THE AXA GROUP 3 1.1 Selected consolidated fi nancial data 4 1.2 Information on the Company 6 1.3 Activity Report 20 1.4 Liquidity and capital resources 87
CORPORATE GOVERNANCE 93 2.1 Corporate offi cers, executives and employees 94 2.2 Full disclosure on executive compensation and share ownership 113 2.3 Major shareholders and related party transactions 141 2.4 The offer and listing markets 149
Certain disclosures about market risks and related matters 3.2 Risk factors 155 3.3 Quantitative and qualitative disclosures about risk factors 168 3.4 Investment Community and organization 185
CERTAIN ADDITIONAL INFORMATION 333 5.2 Description of AXA’s share capital 338
Appendix II Management’s annual evaluation of internal control over fi nancial reporting 349
This Annual Report also includes (i) all the components of the Annual Financial Report (Rapport Financier Annuel)
This registration document was fi led with the Autorité des marchés fi nanciers (AMF) on March 21, 2014, in accordance with the provisions of Article 212-13 of its General Regulations. It may be used in support of a fi nancial transaction if supplemented by an information memorandum approved by the AMF. This document has been prepared by the issuer, and its signatories are responsible for its content.
anonyme organized under the laws of France, which is the publicly traded parent Company of the AXA Group, and (ii) “AXA
Group”, the “Group” and/or “we” refer to AXA SA together with its direct and indirect consolidated subsidiaries. The Company’s ordinary shares are referred to in this Annual Report as “shares”,
For a discussion of the impact of foreign currency fl uctuations on the AXA Group’s fi nancial condition and results of operations, please see Part 1 – “The AXA Group”, Section 1.3 “Activity Report” of this Annual Report.
Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predictions of, or indicate, future events, trends, plans or objectives. Undue reliance should not be placed on such statements because they are by nature subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and AXA’s plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future weatherrelated catastrophic events or terrorist related incidents. Please refer to Part 3 – “Regulation, risk factors, certain disclosures about market risk and related matters” of this Annual Report for a description of certain important factors, risks and uncertainties that may affect AXA’s business and/or results of operations. AXA undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to refl ect new information, future events or circumstances or otherwise.
(In Euro million except per share data) 2013 2012 Restated (a)
A dividend of €0.81 for the 2013 fi scal year will be proposed to the Shareholders’ Meeting to be held on April 23, 2014.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 23, 2014. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.32 per share for fi scal year 2013.
I Table of principal subsidiaries with G roup equity interests and voting rights percentages
PRINCIPAL RATINGS OF THE GROUP AS AT MARCH 11 , 2014
At March 11 , 2014 , the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
December 31, 2013 of €1,113 billion. Based on available information at December 31, 2013, AXA was the world’s 9th largest asset manager (1).
(1) Ranking established by AXA based on the information available as of September 30, 2013.
(b) Restated means comparative information relative to previous periods was retrospectively restated for the amendments to IAS 19.
Assets backing contracts with fi nancial risk borne by policyholders (Unit-Linked) 162,186 147,162
For additional information on AXA’s revenues by segment and geographic area, see Note 21 “Segmental information”
Note 3 “Statement of income by segment” included in Part 4
Fees and charges relating to investment contracts with no participating feature 323 334
Life & Savings products sold by AXA. Many other insurance companies offer similar products to those offered by AXA, and, in some cases, also use similar marketing techniques and distribution methods.
Health products marketed to individual and commercial clients. The Life & Savings products offered by AXA include
Term life, Whole life, Universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. The Health products offered include critical illness and permanent health insurance products. The types and specifi cities of the products offered by AXA vary from market to market.
Gross written premiums by main product lines- Years ended December 31, (b)
To attract and retain clients, especially in the segments identifi ed as strategic, AXA has developed solutions designed to meet the needs of the targeted customer groups. In addition, new products have been designed to support AXA’s crossselling strategy and thus improve client retention and enhance value for the clients. AXA also aims to reuse across markets successful products and experiences developed for individual country markets.
AXA believes that the diversifi cation of its distribution channels through the development of new channels improves opportunities for increased penetration and more frequent contact with AXA’s target customer base.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2013 and 2012, is presented below: Based on gross revenues in 2013
For most Life & Savings products, fees and revenues accrue over time, while costs to the issuing company in the fi rst year are generally higher than costs in subsequent years due to fi rst year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate”, plays an important role in profi tability. The majority of Individual Life &
Savings products issued by AXA may be surrendered for a cash surrender value. Most of the Individual Life & Savings products issued by AXA have front-end charges to the policyholder (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges (charges assessed in the case of early surrender). Both front-end charges and surrender charges are intended to offset a portion of the acquisition costs.
Total surrenders and lapses for 2013 amounted to €28,296 million (2012: €25,056 million) and the ratio of surrenders and lapses was 6.9% (2012: 6.3%).
Business lines since early 2010 to support a new stage of its development. Life & Savings Global Business line, as part of its role to defi ne a common strategy has set the following priorities: ■ focus on inforce optimization; ■ increase productivity and effi ciency; ■ reshape the Savings business; ■ actively grow Protection and Health business.
(b) Mediterranean and Latin American Region includes Spain, Italy, Portugal, Greece, Morocco, Turkey, Mexico and the Gulf Region.
Personal and Commercial Property & Casualty insurance products in other countries in Central and Eastern Europe as well as in Asia (notably Singapore, Malaysia, Hong Kong, China and Thailand), the Middle East and Latin America (Mexico). In addition, AXA operates in Direct insurance mainly in the United
Continental Europe, the same distribution channels may be used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the “Distribution channels” section in the Life &
The split of distribution channels used by AXA’s Property & Casualty operations (excluding Direct), based on gross revenues for the year ended December 31, 2013 and 2012, is presented below: Based on gross revenues in 2013
(1) Ranking established by AXA based on information available for the year 2013.
The table below presents the International Insurance segment’s gross written premiums and gross insurance liabilities by major product for the periods and at the dates indicated: GR OSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
AXA Corporate Solutions Assurance reviews annually its exposure to ensure that the risks underwritten are diversifi ed geographically and by lines of business in order to manage concentration risk. In 2013, AXA Corporate Solutions Assurance ceded €865 million of premiums (2012: €901 million) to thirdparty reinsurers.
Also, in 2013, approximately €854 million of premiums were placed externally by AXA Global Life and AXA Global
(2012: €895 million), mainly for Property & Casualty business but also for Life & Savings business.
Assets backing contracts with fi nancial risk borne by policyholders (Unit-Linked) 46,264 39,439
AllianceBernstein provides diversifi ed investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA and its insurance company subsidiaries (which collectively are
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset management business. AXA IM provides its clients with a wide range of global products and expertise principally via Mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom Mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and Unit-Linked fund backing insurance products. AXA IM’s expertises include (i) AXA Fixed Income,
At December 31, 2013, AXA IM had €546.7 billion of assets under management, including €187.7 billion of assets managed on behalf of third party clients (2012 including AXA Private
AXA Bank targets private customers in retail banking and is an important element of pension and asset management business of AXA Germany. The Bank had approximately 45,000 clients (1) at year-end 2013. The major activities of AXA Bank are loans and deposits. These products are mainly sold through the tied agent network of AXA Germany.
In Europe, despite the low interest rate environment that affected traditional G/A Savings products, the Life & Savings market experienced a slight increase in most countries helped by an increased attractiveness of Unit-Linked products in a strong equity market environment. The only exceptions to this trend were in Belgium due to the exceptional growth observed in 2012 and an increase in the premium insurance tax in 2013 as well as in Italy, which was strongly impacted by a decline in
United Kingdom - Platform funds under management 2.4 2.1 Fundscape and Platforum reports for UK platform market as of September 30, 2013 and Platforum and Pridham reports for UK platform market as of September 30, 2012 (measure on APE individual life in-force business).
Germany Life 7 4.2 6 4.9 Market Factbook 2012 and 2011.
Germany Health 5 7.1 5 7 Market Factbook 2012 and 2011.
Portugal 11 1.2 11 1.7 Portuguese Insurance Association as of September 30, 2013 and 2012.
Italy 7 5.2 6 4.9 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 2012 and 2011 with cross border markets.
Greece 7 3.8 8 3.9 Hellenic association of Insurance Companies as of June 30, 2013 and 2012.
Thailand 4 11.5 5 10.4 TLAA statistics report as of November 30, 2013 and August 31, 2012 (measured on APE).
Philippines 4 10.2 3 Insurance Commission as of December 31, 2012 and Towers Watson 2012 report (measured on total premium income).
United Kingdom 4 5.5 4 5.5 Based on 2012 and 2011 FSA Returns.
Ireland 1 1 Central Bank of Ireland Statistical Review 2012 and 2011. Based on the Motor market.
Switzerland 1 13.0 1 12.9 SIA (Swiss Insurance Association) as of February 2014 for 2013 and February 2013 for 2012; Market share is based on statutory gross written premiums.
Morocco 4 15.7 3 15.7 Moroccan Association of Insurance Companies as of December 31, 2012 and 2011.
The Gulf Region 5 3.9 7 3.8 Regulator report December 31, 2012 and 2011.
Singapore 2 12.0 2 9.0 General Insurance Association as of June 30, 2013 and June 30, 2012.
Malaysia 7 5.0 7 6.0 ISM (Insurance Services Malaysia Berhad) as of December 31, 2013 and September, 30 2012.
Hong Kong 1 6.0 9 3.0 Hong Kong Insurance Authority website 2012 and 2011.
Commercial lines were compensated by lower car registrations or reduced coverage, except for Italy, Spain, Portugal and
In this market, AXA Corporate Solutions, AXA’s subsidiary dedicated to worldwide Property & Casualty, Aviation, Marine and Space insurance, prevention and claims management of large national and multinational corporations, ranks amongst the main carriers worldwide (1).
After several years of soft underwriting conditions, corporate risks insurance pricing conditions continued to tighten in 2013, except in Aviation.
In 2013, risky asset classes benefi ted from a combination of massive liquidity injections by central banks, fading systemic risk in Europe, rerating of valuation multiples and a marginally improving economic environment. Global equities gave investors a healthy 26% return (MSCI World index) over 2013, beating predictions, and leading to a strong rebalancing in favor of equities. However, the threat of the U.S. Federal Reserves tapering asset purchases somewhat reduced investors’
Following the Fed’s announcement of the progressive exit from quantitative easing, government bonds yields embarked on a fairly substantial rise. US Treasury, UK Gilt and German
Stock markets pushed ahead in 2013 to deliver strong positive returns across the globe. Asian markets were boosted by improving Chinese economic data and the Liberal Democratic
Fixed income markets suffered an extremely volatile year impacted by speculations on the US Federal Reserve’s outlined potential quantitative easing tapering. Government bonds generally underperformed in the US and Europe. At the end of the period, better economic data in the US and the tapering caused US government bond yields to further increase.
The MSCI G7 Index increased by 28% and the MSCI Emerging
German Bund yield increased by 61 bps to 1.93%. The France 10-year government bond yield increased by 56 bps to 2.56%.
The 10-year Japanese government bond ended the year at 0.74%, a decrease of 5 bps compared to December 31, 2012.
The 10-year Belgium government bond ended the year at 2.56%, a 50 bps increase compared to December 31, 2012.
European peripheral countries: Italy ended the year at 4.13% (a decrease of 37 bps compared to December 31, 2012), Spain ended the year at 4.15% (a decrease of 112 bps compared to December 31, 2012), Greece ended the year at 8.42% (a decrease of 348 bps compared to December 31, 2012), Ireland ended the year at 3.47% (a decrease of 163 bps compared to December 31, 2012), Portugal ended the year at 6.13% (a decrease of 88 bps compared to December 31, 2012).
In this context, the Euro appreciated against main currencies, as shown below: Year End Exchange Rate Average Exchange Rate
(a) Yen average exchange rate for the twelve months ending September 2012 used for full year 2012 accounts profi t or loss and for the fi fteen months ending December 2013 used for full year 2013 accounts profi t or loss.
& Casualty licenses covering most Chinese provinces as well as a direct distribution license covering these provinces with a market share of 0.8% (1).
On February 20, 2014, AXA announced the fi nalization of the acquisition. AXA has acquired 33% of the company from Tian Ping’s current shareholders for RMB 1.9 billion
(or Euro 240 million (2) and subsequently subscribed to a capital increase for RMB 2.0 billion (or Euro 251 million (2))
to support future growth, raising its stake to 50%. AXA and
Going forward, AXA will consolidate the acquired operations through equity method.
AXA to acquire 51% of Colpatria’s insurance operations and enter the Colombian market
On November 11, 2013, AXA announced it had entered into an agreement with Grupo Mercantil Colpatria (3) to acquire a 51% stake in its composite insurance operations in Colombia
(or Euro 259 million (4)). AXA expects to consolidate the acquired operations within its Mediterranean & Latin American Region.
market share (5), with operations in both Property & Casualty and Life & Savings. It enjoys strong positions in Property &
(#4 with 14% market share (5)) and Capitalization (#2 with 42%
The transaction will allow AXA to enter the attractive Colombian market and benefi t from its strong growth prospects through developed and profi table operations in a joint venture with a well-established local partner. Colpatria Seguros will benefi t from AXA’s strong know-how to accelerate further its development and leverage its competitive advantages in the
On September 30, 2013, AXA announced that AXA IM had completed the sale of a majority stake in AXA Private Equity, generating a Euro 0.2 billion realized capital gain. As of
Seguros de Vida Colpatria S.A. (Life, Workers Compensation), Capitalizadora Colpatria S.A. (Capitalization) and Colpatria Medicina Prepagada
On October 1, 2013, AXA announced it had successfully completed the transaction for a total cash consideration of
In 2004, AXA Financial acquired The MONY Group Inc. and its subsidiaries, including MONY, MLOA, U.S. Financial
Euro 8.0 billion) of statutory liabilities as of end of 2012.
On November 29, 2013, AXA announced it has entered into an agreement with Astra Asigurari to sell its Life & Savings insurance operations in Romania and exit the Romanian market. Astra Asigurari is one of the leading Romanian insurance groups.
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approval.
On October 15, 2013, AXA Global P&C announced the successful placement of Euro 350 million of catastrophe bonds to institutional investors, the largest issuance of catastrophe bonds in Euros so far. There are two classes of notes: the
Class A notes, for an amount of Euro 185 million maturing in January 2017, and the Class B notes, for an amount of
Euro 165 million maturing in January 2018, each class providing protection on different risk levels.
Following the 2010 and 2011 issuances, this new transaction has been structured through a new Irish Special Purpose
For several years, the AXA Group has been offering its employees in and outside France, the opportunity to subscribe to shares issued by way of a capital increase reserved for employees.
Employee shareholders represented 7.03% of the outstanding share capital as of December 31, 2013.
A new law has become effective as of February 1, 2014 under which a signifi cant part of the Pension Fund’s assets would be transferred to the Polish Social Security Institution (ZUS). The main features of this Law are as follows: ■ liquidation of treasury funds: in February 2014, each
(ZUS) and all retirement pensions would be paid out by ZUS; ■ reduction in contribution in comparison with the 2011 reform and in the level of charges.
On April 30, 2013, Moody’s Investors Service reaffi rmed the “Aa3” insurance fi nancial strength ratings of AXA’s main operating subsidiaries, maintaining a negative outlook.
On May 22, 2013, S&P reaffi rmed long-term ratings on AXA
The notes will be treated as capital from a regulatory and rating agencies’ perspective within applicable limits. The transaction has been structured to comply with the expected eligibility criteria for Tier 2 capital treatment under Solvency II.
o/w. gross written premiums 53,861 53,572 o /w. fees and revenues from investment contracts with no participating feature 323 334 -
(b) Excluding (i) net realized capital gains or losses and (ii) change in fair value of assets under fair value and of options and derivatives, net banking revenues and total consolidated revenues would respectively amount to €518 million and €91,244 million for full year 2013 and €460 million and €90,120 million for full year 2012.
The comparable basis mainly consisted of the restatement of: (i) the appreciation of Euro against most of major currencies (€2. 1 billion or -2.4 points), (ii) the disposal of AXA Private Equity
(1) AXA Life Japan aligned its closing date with the Group calendar year starting with 2013 annual accounts. Therefore, its contribution to the AXA
Total Life & Savings New Business APE amounted to €6,335 million, up 3% on a reported basis or up 5% on a comparable basis. This was mainly driven by the United
High growth markets APE increased by 11% as strong growth in South-East Asia, India and China (+21% or €+84 million) and
Hong Kong (+12% or €+48 million) was partly offset by Central
& Eastern Europe (-20% or €-27 million), negatively impacted by regulatory developments in Poland and the focus on higher margin products.
(+26%) to €647 million as new sales through the Elevate platform continued to perform very strongly with IFA sales up by €92 million (+59%), partly offset by the exit from the bancassurance channel. The other signifi cant growth area was on the Corporate pension Investment business which saw two signifi cant new schemes in 2013.
(€+31 million) with higher sales of G/A Protection & Health products refl ecting the continued business growth through
ICBC-AXA Life joint venture, (ii) Thailand (€+29 million) driven by sales initiatives through the bancassurance channel and
Switzerland APE increased by €65 million (+17%) to €430 million driven by strong G/A Protection & Health sales
France APE increased by €53 million (+4%) to €1,431 million mainly driven by (i) an increase in Unit-Linked sales (+32%
Savings, (ii) higher sales of G/A Protection & Health products with the launch of new products and commercial campaigns, partly offset by (iii) lower G/A Savings sales (-8% or €-45 million)
or €+44 million) refl ecting the establishment of a wider active broker network and some large contracts. G/A Protection &
Japan APE decreased by €102 million (-17%) to €504 million driven by (i) lower Variable Annuity sales (-52% or €-92 million)
(-10% or €-24 million) mainly due to the non-repeat of strong
Belgium APE decreased by €24 million (-14%) to €151 million driven by (i) a decrease in G/A Savings (-45% or €-51 million)
mainly due to lower “Crest Classic” sales in the context of focusing on improving business mix, partly offset by the launch of a new hybrid Oxylife product and (ii) lower sales in G/A
Non-Motor revenues decreased by €69 million or -1% mainly driven by: ■ the United Kingdom & Ireland (-12%), mainly in Household, driven by portfolio pruning through tariff increases and exiting of unprofi table schemes; ■ partly offset by Germany (+3%) and France (+2%) mainly attributable to tariff increases in Household; ■ and higher volumes in both Direct business (+10%) and high growth markets (+6%).
Commercial lines (41% of P&C gross revenues) increased by 5% on a comparable basis mainly driven by tariff increases across the board as well as volume increases in high growth markets.
refl ecting positive portfolio developments; ■ the United Kingdom & Ireland (+9%) driven by tariff increases and increased retention in fl eet; ■ France (+7%) mainly driven by tariff increases.
Region and Mexico and in Property in Mexico and Turkey; ■ France (+5%) mainly following tariff increases in Construction and Property, partly offset by lower volumes.
Asset Management revenues increased by 4% on a reported basis, or 8% on a comparable basis, to €3,461 million mainly driven by higher management fees at both AllianceBernstein and AXA Investment Managers as a result of higher average
USD, (ii) €-4 billion outfl ows and (iii) €-4 billion change in scope mainly refl ecting the closed Mony portfolio transaction, partly offset by (iv) €+20 billion from market appreciation.
(+7%) mainly as a result of higher average AUM (+6%) and
(+47%) due to higher net banking product refl ecting an increase in loans production as well as a softer promotional campaign compared to 2012 and (ii) AXA Bank Belgium (+4%) mainly driven by a higher interest margin.
to refl ect the retrospective application of the revised standard which led to a reduction in net consolidated income after tax of €96 million as of December 31, 2012. This restatement was mainly driven by the return on plan assets calculation which, under the amended IAS 19, is based on the rate used to discount the defi ned benefi t liability (using a AA-rated corporate bond yield), as opposed to an assumed rate of “expectedreturn -on-assets” used under the previous IAS 19 principles.
Net income from investments in affi liates and associates 119 136 136
Net realized capital gains or losses attributable to shareholders 434 297 297
(b) For the periods ended December 31, 2013 and December 31, 2012, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectivly €+22,180 million and €+14,186 million, and benefi ts and claims by the offsetting amounts respectively.
Group underlying earnings amounted to €4,728 million, up 15% versus full year 2012. On a constant exchange rate basis, underlying earnings increased by 18% driven by growth in all business segments.
(€-31 million) mainly due to an increase in unallocated policyholder bonus reserve and (vi) the United States (€24 million) as the decrease in investment income refl ecting lower investment yields on fi xed income assets was partly offset by lower credited rates; ■ higher fees and revenues (€+480 million or +7%): • Unit-Linked management fees were up €244 million mainly driven by (i) the United States (€+205 million),
• loadings on premiums and Mutual funds were up €201 million mainly driven by (i) the Mediterranean and
favorable GMxB attribution results versus prior year, partly offset by (c adverse mortality experience and changes to mortality assumptions in the Life business and (ii) Germany
mainly due to lower DAC amortization as a result of model refi nements as well as to lower commissions in line with lower sales,
• lower expense ratio improving by 0.4 point to 26.5% with
(i) 0.2 point reduction in the acquisition ratio driven by both productivity gains and decrease in commission ratio and
• as a result, the combined ratio improved by 1.1 points to 96.6%; ■ higher investment result (€+55 million or +3%) driven by
International insurance underlying earnings amounted to €202 million. On a constant exchange rate basis, underlying earnings increased by €36 million (or +21%) mainly attributable to favorable developments on the run-off portfolios. AXA
Corporate Solutions underlying earnings increased by €5 million (or +4%) mainly as a result of an improved combined ratio to 97.7%.
Asset Management underlying earnings amounted to €400 million. On a constant exchange rate basis, underlying earnings increased by €30 million (or +8%). On a comparable scope basis, restated for the sale of AXA Private Equity, Asset
mainly attributable to AllianceBernstein (€+31 million) as a result of higher revenues net of variable compensations combined with lower general administrative expenses, partly offset by the non-repeat of 2012 positive tax one-offs.
Banking underlying earnings amounted to €78 million. On a constant exchange rate basis, underlying earnings increased by €73 million mainly attributable to (i) Belgium (€+50 million) as a result of a higher interest margin and (ii) France (€+15 million)
Group net capital gains and losses attributable to shareholders increased by €136 million mainly due to: ■ €-12 million lower realized capital gains to €801 million mainly driven by lower realized gains on fi xed income assets
mainly driven by the realized gain from the disposal of AXA
• €-306 million from the change in fair value of hedging derivatives not eligible for hedge accounting under IAS 39, mainly attributable to interest rates increase,
• €-140 million following foreign exchange rate movements, mainly from USD and AUD depreciation, notably driven by an unfavorable change in fair value of economic hedge derivatives not eligible for hedge accounting under IAS 39.
Weighted average number of shares 2,383.9 2,397.2 2,342.5 2,348.9 2,342.5 2,348.9
Adjusted earnings (Euro per Ordinary Share) 2.05 2.03 1.82 1.81 1.78 1.77 15% 15%
(b) Including adjustement to refl ect net fi nancial charges related to undated debt (recorded through shareholders' equity).
Net capital gains or losses attributable to shareholders net of income tax 332 214 214
Profi t or loss on fi nancial assets (under FV option) & derivatives (270) 152 152
Contribution to consolidated gross revenues 55,331 55,016 o/w. high growth markets 2,884 2,887 o/w. mature markets 52,447 52,129
(d) Other correspond to Luxembourg, AXA Life Invest Services, Architas and Family Protect .
(d) South-East Asia earnings include Indonesia, Thailand, Philippines, China, India and Singapore.
(e) Other correspond to Luxembourg, AXA Life Invest Services, Architas and Family Protect.
Net capital gains or losses attributable to shareholders net of income tax 295 124 124
Profi t or loss on fi nancial assets (under FV option) & derivatives 47 185 185
Gross revenues increased by €380 million (+3%) to €14,131 million (1): ■ Unit-Linked revenues (16% of gross revenues) rose by €499 million (+29%) mainly as a result of Unit-Linked oriented commercial efforts. The Unit-Linked share in Individual
Savings premiums increased by 4 points to 28%, above the market average of 15% (2); ■ G/A Savings revenues (39% of gross revenues) decreased by €479 million (-8%) following the focus on Unit-Linked oriented offers on both Individual Savings (-5%) and Group
mainly as a result of Unit-Linked oriented commercial efforts; ■ G/A Savings sales (37% of APE) decreased by €45 million
Term Care and Funerals). Group Protection and Health sales decreased by €7 million following a slowdown in the French market while international business (Employee Benefi ts and
Fees & revenues increased by €24 million (+2%) to €1,583 million due to higher fees on Unit-Linked in line with a higher average asset base, and Protection business, in line with revenues growth, partly offset by the non recurrence of a €+69 million positive URR reserve adjustment in 2012 (fully offset in DAC).
Net technical margin fell by €59 million (-11%) to €455 million mainly due to lower positive prior year reserve developments in
Expenses decreased by €12 million (-1%) to €-2,285 million: ■ acquisition expenses decreased by €+36 million (-2%)
(fully offset in URR), higher DAC amortization and higher commissions in line with business growth, partly offset by lower general acquisition expenses (€+25 million); ■ administrative expenses rose by €-24 million (+3%) to €-849 million driven by the impact of lower favorable tax items (mainly “Couverture Maladie Universelle”) compared to previous year and higher commissions in line with higher volumes, partly offset by continuous efforts to contain expenses.
As a result, the underlying cost income ratio increased by 1.1 point to 71.0%.
(€+191 million) mainly on equities and real estate, including €+195 million related to the sale of a 3.9% equity stake in
Net income increased by €27 million (+3%) to €1,042 million driven by higher adjusted earnings (€+173 million), partly offset by a less favorable change in both the fair value of Mutual funds
(€-52 million) and of economic hedge derivatives not eligible for hedge accounting (€-90 million), mainly driven by higher interest rates.
Net capital gains or losses attributable to shareholders net of income tax (47) (37) (37)
Linked products; ■ asset Management Fees (7% of gross revenues) increased by 6%, refl ecting improvement in market conditions; ■ Mutual funds revenues (2% of gross revenues) increased by 23%, refl ecting higher advisory fees received and increases in sale volumes.
from the prior year, in particular Indexed Universal Life sales due to increased competition and our focus on maintaining margins over growing volumes; (1) €11,303 million after intercompany eliminations.
■ Mutual funds APE was €413 million, 16% better than 2012 refl ecting increased advisory account sales.
Fees & revenues increased by €218 million (+11%) to €2,211 million. On a constant exchange rate basis, fees & revenues increased by €284 million (+14%) primarily due to higher fees earned on higher average separate account balances, higher mutual fund product fees and assumptions updates of Unearned Revenue Reserves.
(reduction of FTE, changes to variable compensation program and real estate optimization including staff relocation); ■ DAC amortization increased by €557 million to €597 million, primarily driven by higher margins on GMxB business as well as unfavorable changes in expected future margins on variable and interest-sensitive life products due to updated mortality assumptions.
Income tax expense increased by €77 million (+71%) to €-187 million. On a constant exchange rate basis, income tax expense increased by €83 million (+76%), refl ecting higher pre-tax underlying earnings and the non repeat of 2012 tax settlements.
Underlying earnings increased by €67 million (+14%) to €559 million. On a constant exchange rate basis, underlying earnings increased by €84 million (+17%).
Adjusted earnings increased by €56 million (+12%) to €511 million. On a constant exchange rate basis, adjusted earnings increased by €72 million (+16%) mainly refl ecting the increase in underlying earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives (2) 2
Recurring revenue streams on investment business have shown strong growth, up €14 million (+11%) with funds under management growing by 18%. However, this has been more than offset by the one-off impacts of exiting the bancassurance channel and the introduction of the Retail Distribution Review
APE increased by €111 million (+21%) to €647 million. On a constant exchange rate and comparable scope basis, APE
was up €137 million (+26%) over prior year. New sales through the Elevate platform continued to perform very strongly with
Fees & revenues decreased by €38 million (-11%) to €296 million. On a constant exchange rate and comparable scope basis, fees & revenues decreased by €2 million.
The reduction in upfront revenues following the closure of bancassurance and the impact of RDR was partly offset by growth in the Elevate business.
On a constant exchange rate and comparable scope basis, expenses decreased by €45 million, largely due to €44 million of savings. In addition, a further reduction in costs following the closure of the bancassurance channel was partly offset by an increase in expenses due to infl ation and business growth.
On a constant exchange rate and comparable scope basis, underlying earnings increased by €5 million.
On a constant exchange rate and comparable scope basis, adjusted earnings increased by €5 million mainly due to the underlying earnings movement.
Net income decreased by €5 million to €-38 million. On a constant exchange rate and comparable basis, net income decreased by €7 million as a result of higher restructuring costs, partly offset by adjusted earnings movement.
Gross revenues decreased by €1,145 million (-17%) to €5,579 million (1). On a comparable basis, revenues decreased by €1,195 million (-18%): ■ Protection revenues (44% of gross revenues) decreased by €72 million (-3%) mainly due to decline in new business sales of Whole life products (€-41 million) which were not actively promoted and a decrease in inforce run-off portfolio of Increasing Term products (€-71 million), partly offset by steady in-force growth in Term & Term Rider products
Income and Medical Whole life products, mostly offset by lower revenues from Medical Term and saving oriented
decreased by €1,126 million (-50%) mainly due to lower sales of Variable Annuity products (€-1,039 million) following product redesign and a lower client appetite in a rising equity market environment.
following product repricing driven by a change in regulation; ■ Health sales (43% of APE) increased by €33 million (+18%)
(€+34 million); ■ Investment and Savings sales (10% of APE) decreased by €103 million (-66%) due to decreased Variable Annuity sales in the bancassurance channel, as a result of product redesign and lower client appetite.
Fees & revenues increased by €90 million (+6%) to €1,696 million. On a comparable basis, fees & revenues increased by €48 million (+3%) mainly due to higher Unit-
Linked management fees driven by increased Variable Annuity in-force and higher loadings coming from a better business mix and increased retention.
Income tax expenses increased by €-111 million to €-226 million. On a comparable basis, income tax expenses increased by €-106 million due to lower positive tax one-offs
(€-58 million) including corporate tax rate change impact, as well as higher pre-tax underlying earnings (€-47 million).
Underlying earnings increased by €73 million (+20%) to €447 million or by €62 million (+17%) on a comparable basis.
Adjusted earnings increased by €60 million (+15%) to €447 million or increased by €49 million (+13%) on a comparable basis, due to higher underlying earnings and lower realized capital gains.
Variable Annuity sales; ■ Health sales (36% of APE) decreased by €14 million (-9%)
Amortization of VBI increased by €10 million to €-33 million due to a negative impact from lower interest rate assumptions.
As a result, the underlying cost income ratio decreased by -13.3 pts to 50.2 pts.
Income tax expenses increased by €-5 million (+11%) to €-51 million mainly due to higher pre-tax underlying earnings.
Adjusted earnings increased by €16 million (+13%) to €142 million mainly due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 41 23 23
Profi t or loss on fi nancial assets (under FV option) & derivatives (21) (4) (4)
Average exchange rate: 1.00 € = Swiss Franc 1.229 1.207 1.207
(€+56 million); ■ Individual Life sales decreased by €1 million (-1%) driven by lower demand for Variable Annuity business, partly offset by the success of the Protect Star product.
Investment margin remained stable at €193 million. On a constant exchange rate basis, investment margin increased by €3 million (+2%) as lower policyholder participation
(€+18 million) mainly in Group Life was partly offset by lower investment income (€-15 million), mainly due to lower investment yields on fi xed income assets.
As a result, the underlying cost income ratio increased by 2.4 points to 43.4%.
Underlying earnings decreased by €37 million (-12%) to €277 million. On a constant exchange rate basis, underlying earnings decreased by €32 million (-10%).
Adjusted earnings decreased by €19 million (-6%) to €318 million. On a constant exchange rate basis, adjusted earnings decreased by €13 million (-4%) mainly resulting from lower underlying earnings and higher impairments mainly on emerging market equity securities, partly offset by higher realized capital gains mainly on hedge funds and fi xed income assets.
Net i ncome decreased by €36 million (-11%) to €290 million.
Profi t or loss on fi nancial assets (under FV option) & derivatives (15) 87 87
For consistency, 2013 fi gures have been compared to the same scope for 2012, i.e. excluding “Vie Populaire” product portfolio, which was sold in September 2012. This is referred to as “comparable scope basis” in the commentary below.
Gross revenues decreased by €76 million (-4%) to €2,012 million (1). On a comparable scope basis, gross revenues were €55 million (-3%) lower than last year: ■ G/A Protection & Health revenues (42% of gross revenues)
increased by €2 million (stable). The decrease in runoff products in Individual Life Protection business was compensated by an increase in Group Life business; ■ Unit-Linked revenues (30% of gross revenues) increased by €417 million (+225%) mainly driven by the launch of Oxylife hybrid product (€+341 million) and by structured funds
(€+54 million); ■ G/A Savings revenues (28% of gross revenues) decreased by €474 million (-45%) mainly due to lower guaranteed rates in the run-off Crest product line (€-732 million), partly offset by the launch of Oxylife hybrid product (€+230 million).
■ G/A Savings (42% of APE) decreased by €51 million (-45%)
to €18 million. On a comparable scope basis, net technical margin decreased by €15 million (-45%) due to a less favorable mortality and morbidity experience.
Underlying earnings increased by €18 million (+12%) to €167 million. On a comparable scope basis, underlying earnings increased by €18 million.
Funds” in Czech Republic due to regulatory changes effective from January 1st, 2013 (€-167 million), partly offset by higher
Unit-Linked revenues in the Czech Republic (€+46 million) and from higher Protection revenues in Poland (€+26 million).
APE decreased by €28 million (-21%) to €108 million. On a comparable basis, APE decreased by €27 million (-20%) driven by Pension Fund activities impacted by the regulatory changes in Poland and the Czech Republic (-39% to €22 million). The
On a constant exchange rate basis, underlying earnings increased by €31 million mainly due to higher fees and loadings from General Account business and Assets Management
(€+37 million) partly offset by lower investment result driven by transformed Pension Fund in the Czech Republic.
As a result, the underlying cost income ratio decreased by 12.1 points to 83.8%.
Adjusted earnings increased by €27 million to €32 million. On a constant exchange rate basis, adjusted earnings increased by €27 million driven by higher underlying earnings, partly offset by lower realized capital gains (€-4 million).
Net capital gains or losses attributable to shareholders net of income tax 17 9
Gross revenues increased by €745 million (+15%) or €748 million (+15%) on a comparable basis to €5,581 million (1): ■ mature markets were up €734 million (+17%) mainly driven by higher sales of (i) Unit-Linked savings products
(€+233 million) mainly driven by increased volumes in hybrid products at AXA MPS, as well as lower competition from bank deposit products in Spain and Italy; ■ high growth markets increased by €15 million (+4%) mainly driven by Individual Protection business in Turkey.
MPS driven by a lower average yield as well as lower average assets as a consequence of a high level of surrenders.
Amortization of VBI decreased by €2 million (-14%) to €-12 million. On a constant exchange rate basis, amortization of VBI decreased by €2 million (-14%).
As a result, the underlying cost income ratio decreased by 3.8 points to 61.2%.
Underlying earnings increased by €12 million (+7%) to €174 million. On a constant exchange rate basis, underlying earnings increased by €12 million (+7%).
Adjusted earnings increased by €20 million (+12%) to €191 million. On a constant exchange rate basis, adjusted earnings increased by €20 million (+12%) driven by higher underlying earnings and higher realized capital gains net of impairments.
AXA MPS, as well as the non-repeat of the 2012 accelerated amortization of the distribution agreement in Greece.
G/A Investment & Savings (€+18 million) with higher sales of retirement products.
On a constant exchange rate basis, net technical margin increased by €4 million (+9%) notably driven by a favorable claims experience mainly in Group Health business.
Underlying earnings decreased by €1 million (0%) to €251 million. On a constant exchange rate basis, underlying earnings increased by €6 million (+2%).
were more than offset by a favorable change in the fair value of interest-rate derivatives not eligible for hedge accounting
Thailand since full year 2012 and India and Philippine since full year 2013.
G/A Protection & Health mainly in Singapore with the launch of new products, partly offset by the slowdown in Unit-Linked business in Indonesia.
July 2012; ■ strong sales in Thailand (€+29 million) in both Pure Protection
(€+7 million); ■ business growth in China (€+3 million) and Singapore
Adjusted earnings (1) increased by €7 million (+8%) to €92 million. On a comparable basis, adjusted earnings increased by €16 million (+20%), driven by underlying earnings growth.
Net realized capital gains or losses attributable to shareholders - 1
Underlying earnings as well as adjusted earnings and net income reached €-31 million in 2013, refl ecting continued investments and direct marketing expenditure to ensure the progressive ramp-up of the activity.
Net capital gains or losses attributable to shareholders net of income tax 108 171 171
Contribution to consolidated gross revenues 28,791 28,315 o/w. high growth markets 4,520 3,843 o/w. mature markets 21,996 22,257
(c) Direct business in France, Belgium, Spain, Portugal, Italy, Poland, United Kingdom, South Korea and Japan.
(c) Mediterranean and Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region and Mexico.
Net capital gains or losses attributable to shareholders net of income tax 32 58 58
Gross revenues increased by €+212 million (+4%) to €5,942 million (1). On a comparable basis, mainly excluding the internal transfer to AXA Assistance of some service guarantees, gross revenues increased by 4% (or €+217 million): ■ Personal lines (57% of gross revenues) were up 1% to €3,347 million mainly driven by tariff increases in all segments and positive net new contracts in Motor and in Household; ■ Commercial lines (43% of gross revenues) were up by 6% to €2,506 million mainly driven by tariff increases, partly offset by lower volumes in a context of selective underwriting.
Enlarged expense ratio was down 1.5 points to 29.4%, driven by an improved expense ratio as well as lower claims handling costs.
Net investment result increased by €9 million (+2%) to €522 million as lower yields on fi xed income assets, were more than compensated by exceptional distribution of dividends from credit and private equity funds.
Income tax expenses decreased by €2 million (-1%) to €-304 million refl ecting higher pre-tax underlying earnings, offset by a more favorable corporate tax rate mix.
Net income increased by €20 million (+3%) to €604 million driven by higher adjusted earnings and a non-recurring income due to the fi rst time integration of AXA Caraibes into the scope of consolidation, partly offset by a less favorable change in the fair value of derivatives, notably on interest rate strategies.
Net capital gains or losses attributable to shareholders net of income tax 10 41 41
Profi t or loss on fi nancial assets (under FV option) & derivatives 17 (26) (26)
to €261 million following the withdrawal from unprofi table schemes and the exit of some non core products; ■ Commercial lines (51% of gross revenues) were up 9% to €1,958 million. Motor was up 9% to €395 million mainly due to strong new business and higher retention within the UK.
Net technical result increased by €54 million (+5%) to €1,264 million. On a constant exchange rate basis, net technical result increased by €99 million (+8%): ■ the current year loss ratio decreased by 2.2 points to 67.2%
As a result the enlarged expense ratio was up 0.3 point at 33.5%.
Adjusted earnings increased by €17 million (+9%) to €212 million. On a constant exchange rate basis, adjusted earnings increased by €23 million (+12%) refl ecting the increase in underlying earnings (+54 million), partly offset by a reduction in realized capital gains (€-31 million) mainly on fi xed income assets.
Profi t or loss on fi nancial assets (under FV option) & derivatives (25) 53
Net technical result increased by €15 million to €1,179 million: ■ the current accident year loss ratio decreased by 1.0 point to 70.3% due to improved attritional claims experience
Expense ratio decreased by 1.1 points to 29.2% mainly due to lower general expenses as a result of productivity programs.
Income tax expenses increased by €-42 million (+46%) to €-133 million mainly due to higher pre-tax underlying earnings as well as the non-repeat of 2012 positive tax one-offs
Adjusted earnings increased by €65 million (+25%) to €320 million mainly driven by higher underlying earnings as well as higher net realized capital gains, mainly on equities.
Net income decreased by €21 million (-7%) to €271 million mainly driven by higher unfavorable change in fair value of fi xed income funds, mainly attributable to the rise in interest rates, partly offset by higher adjusted earnings.
Net income from investments in affi liates and associates - - -
Profi t or loss on fi nancial assets (under FV option) & derivatives (5) (13) (13)
Average exchange rate: 1.00 € = Swiss Franc 1.229 1.2069 1.2069
Gross revenues decreased by €30 million (-1%) to €2,714 million (1). On a comparable basis, gross revenues increased by €20 million (+1%): ■ Personal lines (55% of the gross revenues) were up 3% to €1,483 million as a consequence of volume growth in all major business lines and tariff increases in Household and
Liability; ■ Commercial lines (45% of the gross revenues) were down 2%
Net technical result decreased by €34 million (-3%) to €972 million. On a constant exchange rate basis, net technical result decreased by €16 million (-2%): ■ the current accident year loss ratio improved by 0.2 point to 69.1% mainly driven by an improved attritional claims experience, especially in Personal Property, despite higher natural event charges (+0.3 point); ■ the all accident year loss ratio increased by 0.7 point to 64.0% as a consequence of less favorable positive prior year reserve developments, partly compensated by the improvement in the current accident year loss ratio.
Expense ratio improved by 1.3 points to 24.9% driven by ongoing strict cost management discipline as well as a positive one-time impact resulting from changes in the valuation of employee pension liabilities.
Underlying earnings increased by €3 million (+1%) to €405 million. On a constant exchange rate basis, underlying earnings increased by €10 million (+3%).
Net capital gains or losses attributable to shareholders net of income tax 44 11 11
Profi t or loss on fi nancial assets (under FV option) & derivatives (10) 8 8
to €993 million due to decreases in Motor (€-14 million) in a diffi cult economic environment and Marine (€-13 million) due to a transfer of a large contract to AXA Corporate Solutions.
Enlarged expense ratio was up 0.5 point to 38.3% due to IT
Net investment result increased by €2 million (+1%) to €199 million due to higher dividends following an increased asset allocation towards equities, largely offset by a lower investment yield on fi xed income assets.
Income tax expenses decreased by €+1 million to €-106 million, in line with underlying earnings evolution.
Adjusted earnings increased by €34 million (+15%) to €266 million mainly driven by higher realized capital gains on fi xed income assets (€+38 million) and real estate (€+35 million)
related to an exceptional sale in 2013, partly offset by lower realized capital gains on equities (€-30 million) and higher impairments (€-12 million).
Gross revenues decreased by €2 million (-3%) to €71 million after intercompany eliminations. On a comparable basis, gross revenues remained stable driven by a positive development in proprietary networks, partly offset by lower premiums in the bancassurance channel.
Net income decreased by €11 million to €34 million on a constant exchange rate basis, mainly due to lower adjusted earnings (€-16 million).
Net income from investments in affi liates and associates 2 -
Net capital gains or losses attributable to shareholders net of income tax (9) 40
Motor lines were up (+7% or €+142 million) in high growth markets (€+145 million) with positive volume effect and tariff increases in Health in both the Gulf region (€+50 million) and in Mexico (€+20 million) and new business in property in
Turkey (€+34 million) and Mexico (€+16 million); ■ Other lines (1% of the gross revenues) were up 14% to €48 million.
Net technical result increased by €127 million (+7%) to €1,901 million. On a constant exchange rate basis, net technical result increased by €147 million (+8%) driven by
Expense ratio decreased by 0.2 point to 25.5% mainly driven by an improved acquisition expense ratio in high growth markets (-0.5 point) thanks to positive volume effect and a decrease in commission ratio both in the Gulf region driven by positive business mix and Turkey from lower bonus commissions. Mature markets deteriorated by 0.1 point as benefi ts from productivity plans were more than offset by negative volume effects.
As a result, combined ratio was down by 1.2 points to 99.3%.
Adjusted earnings remained stable at €272 million. On a constant exchange rate basis, adjusted earnings increased by €2 million (+1%), as higher underlying earnings combined with an increase in the impact of equity hedging derivatives were largely offset by lower net realized capital gains (€-58 million)
On a constant exchange rate basis, net income increased by €15 million (+7%), driven by lower restructuring costs and a positive forex impact, partly offset by a lower favorable change in the fair value of Mutual funds.
Net technical result increased by €53 million (+11%) to €512 million. On a constant exchange rate basis net technical result increased by €80 million (+17%): ■ the current accident year loss ratio decreased by 2.2 points to 76.9% as a result of continued underwriting improvement refl ecting segmentation expertise, lower frequency in Motor together with favorable weather conditions in all markets; ■ the all accident year loss ratio decreased by 2.4 points to 76.8% mainly as a result of the decrease in the current accident year loss ratio.
Net investment result increased by €7 million (+7%) to €105 million. On a constant exchange rate basis, net investment result increased by €9 million (+10%) due to a higher asset base.
On a constant exchange rate basis, underlying earnings increased by €35 million.
Net capital gains or losses attributable to shareholders net of income tax (3) 3
Profi t or loss on fi nancial assets (under FV option) & derivatives - -
In the comments below, the comparable basis includes the restated 12-month results in 2012 for the HSBC
(+7%) to €408 million driven by (i) Motor (€+16 million) as a result of positive new infl ows notably refl ecting the increase in private car sales in Malaysia and by (ii) Non-Motor
(€+10 million) with a growth of the Health business both in
Hong Kong and Malaysia bancassurance channels; ■ Commercial lines (51% of the gross revenues) were up €46 million (+12%) to €426 million mainly driven by (i) Health
mainly driven by new projects in Singapore and Malaysia, and (v) Motor (€+4 million) mainly driven by growth in the agency and broker channels in Malaysia.
■ the current accident year loss ratio improved by 1.0 point to 68.0%. On a comparable basis, current accident year loss ratio improved by 0.8 point mainly due to (i) Workers
(+3.0 points) driven by higher frequency and negative price effects in Singapore as well as higher severity in Malaysia; ■ the all accident year loss ratio improved by 1.6 points to 66.0%. On a comparable basis, all accident year loss ratio improved by 0.8 point mainly due to the improvement of current accident year loss ratio.
Expense ratio improved by 1.3 points to 27.0%. On a comparable basis, expense ratio improved by 1.6 points mainly driven by lower acquisition expenses (-1.4 points)
On a comparable basis, income tax expenses increased by €4 million due to higher pre-tax underlying earnings.
(2) Including Thailand (Group share: 99.3%) and India (Group share: 26%) that were consolidated through equity method for the fi rst time in 2013.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income for the
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (7) 23 23
(b) Including AXA Liabilities Managers and AXA Corporate Solutions Life Reinsurance Company.
Net capital gains or losses attributable to shareholders net of income tax 11 (3) (3)
Profi t or loss on fi nancial assets (under FV option) & derivatives (11) 24 24
Gross revenues increased by €26 million (+1%) to €2,099 million (1). On a comparable basis, gross revenues increased by €51 million (+2%) notably in Motor (+9%) and
Net technical result increased by €18 million (+5%) to €381 million. On a constant exchange rate basis, net technical result increased by €20 million (+6%): ■ the current accident year loss ratio increased by 1.9 points to 85.5% driven by major claims mainly in Liability and
Expense ratio increased by 0.2 point to 15.8% due to a higher commission ratio following a change in portfolio mix.
Income tax expenses decreased by €2 million (-3%) to €-91 million. On a constant exchange rate basis, income tax expenses decreased by €2 million (-2%) driven by lower pretax underlying earnings, partly offset by higher taxes on prior year reserve developments.
to €149 million. On a constant exchange rate basis, underlying earnings increased by €5 million (+4%).
Adjusted earnings increased by €19 million (+13%) to €160 million. On a constant exchange rate basis, adjusted earnings increased by €20 million (+14%) mainly driven by higher underlying earnings as well as higher net realized capital gains (€+15 million) mainly from real estate.
On a constant exchange rate basis, net income decreased by €15 million (-9%) mainly due to a negative foreign exchange rate impact (vs. a positive impact in 2012), as well as a less favorable change in the fair value of Mutual funds, partly offset by higher adjusted earnings.
Gross revenues increased by €81 million (+8%) to €1,065 million (2). On a comparable basis, primarily excluding the internal transfer from AXA France of some service guarantees, the acquisitions of WhiteConcierge, IPS Colombia and Russia and the disposal of Cours Legendre, gross revenues increased by €84 million (+10%) driven by strong developments in Travel and Motor notably refl ecting higher revenues from some large contracts in Spain and growth of the in-force base in France, together with higher new business in Health in the US.
Net income decreased by €31 million to €-19 million primarily refl ecting €-32 million exceptional capital losses following the disposal of French based companies.
Adjusted earnings increased by €53 million to €31 million. On a constant exchange rate basis, adjusted earnings increased by €53 million mainly as a result of higher underlying earnings as well as higher realized gains from Property & Casualty runoff portfolio.
Net income increased by €58 million to €32 million. On a constant exchange rate basis, net income increased by €57 million mainly refl ecting higher adjusted earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 13 13 13
Assets under Management (“AUM”) decreased by €3 billion from year-end 2012 to €346 billion at December 31, 2013 as a result of €-16 billion unfavorable foreign exchange rate impact, net outfl ows of €-4 billion (€4 billion net infl ows from
Institutional clients more than offset by €-2 billion net outfl ows from Private Clients and €-6 billion net outfl ows from Retail clients), and change in scope of €-4 billion offset by €20 billion market appreciation. The change in scope is a loss in AUM
Gross revenues increased by €79 million (+4%) to €2,177 million (1). On a comparable basis, gross revenues increased by €142 million (+7%) primarily due to higher investment management fees resulting from a 5% increase in average AUM, higher Institutional Research Services fees up 8% and distribution fees up 16% due to higher Retail average
Income tax expenses increased by €38 million (+51%) to €-114 million. On a constant exchange rate basis, income tax expenses increased by €42 million (+55%) primarily due to higher pre-tax underlying earnings and the non-repeat of 2012 positive tax one-offs (€-13 million)
AXA ownership of AllianceBernstein at December 31, 2013 was 63.7%, down 1.8% from December 31, 2012 due to the granting of units in 2013 for 2012 and 2013 deferred compensation, partly offset by repurchases of AllianceBernstein units during 2013 to fund deferred compensation plans.
AUM increased by €15 billion as a result of €12 billion net infl ows and €8 billion combined market and foreign exchange rate impact, partly offset by €-4 billion negative scope impact, mainly related to the partial sale of the UK Life & Savings operations (1) and to the sale of Private Client activity.
Net infl ows amounted to €12 billion in 2013, mainly driven by infl ows on (i) Retail (€+6 billion) notably from AXA Fixed Income and Asian Joint Ventures, (ii) Main Fund (€+4 billion) and
Gross revenues increased by €61 million (+4%) to €1,638 million (2), including €189 million from AXA PE for the fi rst nine months of 2013. On a comparable basis, net revenues increased by €81 million (+8%) to €1,029 million, mainly driven by (i) higher management fees (€+57 million or
Net investment result improved by €4 million (+27%) to €-12 million, including €-5 million from AXA PE for the fi rst nine months of 2013. On a comparable basis, net investment result improved by €5 million (+50%) mainly driven by lower fi nancing debt expense.
General expenses increased by €62 million (+5%) to €-1,281 million, including €-120 million from AXA PE for the fi rst nine months of 2013. On a comparable basis, general expenses increased by €65 million (+9%) to €-741 million mainly due to the non-recurrence of a €22 million positive impact in 2012 as a result of the closure of AXA Rosenberg coding error issue, and to variable compensation increase.
(1) In line with contractual agreement at the time of the sale.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and the net income attributable to AXA’s banking activities for the periods indicated: CONSOLIDATED GROSS REVENUES
(b) Of which AXA Bank Europe and its branches: €74 million.
(c) Includes commercial activities in Belgium for €41 million and shared services of AXA Bank Europe (treasury and support functions) for €39 million.
Net banking revenues increased by €4 million (+1%) to €316 million. Operating net banking revenues (1) increased by €42 million (+13%) mainly due to a higher interest margin
following lower volumes on savings products and tight expense management (€+4 million), partly offset by an increase in provision for loan losses (€-5 million) due to growing loan portfolio and deterioration of the economic environment.
Underlying earnings and adjusted earnings increased by €15 million to €1 million, following the rise in operating net banking revenues.
Net income increased by €13 million to €-25 million due to lower funding costs (€+7 million), and a lower provision for loan losses (€+10 million) on the outstanding mortgage portfolio, partly offset by an increase in tax expenses (€-4 million).
UCB, while UCB will distribute AXA`s insurance products through its network in both countries. As a result, AXA ceased its banking operations in these two countries in the course of the second half of 2013.
(1) Before intercompany eliminations and before realized capital gains/losses or changes in fair value of « fair-value-P&L » assets and of hedging instruments.
The Holdings and other companies consist of AXA’s non-operating companies, including mainly the AXA parent company, AXA
Performance Units at Group holding level, €13 million increase in dividends received from non-consolidated subsidiaries and a decrease by €5 million in operating losses from nonconsolidated entities, partly offset by the new French tax of 3%
Underlying earnings increased by €1 million to €-23 million mainly due to decreased tax expenses (€+2 million) resulting from decreased inter-company dividends received.
Underlying earnings increased by €7 million to €-8 million mainly due to a decrease in operating losses from nonconsolidated entities.
Adjusted earnings increased by €7 million to €-8 million driven by underlying earnings evolution.
Underlying earnings decreased by €9 million (-6%) to €-167 million. On a constant exchange rate basis, underlying earnings decreased by €14 million (-9%) mainly refl ecting the impact of higher share-based compensation expenses.
Adjusted earnings decreased by €9 million (-6%) to €-167 million. On a constant exchange rate basis, adjusted earnings decreased by €14 million (-9%), in line with the underlying earnings evolution.
On a constant exchange rate basis, net income decreased by €86 million (-77%) refl ecting adjusted earnings evolution and an unfavorable change in fair value of economic hedge derivatives not eligible for hedge accounting under IAS 39.
Net income decreased by €4 million to €-20 million. On a constant exchange rate basis, net income decreased by €4 million mainly driven by an unfavorable movement in fair value of derivatives (€-13 million) due to foreign exchange and interest rate movements and higher costs relating to exceptional operations (€-4 million), partly offset by the improvement in adjusted earnings (€+14 million).
Net income decreased by €16 million (-61%) to €-42 million, mainly driven by adjusted earnings evolution.
Adjusted earnings increased by €8 million (+45%) to €-9 million mainly due to lower impairments.
Net income increased by €8 million (+48%) to €-9 million driven by higher adjusted earnings.
(+14%) to €-44 million. On a constant exchange rate basis, underlying and adjusted earnings increased by €7 million
Derivatives related to invested assets: ■ include all foreign exchange derivatives, except those related to currency options in earnings hedging strategies which are included in underlying earnings; ■ exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy; ■ and also exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing General Account and shareholders’
Diluted earnings per share (diluted EPS) represent AXA’s consolidated earnings (including interest charges related to undated debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares, on a diluted basis (that is to say including the potential impact of all outstanding dilutive stock options being exercised performance shares, and conversion of existing convertible debt into shares, provided that their impact is not anti-dilutive).
The calculation is prepared with the following principles: ■ for net income ROE: Calculation is based on consolidated fi nancial statements, i.e. shareholders’ equity including undated subordinated debt (“Super Subordinated Debts”
Comprehensive Income “OCI”, and net income not refl ecting any interest charges on TSS/TSDI; ■ for adjusted and underlying ROE: • all undated subordinated debts (TSS/TSDI) are treated as fi nancing debt, thus excluded from shareholders’ equity,
Discretionary Participation Features (DPF): ■ gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net
■ the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above)
■ change in URR (Unearned Revenue Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
For investment contracts without DPF: ■ deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines “Fees & Revenues” and “Net Technical margin”,
“underlying” operating margin, where “Underlying” operating margin is the sum of (i) Underlying Investment margin; (ii) Underlying Fees and revenues, and (iii) Underlying Net technical Margin (all items defi ned above).
Underlying net technical result is the sum of the following components: ■ earned premiums, gross of reinsurance; ■ claims charges, gross of reinsurance; ■ change in claims reserves, including claims handling costs reserves, gross of reinsurance, excluding the recurring interests credited to insurance annuity reserves; ■ claims handling costs; ■ net result of ceded reinsurance.
Current accident year loss ratio net of reinsurance is the ratio of: ■ current year claims charge gross of reinsurance + claimshandling costs + result of reinsurance ceded on current accident year, excluding the recurring interests credited to the insurance annuity reserves; to
Assets Under Management (AUM) are defi ned as the assets whose management has been delegated by their owner to an asset management company such as AXA Investment
Net New Money is a banking volume indicator. It represents the net cash fl ows of customers’ balances in the bank, with cash infl ows (collected money) and cash outfl ows (exiting money). It includes market effect and capitalized interests over the period.
Asset Management operations, as well as from capital raising activities, and committed bank credit lines.
Mediterranean Holding SA are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating entities to the Company (or other Group companies) must therefore take into account these constraints as well as potential future regulatory changes. Cash positions also fl uctuate as a result of cash-settled margin calls from counterparties relating to collateral agreements on derivatives, and the Company’s statutory (parent only) results may be signifi cantly impacted by unrealized gains and losses on derivatives used to hedge currency or other risks. The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating needs.
As of December 31, 2013, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €20.6 billion, net of bank overdrafts of €1.0 billion; ■ broad access to various markets via standardized debt programs: for example, at the end of 2013, this included a maximum envelope of €6 billion of French commercial paper, $2 billion of US commercial paper, €15 billion under a Euro
EMTN program), (ii) debt being mostly subordinated and with a long maturity profi le with €4.1 billion of debt repayments over the next two years, estimated taking into account the fi rst date of step-up calls on subordinated debt, out of which €2.1 billion have been reimbursed in January 2014, and (iii) a decrease in the debt ratios (debt gearing (2): 24% at year-end 2013, versus 26% at year-end 2012; interest coverage (3): 10.2x at year-end 2013, versus 9.3x at year-end 2012).
(including derivative instruments) totaled €7,986 million as of December 31, 2013 after taking into account all intragroup eliminations and excluding undated subordinated debt
Consequently, each issuance of a new ordinary share resulting from the conversion of a bond will be offset by the delivery to AXA of an existing ordinary share under the call option
At December 31, 2013, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
Movements in this item are described in Note 17 of Part 4 -
At December 31, 2013, other debt owed to credit institutions totaled €2,504 million (including €978 million of bank overdrafts), an increase of €378 million compared to €2,126 million at the end of 2012 (including €445 million of bank overdrafts).
For several years, the AXA Group has been offering to its employees in and outside France, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2013, employees invested a total of €293 million that led to a total of approximately 19 million newly issued shares. Employee shareholders represented 7.0% of the outstanding share capital at December 31, 2013.
As a holding company, AXA is not subject to legal restrictions on dividend payments, provided that its accumulated profi ts are suffi cient to cover them and that the Group solvency ratio does not decrease below 100% after dividend payment in cash. However, many Group subsidiaries, particularly AXA’s insurance subsidiaries, are subject to restrictions on the amount of dividends they can pay to their shareholders. For more information on these restrictions, see Note 29.4 of Part 4 - “Consolidated Financial Statements”.
Dividends paid to AXA SA’s shareholders in 2013 in respect of the 2012 fi nancial year totaled €1,720 million, or €0.72 per share, versus €0.69 per share paid in 2012 in respect of the 2011 fi nancial year (€1,626 million in total). These dividends were paid in cash.
The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries monitor compliance with these requirements on a continuous basis and are in compliance with the applicable solvency requirements as of December 31, 2013.
A European Directive dated October 27, 1998 requires a consolidated solvency margin calculation effective for periods ending on or after December 31, 2001. France implemented this directive under an ordinance dated August 29, 2001, decreed on March 14, 2002 and applicable from 2002.
(€56.2 billion at December 31, 2012) of which: ■ consolidated shareholders’ equity after dividend proposal: €40.0 billion (€39.1 billion at December 31, 2012), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and undated subordinated debt; ■ gross unrealized capital gains and other: €24.2 billion
December 31, 2012); ■ less intangible assets (excluding goodwill on AllianceBernstein as it is part of its net consolidated book value) of €20.8 billion
(€21.4 billion at December 31, 2012) and less the net consolidated book value of its equity interests in credit institutions, investment companies and other fi nancial institutions: €4.1 billion (€3.7 billion at December 31, 2012).
Until now, AXA has not been deemed a fi nancial conglomerate by the “Autorité de Contrôle Prudentiel et de Résolution”
(“ACPR”), principal French insurance regulator. However, in accordance with the Decree of September 19, 2005, if a company is not subject to the additional supervision applicable to a fi nancial conglomerate, its solvency margin is nevertheless reduced by the amount of its equity interests in credit institutions, investment companies or fi nancial institutions if the
Earnings. This 2013 solvency margin calculation will be reviewed by the ACPR.
Claims paying and credit strength ratings have become increasingly important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may be subject to change in the future.
On March 11, 2014, Fitch reaffi rmed the “AA-” fi nancial strength ratings of AXA’s principal insurance subsidiaries revising the outlook to stable from negative.
A dividend per share of €0.81 will be proposed at AXA’s Annual Shareholders’ Meeting that will be held on April 23, 2014. The dividend will be payable on May 7, 2014 with an ex-dividend date of May 2, 2014.
Commitments made to executive offi cers 139 2.3 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 141
as its c orporate g overnance c ode of reference. The Board of Directors believes that the recommendations of the Afep -
Duverne’s experience, professional and personal qualifi cations as well as the complementary nature of their experience and profi les. After considering these factors and the past four years’
RE-APPOINTMENT OF MR. HENRI DE CASTRIES AS CHAIRMAN & CHIEF EXECUTIVE OFFICER
Finally, the Board made clear that its decision to continue with a unitary governance structure (and with a combined post of
Chairman and Chief Executive Offi cer) is very specifi c to the circumstances of the Group at this point in its development and to the unique qualities of Mr. de Castries and, consequently, that it will continue to re-examine this question as these circumstances evolve.
Bylaws, certain provisions of which go beyond regulatory requirements and market practices, which provide that: ■ the Board must be composed of a majority of independent directors; ■ each of the three Committees of the Board must be chaired by an independent director; ■ certain Committees (the Audit Committee and the
Compensation & Governance Committee) must be composed only of independent directors, and
(executive sessions) and to alert the Chairman and the Board of Directors of any potential confl icts of interest.
Independent Director and the other independent directors, have resulted in a well-balanced governance dynamic within the Board and its Committees and proven their effi ciency and effectiveness over the past four years.
The Lead Independent Director plays an important role in the preparation of the meetings of the Board and its Committees.
Company’s purpose, the Board is responsible for considering all material questions and taking all material decisions related to the Company and its business. It exercises the following powers in particular: ■ chooses between the two forms of Executive Management
Offi cer and Chairman of the Board of Directors) upon appointment or re-appointment of the Chairman of the
Board of Directors or the Chief Executive Offi cer; ■ appoints and determines the compensation of the Chief
According to AXA’s Charter, this appointment is mandatory when the positions of Chairman of the Board of Directors and Chief Executive Offi cer are held by the same person; ■ reviews and sets the Company’s half-year and annual results; ■ approves the Report of its Chairman on the composition of the Board including gender balance, the conditions of preparation and organization of the Board of Directors’
work as well as the internal control and risk management procedures set up by the Company; ■ convenes Shareholders’ Meetings; ■ grants stock options and/or performance shares to Group employees and corporate offi cers within the framework of the authorizations it receives from the Extraordinary
The guidelines governing the operation, organization and compensation of the Board of Directors and its Committees are set forth in the Board’s Bylaws. The Bylaws detail, in particular, the powers, assignments and obligations of the Board of
Group’s principal activities and issues. These sessions mainly focus on the fi nancial structure, the strategy, the governance, the Group’s and its subsidiaries’ main activities and the evolution of the insurance regulatory context.
Lead Independent Director in all cases where the positions of Chairman and Chief Executive Offi cer are held by a single individual. On April 29, 2010, the Board of Directors appointed
Lead Independent Director has a number of specifi c powers including supervising the contribution of the independent directors to the Board’s work and acting as their spokesperson with the Executive Management to the extent necessary or appropriate. He is also consulted by the Chairman of the
(regardless of whether he is a Committee member), to inform the Chairman and the Board of Directors of any potential confl icts of interests, to report to the Shareholders’ Meeting with respect to all corporate governance related matters, to require the Chairman & Chief Executive Offi cer to convene full meetings of the Board on a specifi c agenda at any time, to
Board of Directors, in particular the independent members, as well as with the Executive Management. He made sure that the independent directors could indeed play their important role within the Board and also ensured fl uid and transparent dialogue with the Executive Management.
Chief Executive Offi cer, the Deputy Chief Executive Offi cer and members of the Management and Executive Committee and more generally the main executives of the Group.
On December 31, 2013, the Board of Directors was comprised of fourteen members: four nationals of countries other than
January 27, 2011 and with the recommendations of the Afep -
The presence, since 2004, of a shareholder representative within the Board helps enrich the Board’s work by taking into account, in a more direct and concrete way, the point of view of the Group’s employees, in France and abroad. The Board of
Each year, the Board of Directors assesses the independence of all of its members on the basis of the recommendations contained in the Afep - Medef Code. On February 20, 2014, the
Board of Directors determined that, on December 31, 2013, eleven of the fourteen Board members were independent after assessing the criteria of the Afep -Medef Code: Mmes. Isabelle Kocher, Suet Fern Lee, Deanna Oppenheimer and Dominique Reiniche and Messrs. Jean-Pierre Clamadieu,
(1) Capgemini, the Chairman & Chief Executive Offi cer of which is Mr. Paul Hermelin, provides services to the AXA Group in the course of its ordinary business. Considering (1) that the conditions of these services are negotiated at arm’s length and (2) that the revenues for Capgemini generated by the AXA Group do not exceed 0.5% of its consolidated total revenues, AXA’s Board of Directors considered that these business relationships are not signifi cant neither for AXA nor for Capgemini and therefore are not likely to question Mr. Hermelin’s independence as a member of AXA’s Board of Directors.
(2) Mr. François Martineau is also director of AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle (the “Mutuelles AXA”) that hold together more than 10% of AXA’s share capital. Considering Mr. François Martineau is a member of AXA’s Board of D irectors in his personal capacity and not as a legal representative for the Mutuelles AXA, the Board considered that the independence criteria of the Afep - Medef Code related to “directors representing major shareholders of the corporation” is not applicable and that the exercise of these directorships within the Mutuelles AXA are not likely to question his independence as a director of the Company.
Norbert Dentressangle (59) Chairman of Dentressangle Initiatives (SAS) 30bis, rue Sainte-Hélène - 69287 Lyon Cedex 02 - France French nationality
Jean-Martin Folz (66) Companies’ director AXA - 25, avenue Matignon - 75008 Paris - France French nationality
Mrs. Isabelle Kocher (47) Executive Vice-President, Chief Financial Offi cer of GDF SUEZ group Tour T1 – 1, place Samuel de Champlain - Faubourg de l’Arche - 92400 Courbevoie – France French nationality
Mrs. Suet Fern Lee (55) Senior Partner of Stamford Law Corporation (Singapore) 10 Collyer Quay #27-00 Ocean Financial Centre - Singapore 049315 - Singapore Singaporean nationality
Ramon de Oliveira (59) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue - New York - NY 10065 - United States French nationality
Mrs. Doina Palici-Chehab (56) Chief Executive Offi cer of AXA Singapore General Insurance (Singapore) 8 Shenton Way #27-01 AXA Tower – Singapore 068811 – Singapore German and French nationalities
Chairman of the Board of Directors since April 29, 2010. He is not granted any fees for this directorship.
Suet Fern Lee for a four-year term (their biographies are presented below in this Section 2.1).
Shareholders’ Meeting of April 23, 2014, of fourteen members including eleven members considered independent by the
Board of Directors in accordance with the criteria of the Afep -
Within the framework of its principal assignments such as described above, the Board focused, in particular, on the following matters during 2013: review of the Group’s strategy, examination of the 2012 fi nancial statements and the 2013 half-year fi nancial statements, review of the Board Committee’
Mrs. Deanna Oppenheimer (as from April 30, 2013) 4/5 80% 1/1 100% - - - - - - 3/4 75%
(a) Until April 30, 2013, date of the merger of the Ethics & Governance Committee with the Compensation & Human Resources Committee.
Corporate Finance Department on September 1st, 1989. He was appointed Corporate Secretary in 1991 and Senior Executive
Chairman of the Supervisory Board. Mr. Norbert Dentressangle is also Chairman of Dentressangle Initiatives, the family-owned holding company which, in addition to his majority stake in
French Civil Service, in particular for the Ministry of Industry and as technical adviser in the Ministry of Labour. In 1993, he joined the Rhône-Poulenc Group and held various executive positions. In 2003, he was appointed Chief Executive Offi cer of the Rhodia Group and in 2008, Chairman & Chief Executive
Chairman of the Executive Committee of Solvay and Chairman of the Board of Directors of Rhodia. Since May 2012,
Board in 1997. He left PSA in February 2007. From June 2007 to March 2010, Mr. Jean-Martin Folz was Chairman of the Afep .
Mr. Paul Hermelin is a graduate of the École Polytechnique and École Nationale d’Administration (ENA). Mr. Paul Hermelin spent the fi rst fi fteen years of his professional life in the French government, primarily in the Ministry of Finance. He held a number of positions in the Budget Offi ce and on various ministry staffs, including that of Finance Minister Jacques
Delors. He was chief of staff o the Minister of Industry and
Supérieure (ENS-Ulm), engineer of the Corps des Mines and holds an aggregation in Physics. From 1997 to 1999, she was in charge of the budget of Telecommunication and Defense at the French Ministry of Economy. From 1999 to 2002, she was Advisor on Industrial Affairs of the French Prime Minister
Senior Partner of Stamford Law Corporation (Singapore). She is Chairman of the Asian Civilisations Museum Board, and is also a member of the National Heritage Board, a member of the Executive Committee of the Singapore Academy of Law, a member of the Advisory Board to the Law School at Singapore
University as well as a Fellow of the Singapore Institute of
Mr. Stefan Lippe is a graduate in mathematics and business administration from the University of Mannheim. He obtained his doctorate in 1982 being awarded the Kurt Hamann foundation prize for his thesis. In October 1983, he joined
Mr. de Oliveira spent 24 years at JP Morgan & Co. From 1996 to 2001, Mr. de Oliveira was Chairman & Chief Executive Offi cer of JP Morgan Investment Management. Mr. de Oliveira was also a member of the fi rm’s Management Committee since its inception in 1995. Upon the merger with Chase Manhattan
as UK Banking Chief Operating Offi cer. In December 2005 she became Chief Executive of UK Retail and Business Banking
Business Services in Bangalore (India). Since April 2013, she has been Chief Executive Offi cer of AXA Insurance Singapore
Advertising Manager. In 1986, she joined Kraft Jacobs Suchard and was appointed Marketing & Strategy Manager. In 1992, she joined Coca-Cola Entreprise as a Marketing & Responsible
Chairman & Chief Executive Offi cer of Coca-Cola Entreprise and Vice-Chairman of Coca-Cola Enterprises - Groupe Europe in 2002. From January 2003 to May 2005, she was Chairman of Coca-Cola Enterprises - Groupe Europe. Since May 2005,
To the best knowledge of the Company, there are no family relationships among the members of the Board of Directors or with members of the Executive Management.
To the best of the Company’s knowledge, there are no arrangements or understandings that have been entered into with major shareholders, customers, suppliers or others pursuant to which a member of the Board of Directors was selected.
Absence of any conviction in relation to fraudulent offences, any offi cial public incrimination and/or sanctions, or any responsibility in a bankruptcy for the last fi ve years
Compensation & Governance Committee, decided that the assessment would be conducted by an external consultant
Governance Committee. The Lead Independent Director was also strongly involved in the organization of this assessment and in particular in the examination of the conclusions and areas of improvement identifi ed during this review.
Directors’ meeting of February 20, 2014. The SpencerStuart report highlighted fi rst the strong dedication of the Board
The Board of Directors has three specialized Committees that review specifi c matters and report to the Board: (1) the
One of the main areas for improvement within the Board’s work identifi ed during the 2012 Board self-assessment process concerned the defi nition of the activities and responsibilities of the Committees. Taking note of this conclusion, the
Board of Directors, on April 30, 2013, decided to merge the
The Committee focused, in particular, on the following issues: ■ the full year fi nancial statements for 2012; ■ the 2012 Annual Report (Document de
Composition on December 31, 2013: Jean-Martin Folz, Chairman François Martineau Deanna Oppenheimer Dominique Reiniche
■ to issue proposals to the Board of Directors for the fi xing of: • the compensation of the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer and the preparation of their annual assessment,
• the amount of the directors’ fees for members of the Board of Directors to be submitted to the Shareholders’ Meeting,
April 29, 2010, Mr. Henri de Castries to hold the position of
Committee, AXA’s Board of Directors unanimously approved, on February 20, 2014, the decision to maintain the Company’s current unitary Board structure with Mr. Henri de Castries as
The Board of Directors determines the scope of the powers vested in the Deputy Chief Executive Offi cer who is specifi cally in charge of Finance, Strategy and Operations of the Group.
Jean-Laurent Granier Chief Executive Offi cer of the Mediterranean and Latin America Region business unit, Chairman & Chief Executive Offi cer of AXA Global P&C and in charge of overseeing the worldwide operations of AXA Corporate Solutions
The Executive Committee holds quarterly meetings to assess the status of Group transversal projects and monitor the implementation of the strategic plan “Ambition AXA”. These meetings are also an opportunity to exchange ideas and best practices, including through the participation of external guests on topics of strategic interest.
Executive Committee is advisory in nature and serves as an important sounding board in formulating Group strategy and considering key business issues or strategic initiatives. As a team, the members of the Executive Committee also contribute to shape and disseminate AXA’s management culture.
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: Salaried employees (full time equivalent) At December 31, 2011 At December 31, 2012 At December 31, 2013 - Belgium (including AXA Bank Belgium) (f) 5,085 4,813 4,549 - Mediterranean & Latin American Region 11,919 11,706 11,385 - Other countries and transversal entities 5,028 5,275 5,328
(a) A portion of the employees of AXA's French affi liates are included in GIEs.
AXA’s global executive compensation policy is designed to align the interests of the Company’s executives with those of its shareholders while establishing a clear link between performance and compensation. In this context, its main objective is to encourage the achievement of ambitious objectives and the creation of long-term value by setting challenging performance criteria.
AXA’s executive compensation structure is based on an in-depth analysis of market practices observed in France and abroad, within the fi nancial services sector (insurance companies, banks, asset managers, etc.) and compared to the compensation practices of other international groups.
AXA’s overall policy on executive compensation focuses on the variable part of the compensation, which is the compensation at risk for benefi ciaries. The structure of AXA’s executive compensation is composed of a variable portion which represents a signifi cant portion of the aggregate remuneration.
(3) the allotment of AXA stock options or performance shares to the Chairman & Chief Executive Offi cer, the Deputy Chief
The Compensation & Governance Committee is exclusively composed of independent members. Their independence is assessed annually by the Board in accordance with the criteria set forth in the Afep - Medef Code. While not a member of this
These principles apply to all executives of the Group and are adapted, as appropriate, to ensure compliance with applicable local regulations as well as local market competitiveness.
Executive compensation at AXA is composed of a fi xed and a variable component in cash. In addition to these elements, stock options and performance units/shares are granted annually to the Group’s executives.
The variable component depends on the Group’s global performance, on the benefi ciary’s local entity performance
The target level of the executives’ compensation and the structure of the elements which compose such compensation are based on a detailed analysis of market practices as well as potentially applicable national and international regulations, and take into consideration the equity principles within the
Compensation & Governance Committee, decided to maintain unchanged in 2013 the total cash compensation target of the
The variable component of his compensation, unchanged since 2010, was €2,350,000 in 2013, i.e. 247% of his fi xed annual compensation. In order to align the structure of Mr. de Castries’
The determination of the variable compensation to be paid to the Chairman & Chief Executive Offi cer was based, in 2013, on the following two metrics: ■ Group performance for 50%. This metric is measured based on underlying earnings per share, return on equity (operating
The increase, as from the 2013 fi scal year, of the percentage linked to individual performance from 40% to 50% refl ects the Board’s desire to place more weight on Mr. de Castries’
Offi cer is assessed on the basis of various indicators and qualitative objectives set by the Board of Directors through a written target letter established at the beginning of each calendar year before the performance measurement period. It includes
detailed objectives with regards to the Group’s progress in achieving its “Ambition AXA” strategic plan (which covers the 2011-2015 period) as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives and/or relating to certain geographic areas, and the evolution of certain investments contributing to the transformation of the Group’s operations (for example: the digitalization of the Group’s activities, the strengthening of the brand, the close monitoring of important local transformational plans, the active contribution to the work of the industry representative organizations, the involvement in regulatory discussions, the transformation of the corporate culture and leadership practices within the Group, the development of the executive leaders and the quality of the succession and talent development plans, etc.). The Board’s assessment of Mr. de
The variable compensation amounts actually paid to Mr. Henri de Castries since he was appointed Chairman of the Management
Board in May 2000 are set forth below and demonstrate how demanding his performance objectives have been as well as the impact of the Board’s performance assessments on his variable compensation payouts: Executive compensation and director's fees Target Actual % Target
Executive Offi cer, is based 30% on the Group performance, 20% on his functional area of responsibility and 50% on his individual performance.
Board’s desire to place more weight on Mr. Duverne’s individual performance on the execution of major strategic initiatives critical to the Group’s long-term success.
The assessment of the leadership skills is based on the dimensions of the AXA Leadership Framework which includes: ■ strategic vision; ■ customer focus ; ■ change leadership; ■ results orientation; ■ building capability; ■ team leadership; ■ sharing to succeed; ■ living through AXA values.
Chairman & Chief Executive Offi cer France 2,350,000 2,034,171 87% 2,350,000 2,270,153 (a) 97% 2,350,000 2,549,750 (a) 109%
Total of the other Management Committee members 3,237,792 3,234,801 100% 4,239,737 3,860,437 91% 5,169,568 5,612,753 109%
Solvency II return) which was lower than target, and (3) the improvement of the customer scope index.
of their variable compensation over two years. Under this mechanism, the deferred amount of variable compensation for the 2013 fi scal year, will be paid out in two tranches, in 2015 and 2016. The amount of the payout will vary depending on the AXA share price evolution over the deferral period and will be subject to a fl oor at 80% of the deferred amount and a cap at 120% of the deferred amount; provided, however that no variable compensation would be paid in the event (1) that the
In February 2014, the fi rst tranche of their differed variable compensation with respect to the fi scal year 2012 was paid to the Chairman & Chief Executive Offi cer and the Deputy Chief
Executive Offi cer, i.e. an amount of € 414,540 for Mr. Henri de
Castries and € 261,000 for Mr. Denis Duverne. These amounts, based on the evolution of the AXA share price, were capped at 120% of the differed variable compensation target amount, considering the performance of the AXA share in 2013.
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 2013: USD/EUR 0.753694244; INR/EUR 0.012926302; SGD/EUR 0.603512075.
Chairman & Chief Executive Offi cer France 3,285,743(a) 292,600 1,153,680 - 4,732,023 3,538,114(a) 216,320 1,568,712 - 5,323,146
On March 16, 2012, the fair value of one option was €1.33 for options with performance conditions, and the fair value of one performance share/unit was €8.74.
Chairman & Chief Executive Offi cer France 950,000 1,790,988 (a) - 59,083 4,150 2,773,189 950,000 1,579,253 (a) - 59,083 4,150 2,592,486
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 750,000 1,101,322 (a) - 42,000 4,150 1,881,829 750,000 980,746 (a) - 42,000 4,150 1,776,896
(a) This amount does not include the part of the variable compensation with respect to 2012 and 2013 which has been deferred in accordance with the mechanism described on page 118 .
Chairman & Chief Executive Offi cer France 950,000 1,605,058 (a) - 61,440 4,150 2,594,843 950,000 2,034,171 - 61,440 4,150 3,049,761
Total of the other Management Committee members 3,084,279 4,157,102 - 586,434 651,693 8,182,843 3,025,019 3,685,878 - 586,434 651,693 7,949,024
(a) This amount does not include the part of variable compensation with respect to 2012 which has been deferred in accordance with the mechanism described on page 118 .
(b) Director's fees deducted up to 70% from the variable compensation.
Directors’ fees indicated in the above table were paid for Board memberships held in AXA Group companies and are deducted up to 70% from the variable compensation of the same year.
Code, a minority part of the fees equivalent to 40% of the amount approved by the Shareholders’ Meeting is distributed evenly among the members of the Board of Directors as a fi xed fee, with the Vice-Chairman receiving a double fee;
The Vice-Chairman – Lead Independent Director, when attending the meetings of a Committee of which he is not a member, receives a single fee.
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2013 an annual gross cash compensation of € 445,461 paid by AXA Business Services Pvt. Ltd. in India in connection with her position as Chief Executive Offi cer and then Chief Executive Offi cer of AXA Singapore General
Messrs. Anthony Hamilton and Ramon de Oliveira received in 2013, as non executive directors of several companies of the
Group, directors’ fees for a gross amount of GBP 62,500.02 as well as USD 95,800 for Mr. Hamilton, and USD 65,000 for
December 31, 2013 (disregarding the dilution related to the exercise of these options). Given the nature of options and the evolution of market practices especially in France, the Board of Directors decided to restrict the scope of option grants to Group senior executives, which reduces the number of benefi ciaries compared to prior years.
The portion of options granted in 2013 to the executive offi cers of the Company (Chairman & Chief Executive Offi cer and
Since 2009, a performance condition regarding the options granted have applied to all options granted to the Company’s executive offi cers (members of the former Management Board until 2010) and from 2010 to all members of the Management
On the date of this Annual Report, this index includes 37 companies of the sector.
Date of the Shareholders’ Meeting 09/05/2001 03/05/2002 30/05/2001 (b) 03/05/2002 21/05/2002 (b) 03/05/2002 03/05/2002 03/05/2002 03/05/2002 03/05/2002
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: 8,405,543 2,975,030 1,825,459 10,725,180 496,049 8,855,437 3,697,059 16,981 240,849 25,039
Executive Directors: Start date of exercise 14/03/2005 14/03/2005 02/04/2005 26/03/2006 14/04/2006 29/03/2007 29/03/2007 06/06/2007 27/06/2007 01/07/2007
Expiry date of options 14/03/2013 14/03/2013 02/04/2013 26/03/2014 14/04/2014 29/03/2015 29/03/2015 06/06/2015 27/06/2015 01/07/2015
Executive Directors: Start date of exercise 21/09/2007 31/03/2008 31/03/2008 31/03/2010 25/09/2008 25/09/2010 13/11/2010 10/05/2009 10/05/2009 10/05/2011
Grant date (Board of Directors or Management Board) 24/09/2007 24/09/2007 19/11/2007 19/11/2007 01/04/2008 01/04/2008 19/05/2008 19/05/2008 22/09/2008 22/09/2008
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: 10,681 12,587 4,689 8,205 8,056,370 1,240,890 6,004 12,360 19,127 46,929
Executive Directors: Start date of exercise 24/09/2009 24/09/2011 19/11/2009 19/11/2011 01/04/2010 01/04/2012 19/05/2010 19/05/2012 22/09/2010 22/09/2012
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: 19,047 4,870,844 407,692 114,324 22,291 2,137,462 53,237 3,134 20,890 7,671,540 278,986
Expiry date of options 24/11/2018 20/03/2019 20/03/2019 02/04/2019 10/06/2019 10/06/2019 21/09/2019 08/12/2019 08/12/2019 19/03/2020 19/03/2020
Subscription or purchase price of options (a) 13.89 9.76 9.76 9.76 13.03 15.47 15.88 16.60 16.60 15.43 15.43
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 27/04/2011 27/04/2011 27/04/2011
Subscription or purchase price of options (a) 13.89 13.89 13.01 13.01 12.22 14.73 14.73 14.73 12.22 9.36 13.81
included in Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options or the actual proceeds if and when the options are exercised. On March 22, 2013, the fair value of one option was €1.43 for options without performance conditions, €1.28 for options with performance conditions.
AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance units, restricted shares or similar events. In accordance with the recommendations of the Afep - Medef Code, the executive offi cers of the Company make a formal commitment to not resort to such hedging transactions.
Stock options granted during the year by AXA or any eligible AXA Group’s subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of stock options (aggregate information) 789,382 13.81
Stock options on AXA or any eligible AXA Group’s subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who exercised the highest number of stock options (aggregate information) 2,167,029 13.76
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 65,882 -
AXA share in the medium-term (3 to 5 years); ■ reduce shareholder dilution by granting less subscription options.
Shares and Performance Units are made by the management of each operational entity or business unit and by the Group 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.
Compensation & Governance Committee, which takes into consideration the aggregate compensation elements of the executive offi cer as well as the market studies carried out by the Group. Furthermore, the grant to AXA executive offi cers shall depend on the strategic objectives defi ned by the Board of Directors.
During the performance period, the Performance Units/Shares initially granted are integrally subject to performance conditions regardless of the benefi ciary’s status. These criteria measure both the performance of the AXA Group and the benefi ciary’s operational entity/business unit, according to pre-determined targets.
The performance conditions, determined by the Board of Directors, are defi ned and reviewed on a regular basis depending on the strategic objectives set by the Group and market practices. For example, during the last fi scal years, the performance criteria used have been (i) to measure the operational entities’ performance, the underlying earnings as well as the net income and (ii) to measure the AXA Group performance, the net income per share.
Shares which will be defi nitively granted to the benefi ciaries at the end of the acquisition period, under the condition that the benefi ciary is still employed by the AXA Group. The number of
Units/Shares defi nitively granted shall therefore be equal to the number of Performance Units/Shares initially granted multiplied by the performance rate which may vary between 0% and 130%.
Shares defi nitively granted to the benefi ciaries is calculated on a linear basis depending on the performance of each indicator.
As far as Performance Shares are concerned: ■ shares acquired, under the condition that the benefi ciary is still employed by the AXA Group, at the end of the performance period are restricted from sale during a 2-year period; ■ as from 2014, the Board of Directors intends to gradually condition the Performance Share grants to a minimal 3-year acquisition period and the benefi ciaries shall then keep the shares during a minimal period of 2 years, as of the defi nitive grant of these shares, it being specifi ed that all the Performance Shares granted to the executive offi cers as from 2014 will immediately be subject to a minimal 3-year acquisition period. The purpose of this extension is to allow the measurement of the performance determining the defi nitive grant of the shares over a longer period, i.e. at least 3 years.
since 2013. However, in case of legal, fi scal or others impossibilities, the payment could be made in cash; ■ as from 2014, the Performance Units (International
Performance Shares) will gradually be subject to a 3-year performance period followed by a 1-year differed acquisition period.
The amounts corresponding to Performance Units are expensed each year under the variable accounting method.
Performance Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant and the possibility to deliver existing shares, this choice being the one made up to 2013.
Grant date (Board of Directors or Management Board) 20/03/2009 02/04/2009 10/06/2009 19/03/2010 18/03/2011 04/04/2011 16/03/2012 13/06/2012 22/03/2013
Total number of benefi ciaries 3,608 216 28 3,972 5,059 215 5,039 1 5,162
Number of Performance Units acquired at 31/12/13 2,452,539 (a) 122,361 (b) 306,990 (c) 2,828,546 (d) 11,705 (e) 390 (f) 8,419 (g) 35,509 780 (h)
(a) The 2,452,539 units acquired of the March 20, 2009 plan have been settled as €29.8 million and 404,203 shares restricted until March 20, 2013.
(b) The 122,361 units acquired the April 2, 2009 plan have been settled as €1.5 million and 19,492 shares restricted until April 2, 2013.
(c) The 306,990 units acquired of the June 10, 2009 plan have been settled as €4,1 million and 23,933 shares restricted until June 10, 2013.
(e) 11,705 units of the March 18, 2011 plan acquired by anticipation.
(f) 390 units of the April 4, 2011 plan acquired by anticipation.
(g) 8,419 units of the March 16, 2012 plan acquired by anticipation.
(h) 780 units of March 22, 2013 plan acquired by anticipation.
(b) From which 1,404 shares acquired by anticipation related to deceased benefi ciaries.
The numbers of Performance Shares indicated for 2009 have been adjusted to take into account the impact of the share capital increase with preferential subscription rights of December 4, 2009.
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations earning -net income per share
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2013 “Consolidated
Under the AXA Group Compliance and Ethics Guide, all employees (including the executive offi cers of the Company) are prohibited from engaging in any transaction designed to hedge the value of equity based compensation awards (including stock options, performance units, restricted shares, or similar awards) 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 benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance units, restricted shares or similar events. In accordance with the recommendations of the Afep- Medef Code, the executive offi cers of the Company make a formal commitment to not resort to hedging transactions.
Henri de Castries Chairman & Chief Executive Offi cer 10/06/2009 105,519 10/06/ 2013
Requirement within a period of 5 years as from January 1st, 2007 or the date of his/her fi rst appointment if after January 1st, 2007.
January 1st, 2007, the executive offi cers must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France, this equals approximately 50% of the post-tax capital gain). These shares shall be held during the entire term of offi ce of the executive offi cer; ■ for Performance Shares granted after January 1st, 2007, the executive offi cers must, at every share acquisition date, hold in registered form at least 25% of the Performance Shares acquired during the entire term of offi ce of the executive offi cer.
Pursuant to the AXA Group Compliance and Ethics Guide, executive offi cers and other employees of the Company must refrain from any purchase or sale of AXA securities during specifi c time periods (“blackout periods”) prior to the earnings releases. These blackout periods generally begin about 30 days before its annual or half-year earnings releases and about 15 days before its quarterly fi nancial information releases. Depending on the circumstances, these blackout periods could be declared at other times or be longer.
March 31 , 2010 with Banque Degroof a discretionary mandate to manage a portion of the AXA securities they personally own.
December 31, 2013, the number of AXA shares or ADS indicated in the table below.
Henri de Castries – Chairman & Chief Executive Offi cer 1,373,752 -
I Transactions involving Company securities completed in 2013 by the members of the Board of Directors
Henri de Castries Chairman & CEO Beginning of current mandate: 29 /04 /2010 Term of offi ce: 2014 – X X – X – – X
Denis Duverne Deputy CEO Beginning of current mandate: 29 /04 /2010 Term of offi ce: 2014 – X X – X – – X
The amount of the supplementary pension is calculated at the time of retirement and is in addition to the total amount of retirement pensions paid under mandatory schemes (s ocial security, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
The amount of the supplementary pension is designed, for a minimum executive seniority of 20 years within the AXA Group, to achieve a global pension (including the amounts paid with respect to compulsory schemes) equivalent to 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual s ocial security ceilings (1).
The Company’s commitments as regard to pension or retirement to the aforementioned executives was €50.3 million on December 31, 2013.
The evolution of these commitments between December 31 , 2012 and December 31 , 2013 is due to the cost attributable to one year of additional service within the AXA Group and the technical evolution of the hypothesis considered in the calculation of these obligations.
On February 20, 2014, the Board of Directors decided that the payment of the severance benefi t would be subject from now on to the three following performance conditions: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% (against 65%
AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce (unchanged condition), and (3) the average consolidated adjusted ROE
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights on December 31, 2013 except as indicated in the table above.
Certain of the Company’s shares are entitled to double voting rights as described in Part 5 – “Certain additional information” – “Voting rights” Section of this Annual Report. Of the Company’s 2,417,865,471 outstanding ordinary shares on
Signifi cant changes in the Company’s share capital ownership between December 31, 2011 and December 31, 2013 are set forth in the table below: On December 31, 2013 (a) On December 31, 2012 (a) On December 31, 2011 (a)
Treasury shares held by Company subsidiaries (directly and indirectly) (d) 3,836,408 0.16% [6,774,024] (c) [0.23%] (c) 16,448,654 0.69% [30,906,564] (c) [1.07%] (c) 16,489,792 0.70% [30,258,184] (c) [1.03%] (c)
(d) Treasury shares as indicated in Note 13 to the“Consolidated Financial Statements” included in Part 4 of this Annual Report.
Company had 10,890 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
Meeting of April 30, 2013, the Board of Directors increased the
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2013 program.
The traditional plan allowed employees to subscribe through a personal investment to AXA shares (either through Mutual funds (FCPE) or through direct share ownership, depending
with a 12.95% discount in 2013. The shares are held within the Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable laws). Employees’ personal investment is guaranteed by a bank, and employees also benefi t from a portion of the share appreciation, calculated on the basis of the non-discounted reference price.
The SharePlan 2013 program was carried out through a capital increase that took place in December 2013 and was open to substantially all Group employees through voluntary contributions: ■ approximately 22,000 employees took part in SharePlan 2013, representing over 19% of eligible employees; ■ the total amount invested was approximately €293 million, as follows: • €20.4 million in the traditional plan, and
On August 5, 2010, and after authorization by the AXA Board of Directors of August 3, 2010, the AXA Group and the BNP
The agreement was made public by the AMF on August 9, 2010.
Consequently, the Supervisory Board took the following decisions: ■ T he Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance.
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with,
In connection with the proposal to re-appoint Mr. Henri de Castries, it is up to the Shareholders’ Meeting to once again approve the contractual severance benefi ts in case of termination as described above.
Group’s principal insurance subsidiaries be above the minimum ratings set by the Board).
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 benefi ts.
Consequently, the Supervisory Board took the following decisions: ■ T he Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Denis Duverne would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance.
Duverne in order for the payment of the severance benefi ts to be subject, from now on, to the three following performance conditions: ■ A chievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% (against 65% before) of his variable compensation target; ■ E volution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce (unchanged condition); ■ A verage adjusted Return On Equity (adjusted ROE) over the three preceding consolidated fi scal years higher than or equal to 5%
The other elements related to commitments granted to Mr. Denis Duverne remain unchanged.
Nature, purpose, terms and conditions: On August 3, 2010, the AXA Board of Directors authorized the execution of an agreement between AXA, on the one hand, and BNP
■ This agreement provides, specifi cally, a reciprocal repurchase option with BNP Paribas in the event of a hostile takeover by a third party of the share capital of AXA or BNP Paribas. In these circumstances, and pursuant to the agreement, AXA would be entitled to repurchase, partly or entirely, the outstanding shareholding of the BNP Paribas Group in AXA on the date it exercises its repurchase option. Reciprocally, BNP Paribas will enjoy the same repurchase option over the outstanding shareholding of the
■ In force for a period of three years as from August 5, 2010, this agreement is renewable automatically for successive periods of one year, unless one of the two parties decides to terminate beforehand, in which case it is required to give a three month notice prior to the next renewal date.
With the following Executive Offi cers: Messrs. Henri de Castries (Chairman & Chief Executive Offi cer) and Denis Duverne (Deputy Chief Executive Offi cer)
Nature, purpose, terms and conditions: On October 7, 2009, the AXA Supervisory Board confi rmed that Messrs. Henri de Castries, Denis Duverne and François Pierson, then members of the Management Board, were entitled to the supplementary pension scheme for Group directors in the same conditions that apply to director-level employees of the AXA Group in France.
The amount of the supplementary pension allows , for a minimum executive seniority of 20 years, the grant of a global pension equivalent to 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual Social Security ceilings.
Eurostoxx Insurance index (in percentage) over a 3-year period preceding the termination of the term of offi ce; (3) fi nancial strength ratings (FSR) of the AXA Group’s principal insurance subsidiaries above or equal to the minimum ratings set by the Supervisory
EURO STOXX Sustainability 40, the index representing the largest sustainability leaders in the Eurozone in terms of longterm environmental, social and governance criteria.
REGULATION, RISK FACTORS Certain disclosures about market risks and related matters 3.2 RISK FACTORS 155 3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK FACTORS 168
Governance of investment strategy and asset & liability management (ALM) 185
AXA is engaged in regulated business activities on a global basis through numerous operating subsidiaries and the
des marchés financiers (“AMF”), which is the French financial market regulator, and the Autorité de contrôle prudentiel et de résolution (“ACPR”), which is the principal French insurance regulator.
The Solvency II framework is based on three main pillars: (1) Pillar 1 consists of the quantitative requirements around own funds, valuation rules for assets and liabilities and capital requirements, (2) Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers including the requirement for insurers to submit an Own Risk and Solvency Assessment
(ORSA) which will be used by the regulator as part of the supervisory review process; and (3) Pillar 3 focuses on disclosure and transparency requirements. The Solvency II
capital methodologies and, if approved by the ACPR, will use the Group’s internal economic capital models for this purpose which is intended to enable a better understanding of risks and risk management.
At this stage, uncertainties on certain of the implementing measures of Solvency II remain. While AXA is actively participating in the various fi nalization processes through its involvement in industry bodies and trade associations, there is a continuing risk that the effect of the final measures adopted could depart from the initial objective of the directive (i.e.
setting an economic framework) and end up more focused on prudence driven principles which could be adverse for the Group in many respects including potentially imposing a significant increase in the capital required to support existing business. In addition, the application of Solvency II to international groups is still unclear and there is a risk of inconsistent application throughout Europe, which may place AXA at a competitive disadvantage with regard to other European and non-European financial services groups. We cannot currently predict whether and/or how these uncertainties will ultimately be resolved and their potential impact on the insurance industry generally or our consolidated fi nancial position or results of operations.
While the full impact of such requirements can only be evaluated in the context of implementing regulations, such new legislation could have a substantial impact on AXA’s regulated asset management business.
AXA SA), are currently operating in conformity with these new rules (or preparing for their implementation) and the Group’s fi nancial risk framework, including credit and liquidity risk procedures, has been adjusted to refl ect these requirements. In addition, the Market Financial Instruments Directive II (“MIFID II”)
was fi rst proposed by the European Commission in 2011 and is expected to come into force in 2015 or 2016. MIFID II, which is designed to better integrate the European Union’s fi nancial markets and increase cross-border investment, market transparency and investor protection, imposes a wide variety of new requirements including with respect to trading/clearing of certain derivatives on organized platforms, regular reporting with respect to derivatives positions and certain other types of fi nancial instruments, restrictions and/or prohibitions on certain types of compensation arrangements or other monetary inducements to fi rms providing independent investment advice and greater regulation of structured products and other complex fi nancial instruments.
Since 2008 there have been a variety of proposals with respect to executive compensation practices at financial institutions including from the Financial Stability Board (FSB) and other regulatory bodies. Certain of these proposals have been embodied in regulation or legislation while others remain best practice recommendations.
Group does business. While these restrictions are often aimed primarily at the banking sector and do not apply uniformly to the
Supervisors (“IAIS”) published an initial assessment methodology for designating global systemically important insurers (“GSIIs”), as part of the global initiative launched by the G20 with the assistance of the FSB to identify global systemically important fi nancial institutions (“G-SIFIs”). At the same date, the FSB also published its initial list of nine
GSIIs, which includes the AXA Group. The framework policy measures for GSIIs, also published by the IAIS on July 18, 2013 for implementation by the GSIIs, include (1) new capital requirements, including (i) a “basic” capital requirement, formerly known as “Backstop Capital Requirement” (“BCR”)
applicable to all GSII s activities to serve as a basis for (ii) an additional level of capital, called “Higher Loss Absorbency”
(“HLA”) capacities to be requested from GSIIs in relation to their systemic activities, (2) greater regulatory oversight over holding companies, (3) various measures to promote the structural and fi nancial “self-suffi ciency” of group companies and reduce group interdependencies, and (4) in general, a greater level of regulatory scrutiny for GSIIs (including a requirement to establish a Systemic Risk Management Plan (“SRMP”) and a Recovery and Resolution Plan (“RRP”)) which may entail signifi cant new processes, reporting and compliance burdens (and costs)
as well as potential reorganizations of certain businesses or activities . For additional information see “Designation of the
may adversely impact our capital requirements, profi tability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position” in Section 3.2 “Risk
Finally, management expects the regulatory landscape with respect to insurance and fi nancial markets will continue to evolve in 2014 and beyond with further legislative and regulatory initiatives.
Many of the risks described below are inherent to the nature of our business and the economic, competitive and regulatory environment in which we operate. Given the multiple contingencies and the inherent uncertainties involved with many of these risks, management is not able to quantify the impact of many of these risks with any level of precision, however, it has put in place numerous risk management processes, procedures and controls to monitor and manage these risks on an on-going basis. These risk management processes, procedures and controls are described in detail in Section 3.3 of this Annual Report and this Section 3.2 should be read in conjunction with Section 3.3. In those cases where the risks described in this Section 3.2 have given rise to quantifi able and material fi nancial impacts and/or material contingent liabilities, those fi nancial impacts and/or contingent liabilities are refl ected in the Group’s consolidated fi nancial statements in accordance with applicable IFRS accounting standards.
Certain types of insurance and investment products that we offer expose us to risks associated with fl uctuations in fi nancial markets, including certain types of interest sensitive or variable products such as guaranteed annuities or Variable Annuities, which have crediting or other guaranteed rates or guaranteed minimum benefi ts not necessarily related to prevailing market interest rates or investment returns on underlying assets.
Although we use hedging techniques to help us mitigate our exposure under certain of these guarantees, not all risks can be effectively hedged and volatility in the fi nancial markets, combined with unanticipated policyholder behavior may increase the cost of these hedges and/or negatively affect our ability to hedge certain of these risks, which may adversely affect our profi tability. For further risks related to our hedging techniques, see “Risks relating to the structure of our Group, the scope and nature of our business, and the products we offer – Our hedging programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition.”
Factors such as consumer spending, business investment, government spending, regulation, the volatility and strength of the capital markets, and infl ation all affect the business and economic environment and, ultimately, our activities and the profi tability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of lapses or surrenders on certain types of policies, lower surrender rates than anticipated on other types of products, such as certain Variable Annuities, with in-the-money guarantees, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could have a material adverse effect on our business, results of operations and fi nancial condition.
In the event our current resources no longer satisfy our needs, we may have to seek additional fi nancing. The availability of additional fi nancing will depend on a variety of factors such as market conditions, the volume of trading activities, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. While management has put in place a liquidity risk management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, if our internal sources of liquidity prove to be insuffi cient or if our liquidity requirements change so as to require a need for additional funding, we may not be able to successfully obtain additional fi nancing (whether on favorable terms or otherwise).
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. On December 31, 2013 the Company’s consolidated solvency margin was 221%
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. Insurance regulators generally have broad discretion in interpreting, applying and enforcing their rules and regulations with respect to solvency and regulatory capital requirements and, during periods of extreme fi nancial market turmoil of the type we have experienced over the recent years, regulators may become more conservative in the interpretation, application and enforcement of these rules which may involve them, for example, imposing increased reserving requirements for certain types of risks, greater liquidity requirements, higher discounts/“haircuts” on certain assets or asset classes, more conservative calculation methodologies or taking other similar measures which may signifi cantly increase regulatory capital requirements.
Regulatory restrictions that inhibit the Company’s ability to freely move excess capital among its subsidiaries or which otherwise restrict fungibility of the Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the capital position of the Company’s operating insurance subsidiaries which may have a consequent negative impact on the Company and the perception of its fi nancial strength. Additional regulatory developments regarding solvency requirements, including the proposed “Solvency II”
regime, may further effect changes in the insurance industry’s solvency framework and prudential regime as well as associated costs. At this stage, uncertainty regarding the fi nal outcome of the implementation process remains, and it is diffi cult to predict how the regulations resulting from such initiatives and proposals could affect the insurance industry generally or our results of operations, fi nancial condition and liquidity.
Claims paying ability and credit strength ratings are important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. On April 30, 2013, Moody’s reaffirmed the Aa3 rating for counterparty credit and financial strength on AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, maintaining a negative outlook in each case. The negative outlook reflects
or increasing our cost of fi nancing, (vi) triggering additional collateral requirements under certain agreements to which we are party, (vii) harming our relationships with creditors or trading counterparties and/or (viii) adversely affecting public confi dence in us. Any of these developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition.
Annual Report. Business and market conditions may impact the amount of goodwill we carry in our consolidated balance sheet as well as our pattern of Deferred Acquisition Costs
Our valuation of certain investments may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect our results of operations and fi nancial condition
European Union), could have a material adverse effect on our consolidated results of operations, fi nancial position or cash fl ows through realized losses, impairments, and changes in unrealized gains and loss positions.
Euro. For the year ended December 31, 2013, a signifi cant portion of AXA’s insurance gross premiums and fi nancial services revenues, as well as AXA’s benefi ts, claims and other deductions were denominated in currencies other than the
Swiss Francs. AXA’s obligations are denominated either in Euro or other currencies, the value of which is subject to foreign currency exchange rate fl uctuations.
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations, cash fl ows, shareholders’ equity and solvency. For example, a strengthening or weakening of the Euro against the US Dollar and/or certain other currencies in 2014 and future periods may adversely affect AXA’s results of operations and the price of its securities. In addition, the currency hedges used by AXA to manage foreign exchange rate risk may signifi cantly impact its cash position.
For further details, see the Section 1.4 “Liquidity and capital resources” and Part 4 – Note 29.4 “Other items: Restriction on dividend payments to shareholders” of this Annual Report.
This may result in higher realized losses and unanticipated cash needs to collateralize or settle transactions. In addition, hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and losses on positions that are not collateralized. The operation of our hedging program is based on models involving numerous estimates and management judgments, including among others, mortality, lapse rates, election rates, volatility and interest rates and correlation among various market movements. Our hedging program may change in time and there can be no assurance that ultimate actual experience will not differ materially from our assumptions, which could adversely impact our results of operations and fi nancial condition.
The establishment of insurance reserves, including the impact of minimum guarantees which are contained within certain of our Variable Annuity products, the adequacy test performed on the reserves for life policies (which encompasses the recoverability of DAC, Value of Business In-force and deferred participations assets) and the establishment of DAC,
lapses, persistency, etc.), court decisions, changes in laws and regulations, social, economic and demographic trends, infl ation, investment returns and other factors, and, in the life insurance business, assumptions concerning mortality and morbidity trends. The use of different assumptions about these factors could have a material effect on insurance reserves and underwriting expenses as well as on our DAC, NBV and
EEV. In addition, insurance reserves for minimum guarantees contained within certain of our Variable Annuity products, DAC
EEV calculations, changes in assumptions used in calculating these measures may have a material adverse effect on the level of our NBV and/or EEV. For example, our NBV is sensitive to interest rate movements and, consequently, an adverse evolution of interest rates may have a signifi cant impact on our
In our Life & Savings businesses, our earnings depend signifi cantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. AXA uses both its own experience and industry data to develop estimates of future policy benefi ts, including information used in pricing the insurance products and establishing the related actuarial liabilities. However, there can be no assurance that actual experience will match these estimates and emerging risks such as pandemic diseases could result in loss experience inconsistent with our pricing and reserving assumptions. To the extent that our actual benefi ts paid to policyholders are less favorable than the underlying assumptions used in initially establishing the future policy benefi t reserves, or events or trends cause us to change the underlying assumptions, we may be required to increase our liabilities, which may have a material adverse effect on our business, results of operations and fi nancial condition.
The Property & Casualty insurance business is cyclical. Although no two cycles are identical, these cycles have typically lasted for periods ranging from two to six years. Periods of intense price competition due to excessive underwriting capacity, periods of shortages of underwriting capacity permitting more favorable rates, consequent fl uctuations in underwriting results and the occurrence of other losses characterize the conditions in these cycles. Historically, Property & Casualty insurers have experienced signifi cant fl uctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency or severity of catastrophic events, levels of capacity, general economic conditions and other factors. This may cause a decline in revenues during certain cycles if we choose not to reduce our Property & Casualty product prices in order to maintain our profi tability. We may therefore experience the effects of such cyclicality, changes in customer expectations of appropriate premium levels, the frequency or severity of claims or other loss events, or other factors affecting the Property & Casualty insurance business, which could have an adverse effect on our results of operations and fi nancial condition.
Over the past several years, changing weather patterns and climatic conditions, including global warming, have added to the unpredictability and frequency of natural disasters
(including hurricanes, windstorms, hailstorms, earthquakes, fi res, explosions, freezes and fl oods) and, together with manmade disasters and core infrastructure failures (including acts of terrorism, military actions, power grid and telephone/internet infrastructure failures), created additional uncertainty as to future trends and exposures. We follow the evolution of these risks closely and generally seek to manage our exposure to them through individual risk selection, monitoring risk accumulation, purchase of reinsurance and use of available data in estimating potential catastrophic risks. However, we have experienced in the past and could experience in the future material losses from these types of risks.
These events can potentially result in fi nancial loss, impairment to our liquidity, a disruption of our businesses, regulatory sanctions or damage to our reputation. Management attempts to control these risks and keep operational risk at low levels by maintaining a sound and well controlled environment in light of the characteristics of our business, markets and regulatory environment in which we operate. Notwithstanding these measures, operational risk is part of the business environment in which we operate and we may incur losses from time to time due to these types of risks.
We may have contingent liabilities from discontinued, divested and run-off businesses and may incur other off-balance sheet liabilities that may result in charges to the income statement
For additional information, see Part 4 – Note 29 “Contingents assets and liabilities and unrecognized contractual commitments” and also Note 20 “Derivative instruments” of this Annual Report.
Also, on July 18, 2013, the FSB published its initial list of nine
applicable to all GSII’s activities to serve as a basis for (ii) an additional level of capital, called “Higher Loss Absorbency”
as well as potential reorganizations of certain businesses or activities. The policy measures contemplate the prompt implementation of certain measures, such as the constitution of a Crisis Management Group (“CMG”) by the Group-wide supervisor, the preparation of the above-mentioned SRMP and
The AXA Group operates in more than 50 countries around the world and our operations are subject to a wide variety of insurance and other laws and regulations. We are faced with signifi cant compliance challenges due to the fact that our regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and aggressive role in interpreting and enforcing regulations in the jurisdictions where we do business. The fi nancial turmoil over the past several years gave rise to numerous legislative and regulatory initiatives (many of which focus on the fi nancial services industry) across many of the principal jurisdictions where the Group does business. While management cannot predict whether or when approximately future legislative or regulatory proposals may ultimately be enacted and the fi nal form they will take, certain of these proposals, if enacted, could have a material adverse impact on our business activities, results of operations and fi nancial conditions. We expect that the multitude of new laws and regulations will increase our legal and compliance costs. In recent years there has been an increase in the number of legislative/regulatory initiatives and enforcement actions in the areas of anti-money laundering, trade sanctions and anti-bribery as well as numerous consumer protection related initiatives focused on a variety of matters including, in particular, distribution, suitability and misselling. A number of global fi nancial institutions have been the subject of well publicized enforcement actions that have resulted in very signifi cant monetary and other sanctions in these areas. These are complex areas of law that evolve on a continuing basis and which carry signifi cant fi nancial and reputational risk for non-compliance. In addition, as a global company operating in several countries , we are subject to various tax regimes and regulations. Changes in tax laws, including the US Foreign Account Tax Compliance Act (the
“FATCA”) withholding requirements, could result in higher tax expenses and payments and higher compliance costs. Future interpretations or developments of tax regimes may also affect our tax liability, return on investments and business 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 management proactively manages these risks and has adopted policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where it does business, we cannot predict with any certainty the potential effects that a change in applicable laws or regulations, their interpretation or enforcement (or that any enactment of new regulation or legislation in the future) may have on the business, fi nancial condition or results of operations of our various businesses.
Standards Board (“IASB”) concerning possible modifi cations to the Standards and certain of these modifi cations may have potentially signifi cant impacts on insurers and other fi nancial institutions, including AXA, that prepare their consolidated accounts in accordance with the Standards.
The Mutuelles AXA, which comprises two French mutual insurance companies, collectively held 14.18% of the
Company’s outstanding shares and 23.54% of its voting rights on December 31, 2013. The Mutuelles AXA have stated their intention to collectively vote their shares in AXA and may have interests confl icting with other shareholders’ interests. For example, even though the Mutuelles AXA do not hold a majority of the total voting power in AXA, efforts by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may fi nd attractive, may prevent other shareholders from realizing a premium for their AXA ordinary shares or ADS. The Mutuelles AXA may decide to increase their interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.
or that persons wanting to buy or sell AXA ADS will at all times be able to fi nd a willing seller or buyer at an acceptable price and volume.
This framework is based on the four following pillars, cemented by a strong risk culture: 1. Risk Management independence and comprehensiveness: Chief Risk Offi cers are independent from operations (“fi rst line of defense”) and internal Audit Departments (“third line of defense”). Risk Management Department, together with Legal, Compliance, Internal Financial Control, Human
2. Shared risk appetite framework: Chief Risk Offi cers are responsible for ensuring that the top management reviews and approves the risks they carry in their company, understand the consequences of an adverse development of these risks, and have action plans that can be implemented in case of unfavorable developments.
Chief Risk Offi cer who reports to the Group Deputy CEO, is responsible for developing the Enterprise Risk Management framework in terms of limits/thresholds (covering systemic, fi nancial, insurance and operational risks), standards, minimum requirements or processes.
Casualty; Life & Savings), and centralize the Group’s purchasing of reinsurance.
Their teams are responsible for controlling and managing risks within Group policies and limits, validating investment or underwriting decisions through Local Risk Committees.
Line management and staff are responsible for day to day risk management and decision making and therefore have primary responsibility for establishing and maintaining an effective control environment (fi rst line of defense).
Resources and Security Departments are responsible for developing, facilitating and monitoring effective risk and control framework and strategy (second line of defense), in coordination with Risk Management.
GRM. This committee determines the Group ALM policies and ensures that the Group exposures are within the
AXA is exposed to fi nancial market risks through its core business of fi nancial protection (i.e. insurance and asset management) and through the fi nancing of its activities as part of its equity and debt management.
structure, to reduce the risk to a desired level; ■ a disciplined investment process, requiring for any sophisticated investment a formal thorough analysis by the Investment Department, and a second opinion by Risk
Management Department; ■ hedging of fi nancial risks when they exceed the tolerance levels set by the Group. Operational management of derivatives is based on stringent rules and is mainly performed by AXA SA for the holding company activities and Group asset managers, AXA Investment Managers and
Property & Casualty (P&C) portfolios are exposed arise from a variety of factors including: ■ a decline in returns on assets (linked to a sustained fall in yields on fi xed income investments or to lower equity markets) could reduce investment margins on General
foreign exchange exposure and debt; ■ credit risk. Please read the next part “Credit risk” included in the Part 3 – Section 3.3 – “Quantitative and Qualitative
Group’s debt, along with the largest subsidiaries in France, the United States, the United Kingdom, Belgium, Switzerland,
(Spain, Portugal, Italy, Mexico, Morocco, Turkey, the Gulf Region and Greece), Hong Kong and Japan. At December 31, 2013, these subsidiaries represented 99% of AXA’s consolidated invested assets within its insurance operations.
IFRS shareholders' equity at December 31 42,306 10,617 52,923 45,449 8,215 53,664
Net unrealized capital gains/losses, not included in IFRS shareholders' equity 956 2,515 3,471 1,031 2,520 3,551
Unrealized capital gains projected in VIF & other stat-GAAP adjustments (6,151) - (6,151) (6,923) - (6,923)
Life & Savings Value of Inforce (VIF) 27,793 - 27,793 22,581 - 22,581
Casualty, International Insurance, Asset Management, Banking and Holdings and other companies), such as the time value for P&C reserves. However, the Life & Savings EEV is a key management metric measuring the risk-adjusted value of the business and tracking its evolution over time, and the Group
IFRS shareholders’ equity; ■ elimination of all intangible assets; ■ elimination of unrealized capital gains/losses included in the projection of future cash-fl ows (VIF); ■ adjustment for the differences between AXA’s consolidated accounting basis and local regulatory bases.
(29,2% in 2012); ■ consistent with previous years, AXA used, at the end of 2013, reference rates which included, where applicable, liquidity premia over the swap curves for some of its entities.
AXA’s market-consistent framework does not depend on assumed future asset returns, but rather on the reference rate described above. The Life & Savings VIF valuation depends on stochastic projections of multiple scenarios, rather than a single scenario.
The sensitivities of the Group EV to changes in major economic assumptions were calculated as follows for the 2012 and 2013 values: ■ Upward parallel shift of 100 basis points (bps) in reference interest rates which simulates a sudden shock to the initial conditions. This means changes to: 1) the current market values of fi xed-interest assets, with related possible changes to projected capital gains/losses and/or fee revenues, 2) future reinvestment rates for all asset classes, and 3) risk-discount rates. Infl ation rates are not changed.
Upward parallel shift of 100bps in risk-free rates 1,346 3% (1,428) (3%) (82) (0%) 2,360 6% (1,266) (3%) 1,093 3%
10% higher value of equity markets at start of projection 1,458 3% 347 1% 1,805 4% 1,211 3% 393 1% 1,604 4%
Savings business of 3% to upward 100 bps and -9% to downward 100 bps (2012: 6% and -14%) show an asymmetry mainly driven by guaranteed interest rates having higher value when interest rates decrease, while higher reinvestment returns would need to be shared with policyholders limiting shareholders’ gains in a higher rate environment. However this classical pattern is not followed everywhere, as for certain type of business with signifi cantly low interest rate guarantees, the
Annuity option buyout program, and assumption updates on the dynamic transfer between General and Separate Accounts reducing the impact of downward interest shocks.
Savings business of 3% to 10% higher value and -4% to 10%
In addition to annual sensitivities, limits on interest rate risk are defi ned at the Group level and applied to the operating subsidiaries. In this context, the interest rate risk measure is performed every month and reported to Group Risk
Management. Both the Group and the local interest rate risk positions are also reported every quarter to the Management
■ Life & Savings business: 77% of Group assets at the end of 2013 (77% in 2012): In France, AXA was exposed to exchange-rate risk for a global amount of €10,254 million at the end of 2013 (€8,986 million in 2012) held both directly and indirectly through investment funds partly invested in foreign currencies (particularly US
AXA Germany held €4,456 million investments denominated in foreign currencies at the end of 2013 (€4,216 million in 2012)
US dollar) due to the on-going low interest rate environment in Switzerland and to limited investment possibilities in the
AXA Hong Kong held €6,545 million investments denominated in foreign currencies at the end of 2013 (€6,302 million in 2012), both directly and indirectly through investment funds, with an aim of diversifying its investments. These investments were mainly denominated in US Dollar and amounted to €6,323 million (€6,199 million in 2012). Exchange-rate risk exposure is partially hedged using foreign exchange forwards.
In Belgium, parts of AXA Belgium’s reinsurance portfolio liabilities are denominated in US Dollar for an amount of €79 million
(€88 million in 2012). The foreign exchange risk associated with these liabilities is fully hedged through investments in US Dollar of €111 million (€122 million in 2012).
Net exposure amounted to €30 million, mainly from investments in foreign equities; • investments totaling €520 million (€332 million in 2012) in
CLO funds and other investment funds which hold foreigncurrency investments, of which €490 million are hedged through foreign exchange forwards, while the remaining €30 million mitigate the foreign exchange exposure in AXA
PPP liabilities. Net exposure is nil; • investments in Alternative Credit funds denominated in US
Dollar for a residual amount of €221 million, totally hedged with foreign exchange forwards. Net exposure is nil.
AXA Ireland also operates in Northern Ireland, and therefore manages a portfolio of Pound Sterling policies for an amount of €276 million (€284 million in 2012), hedged with investments in the same currency of €280 million (€253 million in 2012).
These countries accounted for 92% at the end of 2013 (92% in 2012) of the Group’s Property & Casualty companies’ assets.
Assurance carries some insurance liabilities, denominated in foreign currencies, particularly in US Dollar (€970 million at the end of 2013 versus €996 million in 2012) and, to a lesser extent, Pound Sterling (€616 million at the end of 2013 versus.
€635 million in 2012). AXA Corporate Solutions Assurance carries assets denominated in foreign currencies to ensure balance sheet congruence. The congruence between the
Company’s foreign currency assets and liabilities is regularly adjusted, but is subject to unpredictable loss occurrence and the corresponding liabilities movements.
■ Holding companies (6% of Group assets at the end of 2013, same as 2012): Since 2001, AXA SA has adopted a hedging policy on net investments denominated in foreign currencies, which aims at protecting the Group’s consolidated shareholders’ equity against currency fl uctuations, using derivatives instruments and foreign currency debt.
In respect of the US activities, mainly in the form of debt
In respect of the UK activities, mainly in the form of debt
AXA SA’s assets accounted for most of the assets of the Group holding companies at the end of 2013.
In addition to the foreign exchange rate management performed locally (hedged through Foreign Exchange forwards and currency swaps), Group Corporate Finance and Treasury steers the global exposure to foreign exchange risk and reports the position every quarter to the Finance Committee of the Board of Directors.
These limits aim at managing the default risk of a given issuer, depending on the weighted average credit rating of all the bonds pertaining to this issuer (corporate, government, stateowned companies and agencies) and take into account all
Synthetic reports, including information about hedging strategies, are sent to and reviewed by the Finance Committee of AXA’s Board of Directors at least on a quarterly basis.
At December 31, 2013, the breakdown of the debt security portfolio (€372.0 billion) by credit rating category was as follows: BBB
At December 31, 2012, the breakdown of the debt security portfolio (€389.8 billion) by credit rating was: 19% in AAA, 37%
in AA, 18% in A, 19% in BBB, 3% in BB and lower, and 4%
At December 31, 2013, the breakdown of government and government related bonds fair values (€215 billion) by country was as follows: Switzerland
Increase in unrealized gains and losses was driven by interest rate decreases in all geographies, in particular in Italian sovereign bonds.
At December 31, 2013, the economic breakdown of the total value of ABS (€10,3 billion excluding assets held for sale as well as CMOs and agency pool ABS) was as follows: (a) Mainly consumer loans ABS (plus some leases and operating ABS assets)
At December 31, 2013, AXA’s invested assets included a net exposure to US subprime residential and Alt-A mortgage loans of approximately €0.7 billion (6% equaling or above AA rating).
At December 31, 2013, the nominal amount of positions taken through credit derivatives was €17.6 billion (1) of CDS
(cumulated notional amounts of €7.5 billion protections bought and of €10.1 billion protections sold), which can be broken down as follows: i. €3.5 billion of CDS protections bought to hedge credit risk with regard to certain investments, mostly in corporate bonds; ii. €4.0 billion of CDS protections bought used to lock the liquidity premium through purchasing bonds and CDS
(1) This fi gure represents an accounting view i.e.100% of assets held directly and in consolidated investment funds “Core Investment Portfolios”, and excluding credit derivatives in non consolidated investment funds, in line with Note 20 of the notes to the consolidated fi nancial statements. The
At year end 2013, total invested assets of the banking segment amounted to €32.7 billion (€30.5 billion in 2012).
scoring models regularly monitored to ensure a risk selection consistent with each bank’s risk appetite) and a regular monitoring of portfolios by product management teams and risk management teams; ■ other than retail credit risk, resulting from investment activity.
Group level but performed jointly by central and local teams: ■ profi tability analysis mainly through procedures governing product approval before launch (new product risk control)
In each Life & Savings subsidiary, the AXA Group has set up a validation framework which notably relies on the results of the results of the economic capital calculation of AXA internal model (STEC – Short Term Economic Capital) to ensure that new products undergo a thorough approval process before they are put to market. This harmonized approach facilitates the sharing of product innovation across the Group. These procedures are defi ned by Group Risk Management (GRM) but adapted and implemented locally.
Casualty as a regular technical & risk audit. Methods are adapted to the underwriting of risks, while maintaining the principle of local decision-making based on a documented approval procedure. The aim is threefold: ■ for pre-launch business, to ensure that new risks underwritten by the Group have undergone a rigorous process before the products are offered to customers; ■ for post-launch business, to ensure the appropriate profi tability and risks control of the in-force P&C underwritings; ■ this profi tability framework complements underwriting rules to ensure that no risks are taken outside the Group tolerances and that value is created by adequately pricing the risk.
For the Property & Casualty and Life & Savings operations, reinsurance programs are set up as follows: ■ reinsurance placement is mainly handled centrally by AXA
Global P&C and AXA Global Life; ■ prior to ceding risks, in-depth actuarial analyses and modelling are conducted on each portfolio by AXA Global
P&C, AXA Global Life and GRM to optimize the quality and cost of reinsurance cover. They measure frequency risks as well as specifi c severity risks in P&C (natural catastrophes, storms, fl oods, earthquakes) and Life (mortality, geographical concentration risk); ■ estimates of P&C catastrophic risks are carried out through the use of several catastrophe modelling softwares available in the market. Even if these software are key to foster discussions with reinsurers, they are regularly assessed within GRM and adjusted to the specifi c features of AXA’s portfolio.
AXA Global P&C. The remaining share is retained and combined at AXA Global P&C level to build internal Group reinsurance pools by line of business.
The breakdown of the Group’s Life & Savings technical insurance reserves by product type was as follows: ■ 22% at the end of 2013 (20% at the end of 2012) of the
■ 11% at the end of 2013 (11% at the end of 2012) of the
Emerging Risks are risks which may develop or which already exist and are continuously evolving. Emerging risks are marked by a high degree of uncertainty; as some of them will even never emerge.
■ the most critical operational risks of each entity and a set of transversal Group stress scenarios are assessed following a forward-looking and expert opinion approach. These risks are then aggregated using actuarial methods to estimate the capital allocation needed to cover operational risks based on advanced models. Operational Risk profi le is embedded into local governance through senior management validation to ensure adequate corrective and pre-emptive action of the main risks; ■ in addition, a loss data collection process is in place in most companies of the Group in order to track and appropriately mitigate actual operational losses. This process is also used as a valuable source of information to back-test the assumptions taken in local risk assessments.
For further details, please refer to appendices VII – Social and
AXA’s obligations and commitments to policyholders are met at all times, to protect the solvency of the Group’s entities, and to generate superior returns over time.
Local CIOs manage local portfolios, aiming at an optimised risk-return ratio, maintain reporting lines to the Group, and manage close relationships with asset managers and local stakeholders. Moreover, they are responsible for the investment performance and for implementing and executing a sound asset liability management.
AllianceBernstein, AXA US and AXA SA. In a similar way, this set-up ensures all entities benefi t from technical expertise, legal protection and good execution of such transactions within the following governance framework for derivatives.
For a large proportion of its assets, AXA utilizes the services of asset managers to invest in the market: ■ local AXA companies mandate the day-to-day management of their asset portfolios primarily to AXA’s asset management subsidiaries, i.e. AXA Investment Managers and
4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 188 4.2 CONSOLIDATED STATEMENT OF INCOME 190 4.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 191 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 192 4.5 CONSOLIDATED STATEMENT OF CASH FLOWS 196 4.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 198
6 Value of purchased business in force (c) 2,382 2,685 3,074 7 Deferred acquisition costs and equivalent 19,351 19,047 18,624
Assets backing contracts where the fi nancial risk is borne by policyholders (d) 162,186 147,162 134,230 9 Investments from insurance activities 606,039 605,823 569,056 9 Investments from banking and other activities 37,360 35,199 35,264 10 Investments in associates – Equity method 1,387 1,312 1,139 14 Reinsurers’ share in insurance and investment contracts liabilities 17,727 10,558 10,698 14 Deferred policyholders’ participation assets - 4 1,247
Share capital and capital in excess of nominal value 26,199 25,549 25,188
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders (c) 125,593 113,921 104,642
14 LIABILITIES ARISING FROM INSURANCE AND INVESTMENT CONTRACTS 573,058 579,165 549,847 15 Liabilities arising from banking activities 35,374 33,494 34,023 16 Provisions for risks and charges 10,393 11,952 10,891
Fees and charges relating to investment contracts with no participating features 323 334
Change in unearned premiums net of unearned revenues and fees (246) (411)
Change in goodwill impairment and other intangible assets impairment (157) (128)
Net consolidated income – Minority interests 304 130 27 Earnings per share 1.76 1.61
Reserves relating to changes in fair value through shareholders’ equity (2,339) 6,215
Net gains and losses recognized directly through shareholders’ equity (4,066) 4,837
(b) Before 2013, AXA Japan closed its full year accounts at September 30. Given signifi cant movements in foreign exchange rates between September 30, 2011 and December 31, 2011, and between September 30, 2012 and December 31, 2012, balance sheet items were translated using respectively December 31, 2011 and December 31, 2012 exchange rates. Starting with 2013 annual accounts, AXA Life Japan aligned its closing date with the Group calendar year.
(e) AXA Life Japan aligned its closing date with the Group calendar year starting with 2013 annual accounts. Therefore, its contribution to the AXA consolidated result for the 2013 annual accounts exceptionally covered a period of fi fteen months.
Shareholders’ equity opening January 1, 2012 Restated 2,357,198 2.29 5,398 20,471 (385)
(a) Mainly undated subordinated debts (TSS, TSDI), and equity components of compounded fi nancial instruments (e.g. convertible bonds) (see Note 13.1.1).
Notably dilution impact from AllianceBernstein deferred compensation (€+30 million group share in 2012 offset in minority interests) and €-185 million in 2012 from open-market purchase of AllianceBernstein holding units (€-121 million group share and €-64 million minority interests in 2012).
(c) Actuarial gains and losses accrued since the opening as of January 1, 2012.
Change in goodwill impairment and other intangible assets impairment (d) 51 13
Change in fair value of investments at fair value through profi t or loss (24,910) (16,671)
Net change in liabilities arising from insurance and investment contracts (e) 14,135 22,585
Income arising from investments in associates – Equity method (131) (119)
Dividends recorded in profi t or loss during the period (3,451) (2,970)
Investment income & expense recorded in profi t or loss during the period (g) (9,346) (13,048)
Net cash impact of transactions with cash impact not included in the operating income before tax 18,751 14,335
Purchase of subsidiaries and affi liated companies, net of cash acquired (13) (139)
Net cash related to changes in scope of consolidation 352 86
Sales of equity instruments and non consolidated investment funds (h) (i) 25,512 18,507
Purchases of investment properties held direct or not (h) (2,142) (1,946)
Purchases and/or issues of loans and other assets (h) (j) (27,126) (27,679)
Acquisition/sale of interests in subsidiaries without change in control (120) (221)
Net interest margin of hedging derivatives on fi nancing debt 27 -
Impact of change in consolidation method and of reclassifi cations as held for sale (16) (3)
(b) Before 2013, AXA Japan closed its full year accounts at September 30. Given signifi cant movement in foreign exchange rates between September 30, 2012 and December 31, 2012, balance sheet items were translated using December 31, 2012 exchange rate.
(e) Includes impact of reinsurance and change in liabilities arising from contracts where the fi nancial risk is borne by policyholders.
(f) Mainly includes change in provisions for risks & charges, for bad debts/doubtful receivables and change in impairment of assets held for sale.
These consolidated fi nancial statements including all notes were fi nalized by the Board of Directors on March 14, 2014.
Japan, which closed its full year accounts on September 30, aligned its closing date with the Group calendar year starting with the 2013 annual accounts. Therefore, the contribution of
AXA Life Japan to the Group net consolidated income for the 2013 annual accounts exceptionally covered a period of fi fteen months.
Union before the balance sheet date with a compulsory date of January 1, 2013. The Group does not use the “carve out”
option allowing not to apply all hedge accounting principles required by IAS 39.
STANDARD AND AMENDMENTS TO STANDARDS PUBLISHED AND ADOPTED ON JANUARY 1, 2013
The amendment clarifi es that the distinction between shortterm and long-term benefi ts is based on whether payment is expected to be within the next 12 months, rather than when payment can be demanded. As a result, the Group reclassifi ed some benefi t obligations (mainly unused “vacation related accruals”) in the category of other long-term employee benefi ts.
The retrospective application of the amendments to IAS 19 led to a reduction of retained earnings in shareholders’ equity of €39 million as of January 1, 2012 as well as a reduction in net consolidated income after tax of €96 million as of
Liabilities arising from policyholders’ participation (17,938) (6) (17,944) (31,350) (7) (31,357)
Additionally, the application of the following standard and amendments to standards as of January 1, 2013 had no material impact on the Group’s consolidated fi nancial statements: IFRS 13 – Fair Value Measurement, published on May 12, 2011, defi nes fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements.
IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.
The amendment to IAS 1 – Presentation of Financial Statements, published on June 16, 2011, requires entities to group together items presented within Other Comprehensive Income based on whether they are potentially reclassifi able to profi t or loss in a subsequent period. The amendment also preserves the requirement that items in Other Comprehensive Income and profi t or loss should be presented as either a single statement or two consecutive statements.
IFRS 9 – Financial Instruments is an active project to replace
IAS 39, and split into three phases. The fi rst phase addresses classifi cation and measurement, while the second and third phases respectively relate to the impairment methodology and general hedge accounting. The mandatory effective date of IFRS 9 is not specifi ed but will be determined when the outstanding phases are fi nalized. Latest discussions were contemplat ing January 1, 2018. The method of implementation of the future standard and its potential impact on the Group’s consolidated fi nancial statements are currently being examined within the Group.
■ IFRS 9 – Financial Instruments, published on November 12, 2009, amended on October 28, 2010 and December 16, 2011, represents the completion of the fi rst phase of the
IAS 39 replacement project. IFRS 9 uses a single approach to determine whether a fi nancial asset is measured at amortized cost or fair value. A fi nancial asset is measured at amortized cost if both a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash fl ows and b) the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding. At initial recognition, an entity can use the option to designate a fi nancial asset at fair value through profi t or loss if doing so eliminates or signifi cantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in Other Comprehensive Income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in profi t or loss. Additionally, for fi nancial liabilities that are designated as at fair value through profi t or loss, the amount of change in the fair value of the fi nancial liability that is attributable to changes in the credit risk of that liability is recognized in Other
Comprehensive Income, unless the recognition of the effects of changes in the liability’s credit risk in Other Comprehensive
Comprehensive Income and realized gains or losses would be recycled through profi t or loss upon sale.
Losses, published on March 7, 2013 relates to the second phase of the IAS 39 replacement project, not yet fi nalized by the IASB.
A package of fi ve new and revised standards was published on May 12, 2011 addressing the accounting for consolidation, involvement in joint arrangements and disclosure of involvements with other entities. Each of the fi ve standards have an effective date for annual periods beginning on or after
■ IFRS 10 – Consolidated Financial Statements replaces the consolidation guidance in IAS 27 – Consolidation and Separate Financial Statements and SIC 12 – Special
Purpose Entities, by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee. Under IFRS 10, control is based on whether an investor has 1) power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3) the ability to use its power over the investee to affect the amount of the returns.
■ Amended IAS 27 – Separate Financial Statements sets out the unchanged requirements relating to separate fi nancial statements. The other portions of IAS 27 are replaced by
January 1, 2014 and are not expected to have a material impact on the Group’s consolidated fi nancial statements.
The amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets, published on May 29, 2013, address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendments are to be applied retrospectively for annual periods beginning on or after January 1, 2014, with earlier application permitted if IFRS 13 has already been applied. The amendments are not expected to have a material impact on the Group’s consolidated fi nancial statements.
Narrow-scope amendments to IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting, published on June 27, 2013 provides relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendments are effective for annual periods beginning on or after January 1, 2014 (with earlier application permitted) and are not expected to have a material impact on the Group’s consolidated fi nancial statements
Annual Improvements to IFRSs 2010-2012 Cycle and IFRSs 2011-2013 Cycle, published on December 12, 2013 are a collection of amendments to IFRSs in response to issues that are not part of a major project. They are presented in two documents rather than as a series of small changes. The amendments are applicable for annual periods beginning on or after July 1, 2014 and are not expected to have a material impact on the Group’s consolidated fi nancial statements.
IFRS requires the use of estimates and assumptions. It requires a degree of judgment in the application of Group accounting principles described below. The main balance sheet captions concerned are goodwill (in particular impairment tests described in paragraph 1.7.1), intangible assets acquired in a business combination, the value of acquired business in force, deferred acquisition costs and equivalent, certain assets accounted at fair value, deferred tax assets, liabilities relating to the insurance business, pension benefi t obligations and balances related to share-based compensation. The principles set out below specify the measurement methods used for these items. These methods, along with key assumptions where required, are discussed in greater depth in the notes relating to the asset and liability items concerned where meaningful and useful.
AXA chose not to restate past business combinations based on the option available in IFRS 1. As a result, past business combinations prior to January 1, 2004 are accounted for on a previous GAAP basis in the IFRS fi nancial statements, except: ■ goodwill has been denominated in the functional currency of the acquired entity under IFRS since January 1, 2004
As a result, the goodwill gross value disclosed in Note 5 represents the gross value of these goodwill net of cumulated amortization recognized in French GAAP as of December 31, 2003.
IAS 27/SIC 12 listed above they satisfy. For fully consolidated investment funds, minority interests are recognized at fair value and shown as liabilities in the balance sheet if the companies’
instruments can be redeemed at any time by the holder at fair value. Investment funds accounted by equity method are shown under the balance sheet caption “Financial investments”.
Group is measured at fair value and the resulting adjustment is recognized through the net income. Similarly, when an additional purchase changes the control from signifi cant infl uence or joint control to control, any investment pre-existing in a former associate/joint venture is re-measured to its fair value with the gain or loss through net income (consequently also resulting in a new goodwill).
The results and fi nancial position of all Group entities that have a functional currency (i.e. the currency of the primary economic environment in which the entity operates) different from the
Regarding the cumulative amount of the exchange differences related to disposed business, the Group applies the step-bystep consolidation method (IFRIC 16).
The Group applies the IFRS 13 fair value hierarchy as described below for all assets and liabilities where another IFRS requires or permits fair value measurement or disclosures about fair
value measurement in the Notes. Principles below address mostly assets given the nature of the activities of the Group.
Fair values of assets and liabilities that are not traded in active market mainly based on observable market data are disclosed as level 2 in the Notes to the fi nancial statements.
External pricing services may be fund asset managers in the case of non consolidated investments in funds or brokers. To the extent possible, the Group collects quotes from external pricing providers as inputs to measure fair value. Prices received may form tight clusters or dispersed quotes which may then lead to the use of valuation techniques. The dispersion of quotes received may be an indication of the large range of assumptions used by external pricing providers given the limited number of transactions to be observed or refl ect the existence of distress transactions. In addition, given current market conditions since the fi nancial crisis and the persistency of complete inactivity of some markets since then, many fi nancial institutions closed their desks dedicated to structured assets deals and are no longer in a position of delivering meaningful quotes.
The objective of valuation techniques is to arrive at the price at which an orderly transaction would take place between market participants (a willing buyer and a willing seller) at the measurement date. Valuation technique models include: ■ market approach: The consideration of recent prices and other relevant information generated by market transactions involving substantially similar assets or liabilities; ■ income approach: Use of discounted cash fl ow analysis, option pricing models, and other present value techniques to convert future amounts to a single current (i.e. discounted)
The dislocation of certain markets may be evidenced by various factors, such as very large widening of bid ask spreads which may be helpful indicators in understanding whether market participants are willing to transact, wide dispersion in the prices of the small number of current transactions, varying prices over time or among market participants, inexistence of secondary markets, disappearance of primary markets, closing down of dedicated desks in fi nancial institutions, distress and forced transactions motivated by strong needs of liquidity or other diffi cult fi nancial conditions implying the necessity to dispose of assets immediately with insuffi cient time to market the assets to be sold, and large bulk sales to exit such markets at all costs that may involve side arrangements (such as sellers providing fi nance for a sale to a buyer). Primary transactions’ prices in markets supported by government through specifi c measures following the fi nancial crisis do not represent fair value.
AXA performs an impairment test of goodwill at least annually based on cash generating units, using a multi-criterion analysis with parameters such as the value of assets, future operating profi ts and market share, in order to determine any signifi cant adverse changes. It also considers the interdependence of transactions within sub-groups. Within each cash generating unit, a comparison is made between net book value and the recoverable value (equal to the higher of fair value less costs to sell and value in use). Value in use consists of the net assets and expected future earnings from existing and new business, taking into account the cash generating units’ future cash fl ows. The value of future expected earnings is estimated on the basis of the life insurance and investment contracts embedded value models or similar calculations for other activities. Fair values less costs to sell are based on the IFRS 13 fair value as described in Note 1.5 using various valuation multiples.
These unearned revenues and fees reserves are separately recognized as liabilities and are amortized over the contract term using the same amortization approach used for DAC and
Other intangible assets include software developed for internal use for which direct costs are capitalized and amortized on a straight-line basis over the assets’ estimated useful lives.
Investment in real estate properties (excluding investment in real estate properties totally or partially backing liabilities arising from contracts where the fi nancial risk is borne by policyholders)
Portfolios” are classifi ed as available-for-sale unless involved in a qualifying hedge relationship or more broadly when electing the fair value option reduces accounting mismatch. As specifi ed above, the fi nancial instruments held in the “Satellite
If such evidence exists for an available for sale fi nancial asset, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment on that fi nancial asset already booked in the income statement
Liabilities Management (ALM) strategies as these strategies have been set up to take into account specifi c commitments to policyholders. These methods may differ within the Group provided that they are used consistently at each entity level.
Changes in the fair value of all other derivative instruments that do not qualify for hedge accounting are recognized in
the income statement. Given IAS 39 constraints, only a few hedges are eligible to hedge accounting provisions described above. However, most of the derivatives used by the Group are purchased with a view to hedge or for example to use such instruments as an alternative to gain exposure to certain asset classes through “synthetic positions”. See Note 20.
Subsidiaries held for sale remain within the scope of consolidation until the date on which the Group loses effective control. The assets and activities (assets and liabilities)
Unearned premiums reserves represent the pro rata portion of written premiums that relates to unexpired risks at the closing date.
“savings contracts” in AXA’s accounting principles) that carry low mortality and morbidity risk are generally calculated using a prospective approach based on discount rates usually set at inception (similar to the retrospective approach, i.e. “account balance” methodology).
to contracts where the fi nancial risk is borne by policyholders
Shadow accounting and deferred policyholders Participation Asset (DPA) or Liability (DPL)
France where the minimum is set to 90%, 90% and 85%
Unrealized gains and losses on assets classifi ed as trading or designated at fair value through profi t and loss, along with any other entry impacting the income statement and generating a timing difference, are accounted in income with a corresponding shadow entry adjustment in the statement of income. The shadow accounting adjustments relating to unrealized gains and losses on assets available-for-sale (for which change in fair value is taken to shareholders’ equity) are booked through shareholders’ equity.
DAC and VBI assets and deferred policyholders’ participation asset. To perform these tests, entities group contracts together
according to how they have been acquired, are serviced and have their profi tability measured. Entities use current best estimates of all future contractual cash fl ows as well as claims handling and administration expenses, and take into account guarantees and investment yields relating to assets backing these contracts.
Any identifi ed defi ciency is charged to the income statement, initially by respectively writing off DPA, DAC or VBI, and subsequently by establishing a LAT provision for losses arising from the liability adequacy test for any amount in excess of
Deferred tax assets and liabilities emerge from temporary differences between the accounting and fi scal values of assets and liabilities, and when applicable from tax loss carry forwards. Deferred tax assets are recognized to the extent that it is probable that future taxable profi t will be available to offset the temporary differences. The recoverability of deferred tax assets recognized in previous periods is re-assessed at each closing.
Obligation and the market value at the balance sheet date of the corresponding invested plan assets after adjustment for any minimum funding requirement or any asset ceiling effect. If the net result is positive, a provision is recorded under the provision for risks and charges heading. If the net result is negative, a prepaid pension asset is recorded in the balance sheet but not more than its recoverable amount (asset ceiling). Actuarial gains and losses (now termed remeasurements under IAS 19 revised) arising from experience adjustments and changes in actuarial assumptions are recognized in shareholders’ equity (in
All equity-settled share-based compensation plans are accounted for at fair value at the date they were granted and the fair value is expensed over the vesting period.
Amounts collected as premiums from investment contracts with no discretionary participating features are reported as deposits net of any loadings and policy fees. Revenues from these contracts consist of loadings and policy fees relating to underwriting, investment management, administration and surrender of the contracts during the period. Frontend fees collected corresponding to fees for future services are recognized over the estimated life of the contract (see
No such situation currently exists within the Group. In accordance with IFRS 4, the Group continues to use the accounting principles previously applied by AXA to insurance contracts and investment contracts with discretionary participating features. According to these principles, there are no situations in which all rights and obligations related to contracts are not recognized.
They exclude bank operating expenses and change in bad debt provisions, doubtful receivables or loans, which are recorded in the item “Bank operating expenses”.
AXA Affi n General Insurance Berhad (a) Minority interests buyout 42.48 42.48 42.41 42.41
Kyobo AXA General Insurance Co. Ltd. (South Korea) 99.55 99.55 99.52 99.52
(a) The decrease in the Group share of interest is mainly due to the granting of holding units to the employees in relation with the share-based compensation programs.
(€6,717 million at the end of 2012), mainly in France and
ICBC-AXA Life Insurance Co. Ltd (previously AXA Minmetals Assurance Co Ltd) 27.50 27.50 27.50 27.50
As of December 31, 2013, real estate companies accounted for using the equity method amounted to €280 million invested assets (€296 million at the end of 2012) and investment funds accounted for using the equity method amounted to €2,777 million invested assets (€4,900 million at the end of 2012), mainly in the United States, United Kingdom, Ireland,
In 2009, AXA set up a Group fi nancing and cash management company which benefi ted from a loan of £673 million.
Given the activities of AXA, the operating results are presented on the basis of fi ve operating business segments: Life
Company activities reported to the Board of Directors twice a year is consistent with the presentation provided in the consolidated fi nancial statements.
The Group has set up an organization by Global business lines for both Life & Savings and Property & Casualty in order to improve the speed and effectiveness of the organization and further leverage its size.
Property & Casualty: This segment includes a broad range of products including mainly motor, Household, property and general liability insurance for both personal and commercial customers (commercial customers being mainly small to medium-sized companies). In some countries, this segment includes health products. The Property & Casualty segment aggregates nine geographical operating components (France,
Central Eastern Europe, Asia and Other countries) and one operating component for the Direct business.
The Holding companies segment (that includes all nonoperational activities), also includes some investment vehicles and Special-Purpose Entities (SPE).
Fees and charges relating to investment contracts with no participating features 323 - - - - - - 323
Change in unearned premiums net of unearned revenues and fees 3 (265) (19) - - - 35 (246)
Net investment result excluding fi nancing expenses 31,663 2,205 162 255 - 381 (717) 33,958
Technical charges relating to insurance activities (75,377) (19,509) (1,947) - - - 304 (96,530)
(b) Revenues net of intercompany eliminations amounted to €55 billion for Life & Savings, €29 billion for Property and Casualty and €3 billion for International Insurance (see Note 21).
(d) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’equity.
Change in tangible assets impairment - - - - - - - -
Other operating income and expenses (83,564) (28,055) (3,098) (3,032) (510) (665) 703 (118,221)
Net investment result excluding fi nancing expenses 28,602 2,368 229 49 (2) 75 (759) 30,562
Other operating income and expenses (79,851) (27,989) (3,012) (3,157) (507) (665) 638 (114,542)
Income from operating activities before tax 3,618 2,795 317 567 (35) (590) (938) 5,735
Split between: Net consolidated income – Group share 2,841 1,957 178 311 (38) (1,192) - 4,057
Net consolidated income – Minority interests 54 (9) 3 81 2 - - 130
Please refer to pages 170 to 17 6 of the “Quantitative and
Please refer to pages 87 to 92 , “Liquidity and capital resources”
Mediterranean and Latin America Region 883 - 883 900 - 900
Goodwill related to entities accounted for using the equity method is not presented in this table (see Note 10)
million as of December 31, 2013 and €14,783 (1) million as of
(1) AllianceBernstein: €97 million was transferred to Minority Interest following dilution of Group share of interest as of December 31, 2013, while €21 million was transferred to Group share following relution of Group share of interest as of December 31, 2012.
(a) Mainly includes the HSBC portfolio acquisition in Asia (€169 million).
are industry specifi c valuation methods which are consistent with the principles of discounted earnings approaches as the value of business in force results from the projection of distributable earnings. The Group uses however both market consistent risk neutral approaches and traditional discounted cash fl ows projections. The current shareholders’ net asset value is adjusted to take into account any difference between the basis of cash fl ows projections used in the value of business in force calculations and IFRS; ■ the profi tability on future new business.
P&C bancassurance cooperation in this country, as well as in China and India. The value of the distribution agreement in
Insurance Company (“MONY”) and to reinsure an in-force book of life insurance policies written by MONY’s subsidiary MONY
These transactions led to recognize €-11 million exceptional loss (net of tax and group share) in AXA consolidated fi nancial statements as of December 31, 2013.
As of June 30, 2013, comprehensive income amounted to €25 million.
On December 23, 2013, AXA announced it had entered into an agreement with Vienna Insurance Group to sell its Life
(a) In 2013 includes the sale of MONY portfolio in the United States.
Deferred acquisition costs and equivalent relating to Life & Savings 17,577 17,244
Deferred acquisition costs and equivalent relating to Property & Casualty and International Insurance 1,774 1,803
Life & Savings deferred acquisition costs and equivalent net carrying value as of January 1 16,312 932 16,102 836
DAC and similar costs capitalization for the period 1,965 169 2,154 140
Life & Savings deferred acquisition costs and equivalent net carrying value as of December 31 16,634 943 16,312 932
Other intangible assets represented €3,159 million net value as of December 31, 2013 and mainly included: (In Euro million) Gross value Accumulated amortization
Investment in real estate properties at amortized cost 21,925 16,618 2.74%
Investment in real estate properties designated as at fair value through profi t or loss (a) 1,033 1,033 0.17%
Debt instruments designated as at fair value through profi t or loss (a) (b) 33,984 33,984 5.61%
Debt instruments (at cost) that are not quoted in an active market (c) 6,517 6,410 1.06%
Other assets designated as at fair value through profi t or loss, held by consolidated investment funds 6,851 6,851 1.13%
Other assets designated as at fair value through profi t or loss, held by consolidated investment funds 4,777 4,777 0.79%
Assets backing contracts where the fi nancial risk is borne by policyholders 147,162 147,162 24.29%
Debt instruments available for sale 297,439 320,257 320,257 25,288 2,470 308,760 342,815 342,815 36,295 2,240
Equity instruments available for sale 12,222 15,158 15,158 3,034 98 9,547 11,757 11,757 2,257 47
Non consolidated investment funds available for sale 276 281 281 6 - 386 386 386 - -
Debt instruments available for sale 307,046 329,882 329,882 25,424 2,588 317,299 351,430 351,430 36,545 2,414
Debt instruments (at cost) that are not quoted in an active market 7,706 7,813 7,706 141 33 7,827 8,020 7,827 232 39
Non consolidated investment funds available for sale 5,389 6,283 6,283 906 11 5,899 6,754 6,754 940 84
(a) Includes debt instruments issued by companies in which a State now holds interests following the 2008 fi nancial crisis.
Equity instruments as of December 31, 2012 8,645 5,162 1,234 1,319 1,505 1,088 921 2,458 22,332 9.7. TRANSFERS OF FINANCIAL ASSETS NOT QUALIFYING FOR DERECOGNITION
This results in substantially all of the risks and rewards of the fi nancial assets remaining with the Group. As such, the Group does not derecognize the fi nancial assets.
(a) Amounts are presented excluding macro-hedging and other derivatives but including the effect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges).
9.9.1. Breakdown of fi nancial assets subject to impairment (excluding investment in real estate properties)
Debt instruments available for sale 307,098 (1,078) 306,020 23,114 329,134 317,609 (1,340) 316,269 34,067 350,336
Debt instruments (at cost) that are not quoted in an active market 7,694 - 7,694 (9) 7,685 7,806 - 7,806 9 7,815