that individual grants to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee are preceded by a proposal of the
Group and by external consultants. Furthermore, the level of allotment of options to the executive offi cers also depends on the level of achievement of the strategic objectives defi ned by the Board of Directors.
Usually, annual grants are made during the fi rst half of the year, in 2015 the option grant took place on June 19, 2015. The strike price, equal to the average of the closing AXA share price during the 20 trading days before the grant date, was set at €22.90.
In 2015, 3,014,469 subscription or purchase options with a strike price of €22.90 were granted to 148 employees, representing 0.12% of the outstanding share capital as at
Chief Executive Offi cer) represented 9.6% of the total number of options granted.
On December 31, 2015, approximately 8,950 AXA employees held a total of 47,505,915 outstanding options, representing 1.96% of the Company’s share capital on the same date.
Committee. Since 2014, this condition was extended to all options granted to the members of the Executive Committee, which is currently composed of 17 members. This performance condition also applies to the last tranche of each option grant
(i.e. the last 1/3rd of the options granted), for all benefi ciaries of options (as from 2013).
(1) SXIP index (StoxxInsurance Index): a capitalization weighted index, which includes European companies that are involved in the insurance sector.
Date of the Shareholders’ Meeting 03/05/2002 03/05/2002 03/05/2002 03/05/2002 03/05/2002 20/04/2005 20/04/2005 20/04/2005 20/04/2005 20/04/2005
Expiry date of options 29/03/2015 29/03/2015 06/06/2015 27/06/2015 01/07/2015 21/09/2015 31/03/2016 31/03/2016 31/03/2016 25/09/2016
Expiry date of options 25/09/2016 13/11/2016 10/05/2017 10/05/2017 10/05/2017 24/09/2017 24/09/2017 19/11/2017 19/11/2017 01/04/2018
Subscription or purchase price of options (a) 28.03 29.59 32.95 33.78 33.78 29.72 29.72 28.53 28.53 21.00
CORPORATE GOVERNANCE 2 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP
Grant date (Board of Directors or Management Board) 01/04/2008 19/05/2008 19/05/2008 22/09/2008 22/09/2008 24/11/2008 20/03/2009 20/03/2009 02/04/2009 10/06/2009
Total number of shares to be subscribed (a) 1,240,890 6,004 12,360 19,127 46,929 19,047 4,870,844 407,692 114,324 22,291 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 01/04/2010 19/05/2010 19/05/2012 22/09/2010 22/09/2012 24/11/2012 20/03/2011 20/03/2011 02/04/2011 10/06/2013
Expiry date of options 01/04/2018 19/05/2018 19/05/2018 22/09/2018 22/09/2018 24/11/2018 20/03/2019 20/03/2019 02/04/2019 10/06/2019
Number of options exercised at 31/12/2015 149,297 0 0 0 1,274 12,454 2,533,822 109,588 48,081 2,467
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008
Executive Directors: Start date of exercise 22/12/2014 18/03/2013 18/03/2015 04/04/2013 16/03/2014 13/06/2014 22/03/2015 24/03/2017 19/06/2018
Expiry date of options 22/12/2020 18/03/2021 18/03/2021 04/04/2021 16/03/2022 13/06/2022 22/03/2023 24/03/2024 19/06/2025
Number of options exercised at 31/12/2015 5,582 2,628,444 33,393 129,890 1,149,279 25,363 324,695 15,800 0
(a) The number of options and exercise prices have been adjusted, pursuant to applicable regulation, as a result of operations on the AXA stock.
Chairman & Chief Executive Offi cer 19/06/2015 subscription or purchase 100% of options: SXIP
IFRS standards. This is a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2015 “Consolidated Financial Statements” included in
On June 19, 2015, the fair value of one option was €1.47 for options without performance conditions, €1.39 for options with performance conditions.
Under the AXA Group Compliance and Ethics Guide, all employees (including the executive offi cers of the Company)
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS THAT BECAME EXERCISABLE DURING 2015
Chairman & Chief Executive Offi cer 22/03/2013 subscription or purchase 56,334 13. 81 22/03/2023 100% of options: SXIP index 16/03/2012 subscription or purchase 73,334 12. 22 16/03/2022 100% of options: SXIP index 18/03/2011 subscription or purchase 100,832 14. 73 18/03/2021 100% of options: SXIP index
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 22/03/2013 subscription or purchase 56,334 13. 81 22/03/2023 100% of options: SXIP index 16/03/2012 subscription or purchase 64,000 12. 22 16/03/2022 100% of options: SXIP index 18/03/2011 subscription or purchase 82,500 14. 73 18/03/2021 100% of options: SXIP index
i ndex 16/03/2012 subscription or purchase 2,500 12. 22 16/03/2022 Last third of options: SXIP
i ndex 18/03/2011 subscription or purchase 2,916 14. 73 18/03/2021 Last third of options: SXIP
(a) Options vested (according to the vesting calendar) for which the performance conditions have been met during the year or no performance condition is applicable.
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS AT DECEMBER 31, 2015)
Management to ensure a global coherence and respect of the Group’s internal equity principles. Individual grants of
Performance Shares are then decided by the Board of Directors, provided that individual grants to the Chairman & Chief Executive
Group together with an independent compensation consulting firm. Furthermore, the grant to AXA executive officers shall depend on the level of achievement of the strategic objectives previously defi ned by the Board of Directors.
During the performance period, all Performance Shares initially granted are integrally subject to performance conditions regardless of the benefi ciary’s status. These criteria measure both the fi nancial and operational performance of the AXA Group as well as the benefi ciary’s operational entity/business unit’s performance, according to pre-determined targets.
(“performance rate”) is used to determine the number of Shares which will be defi nitively acquired by the benefi ciaries at the end of the acquisition period, under the condition that the benefi ciary is still employed by the AXA Group. The number of s hares defi nitively granted shall therefore be equal to the number of Performance Shares initially granted multiplied by the performance rate which may vary between 0% and 130%.
[average (Adjusted Earnings + Underlying Earnings)] ] +/- 5 points of relative performance (TSR) within the upper limit of 130%.
(2) 5% for mature entities/regions (including Group), 7% for composite entities/regions and 10% for entities/regions with a high growth rate.
For the Company’s executive offi cers the fl oor described above will be increased to 80%. Therefore, in the event of a performance below 80% of the performance required to reach the target, no performance shares would be defi nitively granted. In case of performance equal to 80% of the performance required to reach the target, 50% of the number of shares initially granted will be defi nitively granted. For example, should the achievement rate regarding the Group performance indicator (Adjusted Earnings
Furthermore, for all the members of the Executive Committee, including the executive offi cers, the defi nitive grant of one third of the shares subject to the Adjusted Earnings Per Share of the
As far as Performance Shares are concerned: ■ the Performance Share grants are conditioned to a minimal 3-year acquisition period allowing the measurement of the performance determining the defi nitive grant of the shares over a longer period, i.e. at least 3 years; ■ shares acquired, under the condition that the benefi ciary is still employed by the AXA Group, at the end of the acquisition period are restricted from sale during a 2-year period; ■ Performance Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant and the possibility to deliver existing shares, this choice being the one made up to this date.
Shares are expensed each year under the variable accounting method. They do not create any dilution for shareholders since no new shares are issued.
Grant date (Board of Directors) 18/03/2011 04/04/2011 16/03/2012 13/06/2012 22/03/2013 24/03/2014 19/06/2015
Total number of benefi ciaries 5,059 215 5,039 1 5,162 5,101 5,093
Number of International Performance Shares acquired at 31/12/2015 (h) 3,429,914 (a) 229,374 (b) 6,197,399 (c) 71,790 5,354 (d) 2,600 (f) 1,112 (g)
(b) The 229,374 units acquired of the April 4, 2011 plan have been settled as €4.3 million.
(g) 1,112 units of the June 19, 2015 plan acquired by anticipation.
Number of Performance Shares cancelled 103,020 149,450 117,992 10 1,712 17,881
(a) 50% of shares to be acquired at March 24, 2016, 50% at March 24, 2017, except for the Chairman & CEO, and the Deputy CEO, 100% of shares to be acquired at March 24, 2017.
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 19/06/2015 82,603 0.003% 1,185,353 19/06/2018 19/06/2020 ajusted earnings per share ajusted earnings underlying earnings
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2015 “Consolidated Financial
Statements” included in Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these performance shares or the actual proceeds if and when the Performance Shares are acquired.
Code, the executive offi cers of the Company make a formal commitment to not resort to hedging transactions.
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 18/03/2011 86,730 18/03/2015
In the table above all dates that are indicated are in the format of day/month/year.
Since 2007, AXA has decided to implement a shareholding policy applicable to all members of its Executive Committee. This demanding policy imposes each executive to hold, during the entire duration of his/her functions, a minimum number of AXA
Requirement within a period of 5 years as from the date of his/ her fi rst appointment.
Offi cer) has not met his/her Minimum Shareholding Requirement, all stock options and Performance Shares granted to him/her after January 1, 2007 will be subject to the following restrictions: ■ upon each exercise of these stock options granted after
Company’s executive offi cers already met their Minimum Shareholding Requirement such as described in the above Section “Share ownership policy for executives of the Group”. The following table summarizes the compensation granted to executive offi cers during the fi scal year 2015: Compensation paid in 2015 Shareholding requirement Shareholding on 31/12/2015
Pursuant to the AXA Group Compliance and Ethics Guide, executive offi cers and other employees of the Company must refrain from any purchase or sale of AXA securities during specifi c time periods (“blackout periods”) prior to the earnings releases.
As a matter of principle, the discretionary management agreement has been submitted for review to the Ethics &
December 31, 2015, the number of AXA shares or ADS indicated in the table below.
Henri de Castries – Chairman & Chief Executive Offi cer 1,739,183 -
Mrs. Dominique Reiniche 7,000 - * AXA shares which could be indirectly held through m utual funds are not taken into account.
Detailed information about all of these transactions, as well as individual disclosures fi led in accordance with Articles 223-22 and 223-25 of the AMF General Regulations, are published on the Company’s website (www.axa.com) and on the AMF website
Paul Hermelin * Transaction performed by an independent fi nancial intermediary pursuant to a discretionary mandate.
The executive offi cers of the Company (Messrs. Henri de Castries and Denis Duverne) participate, as all other executive employees
(directeurs) of AXA Group entities in France, in a mandatory and collective supplementary pension scheme with defi ned benefi ts on the condition that they terminate their career in the AXA
The amount of the supplementary pension is calculated at the time of retirement and comes in addition to the total amount of retirement pensions paid under mandatory schemes (social security, ARRCO, AGIRC…) and under any other retirement scheme financed by the employer to which the beneficiary may have participated during his/her career, both within and/or outside the AXA Group (including the mandatory and collective supplementary pension scheme with defined contributions mentioned at the end of this Section 2.2).
During the phase of activity, the employer’s overall tax and social contributions amount to 24% of the premiums paid to the insurer under this regime. On the date of retirement, the tax and social contributions, as of January 1, 2015 amounted to 45% of the lump sum used to serve the annuities, only for annuities higher than 8 times the annual social security ceiling (1).
Report), the estimated annuities that would be paid to him according to the collective defi ned benefi t pension scheme would represent an estimated amount of €750,000 per year, before taxes and social security charges.
Furthermore the executive officers of the Company also participate, as well as all other employees of AXA Group entities in France, in a mandatory and collective supplementary pension scheme with defi ned contributions (collective insurance contract – “contrat d’assurance de groupe” as defined in Article L.141-1 of the French Insurance Code, which is outsourced to an insurer).
(1) For information, the annual social security ceiling for 2016 is equal to €38,616.
Denis Duverne Deputy CEO Beginning of current mandate: 04/29/2010 Term of offi ce: 2018 – X X – X – – X
Code, Messrs. Henri de Castries and Denis Duverne have decided to renounce their respective employment contracts following AXA’s Shareholders’ Meeting of April 29, 2010.
was concerned that the decision of Messrs. Henri de Castries and Denis Duverne to renounce their employment contracts in accordance with the recommendations of the Afep-Medef
Code would jeopardize the continuity of their accrued and future social benefi ts.
(2) evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage)
These commitments took effect upon the effective renunciation by Messrs. Henri de Castries and Denis Duverne of their respective employment contracts at the end of the Shareholders’
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and related voting rights on December 31, 2015: Number of shares % of capital ownership % of voting rights (a)
Treasury shares held by Company subsidiaries (d) 493,206 0.02% [0.02%] (c)
and is generally consulted on all signifi cant matters relating to the Mutuelles AXA including their collective shareholding in AXA
Signifi cant changes in the Company’s share capital ownership between December 31, 2013 and December 31, 2015 are set forth in the table below: On December 31, 2015 (a) On December 31, 2014 (a) On December 31, 2013 (a)
Treasury shares held by Company subsidiaries (d) 493,206 0.02% [500,354] (c) [0.02%] (c) 533,576 0.02% [540,724] (c) [0.02] (c) 3,836,408 0.16% [6,774,024] (c) [0.23%] (c)
April 23, 2014 (resolution 15) and April 30, 2015 (resolution 10)
As a result, on December 31, 2015, following the delivery of AXA
AXA’s share capital at that date). These shares were acquired for an aggregate purchase price of €38,496,992.11 (with a par value of €2.29 per share).
The traditional plan allowed employees to subscribe through a personal investment to AXA shares (either through Mutual funds (FCPE) or through direct share ownership, depending on countries) with a 20% discount. The shares are held within the Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable law). Employees are subject to the share price evolution, up or down, as compared to the subscription price.
At the end of the 5 year holding period, the employees can, depending on their country of residence, do any one of the following: (1) receive the cash value of their investment; (2)
The leveraged plan in 2015 allowed employees to subscribe, on the basis of 10 times their personal investment, in AXA
Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable law). Employees’ personal investment is guaranteed by a bank, and employees also benefi t from a portion of the share appreciation, calculated on the basis of the non-discounted reference price.
The SharePlan 2015 program was carried out through a capital increase that took place in November 2015. Approximately 24,000 employees took part in SharePlan 2015, representing over 20% of eligible employees: ■ the total amount invested was over €375 million, as follows: • €30.1 million in the traditional plan, and
• €345.4 million in the leveraged plan; ■ a total of approximately 19 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on January 1, 2015.
of the share capital and 8.11% of the voting rights. These shares are owned through Mutual funds or directly either in the form of ordinary shares or ADS.
These shares have vested upon completion of a two or four year vesting period (i.e. in 2014 or 2016) depending on applicable local regulations. In 2016, the AXA Miles program resulted in the grant of over 2.1 million AXA shares to more than 43,000
I Special report of the Statutory Auditors on regulated agreements and commitments
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was given to us, to inform you, the S hareholders, of the main features of those agreements and commitments of which we have been informed and the reasons for the Company’s interest in those. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to Article R.225-31 of the French Commercial Code (Code de commerce), you are being asked to form an opinion on the relevance of such agreements and commitments for the purpose of approving them.
Furthermore, we are required, if necessary, to provide information, in accordance with Article R.225-31 of the French Commercial
Code, on agreements and commitments previously approved by the Shareholders’ Meeting which remained in force.
AGREEMENTS AND COMMITMENTS APPROVED DURING PRIOR FISCAL YEARS THAT REMAINED IN FORCE DURING THE PAST FISCAL YEAR
Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized that Mr. de Castries be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the Afep -Medef recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Henri de Castries as employee.
The Supervisory Board was concerned that the decision of Mr. Duverne to renounce his employment contract, in accordance with the Afep -Medef recommendations, would not jeopardize the continuity of his accrued and future social benefi ts.
The payment of the severance benefi t should be also subject to performance conditions. During its meeting held on February 20, 2014, upon the proposal of the Compensation & Governance Committee, the Board of Directors authorized the execution of a new agreement between the Company and Mr. Denis Duverne in order for the payment of the severance benefi ts to be subject, from now on, to the three following performance conditions: 1. Achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target; 2. Evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce; 3. Average adjusted Return On Equity (adjusted ROE) over the three preceding consolidated fi scal years higher than or equal to 5%.
This scheme, which has existed since January 1st, 1992, has been modifi ed twice with effect from January 1st, 2005 and July 1st, 2009.
The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris. Since the delisting of
ordinary share) from the New York Stock Exchange on March 26, 2010, the Company’s ADSs are traded on the U.S. over-thecounter market and listed on the OTC QX platform under the symbol AXAHY.
Offi cial trading of listed securities on Euronext Paris, including the Company’s ordinary shares, is transacted through French stockbrokers (sociétés de bourse) and takes place continuously on each business day in Paris from 9:00 a.m. to 5:30 p.m. (Paris time), with a fi xing of the closing price at 5:35 p.m.
Euronext 100, the index representing Euronext’s blue chip companies based on market capitalization, and in EURO
Eurozone. In addition, the Company’s ordinary shares are also included in the SXIP index-StoxxInsurance Index, the insurance related index for companies within Europe, and in the EURO
REGULATION, RISK FACTORS Certain disclosures about market risks and related matters 3 3.2 RISK FACTORS 160 3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK FACTORS 177
Paris, France, this supervision is based to a significant extent on
des marchés financiers (“AMF”), which is the French financial markets regulator, and the Autorité de C ontrôle P rudentiel et de R ésolution (“ACPR”), which is the principal French insurance regulator. Since 2013, AXA has been identifi ed by the Financial
(“GSII”) and is consequently subject to specifi c measures in this respect.
While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s insurance subsidiaries operate have laws and regulations governing distribution practices, standards of solvency, levels of reserves, permitted types and concentrations of investments, and business conduct to be maintained by insurance companies as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or fi ling of rates. In certain jurisdictions, regulations limit sales commissions, fees and certain other marketing expenses that may be incurred by the insurer and impose product suitability and disclosure requirements. In general, insurers are required to fi le detailed annual fi nancial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or unexpected examinations of the insurers’
(including the definition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly significantly, during periods of declining equity markets and/or lower interest rates.
Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. On
French law in April 2015. The regime is designed to implement solvency requirements that better refl ect the risks that insurance companies face and deliver a supervisory system that is consistent across all European member States. The Solvency II
by the regulator as part of the supervisory review process; and (3) Pillar 3 focuses on enhanced reporting and disclosure requirements. The Solvency II framework covers, among other matters, valuation of assets and liabilities, the treatment of insurance groups, the definition of capital and the overall level of required capital. A key aspect of Solvency II is that assessment of the Group’s risks and capital requirements is aligned more closely with economic capital methodologies and allows the use of either a standard model or an insurer’s own internal economic capital model (to enable a better understanding of the actual risks and risk management of the insurer) to calculate solvency requirements, subject in the latter case to the approval of the insurer’s lead regulator.
The Solvency II directive provides for two separate levels of solvency margin: (i) the Minimum Capital Requirement (MCR), which is the amount of own funds below which policy holders and benefi ciaries are exposed to an unacceptable level of risk should the Company be allowed to continue its operations, and
On November 17 , 2015, AXA received approval from the ACPR
to use its internal model to calculate its regulatory capital under
Solvency II and published, on February 25, 2016, its Solvency II
Occupational Pensions Authority (EIOPA) is also expected to carry out a review of the consistency of European insurer’s models and any such review may lead to regulatory changes to increase convergence and to strengthen oversight of crossborder groups.
identify those insurers whose distress or disorderly failure, because of their size, complexity and interconnectedness, would cause signifi cant disruption to the global fi nancial system and economic activity. Also, on July 18, 2013, the FSB published its initial list of nine GSIIs, which included the AXA Group and which is updated annually following consultation with the IAIS and national authorities and has continued to include the AXA Group.
The policy measures for GSIIs, published by the IAIS in July 2013, include (1) the introduction of new capital requirements; a “basic”
Resolution Plan (“RRP”)) which have entailled signifi cant new processes, reporting and compliance burdens and costs.
and a “one-stop-shop” that will streamline cooperation between the data protection authorities on issues with implications for all the EU, and (iii) stronger enforcement regime, under which data protection authorities will be able to fi ne companies which do not comply with EU rules up to 4% of their global annual turnover. I n
On October 6, 2015, the European Court of Justice declared in the “Schrems case” that the European Commission’s Safe
authorities. In the meantime, and until the EU-US Privacy Shield is put in place, transatlantic data fl ows between companies can continue using other mechanisms, such as (i) Standard
(ii) Binding Corporate Rules for transfers within a multinational corporate group, which are approved by national Data Protection
January 1 , 2016, set out the remuneration policy principles and governance requirements to be implemented by European
& Governance Committee shall be in charge of overseeing the design of the remuneration policy and remuneration practices, their implementation and operation.
These principles and standards are reflected in a variety of regulations and legislative initiatives that have been enacted over the past years in various jurisdictions where the Group does business. While these restrictions are often aimed primarily at the banking sector and do not apply uniformly to the Group across the various jurisdictions where it does business, the
Group has largely aligned its global executive compensation practices with these standards and principles and conducts regular reviews of its compensation practices and policies in light of these standards as well as applicable legal and regulatory requirements. The uneven application of these principles and standards to the different actors in the financial sector (e.g.
The IASB issued a new Exposure Draft on June 20, 2013 in order to defi ne principles to be applied for IFRS 4 phase II.
These new principles may signifi cantly affect the accounting of policyholders’ liabilities at the date of fi rst application which is not expected to be before 2021. Upon application, they will apply in parallel to the IFRS 9 standard on fi nancial instruments issued on July 24, 2014 with a published effective date of January 1 , 2018. However, given the interaction between fi nancial assets and technical insurance liabilities, the IASB issued an Exposure
Draft on December 9, 2015 with the proposal of amending the IFRS 4 – Phase 1 standard still currently applied, allowing certain insurance entities that meet specifi c conditions to defer the IFRS 9 adoption to January 1, 2021 at the latest.
The Group’s insurance and asset management operations are subject to an increasing number of legislative and regulatory initiatives designed to increase transparency of products and distribution including practices with respect to compensation of intermediaries, disclosure of distribution costs, suitability, misselling and avoiding potential confl icts of interest. In Europe, these initiatives include a revision of the Insurance Mediation
Directive (“IMD2”), MiFID II and the Regulation on key information documents for Packaged Retail and Insurance-based Investment
Products (“PRIIPS”). Similar initiatives are under review (or in the course of implementation) in other jurisdictions where the Group operates and are likely to increase operational compliance costs to ensure point-of-sale compliance.
Finally, financial crime compliance programs of financial institutions (anti-money laundering, anti-corruption and international sanctions compliance) continue to be a major focus of regulatory and law enforcement authorities with increasingly significant sanctions imposed for compliance failures. Management believes that the complexity and risks for international fi nancial institutions like AXA in this area will likely continue to increase and that compliance costs will also continue to increase accordingly.
In the countries where it operates (1), AXA is both a taxpayer and a tax collector, given that many specifi c taxes are levied on insurance policies and collected from our customers as part of the insurance and asset management revenues while others are remitted to the various state and federal administrations around the world.
The Group’s policies and procedures with respect to business in or with countries that are “tax havens”, subject to international sanctions or embargoes, or are otherwise identifi ed as high corruption or high political risk are formalized in an internal policy drafted by the Group Compliance Department (entitled
The consolidated financial statements are prepared in compliance with IFRS standards (as disclosed in Note 1 of
The present report discloses the reconciliation between the theoretical tax charge and the effective tax charge under IFRS.
operates, the income and capital gains on savings-products benefi t from a favorable tax treatment, also when such products are included in life insurance products. This leads to a lower effective tax rate for life insurance companies. Over the last several years, and notably following the fi nancial crisis, this difference has trended down.
Tax aspects of AXA’s activities and products offered by the Group
(1) The list of the Group’s main subsidiaries and participating interests are available in Appendix V “AXA parent Company Financial Statements” of this Annual Report. We also make public the legal organizational chart of the Group on the Company’s website (www.axa.com).
A specifi c focus on transfer pricing items is done in application of these standards. In particular, Chief Financial Offi cers must ensure that (re)insurance policies entered into represent a true transfer of risk and that their status as (re)insurance contracts could not be subject to challenge. Business between Group companies must be transacted at market prices where a market price exists, or in the absence of market prices, must be supported by formally documented justifi cation for the charge made.
Liability Management and aspects related to legal, compliance, regulatory, accounting and reputation.
Many of the risks described below are inherent to the nature of our business and the economic, competitive and regulatory environment in which we operate. Given the multiple contingencies and the inherent uncertainties involved with many of these risks, management is not able to quantify the impact of many of these risks with any level of precision; however, it has put in place numerous risk management processes, procedures and controls to monitor and manage these risks on an on-going basis. These risk management processes, procedures and controls are described in detail in Section 3.3 of this Annual
Section 3.3. In those cases where the risks described in this
Section 3.2 have given rise to quantifi able and material fi nancial impacts and/or material contingent liabilities, those fi nancial impacts and/or contingent liabilities are refl ected in the Group’s consolidated fi nancial statements in accordance with applicable
Continuing volatility in the global fi nancial markets and diffi cult economic conditions in certain regions as well as continuing concerns over certain sovereign debt and the Euro may materially adversely affect our business and profi tability, and these conditions may continue
Since June 2011, a number of European sovereigns and several major European financial institutions (including AXA) were downgraded by credit rating agencies in light of the continuing uncertainty stemming from the European debt crisis and future of the Euro. In the event of a default or similar event by a sovereign issuer, some fi nancial institutions may suffer signifi cant losses for which they would require additional capital, which may not be available, and could also suffer further credit rating downgrades and/or solvency concerns which may, in turn, negatively impact public perceptions about the stability and creditworthiness of fi nancial institutions and the fi nancial sector generally and further dampen consumer confi dence levels and spending.
Our ability to make a profi t on insurance products and investment products, including fi xed and guaranteed products, depends in part on the returns on investments supporting our obligations under these products, and the value of specifi c investments may fl uctuate substantially depending on the foregoing conditions.
Although we use hedging techniques to help us mitigate our exposure under certain of these guarantees, not all risks can be effectively hedged and volatility in the fi nancial markets, combined with unanticipated policyholder behavior may increase the cost of these hedges and/or negatively affect our ability to hedge certain of these risks, which may adversely affect our profi tability. For further risks related to our hedging techniques, see “Risks relating to the structure of our Group, the scope and nature of our business, the products we offer and our operations and systems – Our hedging programs and reinsurance arrangements may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition.”
Factors such as consumer spending, business investment, government spending, regulation, the volatility and strength of the capital markets, and inflation all affect the business and economic environment and, ultimately, our activities and the profitability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of lapses or surrenders on certain types of policies, lower surrender rates than anticipated on other types of products, such as certain variable annuities, with in-the-money guarantees, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could have a material adverse effect on our business, results of operations and fi nancial condition.
In the event our current resources no longer satisfy our needs, we may have to seek additional fi nancing. The availability of additional fi nancing will depend on a variety of factors such as market conditions, the volume of trading activities, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity
Company’s consolidated solvency margin was 246% (taking into account the dividend payment of €1.10 per share that will be proposed at the Shareholders’ Meeting of April 27, 2016 with respect to the fi scal year 2015) which represented a €39.8 billion capital surplus at that date: (i) €27.3 billion of required capital (1), versus (ii) €67.1 billion of available capital (2). With effect from
January 1, 2016 a new European regulatory framework for insurance companies “Solvency II” has been implemented in
France. A key aspect of Solvency II is that capital requirements are aligned more closely with economic capital and may be calculated by use of either a standard model or an internal capital model. The use by the Company of its internal model in order to calculate its capital requirements under Solvency II
was approved on November 17 , 2015 and AXA reported its
failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements and/or a reduction in the level of their regulatory capital that may negatively impact their competitive position, may also result in the Company deciding to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position.
(iv) increasing our cost of obtaining reinsurance, (v) negatively impacting our ability to obtain fi nancing and/or increasing our cost of fi nancing, (vi) harming our relationships with creditors or trading counterparties and/or (vii) adversely affecting public confi dence in us. Any of these developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition.
Our accounting principles and policy with respect to the determination of allowances and impairments on our investments are set forth in Note 1.8.2 “Financial instruments classifi cation”
Management updates its evaluations regularly and reflects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that management has accurately assessed the level of impairments taken and allowances refl ected in our fi nancial statements and the need for additional impairments and/or allowances may have a material adverse effect on our consolidated results of operations and fi nancial position.
Variable Annuity account balances invested in fi xed income funds; ■ there may be a decrease in the estimated fair value of certain fi xed income securities we hold in our investment portfolios, resulting in reduced levels of unrealized capital gains available to us, which could negatively impact our solvency margin position and net income; and
Ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors (such as lack of market liquidity, declines in equity prices and the strengthening or weakening of foreign currencies against the Euro, and/or structural reforms or other changes made to the Euro, the Eurozone or the European
Union), could have a material adverse effect on our consolidated results of operations, fi nancial position or cash fl ows through realized losses, impairments, and changes in unrealized gains and loss positions.
For the year ended December 31, 2015, a signifi cant portion of
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations, cash fl ows, shareholders’ equity and solvency. For example, a strengthening or weakening of the Euro against the US Dollar and/or certain other currencies in 2016 and future periods may adversely affect AXA’s results of operations and the price of its securities. In addition, the currency hedges used by AXA to manage foreign exchange rate risk may signifi cantly impact its cash position.
A failure to accurately anticipate higher infl ation and factor it into our product pricing assumptions may also result in a systemic mispricing of our products resulting in underwriting losses which would negatively impact our results of operations.
On the other hand, defl ation experienced in our principal markets may also adversely affect our fi nancial performance. In recent years, the risk of low infl ation and even defl ation (+ a continued period with negative rates of inflation) in the Eurozone has materialized. Defl ation may erode collateral values and diminish the quality of certain investment assets, and may negatively impact consumer behavior or otherwise negatively affect our business and results of operations.
The Group is regularly monitoring its exposure to inflation and defl ation risk, and has taken steps to mitigate it through fi nancial instruments for which value and/or return is linked to the evolution of infl ation and defl ation (index-linked bonds, infl ation swaps, etc.).
For additional information, please see Section 3.3 “Quantitative and qualitative disclosures about risk factors” of this Annual
Report. See also “Risks relating to the fi nancial markets, our fi nancial strength ratings and fi nancial condition, the valuation of our assets and related matters – Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position”.
These hedging techniques are designed to reduce the economic impact of unfavorable changes to certain of our exposures under the Accumulator Guarantees due to movements in the equity and fi xed income markets and other factors. In certain cases, however, we may not be able to apply these techniques to effectively hedge our risks as intended or expected or may choose not to hedge certain risks because the derivative market(s) in question may not be of suffi cient size or liquidity, the cost of hedging may be too expensive (as a result of adverse market conditions or otherwise), the nature of the risk itself may limit our ability to effectively hedge or for other reasons. This may result in higher realized losses and unanticipated cash needs to collateralize or settle transactions. In addition, hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and losses on positions that are not collateralized. The operation of our hedging program is based on models involving numerous estimates and management judgments, including among others, mortality, lapse rates, election rates, volatility and interest rates and correlation among various market movements. Our hedging program may change in time and there can be no assurance that ultimate actual experience will not differ materially from our assumptions, which could adversely impact our results of operations and fi nancial condition.
Certain risks under Accumulator Guarantees and under other contracts and policies issued by AXA US are reinsured by
AXA RE Arizona Company (“AXA RE Arizona”) an indirect wholly owned captive reinsurer subsidiary of the Company, which hedges these risks using the techniques described above. This reinsurance provides important capital management benefi ts to
use of affi liated captive reinsurers or off-shore entities following a highly critical report issued by the NYDFS in June 2013, as part of an industry wide inquiry. The report recommended, among other things, enhanced disclosure, conduct of further regulatory inquiries and a national moratorium on new reserve fi nancing transactions involving captive reinsurers until these inquiries are complete. In June 2014, a report to an NAIC
Task Force made various recommendations including placing limitations on the types of assets that may be used by captive reinsurers and other special purpose vehicles to fi nance reserves associated with certain term and universal life insurance policies, and in August 2014, the NAIC Executive Committee adopted the regulatory framework proposed in this report including recommendations to have various technical working groups of the NAIC propose regulations and guidelines to implement the new framework. In December 2014, the NAIC adopted a new actuarial guideline (“AG 48”) that regulates the portion of the reserves that may be supported by specifi ed asset classes in connection with certain transactions involving captive reinsurance companies, although AG48 does not apply to transactions involving the reinsurance of guarantee risks under
Working Group is developing and drafting a revised variable annuities framework and has indicated that it would like the fi nal framework to be effective by January 1, 2017. While the exact nature and scope of the Working Group’s fi nal framework is undeterminable at this time, it is expected to include a number of changes to the statutory requirements dealing with V ariable
The NAIC and various state regulators continue to consider additional regulations relating to the use of captive reinsurers.
In addition to the regulatory developments discussed above, in 2014, two lawsuits were fi led against AXA US on behalf of purported classes of persons who purchased certain insurance or annuity contracts alleging, among other things, that AXA US’s use of a captive reinsurer violated certain provisions of the New
York insurance law. We cannot predict what, if any, changes may result from these regulatory reviews or the potential impact, if any, of this lawsuit. If the NYDFS or other state insurance regulators were to restrict the use of such captive reinsurers or if AXA US otherwise is unable to continue to use a captive reinsurer, the capital management benefi ts received under this reinsurance arrangement could be adversely affected.
The profitability of AXA’s Variable Annuity products with guarantees depends, among other factors, on AXA’s ability to effectively hedge the guarantees. The Company has implemented and continues to pursue a number of initiatives, including re-design and re-pricing of certain product features, designed to improve the profi tability of these products and limit future hedging losses on the Accumulator Guarantees.
The establishment of insurance reserves, including the impact of minimum guarantees which are contained within certain of our Variable Annuity products, the adequacy test performed on the reserves for life policies (which encompasses the recoverability of DAC, Value of Business In-force and deferred participation assets) and the establishment of DAC,
NBV and EEV are inherently uncertain processes involving assumptions about factors such as policyholder behavior (e.g.
lapses, persistency, etc.), court decisions, changes in laws and regulations, social, economic and demographic trends, infl ation, investment returns and other factors, and, in the life insurance business, assumptions concerning mortality and morbidity trends. The use of different assumptions about these factors could have a material effect on insurance reserves and underwriting expenses as well as on our DAC, NBV and EEV. In addition, insurance reserves for minimum guarantees contained within certain of our Variable Annuity products, DAC balances,
The process of estimating the insurance claims reserves is based on the most current information available at the time the reserves are originally established.
The claims experienced in our Life & Savings businesses could be inconsistent with the assumptions we use to price our products and establish our reserves and may adversely affect our earnings
In our Life & Savings businesses, our earnings depend significantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. AXA uses both its own experience and industry data to develop estimates of future policy benefi ts, including information used in pricing the insurance products and establishing the related actuarial liabilities. However, there can be no assurance that actual experience will match these estimates and emerging risks such as pandemic diseases could result in loss experience inconsistent with our pricing and reserve assumptions. To the extent that our actual benefi ts paid to policyholders are less favorable than the underlying assumptions used in initially establishing the future policy benefi t reserves, or events or trends cause us to change the underlying assumptions, we may be required to increase our liabilities, which may have a material adverse effect on our business, results of operations and fi nancial condition.
The Property & Casualty insurance business is cyclical. Although no two cycles are identical, these cycles have typically lasted for periods ranging from two to six years. Periods of intense price competition due to excessive underwriting capacity, periods of shortages of underwriting capacity permitting more favorable rates, consequent fl uctuations in underwriting results and the occurrence of other losses characterize the conditions in these cycles. Historically, Property & Casualty insurers have experienced signifi cant fl uctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency or severity of catastrophic events, levels of capacity, general economic conditions and other factors.
This may cause a decline in revenues during certain cycles if we choose not to reduce our Property & Casualty product prices in order to maintain our profi tability. We may therefore experience the effects of such cyclicality, changes in customer expectations for appropriate premium levels, the frequency or severity of claims or other loss events, or other factors affecting the Property & Casualty insurance business, which could have an adverse effect on our results of operations and fi nancial condition.
Report a description of how their investment policies take into consideration social, environmental and quality governance objectives, and contribute to clean energy transition.
These and similar regulatory requirements, as well as any further regulations regarding energy transition or our energy-related investments, could increase our compliance costs and adversely affect our business.
The increasing frequency and sophistication of hacking incidents directed at major fi nancial institutions and other corporations recently has made clear the signifi cance of these cyber-risks and the damage, both fi nancial and reputational, they can potentially infl ict. Systems failures or outages could compromise our ability to perform necessary business functions in a timely manner, which could harm our ability to conduct business and hurt our relationships with our customers and business partners. In the event of a disruption, our systems may be inaccessible for an extended period of time, and our employees may be unable to perform their duties for an extended period of time.
Despite the Group’s implementation of a variety of security measures, the Group’s systems may in the future be subject to unauthorized intrusions, such as physical or electronic break - ins, unauthorized tampering or other security breaches. Like other global fi nancial institutions and companies, the Group has, from time to time, experienced threats to its data and systems, including malware attacks, unauthorized access, systems failures and disruptions. Management has put in place internal controls and procedures designed to protect client data as well as the Group’s proprietary information from hacking or other types of unauthorized intrusions into the Group’s information technology systems. There is no guarantee, however, that these measures will be effective and prevent all attempted intrusions into the Group’s information systems and any such intrusion could result in operational disruption, loss of sensitive client data and/or proprietary information.
Regarding transfer of data to the United States of America, the European Court of Justice declared, in the Schrems case of October 6, 2015 that the European Commission’s Safe
Harbour Decision, which allowed for the transfer of personal information for commercial purposes from companies in the
Harbour Privacy Principles”, was invalid. The results of the negotiations between the EU Member States and EU institutions on one side and the U.S. authorities on the other regarding a new Safe Harbour, referred to as the “EU-US Privacy Shield”, were announced on February 2, 2016. The necessary steps to put in place the EU-US Privacy Shield for transatlantic data fl ows remain to be taken, but are being pursued by both EU
and US authorities. While we currently anticipate that we can continue using alternate mechanisms to transfer data into the
Regarding data protection, a General Data Protection Regulation is expected to be adopted by the European Parliament and
For additional information, see Part 4 – Note 29 “Contingent assets and liabilities and unrecognized contractual commitments”
The policy measures for GSIIs, also published by the IAIS on
Group interdependencies including restrictions on intra-group fi nancing and other arrangements, and (4) in general, a greater level of regulatory scrutiny for GSIIs (including a requirement to establish a Systemic Risk Management Plan (“SRMP”), a
Resolution Plan (“RRP”)) which have entailed signifi cant new processes, reporting and compliance burdens and costs.
portion of the Common Framework which are now undergoing public consultation) will be implemented by legislation or regulation in each applicable jurisdiction is unclear. It is expected that the Common Framework will be implemented in 2019.
These measures, if implemented, could have far reaching regulatory and competitive implications for the AXA Group and adversely impact our capital requirements, profitability, the fungibility of our capital and ability to provide capital/financial support for Group companies, our ability to grow through future acquisitions, internal governance and could change the way we conduct business and adversely impact our overall competitive position versus insurance groups that are not designated as
Depending on the breadth of the fi nal rule, the investmentrelated information and support that AXA US affi liated advisors and employees could provide to retirement plan sponsors, participants, and IRA holders on a non-fi duciary basis could be substantially limited compared to what is allowed under current law. This could have an adverse impact on the level and type of services AXA US can provide, as well as the nature and amount of compensation and fees that AXA US and its affi liated advisors receive for investment-related services to plans and IRAs.
The exact nature and scope of the impact under any new fi nal rule is undeterminable at this time. Consequently, management is not in a position at this time to quantify the potential impact of these rules on the new sales of AXA US with any degree of precision, however, based on the information currently available to it, management estimates that the range of potential impacts on the new sales of AXA US could be from 10% to 30% of
APE (which would have represented 2% to 7% of the Group’s consolidated APE for the year ended December 31st, 2015). This estimate does not refl ect any potential mitigating actions such as reducing expenses and expanding sales of products unaffected by these rules.
The insurance industry is highly competitive, and an ongoing challenge we face is the effective adaptation to a constantly changing technological landscape. If we are not effective in anticipating the impact on our business of changing technologies, including automotive technology such as driverless cars and connected devices, our ability to successfully operate our business may be impaired. Technologies that facilitate ride or home sharing could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses. These changes could affect our ability to accurately price our products and might signifi cantly affect our margins in certain lines of business. For example, the advent of driverless cars, connected devices and usagebased insurance could materially alter the way that automobile, health or other p ersonal lines insurance is marketed, priced, and underwritten.
Our business is subject to extensive laws and regulations and to signifi cant litigation risks in the various countries where we operate; changes in existing or new laws and government regulations in these countries, the creation of new laws or government regulations and/or an adverse outcome in any signifi cant pending or future litigation or regulatory investigation may have an adverse effect on our business, fi nancial condition, results of operations, reputation or image
as well as numerous consumer protection related initiatives, including IMD2, MiFID II and PRIIPS, focused on a variety of matters including, in particular, distribution (e.g. compensation of intermediaries, the level of administration and management fees and disclosure of distribution costs), suitability, misselling and avoiding potential confl icts of interest. A number of global fi nancial institutions have been the subject of well publicized enforcement actions that have resulted in very signifi cant monetary and other sanctions in these areas. These are complex areas of law that evolve on a continuing basis and may increase the costs of compliance, limit or restrict our ability to do business or subject us to the possibility of civil or criminal actions or proceedings all of which carry signifi cant fi nancial and reputational risk. In addition, as a global company operating in several countries, we are subject to various tax regimes and regulations. Changes in tax laws, including the US Foreign Account Tax Compliance Act
We expect the scope and extent of applicable laws and regulations, as well as regulatory oversight, to continue to increase over the coming years. While management proactively manages these risks and has adopted policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where it does business, we cannot predict with any certainty the potential effects that a change in applicable laws or regulations, their interpretation or enforcement (or of the potential effects of any new regulation
Part 4 – Note 31 “Litigation” and Section 3.1 “Regulation” of this Annual Report for additional information on these matters.
As the IASB’s work is ongoing, management cannot predict with any certainty at this time the potential impact of these proposed changes (or of other potential future modifi cations to the Standards); however, any signifi cant modifi cations to the Standards may adversely impact the Company’s results of operations.
The Mutuelles AXA, which comprise two French mutual insurance companies, collectively held 14.13% of the
AXA ADS may be materially adversely affected by fl uctuations in the exchange rate for converting Euro into US dollars.
The holders of AXA ADS may not be able to exercise their voting rights due to delays in notifi cation to and by the depositary. In this event, the depositary’s liability to holders of AXA ADS for failing to carry out voting instructions or for the manner of carrying out voting instructions is limited by the Deposit Agreement governing the AXA ADS facility.
The price at which our ADS and ordinary shares will trade may be affected by a large number of factors, some of which will be specifi c to us and our operations and some of which will be related to the insurance industry and equity markets generally.
Information in this section should be read in conjunction with Note 4 to the consolidated fi nancial statements included in Part 4 of this Annual Report which is covered by the Statutory Auditor’s Report on the consolidated fi nancial statements.
In this section, Risk Management refers to the internal function aiming at effectively managing local and global risks.
Group Risk Management (GRM) is the central department responsible for the coordination of Risk Management within
Management is responsible for the defi nition and the deployment of the Enterprise Risk Management (ERM) framework within
This framework is based on the four following pillars, cemented by a strong risk culture: 1. Risk Management independence and comprehensiveness: Chief Risk Offi cers are independent from operations (“fi rst line of defense”) and Internal Audit Departments (“third line of defense”). Risk Management Department, together with Legal, Compliance, Internal Financial Control, Human
2. Shared risk appetite framework: Chief Risk Officers are responsible for ensuring that the top management reviews and approves the risks they carry in their company, understand the consequences of an adverse development of these risks, and have action plans that can be implemented in case of unfavourable developments.
4. Robust economic capital model: AXA’s economic capital model (AXA’s Internal Model) offers a concrete and powerful tool to control and measure exposure to most risks, in line with the Solvency II framework. AXA Internal
Offi cer who reports to the Group Deputy CEO, is responsible for developing the Enterprise Risk Management framework in terms of limits/thresholds (covering systemic, fi nancial, insurance and operational risks), standards, minimum requirements or processes.
The minimum missions required for local Risk Management teams are: ■ coordinating the second line of defence locally (which covers notably Legal, IT and HR Departments) through a specifi c governance; ■ implementing risk appetite on all risks consistently with
Legal, Compliance, Internal Financial Control, Human Resources and Security Departments are responsible for developing, facilitating and monitoring on effective risk and control framework and strategy (second line of defense), in coordination with Risk
Internal Audit performs, as part of its role, an assessment of risks and governance processes on a periodic basis to provide an independent opinion on the effectiveness of the system of internal control (third line of defense).
Please refer to Section 3.4 of this report for more details; For Life insurance risks and for P&C insurance risks: • two Global Business Lines dedicated Boards, chaired by the CEO of each business Line and which GRM attends; For Operational and Reputation risks: • Risk & Compliance Committee, co-chaired by the Group
Group Risk Committees are supported by local Risk Committees to ensure consistency and deployment of the Enterprise Risk
and through the fi nancing of its activities as part of its equity and debt management.
A wide variety of risk management techniques are used to control and mitigate the market risks to which the AXA Group’s operating units and the Group itself are exposed. These techniques include: ■ Asset Liability Management (ALM), i.e. defi ning an optimal strategic asset allocation with respect to the liabilities’
AXA Investment Managers and AB for operating units as well as AXA Bank Europe and AXA US for the hedging program of Variable Annuities’ guarantees; ■ a regular monitoring of the fi nancial risks on the economic and solvency position of the Group; and
■ reinsurance which also offers solutions to mitigate certain fi nancial risks; AXA’s exposure to market risk is strictly monitored. It is mitigated by: ■ its broad range of operations and geographical positions, which provides a high level of diversifi cation; and
Property & Casualty (P&C) portfolios are exposed arise from a variety of factors including: ■ a decline in returns on assets (linked to a sustained fall in yields on fi xed income investments or to lower equity markets) could reduce investment margins on general account products or fees on Unit-Linked contracts; ■ a rise in yields on fi xed-income investments (linked to interest rates or in spreads) reduces the market value of fi xed-income investments and could impact adversely the solvency margin, and increase policyholder’s surrenders due to competitive pressures; ■ a decline in asset market value (equity, real estate, alternatives, etc.) could adversely impact the solvency margin, as well as available surplus; ■ a rise in fi nancial market volatility may increase the cost of hedging the guarantees associated with certain products
The Group policies implemented to manage these risks are tailored to each product type and the risks relating to it.
Disclosures about Risk Factors”; ■ liquidity risk, please refer to “Liquidity position and risk management framework” included in Part 1 – Section 1.4 –
These analyses cover AXA SA, which carries most of the Group’s debt, along with the largest subsidiaries in France, the United
“Embedded Value” (EV) is a valuation methodology often used for long term insurance business. It attempts to measure the present value of cash available to shareholders now and in the future and accordingly is presented net of taxes and minority interests. “European Embedded Value” (EEV) is a refi nement of this methodology based on principles issued by the CFO
For the Life & Savings business, the EV is equal to the EEV, while for other-than-life businesses, the EV is equal to the adjusted net asset value.
The Group EV is not an estimate of AXA “ fair value” as it does not include the value of the new business to be sold in the future, nor does include any value for future profi ts from existing business of other-than-life businesses (Property & Casualty, International
Insurance, Asset Management, Banking and Holdings and other companies), such as the time value for P&C reserves. However, the Life & Savings EEV is a key management metric measuring the risk-adjusted value of the business and tracking its evolution over time, and the Group EV provides a crucial link to processes that impact total Group value but cannot be seen within the Life
Unrealized capital gains projected in VIF & other stat-GAAP adjustments (8,520) - (8,520) (8,585) - (8,585)
IFRS shareholders’ equity adjusted for: ■ the elimination of all intangible assets; ■ the reclassifi cation in the liabilities of all undated debt (TSS/
The Life & Savings EEV equals the Life & Savings Value of Inforce
EEV, AXA has adopted a “market-consistent” approach to setting asset return assumptions. Each cash fl ow is discounted at an appropriate discount factor, so that starting with Euro 1 of bond or of equity, projecting expected cash fl ows and discounting them, will simply give Euro 1 of value. Mechanically, this can be described as assuming that, in the future, all assets will earn the risk-free rate (referred to as the “reference rate” in the
II yield curves with liquidity premia being replaced by volatility adjustments less credit risk adjustments.
Upward shift of 100 bps in risk-free rates 1,776 3% (1,671) -3% 105 0% 2,020 4% (1,569) -3% 451 1%
Downward shift of 100 bps in risk-free rates (4,554) -9% 1,408 3% (3,147) -6% (4,904) -10% 1,499 3% (3,405) -7%
10% lower value of equity markets at start of projection (1,895) -4% (369) -1% (2,264) -4% (1,732) -4% (361) -1% (2,093) -4%
All sensitivities are presented net of tax and minority interests, and where applicable, net of policyholders’ participation.
& Savings business of 3% to upward 100 bps and -9% to downward 100 bps (2014: 4% and -10%) show an asymmetry mainly driven by guaranteed interest rates having higher value when interest rates decrease, while higher reinvestment returns would need to be shared with policyholders limiting shareholders’
gains in a higher rate environment. However this classical pattern is not followed everywhere, as for certain type of business with signifi cantly low interest rate guarantees, the EEV behaves more like a portfolio of fi xed-income assets. In addition, higher interest rates affect the value both positively through higher investment rate and negatively through lower starting value of fi xed income assets and higher discount rates for future profi ts. For different product types these interactions produce different results.
2015 interest rate sensitivities (% of Group EV) for other-thanlife businesses of -3% to upward 100 bps and 3% to downward 100 bps (2014: -3% and 3%) refl ect mainly the impacts on fi xedincome assets, partly offset by derivatives and sensitivities to changes in debt value, should interest rates curve move, with all debt classifi ed as liabilities and re-measured at market value.
2015 equity market sensitivities (% of Group EV) for Life &
The impacts of equity market value changes can come from general account exposures or from changing asset balances impacting future fee revenue on separate account business.
■ downward shift of 100 basis points in reference interest rates which is the same as above but with a shift downward.
Where the shift of 100 basis points would drop rates below 0%, they are fl oored at zero.
■ 10% higher value of equity markets at the start of the projection which simulates a shock to the initial conditions just for equities. This means changes to current market values of equities, with related possible changes to projected capital gains/losses and/or fee revenues. Policyholder and management behaviors are adjusted to be consistent with these conditions. As noted in the defi nitions, these calculations refl ect a shock to the initial conditions for equities, but no changes in value for asset classes such as fi xed maturities or real estate are assumed to accompany the equity change. In reality, changes in value of other asset classes would probably lead to different results than shown here. It is also possible that a gradual movement in equity would produce different results than a sudden shock.
2015 equity market sensitivities (% of Group EV) for otherthan -life businesses of 1% to 10% higher value and -1% to 10%
AXA France to diversify its investments and enable policyholders to benefi t from the performance of international fi nancial markets.
represented an amount of €12,988 million (€13,715 million in 2014). Excluding assets backing unit-linked contracts, the corresponding exchange-rate risk was fully hedged through the use of derivatives.
(€5,853 million in 2014) both directly and indirectly through investment funds, with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments were mainly denominated in US Dollar (€7,249 million versus €5,433 million in 2014) including the US Short Duration
US Dollar) due to the persistent low interest rate environment in Switzerland and to limited investment possibilities in the
Swiss market. A major portion of the exposure is hedged back into Swiss Francs with foreign exchange swaps, options and forwards. At the end of 2015, Switzerland foreign exchange exposure amounted to €30,706 million (€27,226 million in 2014) which represented circa 39% of total assets (circa 38%
of total assets in 2014), of which €28,702 million were hedged
(matching assets and liabilities denominated in the same currency) in particular for Mexico.
At the end of 2015, these countries accounted for 99% of the
Group’s Life & Savings companies’ assets (99% at the end of 2014).
both directly and indirectly through investment funds with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments were mainly denominated in US Dollar (€2,109 million versus €1,394 million in 2014) including the US Short Duration High Yield Fund
(notional €146 million in 2014), foreign exchange collars for a notional amount of €183 million (notional €0 million in 2014) and congruent coverage (matching assets and liabilities denominated in the same currency) for €18 million (€54 million in 2014).
mainly in US Dollar (€2,272 million) and Euro (€514 million), both directly and indirectly through investment funds (CLO funds,
Alternative Credit funds, real estate loans and other investment funds), of which €2,916 million is hedged through foreign exchange forwards or cross currency swaps.
In Switzerland, foreign exchange exposure amounted to €6,661 million (circa 46% of total assets) at the end of 2015 versus €6,129 million (circa 44% of total assets) in 2014, of which €4,564 million were hedged with foreign exchange derivatives (€4,145 million in 2014).
Sterling (€503 million at the end of 2015 versus €404 million in 2014). AXA Corporate Solutions Assurance carries assets denominated in foreign currencies to ensure balance sheet congruence. The congruence between the Company’s foreign currency assets and liabilities is regularly adjusted.
At December 31, 2015, the main hedging positions of AXA SA were as follows: Foreign currency hedging
In respect of the Hong Kong activities, in the form of derivatives
AXA SA’s assets accounted for the biggest part of the Group holding companies assets at the end of 2015.
RISKS RELATING TO THE MANAGEMENT OF HOLDING COMPANIES’ FOREIGN EXCHANGE AND INTEREST RATES EXPOSURE
The Group Corporate Finance and Treasury Department is in charge of producing reporting data that consolidate interest rate, foreign exchange and liquidity risk exposures, as well as the interest expenses of the Company. This reporting also includes medium-term forecasts.
(excluding assets backing separate-account products where the fi nancial risk is borne by policyholders) as well as by banks and holding companies, and
On Sovereign, specific limits have also been defined on government bonds and government-guaranteed bonds.
Compliance with the limits is ensured by the Group through defi ned governance. The Group Credit Risk Committee handles, on a monthly basis, the issuer exposure breaches to the
Group’s limit tolerances and determines coordinated actions for excessive credit concentrations. A Group Credit Team reporting to the Group CIO provides credit analysis independently from
ALM Supervisory Committee is regularly kept informed of the work performed.
At December 31, 2015, the economic breakdown of the total value of ABS (€10.3 billion excluding assets held for sale as well as CMOs and agency pool ABS) was as follows: Prime Residential
Prime Residential, 6% in US Subprime & Alt-A, and 1% in Non confi rming RMBS. At December 31, 2015, AXA’s invested assets included a net exposure to US subprime residential and Alt-A
mortgage loans of approximately €0.6 billion (4% of its total equalling or above AA rating).
Consumer ABS, 6% in CDO, 9% in Commercial MBS, 4% in
Prime Residential, 9% in US Subprime & Alt-A, and 1% in Non confi rming RMBS. At December 31, 2014, AXA’s invested assets included a net exposure to US subprime residential and Alt-A
At December 31, 2015, the nominal amount of positions taken through credit derivatives was €23.9 billion (1) of CDS (cumulated notional amounts of €11.7 billion protections bought and of €12.2 billion protections sold), which can be broken down as follows: i. €9.2 billion of CDS protections bought to hedge credit risk with regard to certain investments, mostly in corporate bonds; ii. €2.5 billion of CDS protections bought used to lock the liquidity premium through purchasing bonds and CDS
Switzerland (€0.6 billion) and Hong Kong (€0.3 billion); iii. €12.2 billion of CDS protections sold as an alternative to the direct purchase of a corporate bond mainly by holding government bonds and at the same time selling protection on very good quality names. This type of ALM strategy is often implemented to compensate for the lack of depth or liquidity in some markets in order to take synthetic credit risk.
At December 31, 2015, the breakdown of these CDS’s underlying debt securities gross exposure by rating was as follows: High Yield/NR
Credit risk relating to CDOs is monitored separately, depending on the tranches held, and regardless of the type of assets held
Committee is in charge of assessing reinsurers’ quality and acceptable commitments. The Committee is under joint authority of Group Risk Management and AXA Global P&C. This risk is monitored to avoid any excessive exposure to any specifi c reinsurer. The Security Committee meets monthly – and more frequently during renewal periods – and decides on any action to be taken with the aim of limiting AXA’s exposure to the risk of default by any of its reinsurers.
Group holds €30.9 billion (notional amount) of credit derivatives as total exposure including consolidated investment funds “Satellite Investment
The breakdown of all reserves ceded to reinsurers by reinsurer rating as of December 31, 2015 (€19.7 billion) was as follows: BB and lower
At December 31, 2014, the breakdown of reserves ceded to reinsurers (€18.9 billion) by reinsurer rating was: 70% in AA, 10%
Europe’s internal capital adequacy assessment and strategic planning processes take into account capital required to mitigate all material risks, capital required for expected business growth, liquidity requirements and stress testing results.