CORPORATE GOVERNANCE 91 3.1 Corporate governance structure 92 3.2 Executive compensation and share ownership 120 3.3 Corporate Governance Code of Reference 152 3.4 Related-party transactions 153
RISK FACTORS AND RISK MANAGEMENT 157 4.1 Risk factors 158 4.2 Internal Control and Risk Management 176 4.3 Market risks 190 4.4 Credit risk 197 4.5 Liquidity risk 201 4.6 Insurance risks 202 4.7 Operational risk 206 4.8 Other material risks 207
SHARES, SHARE CAPITAL AND GENERAL INFORMATION 373 6.1 AXA shares 374 6.2 Share capital 375 6.3 General Information 380
CORPORATE RESPONSIBILITY 393 7.2 Social information 401 7.3 Climate change and biodiversity 411 7.4 Inclusive insurer 421 7.5 Business behaviour 426 7.6 Vigilance plan 433
This Universal Registration Document (which we also refer to as our “Annual Report”) includes (i) all the components of the
Annual Financial Report (Rapport Financier Annuel) referred to in paragraph I of Article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) as well as in Article 222-3 of the AMF General Regulation (Règlement
Registration Document). The cross-reference table on page 478 of this Universal Registration Document indicates the items of Annexes 1 and 2 of Delegated Regulation (EU) 2019/980 to which the information contained herein corresponds.
“AMF”) as the competent authority under Regulation (EU) 2017/1129, without prior approval pursuant to Article 9 of Regulation (EU) 2017/1129.
This Universal Registration Document may be used for the purposes of an off er to the public of securities or admission of securities to trading on a regulated market if approved by the AMF together with any amendments, if applicable, and a securities note and summary approved in accordance with Regulation (EU) 2017/1129.
“Company”, “AXA” and “AXA SA” refer to AXA, a société anonyme
(a public limited company) organized under the laws of France, which is the publicly traded parent company of the AXA Group, and (ii) the “AXA Group”, the “Group” and “we” refer to AXA SA
ordinary shares”. The principal trading market for AXA’s ordinary shares is the regulated market Euronext in Paris (Compartment A), which we refer to in this Annual Report as “Euronext Paris”.
The Group’s consolidated financial statements and related notes are prepared in accordance with International Financial Reporting
Such amounts may have been rounded. Rounding diff erences may exist, including for percentages.
Registration Document, the contents of such website do not form part of this Universal Registration Document. No information, document or material from the website of the Company
Universal Registration Document, unless such information, document or material is expressly incorporated by reference into this Universal Registration Document.
Many of these factors may be more likely to occur, or more pronounced, as a result of catastrophic events, including weather-related catastrophic events, pandemic events or terrorist-related incidents. Please refer to Part 4 – “Risk factors and risk management” of this Annual Report for a description of certain important factors, risks and uncertainties that may aff ect
Report. The non-GAAP financial measures used by the Group are defined in the Glossary set forth in Appendix V to this Annual
and are not, and should not be relied upon as representing, the
Chairman’s Message In 2019, AXA demonstrated its capacity to deliver on its operational targets, while completing major transformative moves, in accordance with its Ambition 2020 strategic plan.
AXA achieved outstanding operational performance during the year. The Group’s revenues grew +5% organically, supported by the dynamism of its preferred segments, P&C C ommercial lines,
As a result of those eff orts, AXA is well on track to achieve its
I am especially satisfied that while delivering this strong business performance, AXA was able to confirm its leadership on societal issues.
Thomas Buberl and the Management Committee members to deliver the Ambition 2020 plan and prepare AXA’s future.
In 2019, our Group continued its transformation journey to be prepared for what tomorrow holds and enhance our ability to help our customers in all circumstances. We have grown across our preferred segments (Health, Protection and P&C commercial lines) which are precisely areas where we have the opportunity to tackle these growing needs. We completely divested from our
US Life and Asset Management businesses, thus completing a shift in our risk profile, moving away from financial risks towards technical risks. At the same time, we made significant progress in the operational integration of AXA XL, strengthening our position as the world’s leading P&C commercial lines insurer, protecting companies of all sizes, anywhere, and against all types of risks.
US. For instance, we completed the acquisition of the remaining 50% stake in AXA Tianping to accelerate our growth in China, thus becoming the number one foreign P&C insurer. We also pursued our innovation eff orts in the healthcare space by partnering with clinics networks to off er integrated insurance and primary care delivery in emerging countries. In partnership with ING, we also launched an innovative digital platform to off er simpler insurance solutions to our customers and best address their needs.
businesses at or above local market average NPS(1) in 2019, versus 54% in 2018) and a strong operating performance. Our underlying earnings increased, including in our key geographies and segments, reaching a record €6.5 billion.
Year after year, our organic growth dynamic continues: our gross revenues increased by 5% to €104 billion. With underlying earnings per share up 5%, adjusted return of equity at 16%, operating free cash flows at €6.3 billion and a solvency ratio up 5 points to 198% despite low interest rates, we have delivered on our financial targets, confirming our trajectory to achieve our strategic plan Ambition 2020.
I would like to sincerely thank our customers for their trust: they are at the heart of what we do, their satisfaction is both our objective and our reward, and standing by them day by day is our pride.
■ The Group started as a local French company and became a global insurance leader in just 30 years.
■ Recently, AXA has transformed its risk profile, from financial to insurance risks, by completing the disposal of its US Life & Savings and Asset Management entity and acquiring the XL Group. AXA is accelerating on Property & Casualty, Health and Protection, which are less sensitive to financial markets.
Several underlying trends have impacted the insurance industry over the last few years: a low interest rates environment challenging the Life & Savings and Protection businesses, increasing competition from non-insurance companies, hardening of legislation & regulation and shifting customer behaviors & expectations. The nature, the frequency and the volatility of risks are also evolving, notably driven by climate change and natural catastrophes, the evolution of technology and the global interconnection of businesses increasing supply chain risk and business interruption.
in 2019, and it progressed on the integration of AXA XL. In line with the strategic priorities of Ambition 2020, AXA continues to focus on its preferred segments, i.e. P&C Commercial lines, Health and Protection, where it further developed ‘beyond Insurance’
services to expand in the Healthcare ecosystem, including the launch of primary care clinics in Mexico through a joint venture with Keralty and in Egypt where AXA owns diagnostic centers and primary care centers.
In Asia, AXA completed the acquisition of the remaining 50% stake in AXA Tianping in China and started building the foundations to roll-out its Chinese health strategy through the recruitment of Chinese health experts, the creation of a new portfolio of products and services and the development of a comprehensive distribution plan. Apart from China, the Group focused on driving growth in its current strongholds (Japan and Hong Kong) and high potentials (Indonesia, Thailand and Philippines) through transforming agency distribution and enhancing insurance and service propositions.
II ratio target range from 170% to 220% and a 3-7% UEPS 20152020 CAGR.
A c tu a ri a l i n si ghts / D
A ss e t li a b il it y m a n a g e m e n t/
A d d it io n a l s e r v i c e s
IFRS indicators presented below are derived from the Consolidated Financial Statements for the year ended December 31, 2019.
(b) As a consequence of the deconsolidation of Equitable Holdings, Inc. (“EQH”) as of March 31, 2019, EQH contribution was excluded from Health Combined Ratio calculation in 2019.
The decrease in Assets under Management in 2019 versus 2018 was driven by the disposal of Equitable Holdings, Inc., including its asset management subsidiary (AB).
“Activity R eport” and Note 3 “Consolidated statement of income by segment” in Part 5 - “Consolidated Financial Statements” of this Annual Report.
The following table sets forth information on the dividends declared and paid in respect of the last five fiscal years: Fiscal year
(d) The gross amount of dividends was subject to a unique withholding tax liquidated at an overall rate of 30%, unless in case of option for the progressive scale on income tax which then applied to all capital income paid in 2018. The option for the progressive scale gave right to the 40% tax relief pursuant to paragraph 2° of Article 158.3 of the French General Tax Code, i.e. €0.50 per share for fiscal year 2017.
(e) The gross amount of dividends will be subject to a unique withholding tax liquidated at an overall rate of 30%, unless in case of express and irrevocable option for the progressive scale on income tax which would then apply to all capital income paid in 2019. The option for the progressive scale would give right to the 40% tax relief pursuant to paragraph 2° of Article 158.3 of the French General Tax Code, i.e. €0.54 per share for fiscal year 2018.
AXA determines its dividend policy on the basis of its adjusted earnings net of its outstanding undated debt interest charges.
Since 2018, AXA targets to pay aggregate dividends in a general range of 50% to 60% of this amount (representing an increase from the prior indicative range of 45% to 55%). The dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors (as noted above) which may have an impact on this target from one year to another. In assessing the dividend to be paid in any given year,
AXA’s social, societal, environmental and governance performance is rated by a number of specialists, including investors, brokers and rating agencies that focus specifically on the SRI market, as well as specialist organizations focused on single sustainability themes. The Group generally ranks amongst the top performers in its industry and is also included in the main international sustainability indices: ■ DJSI World and DJSI Europe (based on Standard & Poor’s study); ■ Euronext Vigeo, World 120, Eurozone 120 and France 20 (based on Vigeo Eiris research); ■ FTSE4GOOD (based on FTSE Russell research).
(a) Note: The Dow Jones Sustainability Index is a reference performance indicator for AXA, its methodology serves as the basis for the Group’s internal sustainability evaluation tool since 2010, and is one of the performance metrics used to calculate long- term incentives (Performance Shares) since 2016.
Standard & Poor’s. Since this year, RobecoSAM teams have joined Standard & Poor’s. As an investment specialist focused on “Sustainability Investing”, it assesses each year over 4,500 companies using criteria that are both industry-specific and financially material. www.robecosam.com/csa/
rating agency. Its methodology leverages a number of sustainability criteria based on international standards.
FTSE Russell is a provider of benchmarks, analytics, and data solutions across asset classes. Each year FTSE Russell rates over 4,000 companies, measuring their exposure to and management of ESG issues. se.com/products/indices/esg
rating agency covering 9,000 companies. The agency focuses on corporate governance, material ESG issues, and controversies.
also transforms this data into analysis on critical environmental risks, opportunities and impacts.
MSCI is an independent provider of research and data for institutional investors. MSCI’s research analysts assess thousands of data points across 37 ESG issues, focusing on both risks and opportunities.
Voluntary delisting of AXA SA from the New York Stock Exchange and deregistration with the Securities and Exchange Commission
Poland; (iii) the P&C large commercial risks insurance subsidiary of SulAmérica in Brazil; (iv) Commercial International Life, the
Sale of AXA’s (i) Portuguese operations to Ageas; (ii) UK off shore investment bonds business based in the Isle of Man to Life
Serbia to Vienna Insurance Group and exit from the Serbian market.
Announcement of the intention to list a minority stake of AXA’s US
Bluefin Insurance Group Ltd, to Marsh; (ii) the Life & Savings insurance operations in Romania to Vienna Insurance Group; and
(iii) AXA Life Europe Limited’s off shore investment bonds business to Harcourt Life International dac (recently renamed to Utmost
US health benefit administration digital company; Initial public off ering (“IPO”) of the US subsidiary, Equitable
Signing of a digital partnership with ING to build a global insurance platform.
Launch of the new global brand positioning: “Know you can”; Finalization of the sale of the Ukrainian operations; Sale of AXA Bank Belgium and conclusion of a long-term insurance distribution partnership with Crelan Bank (2) ; Sale of AXA’s remaining stake in Equitable Holdings, Inc. (EQH) (3); and
The principal competitive factors are as follows: ■ size, strength and quality of the distribution channels, in particular the quality of advisors; ■ range of product lines and product quality, feature functionality and innovation; ■ price; ■ quality of service; ■ investment management performance; ■ historical level of bonuses with respect to participating contracts; ■ crediting rates on General Account products; ■ reputation, visibility and recognition of brand; and
(c) The contribution of the United States in 2019 includes 3 months of operations, until the date of the deconsolidation (March 31).
The tables below summarize AXA gross revenues (aft er inter-segment eliminations) by segment for the indicated periods: I France
AXA off ers in France a full range of insurance products, including
AXA France is developing an Employee Benefit proposition internationally to individuals, corporates and other institutions.
In line with both the “Payer-to-Partner” and Ambition 2020 strategic orientations, AXA France has launched several new product initiatives in 2019 spread across Life & Savings and Property &
As for more complex cases, the website off ers direct access to a legal expert for personalized advice. Additionally, it off ers access to real estate experts and debt recovery assistance.
In household and in partnership with AXA Partners, AXA France has launched a service platform called “Mes Travaux” where retail clients can seek help from AXA’s network of professionals in order to accomplish various types of house reparations or renovations.
Service (Arbetsförmedlingen) and the start-up Stratumn to deliver a blockchain-based solution to accelerate and simplify payment protection in case of involuntary unemployment.
The transformation from Payer to Partner continues in European markets, with the objective of becoming a full-fledged and innovative partner for their customers before, during and aft er claims.
In Health, several initiatives have been launched in a consistent aspiration to enlarge the off er and service portfolio for the benefit of customers and further strengthen AXA’s position as a leading health provider in Europe: ■ in Germany, the new full-cover health product ActiveMe was launched, gaining a very positive response from the market and agents. These core insurance solutions with services beyond underwriting and claims are off ered seamlessly through Meine
(b) Restated: reclassification of Japanese activities of AXA Life Europe (previously reported as part of Japan) into AXA Life Europe (included in Transversal & Central Holdings).
Asia High Potentials include (i) the Property & Casualty subsidiary in Thailand and the non-bancassurance Life & Savings subsidiary in Indonesia which are fully consolidated, (ii) the Property &
AXA off ers a full range of insurance products, including Life
• in China, AXA off ers a whole range of general insurance products with both Personal, including motor and health, and Commercial lines, as well as the whole range of Life &
Savings products; ■ in Asia - Direct, Direct business focuses on motor insurance as well as casualty insurance in South Korea and on motor insurance as well as other personal insurance products in Japan.
“Payer-to-Partner” service, AXA Rescue Line, was also launched which provides users with free access to emergency services,
AXA distributes its products through different distribution channels, in particular exclusive and non-exclusive agents, brokers and partnerships. AXA also has strong bancassurance partnerships, including joint-ventures, with large international and local financial institutions in the region.
AXA XL, through its operating subsidiaries, is a leading provider of Property & Casualty insurance and reinsurance coverages to industrial, commercial and professional firms, insurance companies and other enterprises on a worldwide basis: ■ through its insurance operations, AXA XL off ers a broad range of coverages, including property, primary and excess casualty, excess and surplus lines, environmental liability, professional liability, construction, marine, energy, aviation & satellite, fine art & specie, equine, livestock & aquaculture, accident & health and crisis management, among other risks; ■ through its reinsurance operations, AXA XL provides casualty, property risk, property catastrophe, specialty, and other reinsurance lines on a global basis with business being written on both a proportional and non-proportional treaty basis, as well as a facultative basis; ■ through its risk consulting operations, AXA XL off ers both insurance and non-insurance clients customized r isk m anagement solutions and consulting services to understand and quantify the risks companies face or may face tomorrow, with the objective of avoiding preventable losses and mitigating the impact of losses which do occur.
AXA XL continues to be at the forefront of bringing innovative solutions to the market. For the fourth year in a row, AXA XL
Health to launch a new employer’s liability insurance solution for UK organisations. HealthAssist provides companies with a holistic approach to wellbeing, by combining the security of a traditional employer’s liability insurance policy with the additional benefit of a wellness, health and injury rehabilitation service; ■ Design Professional’s mobile compatible with online Contract eGuide for Design Professionals: a Risk Management handbook for architects and engineers. Contract eGuide is a forwardthinking r isk m anagement tool for insured clients to assist design professionals in understanding and negotiating their professional services contracts. Developed using the latest web technologies, the Contract eGuide automatically adapts to every device allowing on-demand access; ■ a new risk modelling service, Portfolio Catastrophe Loss Modelling in France, is designed for large international companies. The service helps risk managers assess their sites’ exposure to natural hazards, their accumulation risk and, ultimately, refine their insurance coverage; and
SiteForward, which helps its clients visualize their risk exposures and make informed loss prevention decisions.
America, as well as Singapore, Malaysia, India and AXA Bank Belgium activities.
& Casualty, Health, as well as banking products off ered by AXA
Health and transform the access to healthcare of their customer base, through deploying several “Payer-to-Partner” initiatives in
In Mexico, the project aims to provide accessible, aff ordable, quality and continuity of care through a vertical integrated model that will encompass prevention and check-up programs, primary care gatekeeping at proprietary clinics and care followup programs.
International markets aim to off er integrated healthcare services to both AXA-insured and non-insured customers.
In addition, International markets continued to broaden their services beyond insurance, through innovative solutions to improve customer experience, e.g. in Poland (smart inspection by mobile and optimization of first-notification of loss through self-services for customers), in Turkey (Remote Assessment Tool for motor claims to reduce repair time), and in Colombia, new services (Lab Test and Pharma at home, teleconsultation) are integrated as part of Care Delivery and Coordination Programs.
(b) Restated: reclassification of German and Japanese activities of AXA Life Europe (previously reported as part of Germany and Japan respectively) into AXA Life Europe.
(c) Include AXA Liabilities Managers, AXA Global Re and AXA Life Europe.
AXA Investment Managers (“AXA IM”) provides its clients with a wide range of global products and expertise, in the Asset
Management area, principally via Mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors,
AXA IM has continued to add innovative Mutual funds to its off ering in 2019, including but not limited to specialty investment strategies encompassing a broad range of asset classes (AXA WF Framlington
All China Evolving Trends, AXA WF Chorus Systematic Macro, AXA IM
Subsequent events aft er December 31, 2019 impacting AXA’s liquidity 88 2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2019 89
In 2019, trade tensions between the United States and China, combined with weak activity indicators worldwide, led Central
In Europe, the stark dependency of some countries to international trade continued to weigh on economic activity and resulted in a weak manufacturing output across the Eurozone. The European
China which weighed on the economy. As a result, the Federal
The Dow Jones Industrial Average index increased by 22.3% and the S&P 500 index increased by 28.9%. Equity markets in Europe and Japan posted gains in 2019: the EUROSTOXX 50 index in the
In the Eurozone peripheral countries, the 10-year government bond yields decreased as well: -293 bps to 1.46% in Greece, -135 bps to 1.43% in Italy, -128 bps to 0.45% in Portugal, -95 bps to 0.47% in Spain, and -79 bps to 0.12% in Ireland.
Euro swaptions) increased from 46.5% as of December 31, 2018, to 133.9% as of December 31, 2019.
Business Growth and Transformation) has been enacted with a dual objective to simplify and bring more flexibility to pension savings, notably through the introduction of a single Pension
Protection & complementary Health insurance market grew by 5% to reach €25 billion in 2019. Following the implementation of substantial regulatory reforms over the past few years, the
Santé”), which will provide free eye care, dentures and hearing aids without co-payment. Following the standardization of contracts as a consequence of the introduction of the “Accord National
Interprofessionnel” law, insurance companies are now developing new and diff erentiated ad hoc services, such as telemedicine, prevention or processes digitalization.
The French Property & Casualty insurance market continued to grow steadily in 2019. 2019 was marked by a series of natural events, especially in the fourth quarter of 2019 notably with floods recorded in the south of France. Excluding natural events, 2019 did not see the emergence of new loss trends, although frequency remained at significant levels, thus leading to selective underwriting actions and tariff increases in most lines of business, especially in Motor and Casualty.
Savings insurance market was negatively impacted by the tax rule revision in February 2019 on tax-eff icient Savings products, aff ecting notably the SME market in all lines of business (including the Health market), and by lower sales of foreign-denominated
Please find below AXA’s rankings and market shares in the main countries where it operates: Property & Casualty Life & Savings
Germany 5 4.9 8 4.3 GDV (German association of Insurance companies) as of
Hong Kong 1 7.7 7 4.9 Insurance Authority statistics based on gross written premiums as of September 30, 2019.
XL (Lloyd’ s) 1 7.1 n/a n/a Lloyd’s Annual Report 2018 as of December 31, 2018.
XL Reinsurance 9 2.6 n/a n/a AM Best 2018 as of December 31, 2018.
Thailand 28 1.1 4 9.4 TLAA (Thai Life Assurance Association) statistics report and TGIA (Thai General Insurance Association) as of
Philippines n/a n/a 5 11.1 Insurance Commission measured on total premium income as of September 30, 2019.
Brazil 9 3.1 n/a n/a SUSEP (Superintendência de Seguros Privados) as of October 31, 2019.
Asset managers benefitted from favorable market conditions in 2019 as both low interest rates and strong equity markets increased assets under management, thus driving both management and performance fees up across the industry. However, the year was split into two distinct periods as the first half of the year saw investors retreat from volatile markets into safe havens, while accommodative monetary policies combined with equity markets at an all-time high saw investors return into riskier asset classes in the second half of the year.
2019 also saw management fee bps remain under pressure across the industry with high competitive pressure amongst players, combined with the continued shift from active to passive investing that resulted in further compression of the fees charged to clients in liquid asset classes.
Separately, asset managers continued to mirror the evolution of societal trends notably by widening and expanding their
Environmental, Social and Governance (ESG) investments off ers, or by re-assessing their off er in certain asset classes and industries
Re-appointment of Mr. Jean-Pierre Clamadieu as director, and ratification of the cooptation of Mrs. Elaine Sarsynski as director
On April 24, 2019, AXA’s Shareholders’ Meeting approved the reappointment of Mr. Jean-Pierre Clamadieu as director for a four-year term. The Board of Directors held following the
Shareholders’ Meeting confirmed his appointment as Chairman of the Compensation & Governance Committee and Senior
Financial Off icer and a Member of AXA’s Management Committee as of September 1, 2019, and would replace Gérald Harlin as Group
Group in 1997 and has held several financial and operational roles throughout his career at AXA.
Alban de Mailly Nesle, Chief Risk Off icer, Head of Insurance Off ice, and a Member of the Management Committee, became Chief
AXA announced changes in AXA IM’s leadership to prepare a new phase of its development
IM Management Board have been reporting to Gérald Harlin from then on. Christof Kutscher, who has been Chairman of AXA
Matthieu Bébéar and Guillaume Borie took new positions. Benoît Claveranne assumed oversight of AXA Next
On November 15, 2019, AXA announced that Matthieu Bébéar, previously Deputy CEO of AXA France and CEO of AXA Particuliers
International & New Markets and Strategic Development Off icer for Latin America. He reports to Benoît Claveranne, CEO of AXA
of AXA Particuliers & IARD Entreprises. He reports to Jacques de
Peretti, Chairman and CEO of AXA France and a member of the
On December 4, 2019, AXA announced that Delphine Maisonneuve, previously CEO of AXA Brazil, was appointed CEO of AXA Next and Group Chief Innovation Off icer, eff ective January 1, 2020.
She reports to Benoît Claveranne, CEO of AXA International & New
Payer to Partner strategy. She will also build on and leverage the innovation ecosystem across the Group in close cooperation with the business.
President of Chubb’s North America Commercial Insurance division, as CEO of AXA XL. He replaced Greg Hendrick and joined
These changes were eff ective immediately, subject to any required regulatory approval.
AXA has completed the acquisition of the remaining 50% stake in AXA Tianping
On December 13, 2019, AXA announced that it has completed the acquisition of the remaining 50% stake (1) in AXA Tianping
Total cash consideration for the acquisition of the 50% stake amounted to RMB 4.6 billion (3) (or €590 million (4)).
On February 14, 2019, AXA announced that it had completed the sale of both its non-life entity (AXA Insurance (5)) and life entity (AXA
On April 4, 2019, AXA announced that the agreement with Mr. Elkhan
Azerbaijan as soon as practicable, while preserving the interests of its existing clients in Azerbaijan.
In addition, AXA and Crelan have agreed to enter into a longterm P&C and Protection (8) insurance distribution partnership, extending the existing partnership between AXA Bank Belgium and AXA Belgium to the entire Crelan network.
(1) AXA acquired the initial 50% stake in AXA Tianping in February 2014.
(5) AXA Insurance in Ukraine was a joint venture between AXA (50% shareholding) and Ukrsibbank.
Financial impacts are the following: ■ this transaction is expected to result in a positive impact on
In addition, AXA Belgium will take a 9.9% minority equity stake (3) in Crelan NV (4) and AXA Bank Belgium, investing a total of €90 million, which will be fully financed by the purchase by
Crelan, for €90 million, of the contingent convertible bonds previously issued by AXA Bank Belgium to AXA Group.
AXA expands its Payer-to-Partner strategy in emerging markets through innovative healthcare delivery systems
AXA’s target is to open up to 50 medical clinics which would serve as many as 1.5 million clients across emerging markets by 2023, starting with Mexico in Latin America and Egypt in Africa, to be followed by other key emerging markets.
In Mexico, AXA announced the launch of a joint venture with Keralty, to develop a vertically integrated health system incorporating quality day-to-day healthcare delivery. Keralty is the leading health insurer and services provider in Colombia, with significant presence in the United States and Brazil. Concurrently in Egypt,
AXA will open diagnostic centers and primary care centers, owned 100% by AXA, with the support of World Health Management as its technical partner, with expertise in designing and setting up healthcare facilities.
These initiatives fully embody AXA’s strategy to provide healthcare solutions in emerging markets, where the existing health system oft en results in high non-reimbursable medical care spending for the population.
AXA launches a new phase in its climate strategy to accelerate its contribution to a lowcarbon and more resilient economy
Impact Day”, an event organized by AXA in collaboration with the
AXA targets to contain the “warming potential” (5 ) of its investments to below 1.5°C by 2050. As part of this objective, the Group will double its green investment objective to reach €24 billion by 2023.
AXA will also invest in “transition bonds”, an innovative asset class conceptualized by AXA Investment Managers to support companies shift ing towards less carbon-intensive business models. This tool notably complements Green Bonds which are designed to finance projects that are already “green”.
Aft er full exit from coal companies with coal-based business model, AXA sets a new ambition towards a 0% coal energy world.
(1) The net income impact is based on the cash consideration and the value of Crelan Insurance only and does not take into account any value for the insurance distribution partnership with AXA Bank Belgium, and its extension to Crelan.
Benefits) with clients developing new coal projects that exceed 300 MW in capacity, as well as further restrict underwriting services with coal-related businesses.
On April 5, 2019, Moody’s Investors Service aff irmed the “Aa3”
On July 24, 2019, S&P Global Ratings aff irmed the long-term financial strength rating of AXA’s core operating subsidiaries at
This positioning symbolizes AXA’s new promise to its customers, that of being the encouraging partner who helps them feel more confident to achieve their goals and go further. This new promise plays an integral role in the deployment of AXA’s strategic ambition to transition from payer to partner to its customers.
Williams. Embodying success and self-belief, this campaign symbolizes AXA’s values and ambition. The films with
Serena Williams have been at the heart of a comprehensive communications campaign also featuring Liverpool Football
AXA announced the successful completion of a Secondary Common Stock Off ering of Equitable Holdings, Inc.
“Off ering”), at a public off ering price of USD 20.50 per share, of its U.S. subsidiary, Equitable Holdings, Inc. (“EQH”) and the sale to EQH of 30,000,000 shares (the “Share Buyback”) at the per share price paid by the underwriters in the Off ering. In addition, the underwriters exercised in full the over-allotment option to purchase an additional 6,000,000 EQH shares.
EQH was deconsolidated and subsequently accounted for using the equity method.
(6) Including the shares to be delivered on redemption of the bonds mandatorily exchangeable into EQH shares, issued by AXA in May 2018.
(i) the EQH shares sold in the transaction, and (ii) AXA’s remaining 48.3% (2) stake in EQH (i.e. the loss required to be taken upon deconsolidation).
On June 7, 2019, AXA announced that it had successfully completed a secondary public off ering of a further 40,000,000 shares of
AXA announced the successful completion of the sale of its remaining stake in Equitable Holdings, Inc.
USD 21.80 per share. Subsequently, in December 2019, 3 million shares of EQH’s common stock was sold.
Group employee share off ering (“Shareplan 2019”), a capital increase reserved to its employees worldwide, which had been launched on August 26, 2019. Approximately 26,000 employees in 40 countries, representing nearly 24% of the eligible employees, subscribed to Shareplan 2019.
(3) Following the deconsolidation of EQH and its subsequent accounting under the equity method, the Mandatory Exchangeable Bonds (“MEB”) issued by AXA in May 2018 were excluded from the Debt Gearing. Debt Gearing is an alternative performance measure and is defined in the Glossary set forth in Appendix V of this Annual Report.
(7 ) EUR 1 = USD 1.1293 as of June 6, 2019 (Source: Bloomberg).
(8 ) Not including the proceeds from the exercise of the 30-day over-allotment option granted to the underwriters to purchase 6,000,000 EQH shares.
(11) Excluding the 44,162,500 shares of common stock of EQH, primarily related to the EQH shares to be delivered on redemption of the AXA SA bonds mandatorily exchangeable into EQH shares, maturing in May 2021.
(12) EUR 1 = USD 1.1011 as of November 12, 2019 (Source: Bloomberg).
(15) AXA share repurchase program was authorized by the Shareholder’s Meeting of April 24, 2019.
Holdings, Inc. (“EQH”), from 60.1% to 48.3%. The reduction of its voting rights below 50% combined with the reduction of its
(e) New Business Value (NBV) Margin is the ratio of (i) New Business Value representing the value of newly issued contracts during the current year to (ii) APE.
Consolidated Gross revenues amounted to €103,532 million as of December 31, 2019, up 0.6% on a reported basis and up 5.1%
The comparable basis mainly includes the following adjustments: (i) the exclusion of United States contribution of the last three quarters of 2018 following the deconsolidation of Equitable
Holdings, Inc. (€-12.5 billion or +13.0 points), (ii) the exclusion of the Savings portion of 2018 premiums related to the transformed in-force Group Life business in Switzerland (€-3.8 billion or
Gross revenues were up 1% on a reported basis and up 5% on a comparable basis to €103,532 million.
France gross revenues were up 4% (or €+972 million) on a comparable basis to €26,182 million: ■ Life & Savings (€+655 million or +5%) to €14,325 million mainly driven by (i) Individual Savings (€+672 million) due to strong sales of G/A capital light products through the bancassurance channel and higher sales of Eurocroissance products through the proprietary channel, as well as by (ii) Protection (€+198 million)
mainly from growth of in-force on both Individual and Group businesses; ■ Property & Casualty (€+17 million or 0%) to €7,059 million mainly driven by (i) domestic Commercial lines (€+111 million)
supported by volumes and tariff increases in Motor, Property and Construction, partly off set by (ii) continued selectivity in
(ii) Property & Casualty (+2%) driven by Commercial Non-Motor mainly from new business and higher average premium in
Savings (+1%) mainly due to new business in G/A capital light products, partly off set by Protection with Savings and traditional
Market segments, notably in the Public sector and SMEs, driven by new business and tariff increases as well as by Personal
Household mainly following tariff increases; ■ The United Kingdom & Ireland (€+163 million or +3%) to €5,367 million from (i) Property & Casualty (+4%) in Personal
(ii) Health (+2%) mainly driven by volume growth notably due to a new partnership in international business; ■ Spain (€+160 million or +6%) to €2,686 million from (i) Property
driven by higher volumes and tariff increases; ■ Italy (€+686 million or +13%) to €6,104 million from (i) Life &
Asia gross revenues were up 4% (or €+339 million) on a comparable basis to €9,860 million mainly from: ■ Japan (€-24 million or -1%) to €4,850 million from (i) Life &
& Savings (+10%) mainly driven by Protection with Savings due to in-force growth in broker and agency channels, as well as higher new business in broker channel, and by Unit-Linked due to growth in single premium new business, (ii) Health (+11%)
Commercial lines as well as tariff increases in Commercial lines; ■ Asia-Direct (€+41 million or +4%) to €1,018 million from (i) South
Korea (€+30 million or +6%) in Personal Non-Motor from higher new business and in Personal Motor following the improvement of digital channel, combined with (ii) Japan (€+11 million or
AXA XL gross revenues were up 10% (or €+1,676 million) on a comparable basis to €18,741 million: ■ Property & Casualty Insurance (€+1,337 million or +18%) to €9,123 million mainly driven by both volume growth and tariff increases across most lines of business, notably North America
Professional (€+383 million or +36%); ■ Property & Casualty Specialty (€+261 million or +6%) to €4,940 million driven by both volume growth and tariff increases across most lines of business, notably in Political
The United States gross revenues were up 5% (or €+188 million)
on a comparable basis to €4,297 million in 1Q19: ■ The United States Life & Savings (€+231 million or +7%) to €3,643 million in 1Q19 mainly in Unit-Linked from higher sales of non-GMxB Variable Annuity, partly off set by lower revenues from GMxB Variable Annuity; ■ AB (€-43 million or -6%) to €654 million in 1Q19 mainly from both lower research service and management fees as a result of adverse market conditions in 4Q18.
on a comparable basis to €7,078 million mainly from: ■ Mexico (€+123 million or +7%) to €1,925 million from (i) Health
Savings (-25%) mainly driven by a G/A Savings run-off portfolio; ■ Turkey (€+118 million or +21%) to €616 million primarily from
Property & Casualty (+18%) driven by tariff increases in Motor and higher volumes in Commercial Property; ■ Singapore (€+17 million or +3%) to €615 million primarily from
& Casualty (-2%) due to lower revenues in Personal Motor from soft ening market trends;
Property & Casualty (+9%) mainly due to higher new business in Personal Motor; ■ Malaysia (€-23 million or -7%) to €286 million mostly from
Transversal gross revenues were up 2% (or €+59 million) on a comparable basis to €2,959 million mainly from: ■ AXA Assistance (€+93 million or +7%) to €1,415 million from
(i) Property & Casualty (+5%) driven by higher volumes in both
(€- 296 million) due to the non-repeat of exceptional sales in Group
Savings and Unit-Linked from the sales of hybrid products as well as from Protected Unit-Linked, (ii) Belgium (€+37 million) mainly driven by two large Group pension contracts in both Protection with Savings and Unit-Linked, (iii) Germany (€+26 million) mainly due to higher new business in G/A capital light and Pure Protection following the launch of a new disability product as well as in
(€+15 million) mainly driven by a strong growth in Unit-Linked, partly off set by (v) Switzerland (€-20 million) in the context of the transformation of the in-force Group Life business, partly off set by higher new business in Individual Life.
Year, and (ii) Hong Kong (€+4 million) driven by strong sales in
Protection with Savings, partly off set by lower sales in G/A Savings and Group Health, partly off set by (iii) Japan (€-49 million) mainly driven by lower sales of tax savings products impacted by a tax rule change, partly off set by Protection with Unit-Linked and
Health, and (iv) Thailand (€-11 million) mainly driven by lower sales in Unit-Linked.
The United States (€817 million, 14% of total) up €36 million
New Business Value Margin stood at 42.2%, increasing by 2.8 points. On a comparable basis, restated mainly for the decrease of AXA’s ownership in EQH, New Business Value Margin increased by 0.7 point mainly driven by a favorable product mix towards
Income from aff iliates and associates 766 11 - 188 (2) 444 103 21
(a) As a consequence of the deconsolidation of Equitable Holdings, Inc. (“EQH”) as of March 31, 2019, the United States underlying earnings contribution was reported in income from aff iliates and associates for the period January 1, 2019, to November 13, 2019, until its subsequent accounting as financial investment available for sale. As a result, EQH contribution was excluded from Health and Protection Combined Ratio calculation in 2019.
Income from aff iliates and associates 315 20 2 171 (3) - 104 20
Earnings, Underlying Earnings and Underlying Combined Ratio to the most directly reconcilable line item, subtotal or total in the financial statements of the corresponding period is provided in the above tables. Adjusted Return on Equity and Underlying
Gearing calculation methodology based on the information available in the financial statements is defined on page 47 of this Annual Report.
For further information on any of the above-mentioned APMs, see the Glossary set forth in Appendix V to this Annual Report.
VBI, taxes and minority interests: ■ integration, amortization and impairments costs related to material newly-acquired companies as well as restructuring and associated costs related to productivity improvement plans; ■ goodwill and other related intangibles; ■ exceptional operations (primarily changes in scope and discontinued operations); and
Underlying Earnings correspond to Adjusted Earnings without the following elements, net of policyholder participation, deferred acquisition costs, VBI, taxes and minority interests: ■ realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); and
Part 5.6 - Note 17 “Financing debt” of this Annual Report) divided by the weighted average shareholders’ equity. The weighted average shareholders’ equity: ■ is based on opening shareholders’ equity adjusted for weighted average impacts of capital flows (including dividends); ■ without reserves relating to change in fair value of financial investments available for sale as disclosed in Part 5.4 -
Part 5.6 - Note 17 “Financing debt” of this Annual Report), divided by the weighted average number of outstanding ordinary shares.
Debt Gearing refers to the level of a company’s debt related to its equity capital, usually expressed as a percentage. Debt Gearing is used by Management to measure the financial leverage of the Group and the extent to which its operations are funded by creditors as opposed to shareholders. AXA’s Debt Gearing is calculated by dividing the gross debt (financing debt as disclosed in Part 5.6 - Note 17 “Financing debt” and undated subordinated debt as disclosed in Note 13 “Shareholders’ equity and minority interests” of this Annual Report) by total capital employed
(i) Europe (€-95 million) due to lower distribution from investment funds combined with lower reinvestment yields as well as a decrease in the asset base in Switzerland following the transformation of the in-force Group Life business model to a semi-autonomous model, partly off set by (ii) France
(i) France (€+152 million) mainly from higher loadings on premiums in Protection, (ii) Europe (€+71 million) driven by higher loadings on premium in Germany (€+15 million) and
Switzerland, combined with more favorable prior year reserve developments (-0.9 point) mainly in Switzerland and the United
Kingdom & Ireland, partly off set by Life & Savings (€-42 million)
mainly in Switzerland (€-43 million) in Group Life business due to the non-repeat of a particularly low profit sharing in 2018,
■ higher expenses (€-671 million or +5%) primarily in (i) Europe
(Roland Rechtsschutz) starting from October 1, 2018, and higher commissions linked to volume growth in Life & Savings, the
United Kingdom & Ireland (€-54 million) due to higher volumes and Italy (€-49 million) in line with volume growth in Life &
Savings, (ii) France (€-241 million) in line with volume growth in Life & Savings, (iii) International (€-89 million) in line with volume growth in Colombia (€-30 million), Turkey (€-28 million)
Underlying earnings before tax from other activities decreased by €200 million on a constant exchange rate basis to €-727 million mainly driven by (i) Transversal & Central Holdings (€-149 million or -22%) mainly at AXA SA (€-144 million) due to temporary higher financial charges, notably in the context of the acquisition of XL
Group, and the change in the accounting methodology of the mandatory exchangeable bonds triggered by the deconsolidation of Equitable Holdings, Inc., and (ii) Europe (€-60 million) mainly in Germany Holding due to the non-repeat of an exceptional distribution from an investment fund and higher pensions costs.
Income tax expenses decreased by €62 million (-4%) on a constant exchange rate basis to €-1,623 million mainly from (i) France
(€+95 million) mainly driven by the non-repeat of negative tax one-off s in 2018, and (ii) AXA SA (€+37 million) from lower pretax underlying earnings, partly off set by (iii) the non-repeat of favorable tax one-off s in 2018 in Asia and International, combined with (iv) higher pre-tax underlying earnings in International.
Minority interests increased by €24 million (+16%) on a constant exchange rate basis to €-176 million driven by (i) International
(€-13 million) from Colombia and the Gulf Region, as well as
(ii) Europe (€-12 million) mainly from Italy (€-10 million) as a result of the increase of AXA MPS underlying earnings.
Underlying earnings before tax from insurance and reinsurance activities were €725 million, mainly driven by a strong net investment income and the emergence of expense synergies related to the integration within AXA. This was partly off set by current year catastrophe losses in excess of the normalized level in 2H19 (€-0.4 billion), notably from Typhoons Hagibis (€0. 2 billion) and Faxai (€-0.1 billion) in Japan and Hurricane Dorian
Underlying earnings before tax from other activities were €-91 million mainly driven by interest expenses on financing debt.
Ratio improved by 1.1 points to 93.5% driven by more favorable prior year reserve developments (-0.7 point) and an improved current year loss ratio (-0.5 point) mainly from lower attritional losses (-0.6 point) as well as lower large losses (-0.1 point).
The Health Combined Ratio improved by 0.3 point to 94.1%. On a constant exchange rate basis and excluding the contribution of AXA
XL and the United States, the Health Combined Ratio increased by 0.1 point mainly driven by France and the United Kingdom.
The Protection Combined Ratio improved by 2.3 points to 93.2%. On a constant exchange rate basis and excluding the contribution of the United States, the Protection Combined
mainly from Germany (€-130 million) due to the non-repeat of the impact of the derisking strategy from the US market in 2018, partly off set by real estate (€+174 million to €350 million)
mainly from an exceptional transaction in Belgium, fixed income assets (€+71 million to €79 million), and alternative investments
(€+46 million to €90 million); ■ €-36 million unfavorable change in intrinsic value to €-131 million related to equity hedging derivatives due to the strong equity market performance in 2019 combined with the non-repeat of late 2018 equity market turmoil.
On a constant exchange rate basis, net income increased by €1,610 million (+75%) due to: ■ higher adjusted earnings (€+206 million); ■ lower impact of goodwill and other related intangibles up €2,992 million to €-114 million mainly from the non-repeat of the United States goodwill impairment of Equitable Holdings,
Inc. in 2018 (€-3,006 million); ■ a positive change in the fair value of assets accounted for under fair value option, up €492 million to €169 million, driven by the decrease in interest rates and the strong recovery of the equity market in 2019, combined with lower distribution from funds; partly off set by: ■ higher impact from exceptional and discontinued operations
Spain (€+20 million), and the non-repeat of restructuring costs in the context of the IPO of Equitable Holdings, Inc. completed in May 2018 in the United States (€+23 million).
As of December 31, 2019, the Group’s Eligible Own Funds (“EOF”) amounted to €59.4 billion and the Solvency II ratio to 198%, compared to €58.1 billion and 193% as of December 31, 2018.
(a) Including subordinated debts, capital movements, internal dividends paid in 2018 and others.
As of December 31, 2019, Shareholders’ equity Group share totaled €69.9 billion. The movements in Shareholders’ equity Group share since December 31, 2018, are presented in the table below:
Adjusted earnings (Euro per ordinary share) 2.77 2.76 2.61 2.61 5.8% 5.9%
(b) Excluding fair value of invested assets and derivatives and undated subordinated debt (both recorded through shareholders’ equity).
Net capital gains or losses attributable to shareholders net of income tax 168 131
■ Health (€+263 million or +6%) to €4,619 million, driven by higher volumes in Group business (€+233 million or +6%) in both international and domestic markets, as well as in Individual business (€+30 million or +5%); ■ Other (€+37 million or +26%) to €179 million at AXA Banque
France, mainly due to higher volumes in residential mortgages and loans.
due to higher prior year reserve developments and lower attritional losses mostly from lower frequency in Personal lines as well as lower expenses; ■ Life & Savings (€-37 million or -3%) to €1,106 million, mainly due to higher commissions and general expenses from business growth, partly off set by an increase in loadings on premiums mainly from Protection as well as a higher investment margin from continued discipline on crediting rates; ■ Health (€-26 million or -17%) to €123 million, mainly driven by less favorable claims experience in Group International business; ■ Other (€-1 million) to €-1 million.
Profit or loss on financial assets (under fair value option) and derivatives (259) (134)
Net capital gains or losses attributable to shareholders net of income tax 6 81
Gross revenues decreased by €3,539 million (-37%) to €5,992 million. On a comparable basis, gross revenues increased by €53 million (+1%): ■ Property & Casualty (€+43 million or +1%) to €3,152 million, mainly driven by Commercial lines (€+41 million or +3%) due to higher volumes and tariff increases in Workers’ Compensation; ■ Life & Savings (€-1 million or 0%) to €2,824 million, linked to the transformation of the Group Life business which was compensated by higher revenues from semi-autonomous activities; ■ Health (€+10 million) to €16 million.
APE decreased by €20 million (-6%) to €320 million. On a comparable basis, APE decreased by €20 million (-6%) in the context of the transformation of the in-force Group Life business, partly off set by higher new business in Individual Life driven by a new hybrid product launched in 2019.
Group Life business, NBV margin decreased by 8.1 points mainly driven by lower interest rates and an adverse business mix due to a lower share of Group Life business.
to €961 million. On a constant exchange rate basis, underlying earnings before tax decreased by €18 million (-2%): ■ Property & Casualty (€+112 million or +20%) to €693 million, as a result of an improvement in the current year combined ratio (-2.5 points) due to both lower attritional and large losses as well as a decrease of claims handling costs combined with more favorable prior year reserve developments (-1.7 points), partly off set by a lower net investment income (€-21 million); ■ Life & Savings (€-130 million or -32%) to €285 million, mainly due to the non-repeat of the particularly low policyholder bonus in 2018 in Group Life, higher VBI amortization resulting from lower interest rates assumptions, the impact of the transformation of the in-force Group Life business as well as a decrease in the investment margin in Individual Life; ■ Health remained stable at €-16 million.
Income tax expenses decreased by €18 million (-10%) to €-159 million. On a constant exchange rate basis, income tax expenses decreased by €24 million (-13%) mainly due to lower pre-tax underlying earnings combined with the impact of the reduction of the net deferred tax liability position due to the decrease in the corporate tax rate from 20% to 18.5% voted in 2019 and eff ective in 2020.
Net income increased by €364 million (+93%) to €755 million. On a constant exchange rate basis, net income increased by €337 million
(+86%) as lower adjusted earnings were more than off set by the non-repeat of the negative impact linked to the transformation of the in-force Group Life business in 2018 (€+421 million).
Profit or loss on financial assets (under fair value option) and derivatives (83) (50)
On October 31, 2018, AXA Germany completed the disposal of a part of its occupational pension business. Life & Savings comparable basis in Gross revenues, APE and NBV have been adjusted accordingly to exclude the contribution of this business in 2018.
(€-69 million) and traditional G/A Savings (€-21 million) in line with our strategy, and in Unit-Linked (€-19 million) due to lower sales of single premium products.
and Pure Protection (€+6 million) following the launch of a new disability product, as well as in Health (€+5 million) from full benefit insurance both in civil servants segment and in private segment.
to €834 million: ■ Property & Casualty (€+52 million or +12%) to €489 million, driven by an improved current year combined ratio (-0.8 point)
Income tax expenses increased by €22 million (+10%) to €-255 million driven by higher pre-tax underlying earnings and lower positive tax one-off s (€-6 million).
Net capital gains or losses attributable to shareholders net of income tax 145 50
(+1%): ■ Property & Casualty (€+39 million or +2%) to €2,100 million, primarily from Commercial lines (€+28 million or +3%) in Mid-
APE increased by €37 million (+58%) to €101 million. On a comparable basis, APE increased by €37 million (+58%) mainly driven by two large Group pension contracts.
Net income increased by €47 million (+13%) to €420 million driven by higher adjusted earnings and lower restructuring costs, partly off set by an unfavorable change in the fair value of equity derivatives not eligible for hedge accounting.
Net capital gains or losses attributable to shareholders net of income tax 2 (6)
Profit or loss on financial assets (under fair value option) and derivatives (61) (23)
to €438 million. On a constant exchange rate basis, underlying earnings before tax decreased by €2 million (0%): ■ Property & Casualty (€+13 million or +5%) to €265 million, due to (i) more favorable prior year reserve developments
Income tax expenses decreased by €1 million (-1%) to €-55 million.
Net income decreased by €79 million (-21%) to €287 million. On a constant exchange rate basis, net income decreased by €80 million
(-22%) as higher adjusted earnings were more than off set by
(i) a loss relating to the early redemption of a financing debt (€37 million) and the non-repeat of the realized gain relating to the sale of a non-consolidated subsidiary, (ii) an unfavorable change in the fair value of both equity and interest rate derivatives not eligible to hedge accounting, and (iii) higher restructuring costs.
Profit or loss on financial assets (under fair value option) and derivatives (12) (5)
NBV Margin decreased by 19.2 points to 60.3% mainly in Protection driven by actuarial assumptions update on contract duration.
Income tax expenses increased by €3 million (+5%) to €-62 million in line with higher pre-tax underlying earnings.
(+13%): ■ Life & Savings (€+612 million or +17%) to €4,266 million, mainly in G/A Savings (€+391 million or +16%) and Unit-Linked
(€+36 million or +11%); ■ Property & Casualty (€+58 million or +3%) to €1,746 million, from higher new business and renewals in both Personal lines (€+36 million or +3%) mainly in Motor and Property, and
to €401 million: ■ Life & Savings (€+21 million or +12%) to €190 million, mainly due to higher Unit-Linked management fees (€+22 million)
Minority interests increased by €10 million (+14%) to €-85 million as a result of the increase of AXA MPS underlying earnings.
Adjusted earnings increased by €22 million (+11%) to €218 million mainly driven by higher underlying earnings.
Net income increased by €50 million (+32%) to €208 million driven by higher adjusted earnings and lower restructuring costs resulting from pre-retirement plans.
Net capital gains or losses attributable to shareholders net of income tax 14 (34)
Profit or loss on financial assets (under fair value option) and derivatives (20) (55)
Profit or loss on financial assets (under fair value option) and derivatives (25) (42)
(a) Restated: reclassification of Japanese activities of AXA Life Europe (previously reported as part of Japan) into AXA Life Europe (included in Transversal & Central Holdings).
(-1%): ■ Life & Savings (€-41 million or -1%) to €3,378 million, mainly due to the temporary discontinuation of the capital light
NBV Margin increased by 22.5 points to 120.3% mainly driven by a favorable product mix towards Health and Protection with
mainly due to an improved net technical margin; ■ Other (€-11 million or 0%) to €-12 million, mainly due to the registration tax costs linked to the establishment of a holding company (€-5 million).
On a constant exchange rate basis, net income increased by €16 million (+3%) mainly driven by a less unfavorable change in the fair value of derivatives not eligible for hedge accounting.
Net capital gains or losses attributable to shareholders net of income tax 1 (2)
(+10%): ■ Life & Savings (€+244 million or +10%) to €2,917 million, mainly in Protection with Savings (€+219 million or +12%) driven by inforce growth in broker and agency channels, as well as higher new business in broker channel, and Unit-Linked (€+41 million or +27%) due to growth in single premium new business; ■ Health (€+62 million or +11%) to €640 million, mainly driven by higher volumes and tariff increases in both Individual and
Group businesses; ■ Property & Casualty (€+18 million or +7%) to €271 million, mainly due to higher volumes in both Personal and Commercial lines as well as tariff increases in Commercial lines.
APE increased by €30 million (+7%) to €486 million. On a comparable basis, APE increased by €4 million (+1%) driven by strong sales in Protection with Savings (€+67 million or +23%), partly off set by lower sales in G/A Savings (€-46 million or -56%)
Income tax expenses increased by €17 million (+130%) to €-29 million. On a constant exchange rate basis, income tax expenses increased by €15 million (+118%) driven by higher pre-tax underlying earnings combined with lower positive tax one-off s (€-7 million).
On a constant exchange rate basis, adjusted earnings increased by €23 million (+6%) mainly driven by higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 11 (40)
Thailand mainly from Personal Motor (€+5 million or +22%), partly off set by pruning actions in Commercial lines (€-2 million or -8%) mainly in Property; ■ Life & Savings (€-4 million or -8%) to €55 million, in Indonesia driven by Protection with Savings (€-6 million or -16%) reflecting lower volumes in the agency channel; ■ Health remained stable at €41 million, as lower revenues in
Thailand (€-3 million or -26%) due to the loss of a large contract were off set by higher volumes in Indonesia (€+3 million or +11%)
mainly driven by higher new business as well as renewals from the agency channel.
NBV Margin decreased by 10.3 points to 27.5%. On a comparable basis, NBV Margin decreased by 10.2 points mainly driven by strong sales of low-margin G/A Savings products in China during the Chinese New Year as well as lower interest rates in Thailand.
(€-2 million) mainly driven by higher marketing expenses; ■ Property & Casualty (€+8 million) to €0 million, in Thailand mainly driven by the favorable impact of pruning actions in
& Savings combined with a better claims experience following pruning actions in Health; ■ Indonesia (€0 million or +1%) to €42 million, mainly driven by higher volumes from a new product launched in Health, partly off set by higher expenses in Life & Savings; ■ The Philippines (€+6 million or +28%) to €30 million, mainly driven by a favorable change in business mix; ■ China (€-25 million or -44%) to €32 million, mainly driven by higher acquisition expenses, a lower net investment margin and a negative impact of financial assumptions update, partly off set by favorable tax impa cts.
Underlying earnings increased by €22 million (+12%) to €197 million. On a constant exchange rate basis, underlying earnings increased by €9 million (+5%).
On a constant exchange rate basis, adjusted earnings increased by €59 million (+44%) driven by higher underlying earnings and the non-repeat of net realized capital losses in China due to the negative equity market performance in 2H18 .
Net income increased by €111 million (+88%) to €238 million. On a constant exchange rate basis, net income increased by €100 million
(+79%) driven by higher adjusted earnings combined with the positive accounting impact related to the full consolidation of
Corporate Solutions Assurance and AXA Art contributions were not adjusted, as they were fully included in 2018 reported figures.
(€-95 million or -11%) reflecting a reduced Nat Cat exposure; ■ Life & Savings remained stable at €188 million, as the underlying business is in run-off .
Bahamas and in the United States, as well as elevated levels of large non-catastrophe losses and a higher current year loss ratio primarily in long-tail lines of business reflecting an update in assumptions related to claims inflation; ■ Life & Savings reported earnings were €13 million; ■ Other reported earnings were €-91 million mainly driven by interest expenses on financing debt.
Adjusted earnings reported were €585 million reflecting underlying earnings (€507 million) as well as net realized capital gains mainly on fixed-income assets and equity instruments.
(+6%): ■ Property & Casualty (€+174 million or +5%) to €3,888 million driven by: • Mexico (€+16 million or +2%) to €867 million, mainly driven by higher new business mainly in Personal Motor,
• Turkey (€+95 million or +18%) to €551 million, mainly from tariff increases in Motor and higher volumes in Commercial
• Colombia (€+77 million or +17%) to €517 million, driven by higher volumes in Protection and Workers’ Compensation,
• The Gulf Region (€-13 million or -3%) to €466 million, in
• Poland (€-9 million or -2%) to €427 million, mainly due to lower revenues in Personal Motor from soft ening market trends, partly off set by higher sales in Commercial lines,
• Morocco (€+24 million or +9%) to €289 million, mainly due to higher new business in Personal Motor,
(i) Mexico (€+104 million or +16%) to €801 million from the acquisition of several new large accounts and tariff increases,
(ii) the Gulf Region (€+50 million or +16%) to €385 million mainly from large accounts, and (iii) Turkey (€+23 million or +51%)
to €61 million from tariff increases and higher new business; ■ Life & Savings (€+33 million or €+3%) to €1,328 million, mainly driven by (i) Singapore (€+15 million or +6%) to €293 million from higher volumes across all lines of business, (ii) Luxembourg
APE decreased by €8 million (-3%) to €254 million. On a comparable basis, APE decreased by €13 million (-5%) mainly driven by (i) Singapore (€-15 million or -15%) to €88 million from strong market competition mainly in Unit-Linked, partly off set by (ii) India (€+2 million or +6%) to €41 million and (iii) Poland
This was partly off set by (vi) Singapore (€-8 million) from lower prior year reserve developments, partly off set by a more favorable claims experience; ■ Life & Savings (€+10 million or +15%) to €78 million, mainly driven by lower expenses (€+17 million); ■ Other (€+19 million or +49%) to €58 million, from AXA Bank
Belgium (€+10 million) mainly driven by higher fees and lower expenses, and Holdings (€+9 million); ■ Health (€+6 million or +24%) to €32 million, mainly driven by business growth.
On a constant exchange rate basis, minority interests increased by €13 million (+29%) as a result of higher underlying earnings in the Gulf Region and Colombia.
(-2%) to €103 million. On a constant exchange rate basis, income from aff iliates and associates remained stable.
Underlying earnings increased by €66 million (+16%) to €466 million. On a constant exchange rate basis, underlying earnings increased by €66 million (+17%).
On a constant exchange rate basis, net income decreased by €521 million (-147%) as higher adjusted earnings were more than off set by the negative impact related to the expected loss on the upcoming disposal of AXA Bank Belgium (€-590 million).
(a) Restated: reclassification of German and Japanese activities of AXA Life Europe (previously reported as part of Germany and Japan respectively) into AXA Life Europe.
December 31, 2018, to €801 billion at the end of December 31, 2019, driven by €+58 billion positive market eff ects from both lower interest rates and favorable foreign exchange rate impact, and €+13 billion net inflows from (i) Main Fund (€+18 billion) of which €+8 billion linked to the ongoing integration of XL Group, and (ii) Third-Party clients (€+4 billion), partly off set by (iii) net outflows from Asian joint ventures (€-9 billion) mainly from the
Management fee bps decreased by 0.5 bps to 16.5 bps. On a constant exchange rate basis, management fee bps decreased by 0.7 bps mainly due to an unfavorable change in product mix.
On a constant exchange rate basis, the underlying cost income ratio decreased by 0.2 point.
(+8%) to €20 million. On a constant exchange rate basis, income from aff iliates and associates increased by €1 million (+8%).
Equitable Holdings, Inc. in the context of its IPO completed in 2018 and lower restructuring costs.
Income tax expenses decreased by €7 million (-42%) to €-9 million driven by lower pre-tax underlying earnings and a favorable change in country mix.
Net income decreased by €11 million to €-21 million driven by lower adjusted earnings combined with higher restructuring costs and losses on exceptional operations.
Over the past several years, the Group has expanded its core operations ((re)insurance and Asset Management) through a combination of organic growth, direct investments and acquisitions. This expansion has been funded primarily through a combination of (i) dividends received from operating subsidiaries,
and paragraph “The Group’s or its insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position” in Section 4.1 “Risk
Life & Savings and Property & Casualty insurance contracts are disclosed in Note 14.10.1 - “Payment and surrender projections” in
Liquidity needs of Property & Casualty subsidiaries can be aff ected by actual claims experience. Property & Casualty Insurance’s net cash flows are generally positive. They can be negative in the case of exceptional loss events, such as natural or man-made catastrophe events. A portion of these cash flows is invested in liquid, short-term bonds and other listed securities in order to manage the liquidity risk that may arise from such events.
(1) Deconsolidated in 2019 (please refer to Note 3 - “Consolidated statement of income by segment”- Part 5 - “C onsolidated F inancial S tatements” of this Annual Report).
ACTIVITY REPORT AND CAPITAL MANAGEMENT 2 2.4 LIQUIDITY AND CAPITAL RESOURCES
In 2019, AXA continued to follow a prudent approach to manage its liquidity risk. At year-end 2019, AXA had: ■ a large cash position across all business lines (information on cash flows from operations is provided in Note 12 “Cash and cash equivalents” in Part 5 - “Consolidated Financial
AXA’s consolidated statement of financial position included cash and cash equivalents of €21.3 billion, net of bank overdraft s of €0.7 billion.
■ broad access to various markets via standardized debt programs: for example, at the end of 2019, this included a maximum capacity of €6.0 billion of French commercial paper, $2.0 billion of US commercial paper, €18.0 billion under a Euro Medium
à moyen terme; ■ a debt profile characterized by debt that is mostly subordinated, with a long maturity profile. In 2019, AXA SA reimbursed €1.8 (1)
billion of debts and we stand at €19.9 (2) billion at year-end 2019.
This resulted in a decrease in debt gearing (3) (28.8% at year-end 2019, versus 32.1% at year-end 2018). The interest coverage (4)
At year-end 2019, Group entities held, in the aggregate, more than €241 billion of government and related bonds of which €150 billion issued by Eurozone countries, which enables them to address local liquidity needs through highly liquid assets. AXA
(€12.3 billion in 2018). AXA has its own liquidity requirements resulting mainly from solvency needs of entities under severe stress scenarios and collateralized derivatives held by AXA SA.
The derivatives book is monitored and managed on a daily basis by the Treasury Department.
(€10,876 million including derivatives), thus showing an increase of €193 million mainly driven by the FX impact of debts denominated in foreign currencies.
On a consolidated basis, AXA’s total outstanding financing debt excluding derivatives amounted to €1,038 million (1) at
At December 31, 2019, other debt instruments amounted to €93 million (down from €505 million at the end of 2018). The decrease of €412 million mainly related to the loss of control of
Debt instruments (other than financing debt) issued by Group entities are described in Note 18 “Payables” in Part 5 - “Consolidated
At December 31, 2019, other debt owed to credit institutions amounted to €2,541 million (including €679 million of bank overdraft s), an increase of €308 million compared to €2,233 million at the end of 2018 (including €773 million of bank overdraft s).
For several years, the AXA Group has off ered to its employees, in and outside France, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2019, approximately 17.8 million new shares were issued for a total amount of €375 million. To eliminate the dilutive impact of the newly issued shares, AXA bought back the equivalent number of shares.
Dividends received by the Company from its subsidiaries amounted to €5,865 million in 2019 (€3,973 million in 2018), of which €2,821 million were denominated in currencies other than
(€1,049 million in 2018), of which interests on undated subordinated debt of €301 million (€338 million in 2018).
The Group’s operations are subject to a wide variety of insurance and other laws and regulations in the jurisdictions in which it operates, including regulatory capital and solvency requirements.
insurance subsidiaries to meet its regulatory capital requirements and/or a deterioration of its solvency position may also result in the need for significant amounts of new capital, which could adversely aff ect the Group’s liquidity position. For additional information, see paragraph “The Group’s or its insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position” in Section 4.1 - “Risk
The AXA Group has defined and implemented capital management standards in order to ensure that the Company and its subsidiaries are well positioned from a competitive point of view and maintain an adequate solvency ratio in accordance with local regulation requirements. The Management has developed various contingency plans. These plans may involve use of reinsurance, sales of investment portfolios and/or other assets, measures to reduce capital strain of new business or other measures. There can be no assurance, however, that these plans will be eff ective and achieve their objectives.
Eligible Own Funds are split into three diff erent tiers, based on the quality of each component as defined under Solvency
and subordinated to all other obligations including towards policyholders and beneficiaries. Capital elements of the highest quality are classified in Tier 1. Eligibility limits apply to these components to cover the Solvency Capital Requirement (“SCR”).
(2) The information provided in this Section 4.1 is not required under IFRS and as such is not part of the Consolidated Financial Statements. Therefore, it is not covered by the report of the Statutory Auditors on the Consolidated Financial Statements.
(3) Pay out ratio range: 50% - 60% of Adjusted Earnings net of undated debt interest charges, preferred shares and equity components of mandatory exchangeable bonds into shares of Equitable Holdings, Inc.
Dated and undated subordinated notes issued by the Company qualify as eligible own funds.
January 17, 2015 mostly benefit from the transitional provisions set forth in Directive 2014/51/EU (Omnibus II) , which amended the Solvency II Directive, as they were previously eligible under the Solvency I regime and were issued prior to the entry into force of Delegated Regulation EU 2015/35 of October 10, 2014.
The Company has issued dated subordinated notes (“TSR”), undated subordinated notes (“TSDI”) and undated deeply subordinated notes (“TSS”), which include provisions designed to allow the Company to ensure the continuity of its activities in the event its financial position deteriorates.
Certain TSR include clauses which permit or force the Company to defer interest payments. In addition, redemption at maturity is subject to (i) the prior approval by the Autorité de C ontrôle
Group insuff icient to cover its regulatory capital requirements, or (b) pursuant to which the Company would have to take specified action in relation to payments under the notes due to its financial condition, or (c) having an adverse eff ect on its insurance subsidiaries claim payments ability.
Company returns to financial health, as defined under the terms and conditions of the TSS.
■ whether making those own funds available for covering the Group SCR would not be possible within a maximum of 9 months.
For additional information on regulation and capital requirements, please refer to Section 6.3 “General Information Regulation and
(1) This information is not required under IFRS and as such is not part of the Consolidated Financial Statements. Therefore, it is not covered by the report of the statutory Auditors on the Consolidated Financial Statements.
I Subsequent events aft er December 31, 2019 impacting AXA’s liquidity
A dividend per share of €1.43 will be proposed to the Shareholders’
Initially reported in the province of Hubei in the People’s Republic of China, it has spread across other countries, resulting in reported infections and deaths in numerous countries, including
Furthermore, it is currently not possible to know or to predict the extent to which the current levels of reported cases reflect the actual transmission of the virus within populations, and accordingly the scale of the pandemic may be significantly larger than is presently recorded.
AXA and each of its regulated entities has or is in the process of establishing plans to address how it will manage the eff ects of the outbreak, and assess disruptions and other risks to its operations.
These include the protection of employees, sustaining our services to clients and other stakeholders and ensuring eff ective processes are in place to communicate and execute such plans.
Life, Health, Protection and Property & Casualty insurance and reinsurance cover (following, for example, increased business interruptions, travel and event cancellations and higher medical costs), and (iv) change in asset prices and financial conditions
(1) Includes AXA Ubezpieczenia Towarzystwo Ubezpieczeń i Reasekuracji S.A. (P&C business), AXA Życie Towarzystwo Ubezpieczeń S.A. (L&S business) and AXA Powszechne Towarzystwo Emerytalne S.A. (Pension business) in Poland, and AXA pojišťovna a.s. (P&C business), AXA životni pojišťovna a.s (L&S business) and AXA penzijni společnost a.s. (Pension business) in Czech Republic, together with their subsidiaries and branches in Slovakia. AXA XL’s and AXA Partners’ operations in the three countries are not within the scope of this transaction.
Transactions involving Company securities completed in 2019 by the members of the Board of Directors 144
(Code de gouvernement d’entreprises des sociétés cotées) published by the Afep (Association française des entreprises privées) and the
Afep-Medef Code (revised in January 2020 and available on AXA’s website – www.axa.com) and its accompanying guide and have followed the evolution of corporate governance practices in France and abroad, as well as the recommendations and standards of shareholders, regulators, the French High Committee for Corporate
Governance (Haut Comité de G ouvernement d’E ntreprise), proxy advisors, rating agencies and other stakeholders.
Since April 2010, AXA has operated with a unitary Board of
Following Mr. Henri de Castries’ decision to step down from his positions of Chairman and Chief Executive Off icer announced on
March 21, 2016, the Board of Directors decided to separate the positions of Chairman and Chief Executive Off icer, appointing
This decision reflected the Board’s conclusions that splitting the roles of Chairman and Chief Executive Off icer was consistent with the interest of the Company at that time. The Board concluded that the separation of roles would ensure that the Group benefits from the mix and complementarity of the respective experiences and skills of Mr. Thomas Buberl and Mr. Denis Duverne and would lead to a smooth transition.
Chief Executive Off icer, the Board of Directors also decided to maintain the position of Senior Independent Director for a variety of reasons including that Mr. Denis Duverne is not considered independent with regard to the Afep-Medef criteria due to his former role of Deputy Chief Executive Off icer until August 31, 2016.
The Chief Executive Officer is vested with the broadest powers to act in all circumstances on behalf of the Company and to represent the Company in its relationships with third parties
In an increasingly complex and highly competitive global environment, it is important for AXA to have directors with varied and complementary profiles, skills and experience to drive its current and future strategy and development. AXA believes that in order for it to tackle the challenges ahead and create long-term value for the Group, its shareholders and all its stakeholders,
Consequently, in view of the Group’s global presence, the Board of
Committee, has set itself the target to have Board members with diverse nationalities and cultures to ensure a balanced and complementary Board composition, in terms of gender, expertise, experience and tenure of its members.
The objective of this diversity policy is to ensure that, over time, the Board maintains a diverse Board composition to support the
In 2019, the Board took into account these diversity criteria, managing to maintain, on the one hand, a gender balance and, on the other hand, a diversity of profiles and expertise within the Board.
Directors’ tenure at December 31, 2019: ■ Less than 4 years: 9 directors (stable compared to 2018)
■ Between 4 and 8 years: 3 directors (stable compared to 2018)
■ At December 31, 2019, the directors’ average age was 61 years old
■ No director is over the age of 70 (versus 1 in 2018)
Experience in AXA businesses and industries 12/15 9/15 11/15 5/15 7/15 9/15 7/15 of regulatory and legal matters
46% of women, excluding directors representing the employees directors out of 15 are non-French nationals –
Attorney at Law at Lussan/Société d’avocats 282, boulevard Saint Germain – 75007 Paris – France
580 Park Avenue – New York – NY 10065 – United States
The Shareholders’ Meeting to be held on April 30, 2020 will be asked to vote on (i) the re-appointment of two members of the
Kemna and Mr. Stefan Lippe) and (ii) the appointment of four new members of the Board of Directors, one of them upon proposal of the employee shareholders of the AXA Group.
The composition of the Board Committees will be reviewed during the Board of Directors’ meeting following the Shareholders’
(1) Or a rate of 46% (higher than the minimum of 40% required by law) of women (excluding the directors representing the employees and the director representing the employee-shareholders) in accordance with legal requirements.
Mr. Denis Duverne is a graduate of the École des Hautes Études Commerciales (HEC). Aft er graduating from the École Nationale d’Administration (ENA), he started his career in 1979 at the
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
February 2003 until December 2009, Mr. Denis Duverne was the Management Board member in charge of Finance, Control and Strategy. From January 2010 until April 2010, Mr. Denis
From April 2010 to August 31, 2016, Mr. Denis Duverne was director and Deputy Chief Executive Off icer of AXA, in charge of Finance, Strategy and Operations. Mid-2014, Mr. Denis
is a public-private partnership led by the insurance industry and supported by the World Bank and the United Nations, aiming to enhance the use of insurance to build greater resilience against disasters and to help achieve the United Nations Global 2030
Mr. Thomas Buberl worked at the Boston Consulting Group as a consultant for the banking & insurance sector in Germany and abroad. From 2005 to 2008, he had worked for the
Winterthur Group as member of the Management Board of Winterthur in Switzerland, first as Chief Operating Off icer and then as Chief Marketing and Distribution Off icer. Then, he joined Zurich Financial Services where he had been Chief
Executive Off icer for Switzerland. From 2012 to April 2016, he was Chief Executive Off icer of AXA Konzern AG (Germany). In 2012, he has been member of the AXA Executive Committee.
Management Committee. In January 2016, Mr. Thomas Buberl was also appointed Chief Executive Officer of the global business line Life & Savings. From March 21, 2016 to August 31, 2016, Mr. Thomas Buberl was Deputy Chief Executive Off icer
Member of the Board of Directors and Chief Executive Off icer of AXA
(1) Current directorships held by members of the Board of Directors within a listed company are indicated by the following symbol: *. Current directorships held by members of the Board of Directors within companies belonging to the same group are indicated by the following symbol: **.
Chief Executive Officer (non-executive) and member of the Supervisory Board: Financière Pinault
Permanent representative of Artémis to the boards of: Agefi, Collection Pinault Paris, Sebdo le Point
Mrs. Martine Bièvre graduated with a Master’s degree in law specialized in insurance law from the University of
UAP branch in Lyon (France). Since 1988, she held various functions such as claim inspector – adjuster, at the UAP
Mrs. Martine Bièvre was appointed director representing the employees on AXA’s Board of Directors.
Committee of Solvay and Chairman of the Board of Directors of Rhodia. From May 2012 to March 1, 2019, Mr. Jean-Pierre
Mrs. Bettina Cramm is a graduated Medical Educator from the Martin-Luther University (Halle/Saale – Germany). She started her career in 1984 as a Medical Technical Assistant at the German Klinik of Diagnostik of Wiesbaden (Germany).
In 1991, she joined German-Civil-Servants-Insurance (DBV), known today as AXA Konzern AG. From 1991 to 1994, she was Power Clerk General Private Health Insurance at DBV
Cramm was a Healthcare Consultant at DBV-Winterthur. In 1995, she joined the Works Council at DBV-Winterthur and was a member of the Supervisory Board of DBV-Winterthur
Board of DBV Vermittlungsgesellschaft für Versicherungen und Vermögensbildung mbH (2007-2008). From 2008 to 2013, she was responsible for the prevention and health promotion at the company medical service at AXA Konzern AG. From 2013 to June 2018, Mrs. Bettina Cramm held various functions as member of the Works Council, Central Works
Council, European Works Council and their commissions and member of Supervisory Boards of AXA entities in Germany.
Board of AXA Konzern AG. In June 2018, Mrs. Bettina Cramm was appointed member of the Board of Directors of AXA
Bank. She then held various senior front line and support function roles in Midland Global Markets and HSBC Bank. In early 2007, she became Deputy Chairman & Chief Executive
Off icer of HSBC in Malaysia. From 2010 to 2014, she was Chief
Mrs. Rachel Duan holds a bachelor’s degree in Economics and International Business from Shanghai International
(Madison – United States). Mrs. Rachel Duan’s 22-year career at General Electric (GE) began in 1996 when she joined the
Corporate Audit Staff at GE Capital. She progressed through a number of leadership roles in Six Sigma Quality, Sales, and Marketing in GE Plastics and became President & Chief
Mrs. Rachel Duan has been President & Chief Executive Off icer of GE Global Markets, regions including China, APAC, India,
Mr. André François-Poncet graduated from École des Hautes Études Commerciales (HEC) and holds a Master in Business
Sloan School, MIT (United States). Dr. Angelien Kemna began her career as Associate Professor in Finance at the Erasmus
Management Director from 1998 to 2001. During this period, she was also part-time Professor of Financial Markets at the University of Maastricht (the Netherlands) (1993–1999).
Management BV (the Netherlands), where she initially held the position of Global Chief Investment Officer and subsequently Chief Executive Off icer for the European region.
In 2009, he was appointed Chief Executive Off icer of Swiss
Swiss Re, he turned to other activities. In 2011, Mr. Stefan
Board of Directors of this company. In October 2013, Mr. Stefan
CelsiusPro AG. From May 2014 to May 2018, Mr. Stefan Lippe was a member of the Supervisory Board of Commerzbank AG
(Philosophy Degree), University Paris I (Law Master), and of the Institut d’études politiques of Paris. Mr. François Martineau has been an attorney since 1976. In 1981, he was Secrétaire de la Conférence. In 1985, he was a lecturer at the University
Mr. François Martineau has been a Partner of the law firm
& Co. From 1996 to 2001, Mr. Ramon de Oliveira was
University. Mr. Ramon de Oliveira is the Managing Director of the consulting firm Investment Audit Practice, LLC, based in New York. He is also Chairman of the Board of Directors of
Trustee and Chairman of the Investment Committee: Fondation Kaufman (United States)
Singapore. From January 1, 2017 to June 30, 2017, Mrs. Doina
April 1, 2018 to December 31, 2019, she was the Executive
Chairman of AXA Corporate Solutions and AXA ART. As from April 1, 2018, she has been Executive Chairman of
Chief Integration Off icer of AXA and Executive Chairman of AXA Matrix Risk Consultants
School, New York (United States). Ms. Elaine Sarsynski started her career in 1977 as Real Estate Analyst at Morgan Stanley
From 1998 to 2001, she worked for Sun Consulting Group, LLC
Selectman for the town of Suff ield (United States) in 2001. In 2005, Ms. Elaine Sarsynski joined Massachusetts Mutual Life
President, Chief Administrative Off icer, Chief Executive Off icer and President of MassMutual International and in 2008,
Executive Vice President, member of the Off ice of the Chief
(the criterion is considered to be met when it is identified by ✓)
Clamadieu 1 Not have been an employee or executive off icer of the Company, or an employee, executive off icer or director of a consolidated subsidiary within the previous five years 2 Not have cross-directorships ✔ ✔ ✔ ✔ ✔
4 Not be related by close family ties to a company off icer ✔ ✔ ✔ ✔ ✔
6 Not have been a director of the Company for more than twelve years ✔ ✔ ✔ ✔ ✔
7 Not represent a major shareholder of the Company (holding more than 10% of share capital or voting rights)
Independent director aft er assessing the Afep-Medef criteria 0 0 ✔ 0 ✔
Executive Management, subject to relevant laws and regulations and the Bylaws of the Company. In addition, the Board inter alia: ■ chooses the appropriate corporate governance framework; ■ appoints and dismisses the Chairman, any Vice-Chairman/
Deputy Chief Executive Off icer, any dirigeant effectif (executive who eff ectively runs the Company as required by Solvency II), and determines their respective compensation; ■ convenes Shareholders’ Meetings; ■ proposes directors for appointment to the Shareholders’
Meeting and/or coopts directors to the Board; ■ reviews and endorses (arrête) the Company’s and the Group’s half-year and annual financial statements; ■ presents a report on corporate governance to the Shareholders’
Meeting; ■ fulfills all the Board obligations set out in Solvency II; ■ adopts and oversees the general principles of the Group’s compensation policy; ■ reviews the strategies and the policies on the taking, management and monitoring of risks as well as the conclusions of the internal assessment of risks and solvency (ORSA – Own
Board of Directors (with the exception of the directors representing the employees) must hold, within two years following his/her first appointment, a number of AXA shares with a value at least equal to the gross annual amount of his/her compensation (director’s fees) earned in respect of the previous fiscal year (1).
In accordance with French law, the Chairman’s role is to organize and oversee the work of the Board of Directors. In this context, he sets the agenda of the Board meetings, holds regular discussions with the Chief Executive Off icer and the directors, requests any document or information necessary to help the Board of Directors for the preparation of its meetings, verifies the quality of the information provided and more generally, ensures that Board members are in a position to fulfill their role. Prior to each meeting,
Board members receive documentation concerning matters to be reviewed, generally eight days in advance of Board meetings.
Company’s main strategic partners and stakeholders; ■ consult with the Chief Executive Off icer on major topics and events relating to the Company (including the Company’s strategy, major acquisition or divestment projects, significant financial transactions, major community projects and the appointment of the most senior executives of the Group); ■ upon invitation of the Chief Executive Off icer, take part in internal meetings with Group executives and teams to provide his opinion on strategic issues or projects; ■ assist and advise the Chief Executive Off icer.
In this context, in 2019, the Chairman of the Board of Directors, notably: ■ represented the Company at various national and international events attended by certain of the Group’s main partners and strategic stakeholders; (1) For this purpose, AXA shares are valued using the closing price of the AXA share on December 31 of the preceding fiscal year.
Executive Off icer, his role is contributory in nature and does not confer any executive power. Under French law, it is the Chief
Executive Off icer who is solely responsible for the Company’s operational leadership and management.
Chief Executive Off icer, the Board of Directors decided to maintain the position of Senior Independent Director, in particular due to the qualification of non-independent director of the Chairman of the Board of Directors.
April 24, 2019 and Mr. Jean-Pierre Clamadieu as of April 24, 2019), replaces the Chairman of the Board of Directors in the event of temporary incapacity or death, chairs meetings of the Board in the absence of the Chairman, acts, if need be, as spokesperson for the independent directors and informs the Chairman of any potential conflict of interest identified. The Senior Independent
In 2019, the Senior Independent Director, also acting as Chairman of the Compensation & Governance Committee: ■ maintained regular dialogue with the Chairman of the Board and with the Executive Management (i.e. the Chief Executive
In 2019, several training sessions were organized by the Chairman of the Board of Directors to familiarize the members of the Board of Directors with the Group’s main activities and challenges.
Crime Compliance (anti-money laundering, sanctions and antibribery & corruption), reinsurance and Solvency II regulation.
In October 2019, the Board of Directors also visited the Group’s
In 2019, the Board self-assessment was conducted internally and all directors (except the Chairman of the Board) answered the self-assessment questionnaire and had a meeting with the
Chairman of the Board in order to assess the eff ectiveness of the
Board and each Board member’s contribution. The conclusions concerning the personal contribution of each director were then transmitted by the Chairman of the Board who provided individual feedback during dedicated one-on-one meetings with each Board member.
Each director also had a meeting with the Chairman of the
The members of the Board of Directors identified the following areas of improvement: ■ closely monitor the selection of future Board members with the objective of appointing (i) directors with predefined critical skills (industry knowledge, digital/IT/technology, HR, customer/
Board of Directors and provide the Board with regular updates on the work performed in this regard; carefully manage the succession process for the current Chairman of the Finance
Committee in 2021; and regularly discuss with the Board the succession plan for the Group Chief Executive Off icer and
Management Committee members; ■ find occasions for the Board members to meet with the directors of the main operating subsidiaries (e.g. during the
■ continue to provide and improve information sent by the Chief
Executive Off icer to the Board on insurance sector-related news or reactions to public announcements made by the Company.
In 2019, the Board met ten times and the average attendance rate was 99.35%. Board meetings lasted approximately four hours on average.
To ensure a well-balanced governance, the Board’s Terms of Reference go beyond the requirements of French law and specifically provide that independent directors have a major role in all Board Committees, as follows: ■ each of the three Committees is chaired by an independent director; ■ all members of the Audit Committee are independent directors; ■ all members of the Compensation & Governance Committee are independent directors, with the exception of the director representing the employees who sits on the Committee pursuant to the Afep-Medef recommendations; ■ none of AXA’s corporate officers may be members of the
Risk Off icer and the Group Chief Financial Off icer describing the
The Chief Executive Off icer, the Group Deputy Chief Executive Off icer
Composition: Ramon de Oliveira (Chairman) – André François-Poncet – Stefan Lippe - Doina Palici-Chehab
Asset Liability Management policy on the Group’s capital and solvency; and
■ to review the risk appetite framework developed by the Executive
The Chairman of the Board of Directors, as well as the Chief Executive
Off icer, although not members of the Committee, contribute to the work of the Committee and attend its meetings.
■ review of the proposed capital increase reserved for the employees of the AXA Group (Shareplan 2019).
– the appointment of the Chairman, the Senior Independent Director, the members of the Executive Management and the persons who eff ectively run the Company (dirigeants effectifs ) as defined under the Solvency II.
The Committee also prepares, with the Chairman of the Board of Directors and the Chief Executive Off icer, the succession of the Executive Management.
The members of the Committee are also kept informed of the appointments of the main executives of the Group, and in particular the members of the Management Committee; ■ to issue proposals to the Board of Directors on: – the compensation of the Chairman of the Board of Directors and the
Chief Executive Off icer and the preparation of their annual assessment,
Executive Officer and the other members of the Management Committee; ■ to formulate an opinion on the proposals of the Chief Executive Off icer concerning: – the principles and conditions for the determination of the compensation of the main executives of the AXA Group,
– the overall annual allocation of Company performance shares to employees of the AXA Group; The Chief Executive Off icer also informs the Committee of the compensation of the main executives of the AXA Group; ■ in depth analysis of certain Group human resources topics, including the annual review of the Company’s policy with respect to professional equality and equal pay; ■ to examine the Group’s strategy on corporate responsibility and other related issues; ■ in depth analysis certain governance matters relating to the operation and organization of the Board of Directors and the organization of the periodic self-assessment of the Board of Directors; and
The Group Deputy Chief Executive Off icer (Directeur Général Adjoint ) & General
The Chairman of the Board of Directors, as well as the Chief Executive Off icer, although not members of the Committee, contribute to the work of the
Committee and attend its meetings, except when their personal situation is discussed.
Chief Executive Off icer, the succession of the Executive Management, including emergency succession, and reports regularly to the Board of Directors. It also regularly ensures the existence of succession plans, with diff erent time horizons
Governance issues: ■ the selection process for future directors; ■ the composition of the Board and its Committees as well as the composition of the Management Committee; ■ the independence of the members of the Board; ■ the self-assessment of the Board of Directors; and
The Chief Executive Off icer is vested with the broadest powers to act in all circumstances on behalf of the Company and to represent the Company in its relationships with third parties.
He exercises these powers within the scope of the Company’s corporate purpose and subject to the powers expressly assigned by law to the Shareholders’ Meetings and the Board of Directors.
The Management Committee meets fortnightly to discuss Group strategic, financial and operational matters. The Management
Gérald Harlin Group Deputy Chief Executive Off icer (Directeur Général Adjoint ) & Executive Chairman of AXA Investment Managers
Management Committee and over thirty other senior executives from across the Group. Its principal role is to assist the Chief
Executive Off icer and the Management Committee in the definition and implementation of key strategic initiatives in the context of the strategic plans and to contribute to a permanent strategic dialogue throughout the Group. It has no formal decision-making authority and is advisory in nature. The Partners group meets at least twice a year.
Mrs. Martine Bièvre, who is an employee representative on AXA’s Board of Directors, is currently an employee of AXA
The Chairman of the Board of Directors and the Chief Executive
These agreements or deals are systematically negotiated and performed at arm’s length terms and conditions. Consequently,
AXA does not believe that any of these agreements or transactions give rise to any conflicts of interests between (i) the director’s duties towards AXA and (ii) their private interests and/other duties.
(i) subject to any conviction in relation to fraudulent off ences or to any off icial public incrimination and/or sanction by statutory or regulatory authorities (including designated professional bodies), (ii) disqualified by a court from acting as a member of the administrative, management or supervisory body of an issuer or from acting in the management or conduct of the aff airs of any issuer, or (iii) associated as a member of the administrative, management or supervisory body with any company that has declared bankruptcy or been put into receivership, liquidation, or administration provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated aff iliated 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.
(a) Restated: as per the new governance in force since 2018.
(c) In 2019, the increase by 210 in France was mainly driven by recruitments in both sales platform and call centers in Morocco, as well as business growth.
(e) Some employees of AXA Bank Belgium provide common services for both insurance and banking activities and vice versa.
(f) In 2019, the decrease by 114 in Belgium was mainly driven by restructuring measures.
(g) In 2019, the increase by 179 in UK & Ireland was mainly driven by recruitments in compliance and regulatory projects, as well as business growth.
(h) In 2019, the increase by 2,988 in China was driven by the full consolidation of AXA Tianping in AXA Group’s financial statements as at December 31, 2019.
(j) In 2019, the decrease by 7,959 in the United States was driven by the deconsolidation of Equitable Holdings, Inc. in AXA Group’s financial statements as at December 31, 2019.
(m) In 2019, the decrease by 421 in AXA Assistance was mainly driven by the Americas Region (-389) related to contract cancellations and simplification programs.
AXA’s executive compensation structure is based on an in-depth analysis of market practices in France and abroad, within the financial services sector (insurance companies, banks, asset managers, etc.) and of other international groups.
(1) The information in this section is presented in accordance with the recommendation No. 2009-16 of the AMF, as modified on July 25, 2019, and with the recommendations of the Afep-Medef Code.
Chief Executive Off icer and the other members of the Group
Resources and Group Legal. The Committee is empowered to undertake or commission specific 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 firm in order to benefit from an external technical expertise and an independent overview in order to compare AXA’s variable compensation practices with general market practices.
Solvency II regulations came into force on January 1, 2016, and include a number of specific compensation and governance requirements applicable to European insurers and reinsurers.
Policy applicable to all AXA employees as of January 1, 2016. This
The AXA Group Remuneration Policy is designed to: ■ attract, develop and motivate critical skills and best talents; ■ drive superior performance; ■ align compensation levels with business performance; ■ ensure that employees are not incentivized to take inappropriate and/or excessive risks and that they operate within AXA’s overall risk framework; and
The requirements set out in the Group Remuneration Policy may be supplemented in order to comply with local regulatory requirements or best practices. The Policy is reviewed and updated annually to mirror, as the case may be, changes in the internal organization and the nature, scale and complexity of the risks inherent to AXA’s business and to reflect exchanges with the
The overall remuneration structure is based on the following components, which are designed to provide balance and avoid excessive risk taking for short-term financial gain: ■ a fixed component which comprises of a base salary and any other fixed allowances. Fixed remuneration primarily reflects the relevant organizational responsibility, professional experience, technical and leadership skills required of the role, criticality or scarcity of skills, as well as the individual’s capability to sustainably perform the duties of the role; ■ a variable component which primarily reflects the business and individual performance, including performance in excess of that required to fulfil the role description. It comprises of an upfront cash element (annual cash bonus) and a deferred element recognizing the importance of aligning remuneration over longterm value creation. The deferred element is awarded through
AXA performance shares. This variable component depends on the AXA Group’s global performance, on the beneficiary’s operating business performance, and on the achievement of the executive’s individual objectives including demonstrated abilities for leadership. The variable portion is designed to represent a substantial component of the executive’s global compensation and, where an executive attains or exceeds the set objectives, to position the compensation levels of AXA
Each year, AXA, with the assistance of specialized firms, conducts compensation reviews in order to ensure the competitiveness and consistency of executives’ compensation and to measure the suitability of the global remuneration policies. In this context, three markets are used as a reference: ■ a first market composed of 12 companies in the French CAC 40 index (companies selected to form the panel, which may vary from year-to-year, are comparable to AXA in terms of stock capitalization, revenues, sector, number of employees and/
Netherlands, the United Kingdom, Spain and Switzerland), and in the United States; ■ a third market composed exclusively of international financial companies comparable in size and scope to the AXA Group
The total amount of compensation of the Chief Executive Off icer and the balance between its diff erent components (fixed and variable) are mainly based on a study by an external advisory firm (Willis Towers Watson) on compensation practices for similar positions within a sample of CAC 40 companies as well as the main European companies in the financial sector (insurance companies, banks), and follows the recommendations of the
Board of Directors was to limit his compensation to a sole fixed annual compensation.
Furthermore, Mr. Denis Duverne, who claimed his rights to pension as of September 1, 2016, has decided to waive payment, for his entire term of off ice as Chairman of the Board of Directors, of the annuities which he would have received as from September 1, 2016, under the complementary pension scheme for Group executive off icers in France, amounting to circa €750,000 per year.
Finally, no variable compensation is paid to him, nor does he receive directors’ fees or performance shares or any other longterm incentive during his term of off ice.
(adjusted Return on Equity – RoE), (iii) gross revenues in both
The individual performance of the Chief Executive Off icer is assessed on the basis of various indicators and qualitative and quantifiable objectives set by the Board of Directors through a written target letter drawn up at the beginning of each calendar year. This letter includes detailed objectives about 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
The determination of the actual amount of variable compensation to be paid to the Chief Executive Off icer is based on the following additive formula: Variable compensation due = Target Variable compensation x (50% Group Performance + 50% Individual
With this evolution, the Board of Directors, upon recommendation from its Compensation & Governance Committee, wished to strengthen the formulaic/quantitative component of the Chief
Executive Off icer’s variable compensation, in line with market practices in France and abroad, as well as feedback received from a number of institutional investors.
■ Innovation: Scale innovation to support acceleration of Payer to Partner
• Develop vertical integration in Health in 1 or 2 emerging market(s);
• Achieve relevant steps in deleveraging AXA; ■ Culture: Evolve culture, transform leadership and develop his own leadership: • Improve Employee Net Promoter Score (eNPS) by 5 points on average compared to the December 2018 score,
Off icer may not exceed 150% of his variable target compensation, i.e. 150% of his fixed annual compensation.
For the other members of the Management Committee, their variable compensation is also determined on the basis of an individual predefined target which is entirely based on the following formulas.
Management Committee members’ performance with operating business responsibilities is determined according to the following metrics: 50%* (50% Entity Score + 50% Group STIC Score) + 50%
Committee with Group responsibilities is determined according to the following metrics: (50%* Group STIC Score + 50% Individual
Group performance is measured by the (i) underlying earnings per share, (ii) return on equity (adjusted Return on Equity – ROE),
(iii) gross revenues in both Commercial Property & Casualty and Health & Protection, and (iv) Net Promoter Score (customer recommendation index). Individual performance is evaluated considering predetermined objectives specifically deriving from strategic initiatives.
In the tables of this section, compensation not paid in Euro was converted into Euro on the basis of the following yearly average exchange rates for 2019: 1 USD = 0.8933 EUR; 1 HKD = 0.1140 EUR
Thomas Buberl Chief Executive Off icer France 1,450,000 1,754,500 (a) 121% 1,450,000 1,725,500 (a) 119% 1,450,000 1,609,500 (a) (c) 111%
(c) Pursuant to Article L.225-100 III of the French Commercial Code, the payment of the Chief Executive Off icer’s 2019 variable compensation is withheld until the approval of the Shareholders’ Meeting on April 30, 2020.
Since 2013, the Board of Directors has implemented a deferral mechanism for 30% of for the executive officers’ variable compensation over a two-year period.
Under this mechanism, the Chief Executive Off icer’s deferred amount of variable compensation for the 2019 fiscal year will be paid out in two tranches, in 2021 and 2022. The actual amount to be paid will vary depending on the AXA share price performance over the deferral period and will be subject to a minimum of 80%
and a cap at 120% of the deferred amount; provided, however that no deferred variable compensation would be paid in the event (i) that the Group’s underlying earnings are negative for the year ending immediately prior to the year of scheduled payout, or (ii) of resignation or dismissal, for gross or wil ful misconduct prior to the payout date (clawback provision).
(c) As at December 31, 2019, the Management Committee was comprised of 13 members (compared to 11 as at December 31, 2018).
On each date of grant, the fair value of stock options and performance shares is determined in accordance with IFRS
Report. This value does not represent a current market value, a current valuation of these options and performance shares, nor the actual amounts that may be paid to beneficiaries if and when the options are exercised or the performance shares are acquired.
On June 27, 2018, the fair value of one option was €1.17 for options with performance conditions, and the fair value of one performance share was €14.06.
On June 19, 2019, the fair value of one performance share was €15.17.
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2018
(a) This amount does not include the part of the variable compensation with respect to 2018 which has been deferred in accordance with the mechanism described on page 125 .
The only “benefit in kind” for Messrs. Thomas Buberl and Denis
(a) This amount does not include the part of the variable compensation with respect to 2019 which has been deferred in accordance with the mechanism described on page 125 .
Ratio between AXA SA CEO’s compensation and the median compensation of AXA SA employees N/A N/A (d ) -5.73% (e ) +4.51%
Ratio between AXA SA Chairman’s compensation and the median compensation of AXA SA employees N/A -14.23% (g ) -9.74% -2.06%
Ratio between AXA SA Chairman & CEO’s compensation and the mean compensation of employees of AXA in France -30.86% (b ) N/A N/A N/A
Ratio between AXA SA Chairman’s compensation and the median compensation of employees of AXA in France N/A -2.27% (g ) -2.75% -2.83%
(b ) The cash compensation granted to the Chairman & CEO in 2016 has been annualized for the purpose of the table above. No Long Term Incentives were granted to the Chairman & CEO in 2016 (year of retirement).
(d ) No variable compensation with respect to the CEO term of off ice was granted during 2016.
(e ) The variable compensation granted to the CEO in 2017 has been annualized for the purpose of the table above.
Denis Duverne – Chairman of the Board of Directors 0 0
The total annual maximum amount of directors’ fees to be allocated to the members of the Board of Directors was set by the Shareholders’ Meeting of April 25, 2018, at €1,900,000.
Directors as a fixed fee): ■ a fixed amount determined by the Board of Directors shall be paid annually to the Senior Independent Director (set to €80,000); ■ 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 fixed fee, and 60% shall be paid according to
Committee, and 50% to the Audit Committee. Each Committee shall then allocate such amount to its members as follows: 40% shall be divided equally among members and paid as a fixed fee, and 60% shall be paid according to Committee attendance, with the Chairman of the Committee receiving in each case a double fee.
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2019 an annual gross cash compensation of €1,579,943 in connection with her position as Chief Integration Off icer. This compensation consists of €700,000 of fixed compensation and €879,943 of variable compensation.
interests with the overall performance of the AXA Group, and the corresponding operational Entity/Business Unit as well as with the stock performance of the AXA share over the medium-long term.
Performance shares generally result in low shareholder dilution due to the possibility to deliver existing shares, this choice being the one made up to this date.
Each year, the Board of Directors, acting upon recommendation of its Compensation & Governance Committee, approves a global performance share pool to be granted.
The recommendations for grants of performance shares are made by the management of each operating business and by the
Group’s functional department heads. These recommendations are reviewed by the Executive Management to ensure a global coherence and respect of the Group’s internal equity principles.
Governance Committee, which takes into consideration their aggregate compensation elements as well as the market studies carried out by the Group together with an independent compensation-consulting firm. Furthermore, the grant to AXA
executive off icers shall depend on the level of achievement of the strategic objectives previously defined by the Board of Directors.
The nature of these criteria as well as the associated targets are defined and reviewed on a regular basis by the Board of Directors, depending on the evolution of the Group’s strategic objectives and aft er consideration of market practices as well as changes in regulations. Thus, during the last few years, the performance criteria used for this purpose have been linked to (i) the underlying earnings and the adjusted earnings to measure the operating businesses’ performance, and (ii) the adjusted earnings per share to measure the AXA Group performance.
The achievement rate of the performance indicators (“performance rate”) is used to determine the number of shares, which will be definitively acquired by the beneficiaries at the end of the acquisition period, under the condition that the beneficiary is still employed by the AXA Group. The number of performance shares definitively 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%.
The AXA Group performance weighs for 40% performance of the total performance while the operating business weighs for 50%.
For beneficiaries in Group functions (including AXA executive off icers) as well as Head of Control Functions, the considered operating business is the AXA Group.
Since the 2016 grant, two relative performance criteria were introduced in the calculation of the global performance: ■ one criterion linked to Corporate Responsibility – CR (based on the Dow Jones Sustainability Index “DJSI”) which weighs for 10% of the global performance rate. Accordingly, the average of the scores achieved by AXA according to the DJSI during the acquisition period is compared to the average of the scores achieved by the other companies included in the DJSI over the same period. Consequently, under this indicator: • no share shall be granted if AXA’s score is lower than the 75th percentile (1),
or more) compared to the SXIP index shall trigger a maximum increase of the global performance rate of 5 points (subject however to the upper limit of 130% of the global performance rate) and AXA’s under-performance (75% or less) compared to the SXIP index shall trigger a maximum decrease of 5 points of the global performance rate. Between these minimal and maximal performance levels, the number of shares definitely granted shall be calculated on a linear basis depending on the performance achieved.
In the event of 100% achievement of the strategic plan targets
(“target”), the number of shares definitively granted at the end of the acquisition period would be equal to the number of performance shares initially granted.
Committee, should the performance be: ■ lower than the average cumulated results achieved over the 3 years immediately prior to the grant date, no share would be delivered to the beneficiary at the end of the acquisition period; consequently, in the absence of growth, no shares would be granted, and no potential underperformance would be rewarded; ■ equal to 100% of the average cumulated results achieved over the 3 years immediately prior to the grant date, the number of shares definitively granted would be equal to 50% of the number initially granted (the Board of Directors, upon recommendation from its Compensation & Governance Committee, has decided to lower this threshold to 40% from the 2020 grant onwards); ■ equal to 100% of the performance required to reach the target, the number of shares definitively granted would be equal to 100% of the number initially granted; ■ equal to or higher than 130% of the performance required to reach the target, the number of shares definitively granted would be equal to 130% of the number initially granted.
Calculation of the global performance rate = [40% Group Performance + 50% Operating Business Performance + 10% CR criterion]
+/- 5 points according to AXA’s score vs a relative performance criterion (TSR).
The Performance Shares and International Performance Shares granted in 2019 to all beneficiaries (except for the Management
The Performance Shares granted to the Management Committee members, including the Chief Executive Off icer, were acquired at the end of a 3-year acquisition period and restricted from sale during a 2-year holding period.
The Performance Shares and International Performance Shares granted in 2020 to the Management Committee members’
(a) International Performance Shares granted to Mr. Thomas Buberl prior to his appointment as AXA Chief Executive Off icer.
(d) 50% of International Performance Shares of the Management Commitee members have a 2-year holding period.
Number of Performance Shares cancelled 190,195 254,447 195,804 98,170 17,105 -
(a) Eleven employees have chosen the 4+0 vesting calendar (aquisition at June 6, 2020 with no restricted period), based on the plan rules due to moves out of France during the acquisition period.
(d) The members of the Management Committee (including the Chief Executive Off icer of AXA) have a 2-year holding period.
(f) 100% of the Performance Shares for the Chief Executive Off icer of AXA as well as 50% of the Performance Shares for the other members of the Management Committee have a 2-year holding period.
The fair value of performance shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 “Share based compensation instruments issued by the Group” in Part 5 “Consolidated Financial Statements” of this
Under the AXA Compliance & Ethics Code, all employees (including the executive off icers of the Company) are prohibited from engaging in any transaction designed to hedge the value of equity-based compensation awards (performance shares) granted under any plan or arrangement maintained by AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the beneficiary receives the securities underlying the award upon, for example, the lapse of restrictions on performance shares or similar events. In accordance with the recommendations of the Afep-Medef Code, the executive off icers of the Company make a formal commitment to not resort to hedging transactions.
Denis Duverne Chairman of the Board of Directors 24/03/2014 111,745 24/03/2019
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 19/06/2015 7,193 19/06/2019
Governance Committee, in order to simplify AXA’s compensation policy and in line with market practice and feedback received from a number of institutional investors, decided to cease awarding stock options to corporate off icers and AXA employees.
This performance condition also applied to the last tranche of each option grant (i.e. the last third of the options granted) for all other beneficiaries of options.
(1) SXIP index (Stoxx Insurance Index): a capitalization-weighted index, which includes European companies that are involved in the insurance sector. As at December 31, 2019, the index included 35 companies of the sector.
Management Board) 20/03/2009 20/03/2009 02/04/2009 10/06/2009 10/06/2009 21/09/2009 08/12/2009 08/12/2009 19/03/2010 19/03/2010
Start date of exercise 20/03/2011 20/03/2011 02/04/2011 10/06/2013 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012 19/03/2012
Exercise schedule of options 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y
Date of the Shareholders’ meeting 27/04/2011 27/04/2011 23/04/2014 23/04/2014 26/04/2017 26/04/2017
Exercise schedule of options 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 33% aft er 3 y 66% aft er 4 y 100% aft er 5 y 33% aft er 3 y 66% aft er 4 y 100% aft er 5 y 33% aft er 3 y 66% aft er 4 y 100% aft er 5 y 33% aft er 3 y 66% aft er 4 y 100% aft er 5 y 33% aft er 3 y 66% aft er 4 y 100% aft er 5 y
Number of options exercised at 31/12/19 2,507,217 1,106,925 191,693 180,437 76,416 0
(a) The number of options and exercise prices have been adjusted, pursuant to applicable regulations, as a result of operations on the AXA stock.
(c) Options were granted to Mr. Thomas Buberl prior to his appointment as Chief Executive Off icer.
(including the corporate off icers of the Company) are prohibited from engaging in any transaction designed to hedge the value of equity-based compensation awards (stock options and performance shares) granted under any plan or arrangement maintained by AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the beneficiary receives the securities underlying the award upon, for example, the exercise of a stock option or the lapse of restrictions on performance shares. In accordance with the recommendations of the Afep-Medef Code, the executive off icers of the Company make a formal commitment to not resort to such hedging transactions.
STOCK OPTIONS EXERCISED BY THE TOP 10 BENEFICIARIES (OUTSIDE THE CORPORATE
Stock options of AXA or any eligible AXA Group subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group subsidiaries, who exercised the highest number of stock options
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 85,745 -
Requirement”) representing a multiple of the annual fixed compensation received for his/her functions within the Group: ■ the Chief Executive Off icer is required to hold the equivalent of his annual fixed compensation multiplied by 3; ■ Management Committee members are required to hold the equivalent of their annual fixed compensation multiplied by 2; ■ Partners Group are required to hold the equivalent of their annual fixed compensation multiplied by 1.
Requirement such as described in the above Section “Share ownership policy for executives of the Group”.
(a) AXA shares which could be indirectly held through Mutual funds are not taken into account.
(b) The holding of AXA shares by directors representing the employees (Mmes Martine Bièvre and Bettina Cramm) is not mandatory.
Directors made the following disclosures in the course of 2019 concerning their transactions involving Company securities.
(a) Transaction performed by an independent financial intermediary pursuant to a discretionary mandate.
(b) AXA shares locked in under the AXA employee-stock purchase plan (plan d’Épargne d’entreprise du Groupe).
(c) Transaction performed by a legal entity linked to Denis Duverne.
(“blackout periods”) prior to the earnings releases. These blackout periods generally begin about 30 days before its annual or halfyear earnings releases and 15 days before its quarterly financial information. Depending on the circumstances, these blackout periods could be declared at other times or be extended.
Mr. Denis Duverne, who retired from his position as Deputy Chief
The collective defined benefits pension scheme is currently under review and amendment to ensure compliance with this directive.
The Chief Executive Off icer of the Company. Mr. Thomas Buberl, as well as all other employees of AXA Group entities in France, participate in a mandatory and collective supplementary pension scheme with defined contributions (collective insurance contract –
contrat d’assurance de Groupe as defined in Article L.141-1 of the
These performance shares are subject to (i) an acquisition period of three years, and (ii) an obligation to hold the shares until retirement, provided that the beneficiaries may sell all or part of their shares for diversification purposes (following the three-year acquisition period), as long as the sale proceeds are invested in a long-term savings plan until the beneficiary’s retirement.
The definitive acquisition of these shares is subject to (i) the beneficiary’s presence in the AXA Group on December 31 of the year during which the grant is decided, and (ii) the achievement of a performance condition related to the average AXA Group
Solvency II ratio calculated during the acquisition period and subject to diff erent performance levels: to benefit from the totality of performance shares initially granted, the average AXA Group
The Board of Directors also decided that no more than 10% of the total number of shares granted during any fiscal year should be granted to AXA’s executive off icers, to avoid an excessive concentration of retirement performance shares granted to the executive off icers.
On December 18, 2019, the Board of Directors approved a grant of retirement performance shares. Accordingly, 571,909 retirement performance shares were granted to 466 off icers, which represent 0.02% of the outstanding share capital on the date of the grant, of which 18,947 retirement performance shares were granted to
(a) Mr. Thomas Buberl is a beneficiary of the retirement performance shares plans.
(b) Mr. Denis Duverne decided to waive payment of the annuities he is entitled to under the collective defined benefit pension scheme, until termination of his term of off ice as Chairman of the Board without any retroactive payment. He does not benefit from additional pension schemes as Chairman of the Board.
Mr. Thomas Buberl has decided to renounce to his employment contract as of the date of his appointment as Chief Executive
Directors’ decision. The payment of the severance benefit would be subject to the three following performance conditions as determined by the Board of Directors during its August 2, 2016, meeting: (1) achievement, for at least 2 of the 3 preceding fiscal years, of the objectives set for the beneficiary’s variable compensation and corresponding to the payment of at least 60% of his variable compensation target, (2) evolution of the
AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of off ice, and (3) the average consolidated adjusted ROE over the 3 preceding years higher than or equal to 5%.
The amount of severance benefit to be paid to the beneficiary would be adjusted in accordance with the level of achievement against these performance conditions: 100% of the severance benefit will be paid if at least two of the three performance conditions are met; 40% of the severance benefit will be paid if only one performance condition is met; and no severance benefit shall be paid if none of the performance conditions are met. Notwithstanding the foregoing, if only two of the three performance conditions are met, the amount of severance benefit will be reduced by 50% if performance condition (1) above is not met or if AXA’s consolidated net income for the preceding fiscal year is negative.
No severance benefit will be paid if the beneficiary is entitled to a pension scheme within the 6 months following his termination.
I Compensation policy of the Company’s corporate off icers (Ordinary and Extraordinary Shareholders’ Meeting of April 30, 2020)
This policy was prepared in accordance with Articles L.225-37-2 and R.225-29-1 of the French Commercial Code and presents the principles and criteria for determination, distribution and allocation of all elements of compensation of the corporate off icers of the Company as approved by the Board of Directors during its meeting held on February 19, 2020, upon recommendation of its
Report, is responsible for, among others, formulating propositions to the Board of Directors regarding the Company’s principles and policy on corporate off icers’ compensation.
The Compensation & Governance Committee is mostly composed of independent members who exchange frequently with the
Structure and criteria for determination of the Chief Executive Off icer’s compensation
The diff erent components of the Chief Executive Off icer’s total compensation are presented in detail hereaft er: FIXED ANNUAL COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Board of Directors, relying in particular on a study carried out by an external advisory firm (Willis Towers Watson) regarding compensation practices for similar functions in a sample of CAC 40 companies and in the main European companies in the financial sector (insurance companies, banks), and upon recommendation of its Compensation & Governance Committee, decided to maintain unchanged, for 2020, the amount of the Chief Executive Off icer’s fixed annual compensation, at €1.45 million.
The Chief Executive Off icer’s variable annual compensation is subject in its entirety to challenging performance conditions and closely aligned with the Group’s strategy. No minimum payment is guaranteed to the Chief Executive Off icer.
Thus, the Board of Directors, upon recommendation of its Compensation & Governance Committee, and following a comparative review of national, European and industry practices, decided to maintain unchanged, for 2020, the Chief Executive Off icer’s target annual variable compensation, at €1.45 million, i.e. 100% of the amount of his annual fixed compensation.
The evaluation of the Chief Executive Off icer’s individual performance with respect to the 2020 fiscal year will be based on the following two components, each of them capped at a 150% achievement rate: ■ the Group’s performance, as assessed based on underlying earnings per share, return on equity (adjusted Return on Equity – ROE), gross revenues in both Commercial Property & Casualty and in Health & Protection, Net Promoter Score (customer recommendation index) and non-commission expenses. The relative weight of each indicator is, respectively, 55%, 15%, 10%, 10% and 10%. The indicators selected to measure the Group’s performance reflect objectives in terms of growth, profitability, capital management, operational eff iciency and proximity with clients that have been disclosed both internally and externally. Thus, indicators which are directly linked to the strategic orientations of the Group include both financial and operating indicators and rely on achievement of a predefined budget or target figure; ■ individual performance, assessed on the basis of various indicators and qualitative and quantifiable objectives determined by the
Board of Directors in a target letter drawn up at the beginning of each relevant year, as well as on the basis of demonstrated leadership abilities by the Chief Executive Off icer. The target letter includes detailed objectives with regards to the Group’s progress in the elaboration of its strategic plan as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives or relating to certain geographic areas, as well as progress on certain investments that are expected to contribute to the development of the Group’s operations.
Off icer will therefore be based on the addition of two components: the Group performance for 70% (compared to 50% beforehand)
Under this mechanism, payment of 30% of his actual annual variable compensation will be deferred over the course of two years and will be subject to performance condition. Thus, the actual deferred amount will vary depending on changes in the AXA share price over the deferral period, within a minimum of 80% of the deferred amount and a maximum of 120% of the deferred amount. However, no deferred variable compensation will be paid in the event that the Group’s underlying earnings are negative for the year ending immediately prior to the year of the scheduled payout, or in case of resignation or dismissal for gross or wi lful misconduct, prior to the payout date.
The Board of Directors also reserves the right to exercise its discretionary power regarding the determination of the Chief Executive
Payment of the Chief Executive Off icer’s variable cash compensation for 2020 is subject to the approval by the Shareholders’ Meeting to be held in 2021 of the compensation elements paid during or granted with respect to the 2020 fiscal year to the Chief Executive Off icer.
Each year, the Board of Directors, upon recommendation of its Compensation & Governance Committee, decides to grant Long-Term
In order to give the Chief Executive Off icer a stake in long-term value creation, these performance shares represent an important part of his compensation. Therefore, the value of the allocated performance shares is determined in order to position the Chief Executive
Off icer’s overall compensation (in cash and in shares) between the median and the 3rd quartile of market references.
However, the value of the performance shares granted to the Chief Executive Off icer as determined in accordance with the IFRS standards may not in any event exceed half of his total compensation.
The Board of Directors has also decided that the number of performance shares allocated to the Company’s corporate off icers may not exceed 10% of the total number of performance shares granted to all beneficiaries within the Group.
The Chief Executive Off icer, who also is a member of the Board of Directors of the Company, is not entitled to payment of any directors’
Section 3.2. of this Annual Report), linked to the average AXA Group Solvency II ratio calculated over the vesting period. Furthermore, no performance share would be definitely acquired should the Company not pay a dividend during any of the fiscal years of the acquisition period. Therefore, no minimum grant or gain is guaranteed to the Chief Executive Off icer under this scheme.
The Board of Directors, upon recommendation of its Compensation & Governance Committee, has decided that the total value of the retirement performance shares to be granted to the Chief Executive Off icer during 2020 shall not exceed 15% of his annual fixed and cash variable compensation.
For purposes of this policy only, and in accordance with applicable regulations, the Board of Directors has also considered the hypothetical appointment of a new Chief Executive Off icer following the Shareholders’ Meeting to be held on April 30, 2020.
Structure and criteria for determination of the Chairman of the Board of Directors’ compensation
Towers Watson) in order to identify compensation practices for similar functions in a sample of CAC 40 companies and in the main
Board of Directors. This role is presented in detail in the Board’s Terms of Reference as well as in Section 3.1 of this Annual Report and goes beyond the statutory duties of a Chairman under French law.
Accordingly, the Board of Directors has decided, upon recommendation of its Compensation & Governance Committee, to maintain the amount of the fixed annual compensation of the Chairman of the Board of Directors unchanged, for 2020, i.e. at €1.2 million.
Having considered that the most appropriate compensation structure for the Chairman of the Board of Directors would be fixed compensation only, the Board of Directors has resolved, as a consequence, that the Chairman of the Board of Directors will not benefit from any variable compensation, any directors’ fees, any performance shares grants, or of any other long-term compensation elements.
REGULATED COMMITMENTS MADE TO THE CHAIRMAN OF THE BOARD OF DIRECTORS
Appointment of a new Chairman of the Board of Directors aft er the Shareholders’
For further information on the compensation of the Chairman of the Board of Directors, please see Section 3.2 of this Annual Report.
COMPENSATION POLICY OF THE OTHER MEMBERS OF THE BOARD OF DIRECTORS
The total annual maximum amount of directors’ fees is determined by the Shareholders’ Meeting, in accordance with applicable laws, and apportioned by the Board of Directors to its members in accordance with its Terms of Reference (pursuant to the recommendations of Afep-Medef Code, a minority part of the fees is distributed evenly among the members of the Board of Directors as a fixed fee): ■ a fixed amount determined by the Board of Directors shall be paid annually to the Senior Independent Director (set at €80,000); ■ 65% of the remaining amount shall be allocated to the Board as follows: 40% shall be divided equally amongst Board members and paid as a fixed fee and 60% shall be paid depending on Board attendance; ■ the remaining 35% shall be allocated by the Board of Directors to the Board Committees as follows: 25% to the Finance Committee, 25% to the Compensation & Governance Committee, and 50% to the Audit Committee. Each Committee shall then allocate such amount to its members as follows: 40% shall be divided equally amongst members and paid as a fixed fee and 60% shall be paid depending on Committee attendance, with the Chairman of the Committee receiving in each case a double fee.
■ The total annual maximum amount of directors’ fees to be allocated to the members of the Board of Directors was set by the
(Mouvement des entreprises de France) in April 2010 and revised in January 2020 (hereaft er the “Afep-Medef Code”), which is available at AXA’s registered off ice or on its website (www.axa.
AXA complies with the recommendations of the Afep-Medef Code that are in line with the long-established corporate governance principles initiated by the Company. Details are presented in
Sections 3.1 “Corporate governance structure” and 3.2 “Executive compensation and share ownership” of this Annual Report describing corporate governance mechanisms and containing information about executives’ compensation.
Afep-Medef Code. However, in order to take into account certain specificities of its business and governance practices, AXA has decided, while remaining in line with the principles of the Afep-
Medef Code, to adapt the following provision of the Code: ■ Section 9.5 of the Afep-Medef Code relating to the independence of parent company directors holding a directorship in a Group subsidiary: although certain members of the AXA Board of
For further information concerning related-party transactions, please see Note 28 “Related-party transactions” included in
Department to carry out a prior review of the agreement in order to determine whether it should be subject to the “regulated”
In addition, the Group Legal Department annually assesses whether ordinary agreements concluded at arm’s length terms and conditions continue to meet the conditions for such qualification, in cooperation with AXA Group’s relevant departments and the
It is our responsibility to report to shareholders, based on the information provided to us, on the main terms and conditions of agreements that have been disclosed to us or that we may have identified as part of our engagement, as well as the reasons given as to why they are beneficial for the Company, without commenting on their relevance or substance or identifying any undisclosed agreements. Under the provisions of Article R.225-31 of the French Commercial Code (Code de commerce), it is your responsibility to determine whether the agreements are appropriate and should be approved.
Where applicable, it is also our responsibility to provide shareholders with the information required by Article R.225-31 of the French
On August 2, 2016, the Board of Directors acknowledged the eff ective renunciation by Mr. Thomas Buberl, in accordance with the
Consequently, the Board of Directors proceeded to a full review of the future social status of Mr. Thomas Buberl, once the renunciation of his employment contract will be eff ective in accordance with the Afep-Medef recommendations.
In this context, the Board of Directors, in view of the seniority of Mr. Thomas Buberl in his employee status and from the significance of his services provided to the Company, confirmed its wish to maintain social benefits (health and disability insurance, etc.), as an executive director, in the same conditions than the ones applicable to AXA Group director-level employees in France.
On February 17, 2010, the Supervisory Board acknowledged the eff ective renunciation by Mr. Denis Duverne of his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure.
The Supervisory Board was concerned that the decision of Mr. Denis Duverne to renounce his employment contract, in accordance with the Afep-Medef recommendations, would not jeopardize the continuity of his accrued and future social benefits.
Consequently, the Supervisory Board took the following decision: ■ The Supervisory Board authorized the Company to take all appropriate commitments to ensure that, as a corporate off icer, Mr. Denis
Duverne would continue to have social benefits (health and disability insurance, etc.) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefit plans in terms of health and disability insurance.
Risks related to the ownership of the Company’s shares 175 4.2 INTERNAL CONTROL AND RISK MANAGEMENT 176
Risk control and risk mitigation 197 4.5 LIQUIDITY RISK 201 4.6 INSURANCE RISKS 202
You should carefully consider the following risk factors together with other information contained in this Annual Report. Any of these risks could materially aff ect our business, financial condition or results of operations, cause the trading price of our ordinary shares to decline materially or our actual results to diff er materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company.
Management” of this Annual Report, which should be read in conjunction with this Section 4.1. While M anagement devotes very substantial resources to Risk Management on an ongoing basis, the Group’s Risk Management activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Part 4 or the losses that may be incurred in connection with these risks.
Where the risks described in this Section 4.1 have given rise to quantifiable and material financial impacts and/or material contingent liabilities, those financial impacts and/or contingent liabilities are reflected in the Consolidated Financial Statements.
You should also refer to Section 4.3 et seq. of this Annual Report for quantitative information on the material risks to which the Group is exposed. For avoidance of doubt, references to “insurance”,
“(re)insurance”, “Property & Casualty” and “Life & Savings” in this section also refer to “Health” activities as appropriate.
Italy and Hong Kong and the European Union; and continuing political uncertainty regarding the United States.
Agreement, most EU rules and regulations will continue to apply to the United Kingdom until December 31, 2020 (such period, the “Transition Period”), subject to a one-time extension of up to two years upon a joint decision of the European Union and the
Union and the United Kingdom will negotiate the terms of their new relationship during the Transition Period. Although they have agreed to a political declaration on the outline of their future partnership, the exact terms of that future relationship aft er the expiry of the Transition Period, including those regarding access to each other’s financial markets and cross-border financial services generally, remain subject to future negotiation. Such negotiations could have far-reaching and unpredictable eff ects on financial markets and macroeconomic conditions. These eff ects could be amplified by the uncertainty surrounding the terms of the new relationship between the European Union and the United
In-force life insurance and annuity products may become comparatively more attractive to customers in a declining interest rate environment, resulting in an increase in our liabilities (in particular in relation to flexible-premium products), asset-liability duration mismatches (as more policies and contracts remain in-force from year-to-year) and an increase in provisions for guarantees included in life insurance and annuity products.
Accordingly, during a period of declining interest rates or a prolonged period of low interest rates, our profitability may suff er as the result of a decrease in the spread between interest rates credited to insurance policyholders and annuity contract owners and the rates we are able to earn on our fixed-income investment portfolio. In addition, certain regulatory capital and reserve requirements are based on formulas and models that consider interest rates, such as the Group’s Internal Model, and an extended period of low interest rates may increase the regulatory capital we are required to hold and the amount of assets we must maintain to support our reserves, while decreasing the amount of our Eligible Own Funds (“EOF”), which could have an adverse impact on our Solvency II ratio.
For a description of the sensitivity of our EOF to changes in interest rates, please refer to Note 4.2 “Market risks (including sensitivity analysis)” in Part 5 “Consolidated Financial Statements” of this
Annual Report. For additional information on the sensitivity of our Solvency II ratio to financial shocks on interest rates, please refer to the AXA Group’s SFCR, available on AXA’s website (www.
Solvency II ratio to financial shocks on corporate bond spreads, please refer to the AXA Group’s SFCR, available on AXA’s website
Accordingly, ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors, could have a material adverse eff ect on our solvency position, and on our results of operations, financial position or cash flows through realized losses, impairments, and changes in unrealized gains and loss positions.
Financial Statements are established in Euro. Likewise, the part of our debt and other obligations denominated in currencies other than Euro is subject to foreign currency exchange rate fluctuations.
(1) The AXA Group’s SFCR for the year ended December 31, 2018 is available on AXA’s website, and the AXA Group’s SFCR for the year ended December 31, 2019 is expected to be published on May 14, 2020 on AXA’s website.
In particular, inflation in relation to medical costs, construction costs and tort issues impacts the Property & Casualty industry.
business, as they require a relatively long period of time to finalize and settle claims for a given accident year. Changes in the level of inflation could also result in an increased level of uncertainty in our estimation of claims reserves, particularly for long tail lines of business.
Adverse business and market conditions as well as accounting rules may impact the amortization of our Deferred Acquisition Costs
and other intangibles and/or reduce deferred tax assets and deferred policyholders participation assets, which could materially aff ect our results of operations and financial statements
We need liquidity to pay our operating expenses (including claims and surrenders), dividends and interests on our debts and to refinance certain maturing debts and other liabilities. In addition, we need liquidity in connection with derivatives transactions to which we are party which require us to transfer cash collateral and/or subject us to margin calls in certain circumstances. The
Insurer (and reinsurer) financial strength and credit ratings are important factors used by the market and customers in establishing the competitive position of insurance and reinsurance companies and in assessing our claims-paying ability. Rating agencies review their ratings and rating criteria and methodologies on a recurring basis, and they may change or withdraw their ratings at any time, based on relevant factors that may not be entirely within our control and/or aff ect the insurance and reinsurance industry generally. Consequently, our current ratings may not be maintained in the future and no undue reliance should be placed on such ratings, which should not be considered as recommendations to purchase, sell or hold any securities we have issued.
A downgrade or the potential for a downgrade in our ratings could have an adverse eff ect on us, including (i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies,
Such third parties include private sector and government (or government-backed) issuers whose securities we hold in our investment portfolios (including mortgage-backed, asset-backed, government bonds and other types of securities), borrowers under mortgages and other loans that we extend, reinsurers and capital market counterparties to which we have ceded
Adverse experience relative to the assumptions and judgment used in setting reserves, developing and pricing products and calculating industry measures of value may significantly aff ect our results of operations or performance indicators, which may have an adverse impact on the price of our securities
In our Property & Casualty business, we establish reserves for claims (either reported or unreported) and claims expenses in accordance with industry practices and accounting, actuarial and regulatory requirements. Reserves do not represent an exact calculation of liability, but instead represent expectations of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity and frequency, actuarial experience on past events, legal liability and other factors. While we continually review the adequacy of our claims reserves, because the establishment of claims reserves is an inherently uncertain and complex process involving numerous estimates, including the impacts of any regulatory and legislative changes, court interpretations, medical condition of claimants, emerging trends and theories of liability, including with respect to environmental, medical and products liability exposures, and changes in economic conditions (including inflation changes and discount rates used for evaluation of settlements), there can be no assurance that ultimate losses will not materially exceed our claims reserves and have a material adverse eff ect on our results of operations. The impact of certain of these factors, such as social inflation, particularly in the U.S.
In our Life & Savings business, 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. In certain cases, product features such as minimum guarantees or options to swap between underlying funds in certain savings products may with time result in higher realized losses than anticipated in initial assumptions.
In particular, assessing the impact of minimum guarantees which are contained within certain of our Variable Annuity products and the adequacy test performed on the reserves for life policies
The occurrence of natural or man-made disasters, including those resulting from changing weather patterns, diseases and climatic conditions, could adversely aff ect our financial condition, profitability and cash flows
insurers to reserve for catastrophic events until they occur may also augment the impact of such events.
While we seek to reduce our exposure to catastrophic events, through diversification and incremental reinsurance, we have experienced and could in the future experience material losses from these types of risks, which may exceed our reinsurance and retrocessional protection (or similar protection aff orded through risk transfer transactions to capital markets) or such protection may otherwise be inadequate to protect us against losses or uncollectible reinsurance when due. In particular, we may enter into risk transfer transactions to capital markets that off er reinsurance protection based on an industry loss index rather than on our actual incurred losses, which may result in our residual losses not being covered to the extent they are not fully correlated with the relevant share of the related industry loss.
Over the past several years, changing weather patterns and climatic conditions, including as a result of climate change, have added to the unpredictability of natural disasters and to the frequency and severity thereof and created additional uncertainty as to future trends and exposures. In particular, the consequences of climate change might significantly impact the insurance and reinsurance industry, including with respect to risk perception, pricing and modelling assumptions, and the need for new insurance products, all of which may create unforeseen risks and costs not currently known to us.
COVID-19 Outbreak. Since December 2019, a significant number of cases of pneumonia associated with the Coronavirus, now called COVID-19 by the W orld Health Organization (“WHO”), has been reported worldwide. Initially reported in the province of
The spread of COVID- 19 has resulted globally in governmental authorities imposing quarantines and travel restrictions of varying scope; has led to significant disruptions in the global travel and hospitality industries, and in global trade and supply chains more broadly; has resulted in decreased economic activity and lowered estimates for future economic growth; has created severe strains on local, national and supra-national medical and healthcare systems and institutions; and has caused global financial markets to experience significant volatility and the worst downturn since the 2008 financial crisis. While significant resources have been mobilized to attempt to find a vaccine or other measures to achieve containment of COVID- 19, such eff orts are in the early stages and there can be no assurance that vaccines or other treatments will be developed in the near term, nor that their eff icacy and availability will be adequate if and when developed.
We use derivatives (including equity futures, treasury bond futures, interest rate swaps and swaptions, equity options and variance swaps) to hedge certain, but not all, risks under guarantees provided to our clients or stemming from our assets.
In certain cases, however, we may not be able to apply these techniques to eff ectively hedge our risks as intended or expected or may choose not to hedge certain risks because the derivative markets in question may not be of suff icient 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 eff ectively hedge or for other reasons. This may result in higher realized losses and unanticipated cash needs to collateralize or settle transactions. Hedging counterparties may also fail to perform their obligations, resulting in unhedged exposures and losses on positions that are not collateralized.
Cyber attacks or other security breaches of our computer systems, technologies or networks, or those of our third-party providers, could disrupt our businesses, result in damage to our reputation or significant financial losses, and expose us to potential regulatory sanctions
Management has put in place internal controls and procedures designed to protect client data as well as the Group’s assets from hacking or other types of unauthorized intrusions into the Group’s computer systems, technologies and networks.
There is no absolute guarantee, however, that these controls and procedures will be suff icient, properly implemented or eff ective, and prevent all attempted intrusions into the Group’s systems, technologies and networks. Any such intrusion could result in operational disruption, financial losses, unauthorized access to or loss of sensitive personal data and/or proprietary information and lead to regulatory actions, proceedings or sanctions against us. In addition, due to our reliance on certain infrastructures and interconnectivity with third-party providers, exchanges, clearing houses, financial institutions and other third parties, we could also be adversely impacted by any successful cyber-attack or other security event aff ecting any of them.
Any failure in managing and implementing our strategic initiatives could materially impact our results of operations, share price, and competitive position
In connection with our “Ambition 2020” strategic plan, we have recently implemented a number of major initiatives which have had and can be expected to have a significant impact on the Group’s business, competitive position, and results of operations. These initiatives have included, for example, our acquisition of XL Group in 2018 and the resulting shift of our business mix further towards Property & Casualty lines, particularly commercial and specialty lines and reinsurance, as well as the IPO of EQH in 2018 and additional EQH share sales in 2018 and 2019. The combined eff ect of the acquisition of XL Group and the disposal of our remaining stake (1 ) in EQH
resulted in our overall business mix shift ing significantly, with reduced exposure to life/annuity business lines and significantly increased exposure to Property & Casualty lines, both in our direct business and in reinsurance. In addition, we have announced other major initiatives in the areas of life/health insurance; digital transformation and “insurtech”; increased exposure to Asian markets, including through the acquisition of the remaining 50%
stake in AXA Tianping from its domestic shareholders; the sale of
We may pursue acquisitions, joint ventures and other transactions to expand, complement or reorganize our business, which could adversely aff ect our business, future profitability and growth
Furthermore, we may be exposed from time to time to certain risks relating to the integration of newly acquired companies, which include, for instance, XL Group in 2018. Such risks include diff iculty or delay in integrating such companies, their IT, operations, employees and areas of expertise in an eff icient and eff ective manner, which may result in the loss of certain key employees and/or customers of the acquired companies. As a result, we may not be able to eff ectively integrate acquired companies and achieve all of the expected strategic objectives, anticipated synergies, expected cost savings, impact on solvency capital requirements (including contributions to the Group’s Solvency II
(1 ) Excluding the 44,162,500 shares of EQH’s common stock, primarily related to the EQH shares to be delivered on redemption of the bonds mandatorily exchangeable into EQH’s shares, issued by AXA in May 2018 and maturing in May 2021. For additional information on the selldowns of EQH, please refer to Section 2.2 “Operating Highlights” of this Annual Report.
We may also carry out divestitures, such as the announced sales of AXA Life Europe in 2018, AXA Bank Belgium in 2019 and our operations in Poland, Czech Republic and Slovakia, announced in
From time to time, we may also consider acquisitions of or investments in other companies, including through joint ventures.
Any such acquisition or investment may be subject to approvals from regulatory authorities in certain countries, including as a result of foreign investment regulations and controls, which may lead to the transfer of certain assets or branches of activity and/or commitments or restrictions aff ecting the conduct of our business.
An ongoing challenge we face is the eff ective adaptation to a constantly changing technological landscape. If we are not eff ective in anticipating the impact on our business of changing technologies, such as driverless cars, drones, connected devices, artificial intelligence or roboadvisors, 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 also aff ect our ability to accurately price our products and might significantly aff ect 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. In addition, the market for coverage for so-called
“cyber risks” or similar emerging threats is a rapidly evolving one, and any failure by us to provide innovative products relative to our competitors or new entrants in the market may result in a competitive disadvantage.
In addition, the rapid increase in the nature, volume and availability of data in recent years, whether resulting from connected customers, so-called “big data”, “blockchain”, cloud computing, satellite information, personalization of genetic data, asymmetric information with respect to genetic testing, artificial intelligence or otherwise, may have unanticipated and adverse impacts on our business, for example by changing the nature of insurance underwriting, pricing and claims handling; by allowing customers and competitors to tailor coverage in ways that we do not currently off er; or by potentially exposing us to increased “moral hazard” in business lines where we are unable for regulatory or other reasons to adjust pricing or coverage to reflect individual risk profiles. While data-driven changes in the industry are at an early stage and diff icult to predict, they could adversely impact our business going forward, including through the expense and eff ort that we will need to incur in order to ensure that our employees, systems and processes are able to eff iciently adapt to and manage such changes as they arise.
We operate through arrangements with third parties, including delegation of underwriting and claims authority, which exposes us to operational and regulatory risks and could materially adversely impact our business, results of operations and financial condition
Furthermore, as with other reinsurers, in our reinsurance business we do not separately evaluate each of the individual risks assumed under our reinsurance treaties and we largely rely on original underwriting decisions made by ceding companies. As a result, if ceding companies did not adequately evaluate the risks insured, the premiums ceded to us may not compensate us for the risks we reinsure and the losses we may incur, which may adversely aff ect our results of operations and financial condition.
We carry out certain of our operations through joint ventures and other partnership arrangements with third parties that we do not control. These arrangements expose us, in particular, to the failure of any of our partners to meets its contractual obligations or to comply with applicable laws and regulations.
There can be no assurance that any of our contractual arrangements with third parties will not expose us to operational, financial and reputational risk, which could materially adversely impact our business, results of operations and financial condition.
failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position
Pensions Authority (“EIOPA”), including regarding (re)insurance group supervision and internal models used by certain (re)insurers, such as AXA, to calculate their solvency capital requirement. It is diff icult to predict the ultimate outcome of discussions regarding changes to these requirements, the impacts of which could include additional regulatory costs and operational constraints, as well as changes to our Internal Model, which may significantly and adversely aff ect our Solvency II ratio and EOF, results of operations, financial condition and liquidity.
The AXA Group’s Solvency II ratio is sensitive to capital market conditions (including the level of interest rates, the level of equity markets and foreign exchange impacts) as well as other economic factors. For additional information on the sensitivity of our Solvency II ratio to capital market conditions, please refer to the AXA Group’s SFCR, available on AXA’s website (www.axa.com) (1 ).
(1 ) The AXA Group’s SFCR for the year ended December 31, 2018 is available on AXA’s website, and the AXA Group’s SFCR for the year ended December 31, 2019 is expected to be published on May 14, 2020 on AXA’s website.
measures which may significantly increase regulatory capital requirements. In particular, the ACPR, the French insurance supervisory authority may impose changes to the Internal Model we use to calculate our SCR or change its view regarding our methodologies and/or the integration method of some of our subsidiaries, which may adversely aff ect our Solvency II ratio. For additional information on our Internal Model and Solvency II ratio, please refer to Section 4.2 “Internal Control and Risk Management –
In the event of a failure by us, the Company or our (re)insurance subsidiaries to meet applicable regulatory capital requirements, insurance supervisory authorities have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends or other shareholder distributions, and/or putting a company into recovery, resolution or insolvency proceedings. In particular, under the French recovery and resolution framework for the insurance industry (the “French Resolution Framework”), the ACPR
Regulatory restrictions that inhibit our ability to freely move excess capital among our subsidiaries or which otherwise restrict fungibility of the AXA Group’s capital resources may, depending on the nature and extent of the restrictions, adversely aff ect the capital position of our operating (re)insurance subsidiaries, which may have a consequent negative impact on the perception of the
Additional regulatory developments regarding solvency capital requirements, including changes to the Solvency II framework, may adversely aff ect our prudential regime as well as increase associated costs. There can be no assurance that contingency plans developed by M anagement will be eff ective to achieve their objectives and any failure by us and/or our (re)insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse eff ect on our business, liquidity, credit ratings, results of operations and financial position.
Our (re)insurance and financial services operations are generally conducted through direct and indirect subsidiaries. As a holding company, our principal sources of funds are dividends from subsidiaries and funds that may be raised from time to time through the issuance of debt or equity securities or through bank or other borrowings.
(1 ) Please also refer to the AXA Group’s SFCR for the year ended December 31, 2019, which is expected to be published on May 14, 2020 on AXA’s website.
The AXA Group operates in 57 countries around the world and our operations are subject to a wide variety of insurance and other laws and regulations. Our regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and aggressive role in interpreting and enforcing regulations in the jurisdictions in which we do business, resulting in significant compliance challenges. We have highlighted below some of the more recent and noteworthy regulatory developments that we anticipate may impact our business in the coming periods; further details regarding these and related regulatory and supervisory matters also appear in Section 6.3 “General Information – Regulation and
Capital Standards. The multiplicity of diff erent regulatory regimes, capital standards and reporting requirements resulting from work on new capital standards led by the IAIS such as the Insurance
Capital Standard (the “ICS”), and the development by IAIS of the
AML and Compliance Matters. In recent years there also has been a significant increase in legislative and regulatory initiatives and enforcement actions in the areas of financial crime compliance, anti-money laundering (“AML”), international trade sanctions and anti-bribery laws and regulations (including the US Foreign
No. 2016-1691 of December 9, 2016, known as “Sapin II”, and the various implementing measures of Directive 2015/849 of
May 20, 2015, as amended, including enhanced control on transactions involving high risk countries and requirements regarding disclosure of beneficial ownership). In particular, financial crime compliance programs of financial institutions
continue to be a major focus of regulatory and law enforcement authorities. In France, the Sapin II Law recently introduced new requirements for all large French companies and corporate groups, such as the AXA Group, including the establishment of internal procedures to prevent and detect acts of corruption and influence peddling committed in France and abroad, while establishing a new French anti-corruption agency (Agence française anticorruption), which was given strengthened supervisory and enforcement powers. Furthermore, in certain jurisdictions the relevant AML, anti-corruption and sanctions rules may be enforced on an extraterritorial basis, which could expose our operations to additional or conflicting requirements. In addition, increased cooperation amongst authorities globally may, in the event we become subject to enforcement proceedings, or are otherwise found to be non-compliant in this area, result in more severe sanctions or monetary penalties.
Benchmark Reforms. Regulatory authorities have also proposed reforms to and potential changes aff ecting interest rate, equity, foreign exchange rate and other types of indices (also known as “benchmarks”). In particular, Regulation (EU) 2016/1011 of June 8, 2016 (as amended, the “Benchmark Regulation”), which entered into force on January 1, 2018, imposed additional requirements on the provision of financial market-related benchmarks, the contribution of input data to a benchmark and the use of benchmarks within the EU. Several interbank market benchmarks have been designated as critical benchmarks under the Benchmark Regulation, including Libor, Euribor and
Libor, as it is likely that contributing banks will cease providing submissions for the calculation of Libor aft er 2021. We are closely following industry and regulatory developments with respect to the potential impacts of future benchmark changes, which could have implications for our capital models, risk management eff orts, investment strategies and product design, amongst others. Implementation of these and any future regulations, amendments to existing regulations, or future or revised guidance issued by regulatory authorities (such as the European Securities and Markets Authority (“ESMA”), EIOPA, the AMF and the FCA)
French, European Union and international levels, regarding climate change may aff ect our operations and those of our counterparties, and potentially limit our investments or aff ect their value, as certain companies struggle to adapt to these regulations. These may include: (i) new investment requirements; (ii) new disclosure requirements, such as the recently adopted
Changes to IFRS. Changes to IFRS, as developed by the International
Accounting Standards Board (“IASB”), could significantly impact insurers and other financial institutions, including AXA, that prepare their consolidated financial statements in accordance with IFRS.
Information – Regulation and Supervision – Other significant legislative and regulatory frameworks”. The abovementioned and any other changes to IFRS that may be adopted in the future could have a material adverse eff ect on our results of operations and financial position.
Lloyd’s market could also impair Syndicate 2003’s ability to trade in certain classes of business at current levels. As a Lloyd’s syndicate providing coverage to US policyholders and covering US
risks, we could also be required by US regulators to increase the level of funding required as minimum deposits for the protection of US policyholders. Any Lloyd’s-related risks could have an adverse eff ect on our business, financial condition and results of operations.
We expect the scope and extent of applicable laws and regulations, as well as regulatory oversight, to continue to increase over the coming years. While M anagement proactively manages legal and regulatory risks and has adopted policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where we do business, we cannot predict with any certainty the potential eff ects that a change in applicable laws or regulations, their interpretation or enforcement (or of the potential eff ects of any new regulation or legislation in the future), or any determination we make regarding compliance with conflicting regulations, may have on our business, financial condition or results of operations. Any failure by us to remain in compliance with regulations applicable to us could result in fines, penalties, injunctions or other similar restrictions, any of which could negatively impact our earnings and reputation.
We may also be adversely aff ected by a change in applicable laws or regulations, their interpretation or enforcement impacting, or regulatory decisions, authorizations or approvals relating to, third parties with which we do business. For instance, certain of our letter of credit facilities for cedants are eff ective only if the banks issuing the letters of credit are on the list of banks approved by the
(both class actions and individual lawsuits) and involved in various regulatory investigations and examinations, and other actions arising in the various jurisdictions where we and our subsidiaries do business. Please refer to Note 31 “Litigation” in
Certain of these lawsuits and investigations seek significant or unspecified amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these proceedings have substantial powers over the conduct and operations of our business. The introduction of a class action system in France in 2014 and similar developments in certain other European jurisdictions and at the EU level have increased, and are likely to continue to increase litigation, risks and costs. Similarly, in the
US there is an increasing trend towards large damage awards in the consumer class action context, and such trend can be expected to continue in the future. For additional information, please refer to Section 6.3 “General Information – Regulation and
Collection, transfer and protection of significant amounts of sensitive data are critical to the operation of our business.
Decision by the European Union Court of Justice (the “2015 ECJ
In order to raise capital to fund future growth or for solvency purposes, we may, in the future, off er rights, warrants or similar securities at prices below the then-current market price which may adversely aff ect the market price of our ordinary shares and dilute the positions of existing shareholders.
Management and Banking businesses on a global scale. As such, it is exposed to a wide variety of risks, including market risks, credit risk, insurance risks, operational risk and other material risks, as further described in this Part 4 “Risk factors and Risk
Management” (1) and in Note 31 “Litigation” in Part 5 “Consolidated
In addition, the Solvency II regime requires the Group to have in place an eff ective system of governance which provides for sound and prudent risk management. This governance system must be based on a clear separation of responsibilities and must be proportionate to the nature, extent and complexity of the
The four key functions are: ■ the Risk Management function is responsible for coordinating the second line of defense, ensuring that the risk appetite is implemented with respect to all risks, and in charge of the design, implementation and validation of AXA Group economic capital model which is the basis for the Group Solvency II
■ the actuarial function is responsible for overseeing the calculation of Solvency II technical provisions (including ensuring the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions), assessing the suff iciency and quality of the data used in this calculation and comparing best estimates against experience, expressing an opinion on the overall underwriting policy and on the adequacy of reinsurance arrangements. The actuarial function holder at Group level is the Group Actuarial Function Holder. For further information on the actuarial function, please refer to Section 4.6 “Insurance
The Group Chief Executive Off icer and the Group Deputy Chief
■ propriety, taking into account reputation, financial soundness and personal characteristics such as integrity and transparency
(“ACPR”), through a formal process, including submission of a detailed questionnaire addressing the fitness and propriety of each person, as well as detailed background information.
The Board of Directors is responsible for ensuring that an appropriate and eff ective system of internal control and Risk
The Board of Directors has established three Committees to assist it in fulfilling its responsibilities: an Audit Committee, a Finance
Board of Directors and its Committees, please refer to Section 3.1
For more information about the Executive Management, please see Section 3.1 “Corporate governance structure” of this Annual
The scope of the ARCC covers all the Group’s operations and includes the following: ■ the Group’s overall risk appetite, material breaches of risk limits and proposed remedial actions, the Group’s risk framework as well as action plans proposed to reduce or otherwise modify the Group’s material risk positions when they are beyond defined limits; ■ the Group’s standards and limits to ensure that they are consistent with the Group’s defined risk appetite; ■ the Own Risk & Solvency Assessment (“ORSA”) and the other
Reporting to the ARCC, the following Group Risk Committees cover the main risk categories: ■ for financial risks: the Group Financial Risk Committee is co-chaired by the Group Chief Financial Off icer and the Group
Compliance Committee is co-chaired by the Group Chief Risk and Investment Off icer and the Group Chief Operating Off icer.
Risk Off icer and the Group Chief Financial Off icer, is in charge of (i) steering the overall AXA Group Solvency II framework,
Group Risk Committees are supported by local Risk Committees to ensure consistency in the implementation of the Enterprise
(ii) identifying and managing the risks inherent in the products, services and activities in their scope and (iii) designing, implementing, maintaining, monitoring, evaluating and reporting on the Group’s internal control system in accordance with the risk strategy and policies on internal control as approved by the
Off icers provide a systematic and independent second opinion on product approval process, reserves, reinsurance, investments and ALM, and challenge on operational risks and strategic plan;
4. Extensive use of Internal Model based on a robust economic capital metric: the Internal Model is intended to offer a concrete and powerful tool to control and measure exposure to most risks, in line with the Solvency II
The Group Chief Compliance Off icer reports to the Group Deputy
The compliance activities within the Group are set out in a number of standards and policies which set the minimum requirements expected to be achieved by the entities and their compliance functions.
The Group Compliance function has implemented a number of monitoring processes. For example, the Compliance Support and
The main purpose of these reviews is to measure adherence to the Group Standards and Policies, to define improvement action plans, to provide experienced advice and to rate the entity’s maturity level against other Group companies. This program was introduced in 2009 using a risk-based approach.
On a regular basis, the Group Compliance function reports to the Group Audit Risk & Compliance Committee, the Audit
Committee, and the Board of Directors (as required) on significant compliance matters. These include major regulatory changes that have compliance implications, results of the Compliance
Operational Risk and Internal Control. The Group Internal Control department is responsible for the development of a standardized methodology and framework for internal control and for oversight of its implementation in the AXA Group’s subsidiaries. For more information on the internal control at local level, please refer to the paragraph “Risk Management and internal control at local level” below.
Framework” of the Committee of Sponsoring Organizations of the Treadway Commission; ■ is an integral part of the Risk Management thus providing the
December 2017; ■ encompasses Internal Financial Control, implemented since 2010 to provide reasonable assurance regarding the reliability of Internal Control Over Financial Reporting (“ICOFR”), and extended to Solvency II in 2014 to contribute to the Internal
Committee and the Group’s Management Committee with independent and objective assurance on the eff ectiveness of the overall control environment across the Group.
AXA Group Audit Committee with an administrative reporting line to the Group Deputy Chief Executive Off icer.
All internal audit teams across the Group report to the Global
Over the audit cycle, all applicable audit universe components for each entity are expected to be audited. Any exceptions identified are notified to the Audit Committee for ratification.
AXA SA and entities (including Joint Ventures) where AXA has the majority of the voting rights, or has a minority interest but exercises control through other means such as management.
Group Chief Executive Off icer that to the best of their knowledge their entities comply with the Standards. Entity Boards must be formally informed of the Annual Certifications, together with any material breaches, areas of non-compliance and corresponding mitigation plans in order to monitor progress of remedial actions.
Risk Management: Risk Management is a local responsibility, in accordance with GRM standards and guidelines. The roles and responsibilities of local Risk Management teams are validated jointly by the Executive Committees of local entities and the
Local Chief Risk Off icers regularly report to the local Board of
Off icer. Local Heads of Internal Control (or equivalent) regularly report to the local Executive Committee (or to a sub-committee)
Compliance: The local Compliance functions are expected to undertake an annual Compliance Risk Assessment to identify the major compliance risks to which the business is exposed. Based on the Compliance Risk Assessment, an Annual Compliance
The PBRC department within the Group Finance department is responsible for consolidation, management reporting, as well as actuarial indicators and the economic balance sheet.
The local PBR units are responsible for producing their respective contribution to the Group Consolidated Financial Statements.
PBRC has defined and implemented a set of policies and procedures to ensure that the consolidation process leading to the consolidated financial statements is timely and accurate. This consolidation process is based on the following:
These guidelines are submitted to AXA’s Statutory Auditors for review before being made available to AXA’s subsidiaries.
Financial Off icer of each entity signs off on the accuracy of their respective contribution to the consolidated figures reported through “Magnitude” and their compliance with both the AXA
Group Accounting Manual and instructions in all frameworks produced (IFRS, Embedded Value, actuarial indicators and economic balance sheet) within the internal financial control program.
At PBRC level, accounting, financial and economic information reported by entities are analyzed by teams that liaise with subsidiaries on a full-time basis. In particular, these teams analyze the compliance with the AXA Group Accounting Manual and
In that context, and based on the Group Internal Control Standard, the Group has implemented a comprehensive program managed by Group Risk Management, entitled Internal Financial Control
The IFC program is based on the Group’s IFC Standard, which is an internal control and governance standard based on the “Internal
The entities in IFC scope are required to document their significant processes and key controls, as well as the rationale of how the associated risk of material misstatement due to error or fraud can be reduced to an acceptable level. This is performed under the supervision of the Chief Financial Off icer, sponsor of the IFC
At each year-end, the in-scope entities have to perform an evaluation of their ICOFR as part of an internal certification process, involving formal sign-off by process owners and with a formal management report from the entity’s Chief Financial Off icer and
The Group has implemented a formal internal review and sign-off process pursuant to which all Management Committee members,
Document and formally certify (i) the accuracy and completeness of the information in the Annual Report with respect to the companies under his/her responsibility, and
Registration Document relating to risk and other matters; 4. Chief Financial Off icer Sign-Off Certificates on the notes to the Consolidated Financial Statements: PBRC provides Chief
Under Solvency II, the Group and certain of its subsidiaries (i.e.
Chief Risk Off icer is responsible for developing the ORSA policy, implementing the ORSA process and coordinating the ORSA
Committee and then presented, first, to the ARCC and the Audit
Board of Directors and to the ARCC which regularly reviews all material audit, risk and compliance issues faced by the Group.
Management system, including the identification, monitoring and management of non-quantifiable risks; ■ the compliance, on a continuous basis, with (i) regulatory capital requirements, through the assessment of the ability to meet capital requirements using the approved Internal Model, in compliance with the Solvency II regulatory standard, as well as
The Group has developed a robust economic capital model since 2007. The internal model of the Group (the “Internal Model”)
Internal Model encompasses the use of AXA Group’s economic capital model on all material entities, except entities that were part of the XL Group we acquired in 2018 (“XL entities”). The
AXA continues to review regularly the scope, underlying methodologies and assumptions of the Internal Model and will adjust its SCR accordingly. In addition, AXA’s Internal Model has been and may be revised from time to time in accordance with applicable regulations. However, any major change to the
The Group’s main goal in using its Internal Model as opposed to the Solvency II standard formula is to better reflect the Group’s risk profile in its SCR. This is reflected through several objectives: ■ taking into account local specificities – The Group is a global company, and caters to a wide range of insurance markets with a variety of products off ered targeting certain demographics and with diff ering risk exposures. It is therefore appropriate, to the extent possible, to calibrate stresses specific for these risk profiles and to allow for the benefits of diversification of risks which arise as a result of being spread over these markets; ■ addressing shortcomings inherent to the standard formula –
■ allowing for better evolution of the model over time – as the
Group’s experience increases, business expands to new markets and product innovations create diff erent risks to consider, the flexibility of an internal model allows the specificities of these developments to be reflected.
The Internal Model is based on a common definition of risks used consistently throughout the Group. It aims to ensure that the
The underlying methodologies and assumptions used in the economic capital model are regularly reviewed to ensure that they accurately reflect the AXA Group’s risk profile and new methods are developed and integrated regularly (in accordance with the
In addition to the SCR assessment, which intends to cover all quantifiable risks to which the Group is exposed (insurance, financial, and operational risks), the AXA Group performs sensitivity analyses of its Solvency II ratio to material risks and events.
AXA Group’s Solvency II ratio of (i) financial shocks on corporate bond and sovereign spreads, on interest rates, and on equity and
(ii) a wide range of shocks reflecting historical stress events (such as the 2008-2009 financial crisis, the 2011 financial crisis, the 1918
The Solvency II ratio as of December 31, 2019, published on
(1) The Group risk grid is designed to identify all risks applicable to AXA businesses. Risk categories are further split into sub-risks. The risk assessment is performed at the sub-risk level. The risk grid is regularly reviewed and validated at Group level.
(2) The Solvency II ratio is estimated primarily using AXA’s internal model calibrated based on an adverse 1/200 years shock. In compliance with the ACPR’s decision, from January 1, 2019, entities that were part of the XL Group (“XL entities”) have been fully consolidated for Solvency II purposes (as per the consolidation-based method set forth in the Solvency II Directive) and their contribution to the Group’s solvency capital requirement has been calculated using the Solvency II standard formula. Subject to prior approval of the ACPR, the Group intends to extend its internal model to XL entities as soon as December 31, 2020. For additional information, please refer to Section 4.2 “Internal Control and Risk Management - Internal Model” . The Solvency II ratio will be finalized prior to the publication of the AXA Group’s SFCR currently expected to be on May 14, 2020.
Model governance are as follows: ■ the Board of Directors reviews the Internal Model, and authorizes the application to the ACPR for approval of major changes to the Internal Model; ■ the Audit, Risk and Compliance Committee; and
Validation does not only apply to the quantitative aspects of the model (input data, theory & methodology, parameters & assumptions, data, results) but also encompasses the qualitative aspects of the model: expert judgment, documentation, model governance, use test, systems/IT.
The AXA Group, as an insurance group, follows an investment strategy mainly driven by Asset & Liability Management (“ALM”).
The overall objectives of all investment decisions made within the Group are to meet its obligations and commitments to policyholders, to protect the solvency of the Group’s entities, and to generate superior return over time.
The Group Chief Investment Off icer (Group CIO) heads the Groupwide community of local insurance companies CIOs, the central
Moreover, they are responsible for the investment performance and for implementing and executing a sound Asset Liability
In order to eff iciently coordinate local and global investment processes, decisions within the Group’s investment community are taken by two main governance bodies: ■ the Group Investment Committee, which is co-chaired by the Group Chief Risk and Investment Off icer and the Group
Chief Financial Off icer. This Committee defines the Group’s investment strategy, steers tactical asset allocation, evaluates new investment opportunities and monitors the Group’s investment performance; and
ALM constraints are also taken into account when new insurance products are being designed as part of the product approval process (see Section 4.6 “Insurance risks – Product approval” of this Annual Report).
ALM study must be reviewed by local Risk Management, and verified against predefined risk appetite limits, before being approved by the local Investment and ALM Committee.
Investment opportunities, like non-standard investments, new strategies or new structures, are subject to an Investment Approval
Committees. In addition, there is a segregation of duties between those responsible for making investment decisions, executing transactions, processing trades and instructing the custodian.
has established rules on authorized counterparties, minimum requirements regarding collateral and counterparty exposure limits.
For a large proportion of its assets, the Group utilizes the services of asset managers to invest in the market: ■ local AXA companies assign the day-to-day management of their asset portfolios primarily to AXA’s Asset Management subsidiaries, i.e. AXA Investment Managers and Architas. Local
Information in this section should be read in conjunction with the paragraph “Market-related risks” in Section 4.1 “Risk Factors”
Casualty (P&C) portfolios are exposed arise from a variety of factors including: ■ a decline in market returns may cause us to accelerate amortization of deferred acquisition costs, value of business in-force and other intangibles; ■ a decline in returns on assets (linked to a sustained fall in yields on fixed income investments or to lower equity markets) could reduce investment margins on General Account products or fees on Unit-Linked contracts and impact the performance of asset managers; ■ a change in yields on fixed-income investments (linked to changes in interest rates or in credit spreads) aff ects the market value of investments and liabilities and could impact adversely the Group’s solvency position, and increase policyholder’s surrenders due to competitive pressures; ■ a decline in asset market value (relating, for example, to equity, real estate, or alternatives, etc.) could adversely impact the