Executive compensation, major shareholders and related matters 2.1 Directors, senior management and employees 112 2.2 Full disclosure on executive compensation and share ownership 134 2.3 Description of the Company’s share repurchase program 179 2.4 Major shareholders and related party transactions 181 2.5 The offer and listing 190
CERTAIN ADDITIONAL INFORMATION 411 5.2 Description of AXA’s share capital 416
APPENDICES 417 Appendix I Chairman of the Board of Directors’ report 418
Appendix XI Commission regulation of April 29, 2004 - Correspondence table 535
as well as in Article 222-3 of the AMF General Regulations (Règlement Général de l’AMF) (please refer to the table on page 537 of this Annual Report which indicates the relevant sections of this Registration Document corresponding to disclosures required under Article 222-3 of the AMF General Regulations), (ii) all disclosure matters required to be included in the Board of Directors’ Report to AXA’s Shareholders’ Meeting to be held on April 27, 2011, established pursuant to the Articles L.225-100 and L.225-100-2 of the French Commercial Code (Code de commerce) (the relevant sections of this Registration Document corresponding to these required disclosures have been approved by
AXA’s Board of Director’s and are presented in the table on page 534 of this Annual Report), and (iii) all information required under Article R.225-83 of the French Commercial Code.
Anonyme organized under the laws of France which is the publicly traded parent company of the AXA Group, and (ii) “AXA
Statements for the year ended December 31, 2010, as well as, by reference, the AXA’s Consolidated Financial Statements for the years ended December 31, 2009 and 2008 (1). AXA’s
Consolidated Financial Statements also comply with IFRS as issued by the International Accounting Standards Board (“IASB”).
Cautionary Statements concerning the use of non-gaap measures and forward-looking statement
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.
THE AXA GROUP Our global business operations, recent fi nancial performance and fi nancial condition 1.1 SELECTED CONSOLIDATED FINANCIAL DATA 4
The Consolidated Financial Statements are prepared in compliance with IFRS standards and IFRIC interpretations that are defi nitive and effective as at December 31, 2010, as adopted by the European Union before the balance sheet date.
However, the Group does not use the “carve out” option to avoid applying all the hedge accounting principles required by
(IASB) in November 2009 has not been yet formally submitted to the European Union. However, the Group would not have used the earlier adoption option of the standard in 2009. As a consequence, the Consolidated Financial Statements also comply with IFRSs as issued by the IASB. The adoption date of IFRS 9, including its different phases and its mode of enforcement are currently being reviewed within the Group.
(e) An annual dividend is generally paid each year in respect of the prior year after the Annual Shareholders’ Meeting (customarily held in April or May) and before September of that year. Dividends are presented in this table in the year to which they relate and not in the year in which they are declared and paid. A dividend of €0.69 per share will be proposed at AXA’s Shareholders’Meeting that will be held on April 27, 2011. The dividend will be payable on May 4,2011with an ex-dividend date of April 29, 2011.
The average and closing exchange rates used in the preparation of the Consolidated Financial Statements, to translate into Euro the results of operations of the principal subsidiaries that are not denominated in Euro, are set out in the table below: Year End Exchange Rate Average Exchange Rate
The following table sets forth information on the dividends declared and paid in the most recent fi ve years: Fiscal year Distribution (in Euro million)
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.424 per share for fi scal year 2006.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.48 per share for fi scal year 2007.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 27, 2011. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2010.
AXA is a French “Société Anonyme” (a form of limited liability company) existing under the laws of France. The Company’s registered offi ce is located at 25 avenue Matignon, 75008 Paris,
& Provincial Holdings (“SLPH”). The Guardian Royal Exchange acquisition allowed AXA to further strengthen its positions in both the United Kingdom and Germany.
(iv) acquired Sanford C. Bernstein through its US asset management subsidiary Alliance Capital (which subsequently changed its name to AllianceBernstein), and (v) acquired the minority interest in AXA Financial, which is now a 100% owned subsidiary of AXA.
AXA acquired the American insurance group MONY, which allowed the expansion of its life insurance distribution capacity in the United States by approximately 25%. In addition,
(iii) its Dutch Health insurance operations, and (iv) its mortgage lending activities in Germany (AXA Bausparkasse AG).
FINAXA, a listed holding company that was AXA’s principal shareholder, was merged into AXA. Prior to the merger, FINAXA
owned the “AXA” brand which, upon consummation of the merger, became the property of AXA. This merger resulted in a simplifi cation of AXA’s shareholding structure and an increase in the proportion of its publicly traded shares.
AXA acquired the Winterthur Group, which was then active in 17 countries and served approximately 13 million clients worldwide. This operation gave AXA the opportunity to strengthen its leading position in several European markets and to increase its presence in a number of high growth markets including in Central and Eastern Europe and Asia.
AXA (i) completed the acquisition of 36.7% of the share capital of RESO, Russia’s 2nd largest P&C insurer (June), (ii) completed the acquisition of Seguros ING (subsequently renamed
Mexican insurer with leading positions in key markets such as Motor or Health and also active on the Life market (July), and (iii) acquired OYAK’s 50% share in AXA OYAK, Turkey’s 1st largest P&C insurer (August).
March and deregistered with the SEC in June. Since its NYSE
Limited (“AXA APH”) and AXA entered into transaction documents whereby AXA will acquire from AMP 100% of the Asian businesses of AXA APH following the acquisition of 100% of AXA APH by AMP. This transaction is subject to a number of conditions as well as court, regulatory and shareholder approvals and is expected to be completed in the fi rst quarter or early second quarter of 2011.
For a description of signifi cant acquisitions and disposals undertaken by AXA during the fi scal year, please see Part 1
December 31, 2010 of €1,103 billion. Based on available information at December 31, 2009 and taking into account companies engaged in the asset management business, AXA
(1) Source: Towers Watson, “The World’s 500 largest asset managers” ranking, 2009.
(“Group share of interests”) represent the economic interest and the percentages shown in the fourth column (“Voting rights percentage”) represent the percentage of the company’s total voting power controlled by AXA.
(m) Holding company that owns AXA Ireland Limited and AXA Insurance Limited.
(n) Holding company that owns AXA Versicherung AG, AXA Lebensversicherung AG, AXA ART Versicherung AG and AXA Krankenvesicherung AG.
(o) Holding company that owns DBV-Winterthur Lebensversicherung AG, AXA Krankenversicherung AG, DBV-Winterthur Holding AG and DBV-Winterthur Versicherung AG.
(p) Holding company that owns AXA Assurances Luxembourg and AXA Assurances Vie Luxembourg.
At March 17, 2011, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
(a) Reclassifi cation of AUM Australia & New Zealand from “managed by AllianceBernstein” to “managed by other AXA companies” (General account: €4.4bn; unit-linked: €1.7bn).
AXA offers a broad range of Life & Savings products including Individual and Group savings products, as well as life and health products for both individual and commercial clients. The Life & Savings segment accounted for €56.9 billion or 63% of AXA’s consolidated gross revenues for the year ended December 31, 2010 (2009: €57.6 billion or 64%).
Gross revenues Years ended December 31, Gross insurance liabilities at of which Australia and New Zealand (c) 1,551 3% 1,532 3% 10,339 of which Central & Eastern Europe (d) 512 1% 468 1% 5,700
(c) The assets and liabilities of the Australian and New Zealand operations (including local holdings) are classifi ed as held for sale separately from other assets and liabilities in the consolidated balance sheet, but are included in the following table as gross insurance liabilities for €8.7 billion.
(e) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales).
(a) Annual Premium Equivalent (APE): Measure of new business volume. Represents 100% of regular premiums +10% of single premiums, in line with EEV methodology. APE is Group share.
(c) For APE and NBV: Mediterranean & Latin American Region includes Spain, Italy, Portugal, Turkey, Greece and Mexico.
Region), the United States and Japan. In addition, AXA offers investment and saving products as well as life and health products in a number of other jurisdictions including Australia and New Zealand, Asia (notably Hong Kong, Singapore, China and Indonesia), Central and Eastern Europe, Middle East and Latin America (Mexico). The products in these markets are offered through various distribution channels, including exclusive agents, salaried sales forces, brokers, independent fi nancial advisers, and bank networks. See the “Distribution channels” section below.
(e) AXA’s ranking and market share are based on updated December 2009 fi gures (which included both sold and retained business). For detailed market positions on retained business, please refer to Activity Report Section “Insurance and Management Market”.
(i) Considering all companies part of the Group of Public Insurers independently.
For additional information on markets, see Section “Insurance and Asset Management Markets” included in “Part 1.3 –
Investment and savings products include: ■ Deferred annuities, which may be purchased with either a single premium or regular premiums. A deferred annuity has two distinct periods: an accumulation period and an annuity payment period. Typically, more fl exibility is permitted in premium payments for longer deferred periods. The premium generally can be invested either in the general account of the insurer, or in a choice of unit-linked funds. Also known as individual variable annuities in the United States, these products often include optional guarantees (for a fee) such as guaranteed minimum income benefi t (GMIB), guaranteed minimum death benefi t (GMDB) and guaranteed minimum withdrawal benefi t (GMWB);
bears the investment risk; ■ Universal savings products, which is the same as universal life but has no signifi cant death benefi t component. See below for a description of universal life products.
The benefi t can be a lump sum, or a percentage of the income paid over a specifi ed period of time; ■ Immediate annuity products, which are usually single premium products with no previous accumulation period, which promise regular payments for a fi xed period of time or over a benefi ciaries’ lifetime.
• Mutual funds offered by insurance companies are generally open-ended funds operated by an investment management company, in accordance with a stated set of objectives.
AXA’s Life & Savings products may be distinguished between: ■ Participating contracts, in which the policyholders participate in the excess assets over liabilities (the surplus)
of – and therefore in the investment return and/or in part of the operating profi ts earned by – the insurance company issuing the contract by way of the payment of an interest or bonus payment; ■ Contracts with the financial risk borne by the policyholders
is generally borne by the policyholder while the issuing company earns fee income from managing the underlying assets.
Of which: Contracts with fi nancial risk borne by policyholders (Unit-Linked) 12,285 22% 13,167 24% 143,007
(c) UK with-profi t business: A participating contract, specifi c to the United Kingdom and known as the with-profi t contract, was offered by AXA Sun Life until 2002. Under with-profi ts contracts, the policyholders are entitled to receive a share of the profi ts arising from the invested policyholders’ premiums which includes regular bonuses and terminal bonuses. The regular bonuses are designed to provide a return to the policyholder through a periodic increase in benefi ts and are credited to the policyholder. Once credited, regular bonuses are guaranteed to be paid at maturity, death or as otherwise specifi ed in the policy. Terminal bonuses, which are not guaranteed in advance of payment are designed to provide policyholders with their share of total investment performance and other experience of the fund (including expenses, mortality experience and income taxes) over several periods. Terminal bonuses can represent a signifi cant portion of the total amount paid at maturity or upon surrender prior to maturity and are at the discretion of the Board of Directors. Following policyholder and court approvals, in 2001 AXA Equity & Law underwent a fi nancial reorganization whereby the life insurance funds were transferred to AXA Sun Life and fundamentally restructured. A portion of the assets that accumulated over the years (which we refer to in this Annual Report as the “inherited estate”) were attributed to AXA as the shareholder, less a portion allocated to the with-profi ts policyholders in the form of a reorganization bonus, based on the number of eligible policyholders that elected in favor of this plan.
AXA distributes its products through exclusive and non-exclusive channels that vary from country to country. Exclusive channels include exclusive agents, salaried sales forces and direct sales.
Distribution partnerships are generally structured as sales agreements between an insurance company and another company from the fi nancial services industry, especially banks, or from another industry. This may take the form of a joint venture between the insurance company and its partner or a pure contractual distribution arrangement.
AXA’s Property & Casualty segment offers a broad range of products including motor, household property and general liability insurance for both personal and commercial customers, targeting mainly small to medium sized companies. In certain countries, health products are classifi ed as Property & Casualty products (1). The Property & Casualty segment accounted for €27.4 billion, or 30% of AXA’s consolidated gross revenues for the year ended December 31, 2010 (2009: €26.2 billion or 29%).
In the Property & Casualty segment, AXA operates mainly in the largest Western European markets, including France,
The principal competitive factors are as follows: ■ Price; ■ Quality of service; ■ Distribution network; ■ Brand recognition; ■ Ratings for fi nancial strength and claims-paying ability; and
■ Changes in regulations, which may affect premium rates charged or claims settlement costs paid.
(a) Source: Swiss Re, Sigma report 2010 “World insurance in 2009”.
(e) AXA’s ranking and market share based on updated September 2010 fi gures.
(g) AXA’s ranking and market share based on updated December 2010 fi gures.
Operations in this segment are principally focused on large risks, reinsurance and assistance. The insurance products, offered by AXA Corporate Solutions Assurance include coverage to large national and international corporations mainly relating to property damage, third party liability, marine, aviation and transport, construction risk, fi nancial risk, and directors and offi cer liability. In addition, AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA
Group’s Property & Casualty run-off portfolios including risks underwritten by Colisée Re (ex AXA RE) for all periods prior to and including 2005 when Colisée Re’s business was sold. Reinsurance operations (Colisée Re) principally focus on property damage, third party liability, marine and aviation property, and third-party liability reinsurance. The reserves corresponding to the ceded business are fully reinsured by
Property pool which provides AXA entities with cover on natural catastrophes.
AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty runoff portfolios. This entity manages the internal run-off portfolios of AXA UK, AXA Germany and AXA Belgium, as well as a number of stand-alone run-off companies in the “Other International
Activities” segment. In connection with the disposal of AXA’s reinsurance activities, AXA Liabilities Managers also manages the run-off of Colisée RE as noted above.
AXA Corporate Solutions Assurance. The competitors in the global risks market are acting at a worldwide level with multinational clients placing their risks far beyond their countries of origin via international programs or in key global market places. In this market, AXA Corporate Solutions Assurance,
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 2010, AXA Corporate Solutions Assurance ceded €842 million of premiums (2009: €844 million) to thirdparty reinsurers.
The development of Asset Management activities is a key part of AXA’s fi nancial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the belief that its asset management expertise will enable AXA to benefi t in the future from the expected growth in savings-related products in the markets where it operates.
The Asset Management segment accounted for €3.3 billion, or 4% of AXA’s consolidated gross revenues for the year-ended
AllianceBernstein and AXA Investment Managers. These companies manage assets on behalf of institutional clients, retail investors and private clients, as well as on behalf of companies affi liated with AXA and operate in each of AXA’s major markets: Western Europe, the United States and the Asia / Pacifi c
(c) In 2009, reclassifi cation of AUM Australia & New Zealand from “managed by AllianceBernstein” to “managed by other AXA companies” (General account: €4.4bn; Unit-linked: €1.7bn)
AllianceBernstein, a 61.43% subsidiary, is a leading global investment management fi rm based in the United States.
AllianceBernstein provides diversifi ed Asset Management and related services globally to a broad range of clients including: ■ Diversifi ed investment management services through separately managed accounts, hedge funds, mutual funds, and other investment vehicles to private clients (such as high net worth individuals, trusts and estates and charitable foundations); ■ Management of mutual funds sponsored by AllianceBernstein, its subsidiaries and affi liates, for individual investors; ■ Management of investments on behalf of institutional investors; and
At December 31, 2010, AXA IM had €515.9 billion of assets under management, including €176.0 billion of assets managed on behalf of third party clients (2009: €498.9 billion and €145.5 billion, respectively).
The operations in the Banking segment are conducted primarily in Belgium, France, Germany, Switzerland and Central &
Eastern Europe. For the years ended December 31, 2010 and 2009, the Banking segment accounted for €0.5 billion each year, or less than 1% of AXA’s consolidated gross revenues.
Based in Paris, AXA Banque had more than 718,212 registered customers at the end of 2010, with a retail banking product offer (innovative current accounts with advantages on insurance premiums, savings and credit). Directly linked with the Group’s insurance business, banking products are offered to AXA France clients through its distribution networks. AXA
The commercial activity of AXA Bank in Switzerland was launched in January 2009 as a branch of AXA Bank Europe.
For information relating to certain additional matters that may affect AXA’s business, see the Section included in Part 3 “Risk
French regulatory system. The AXA Group’s principal regulators in France are the Autorité des marchés financiers (“AMF”), which is the French fi nancial market regulator, and the Autorité
de contrôle prudentiel (“ACP”), a new authority resulting mainly from a merger of the Banking Commission (“Commission bancaire”), the Comité des entreprises d’assurance and the
For example, in the European Union, signifi cant efforts towards establishing a more cohesive and streamlined European supervisory framework have been made, including by adjusting the current insurance regime to include a European Insurance and Occupational Pensions Authority and establishing a
Frank Act” or “Dodd-Frank”) represents a fundamental change to the US fi nancial regulatory landscape and, while directly impacting US fi nancial institutions, may also have a substantial impact on large non-US fi nancial institutions such as AXA
and its US affi liates and subsidiaries. In addition, while many international reform initiatives revolve around common themes and attempts are being made to coordinate and harmonize these reforms internationally, management believes that the multitude of reform initiatives under consideration may ultimately result in the enactment of a series of technically incoherent and inconsistent measures across the various jurisdictions where the Group does business, with broad potential implications for the Group and its business.
Act will only be determined once extensive implementing regulations have been promulgated and become effective,
• make recommendations to the Federal Reserve regarding the establishment of the supervisory requirements and prudential standards applicable to “systematically important” entities and activities and work with all primary
fi nancial regulatory agencies (including state insurance regulators) to establish regulations, as necessary, in order to address fi nancial stability concerns; ■ a new resolution procedure for large fi nancial companies; ■ imposition of comprehensive regulation of the over-the-counter derivatives market; ■ expanding reach of the antifraud provisions of the US
securities laws with respect to non-US issuers to actions brought by the United States or the Securities and
US contacts; ■ the Volcker Rule, which will potentially limit in important respects the ability of US and non-US “banking entities”
US non-bank fi nancial company, result in heightened capital requirements for such activities; ■ enhanced reporting and regulation of incentive-based compensation structures regarding certain regulated entities, including registered broker-dealers and investment advisers such as certain of the Group’s subsidiaries and affi liates; ■ elimination of the private adviser exemption from registration, thereby requiring advisers to hedge funds and private equity funds to register with the SEC, subject to certain exceptions; and
Dodd-Frank also contains measures designed to enhance consumer protection for various types of fi nancial services, including by increasing SEC enforcement powers and antifraud provisions, and centralizing responsibility for consumer fi nancial protection by creating a new agency responsible for implementing, examining and enforcing compliance with federal consumer fi nancial laws, many of which are strengthened. Dodd-Frank also facilitates sharing of information between the SEC and US and non-US regulators, including law enforcement authorities, expands extraterritorial jurisdiction in actions brought by the US Department of
Justice or the SEC and extends the statute of limitations for a securities fraud offenses. This expansion of enforcement power potentially includes conduct within the United States that constitutes signifi cant steps in furtherance of the violation, even if the securities transaction occurs outside the United
Signifi cant French and E.U. reforms impacting the French fi nancial sector include, but are not limited to: ■ the creation of the French prudential supervisory authority
• enhanced corporate governance standards, including the creation of new board committees or by additional responsibilities of existing committees, in particular with respect to supervising risks within fi nancial institutions, and to specifi cally identify and address fi nancial incentives that may lead to “excessive” risk taking by an institution.
• proposals to establish new regulatory or judicial “resolution authorities” designed to stabilize, merge, wind-up/ liquidate or take other appropriate actions with respect to systemically signifi cant fi nancial institutions that become insolvent or otherwise unable to meet their obligations,
the “Tobin tax”), and/or (3) bonuses or other executive compensation in excess of defi ned limits,
“guaranty funds” (funded with new taxes or fees similar to those described above) to stabilize insolvent fi nancial institutions, protect customers and ensure stability of the overall fi nancial system,
• Similar proposals aimed at ensuring the continued stability of the overall fi nancial system and addressing the risk of “regulatory arbitrage” arising from fractured and inconsistent regulation of fi nancial institutions both nationally and internationally; ■ potential legislative initiatives designed to “cure” perceived excessive risk taking and misaligned fi nancial incentives: • increased responsibilities of Boards and Board
• increased restrictions on, and new disclosure requirements with respect to, confl icts of interest – in particular aimed at misaligned fi nancial incentives,
• increased restrictions on, and new disclosure requirements with respect to, securitization transactions – in particular retention of risk by originators/sponsors,
• regulation of rating agencies and redefi nition of the relationship (including compensation relationship) between agencies and issuers,
Management believes that 2011 is likely to see signifi cant additional regulation in some or all of these areas, among others. In addition, during 2011, management believes that
banks, insurers, asset managers, private equity funds, hedge funds, etc.) and across the various jurisdictions where the
At the consolidated Group level, the Company is required to calculate, in accordance with applicable French “Solvency I”
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. As at December 31, 2010 the Company’s consolidated solvency margin was 182%. The
Insurance regulators have broad discretion in interpreting, applying and enforcing their rules and regulations with respect to regulatory capital requirements and, during periods of extreme fi nancial market turmoil of the type we have experienced over the past several 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.
– Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, result of operations and fi nancial position”.
The EU has also adopted various directives concerning solvency margin requirements for insurers and insurance groups: ■ A 1998 EU directive, implemented into French law in 2002, requires insurance groups to calculate a consolidated solvency margin. In accordance with this directive, AXA
a fi nancial conglomerate in the future, in particular within the framework of the current revision of the directive.
jurisdictions, AXA’s Belgian subsidiaries have been deemed a fi nancial conglomerate by the Belgian insurance regulator and it is possible that other European subsidiaries of the
AXA Group may also be deemed fi nancial conglomerates by local regulators thereby subjecting them to the requirements of this law.
regime. In 2009, the Commission, the European Parliament and the European Council agreed on a compromise text for the Solvency II Framework Directive that was adopted by the European Parliament in April. The fi nal text of the
“implementing measures” (Level 2), which are subject to a consultation process and are not expected to be fi nalised until late 2011.
Commission. At this stage, signifi cant uncertainties on some of the implementing measures remain. AXA is actively participating in the various consultation processes through its involvement in industry bodies and trade associations, including the Chief Risk Offi cer and Chief Financial Offi cer
There is continuing risk that the effect of the fi nal measures adopted could depart from the initial objective of the
Directive (i.e. setting an economic framework) and end up more focussed on prudence driven principles which could be adverse for the Group in many respects including potentially imposing a signifi cant 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 regards to other European and non-European fi nancial services groups.
Having assessed the high-level requirements of Solvency II, an implementation programme was initiated with dedicated teams at both the Group level and in each entity. Over the coming months the Group will pursue its implementation plans and remains in regular contact with the ACP and local regulators to prepare the initial stage of the approval process for its internal economic capital models. While the Group currently expects to be able to obtain ACP’s approval for use of its internal economic capital models on a timely basis,
“Swiss Solvency Test” is designed on a risk-based capital approach. After a transition period of fi ve years, the new capital requirements resulting from the Swiss Solvency
The standard for attributing criminal conduct by corporate offi cers and employees to corporate entities is not clearly defi ned in many of these jurisdictions and government prosecutors and judges have broad discretion in this area. In recent years, indictments of corporate entities for alleged criminal offenses have become increasingly common. While a criminal indictment of a corporate entity may not pose material fi nancial risk, it could have broad potential implications for a regulated fi nancial institution like AXA both from a reputation point of view and from a regulatory perspective because a criminal conviction can have potentially far-reaching negative implications for other Group companies engaged in regulated businesses around the world including for their ability to obtain and/or maintain licenses to engage in certain types of regulated business activities.
■ A number of countries in Europe are currently considering legislation that would authorize class action litigation and/or other forms of redress for consumers.
as long as it carries on a business, or part of a business, in the UK. In addition, corporates can be guilty of an offence if an “associated person” carries out an act of bribery in connection with the company’s business whether in the
UK or elsewhere. A person will be “associated” with the company where that person performs services for or on behalf of an organisation.
■ Over the past several months, a number of European jurisdictions, have also been considering legislation or regulations designed to better “ring fence” companies in their jurisdiction by imposing prohibitions (or strengthening existing restrictions) on intra-group transactions between local subsidiaries and foreign parent (or other affi liated)
This provision is designed to permit German authorities to prevent a non-German company from withdrawing liquid assets from a German affi liate during periods of fi nancial diffi culty.
of solvency that must be met and maintained (including risk-based capital measurements), the establishment and levels of reserves, the licensing of insurers and their agents, sales practices by agents, the nature of and limitations on permitted investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefi t of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, and the form and content of reports of fi nancial condition and results of operations to be fi led. In addition, many federal laws currently affect the insurance business in a variety of ways, including the Federal Fair Credit Reporting Act related to the privacy of information and the USA Patriot Act of 2001 relating to, among other things, the establishment of anti-money laundering programs.
Insurance Offi ce (“FIO”) within the US Treasury Department and reforms the regulation of the non-admitted property and casualty insurance market and the reinsurance market. The
FIO has authority that extends to all lines of insurance except health insurance, crop insurance and (unless included with life or annuity components) long-term care insurance. Under the Dodd-Frank Act, the FIO is charged with monitoring all aspects of the insurance industry (including identifying gaps in regulation that could contribute to a systemic crisis), recommending to the FSOC the designation of any insurer and its affi liates (potentially including the Group and its affi liates) as a non-bank fi nancial company subject to oversight by the Federal Reserve (including the administration of stress testing on capital), assisting the Treasury Secretary in negotiating “covered agreements” with non-US governments or regulatory authorities, and, with respect to state insurance laws and regulation, determining whether such state insurance measures are pre-empted by such covered agreements. In addition, the FIO will be empowered to request and collect data (including fi nancial data) on and from the insurance industry and insurers (including reinsurers) and their affi liates.
In such capacity, the FIO may require an insurer or an affi liate of an insurer to submit such data or information as the FIO
AXA Equitable Life Insurance Company (“AXA Equitable”), and certain life insurance policies and annuity contracts offered by them are subject to regulation under the Federal securities laws administered by the SEC and under certain state securities laws. The SEC conducts regular examinations of the operations of these companies, and from time to time, makes requests for information from them. The SEC, other governmental and regulatory authorities, including state insurance and securities regulators, and the Financial
In addition, the Dodd-Frank Act provides that the SEC may promulgate rules to provide that the standard of conduct for all broker-dealers, when providing personalized investment advice about securities to retail customers (and any other customers as the SEC may by rule provide) will be the same as the standard of conduct applicable to an investment adviser under the US Investment Advisers Act of 1940 (i.e. a fi duciary standard). Although the full impact of such a provision can only be measured when the implementing regulations are adopted, the intent of this provision is to authorize the SEC to impose on broker-dealers fi duciary duties to their customers, as applies to investment advisers under existing law. At the same time the SEC is considering rulemaking as directed by Dodd-Frank,
FINRA has recently proposed and, in some cases, fi nalized signifi cant additional rules of conduct affecting broker-dealers in a number of areas. The Dodd-Frank Act also permits the
SEC to promulgate rule making to limit or prohibit the use of mandatory arbitration clauses in standard broker-dealer customer agreements, which, if enacted, could potentially lead to an increased number of customer complaints going into litigation rather than arbitration.
Several US states, including the state of New York, regulate transactions between an insurer and its affi liates under insurance holding company acts that establish certain reporting requirements and place restrictions on provision of services and on intercompany transactions. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, the issuing insurer is not maintaining adequate statutory surplus or capital. Life insurers in the United States are also subject to risk-based capital (“RBC”) guidelines, which provide a method of measuring the adjusted capital (statutory capital and surplus plus asset valuation allowance and other adjustments) that a life insurance company should have for regulatory purposes and that takes into account the risk characteristics of the company’s investments and products. AXA Equitable and
Furthermore, many US federal tax laws affect the business in a variety of ways. There are a number of existing, expiring, newly enacted and previously or currently proposed US federal legislative initiatives, including US federal tax initiatives, that may signifi cantly affect AXA’s US life insurance subsidiaries including, among others, the following: Estate and Related Taxes. Under federal tax legislation passed in 2001, exemption amounts had been increasing and rates had been decreasing for estate and generation skipping transfer (“GST”) taxes through 2009. These taxes were repealed for 2010, though a $1 million gift tax limit remained in place. Legislation enacted in December 2010 reinstated the estate and GST taxes in the United States, on estates over $5 million ($10 million for married couples), at a top rate of 35%. The legislation also reunifi ed gift taxes with the new exemption level and rates. This rate and exemption amount will apply through December 31, 2012, at which time they are scheduled to increase to a 55% maximum rate with a $1 million exemption amount.
The reinstatement of the estate tax for 2011-2012 with a return to lower exemptions and higher rates in 2013 may benefi t sales and persistency. The prospect of future elimination of the estate tax or permanency of the 2011-2012 exemptions and rates could be expected to have an adverse impact on life insurance sales since a signifi cant portion of our life insurance sales are made in conjunction with estate planning. In the interim, the higher gift tax exemption may encourage certain life insurance estate planning for larger estates.
Income, Capital Gains and Dividend Tax Rates. Federal tax legislation passed in 2001 and 2003 reduced income tax rates, and tax rates on long-term capital gains and qualifying corporate dividends. Such changes have lessened the tax appeal of cash value life insurance and annuity products.
Legislation passed in December 2010 extended these lower rates until taxable years beginning after December 31, 2012, at which time these lower rates will expire. The tax advantages of cash value life insurance and annuity products would favorably increase in the event of higher income and capital gains tax rates but would be reduced by lower tax rates.
Dividends Received Deduction. The US Treasury Department and the Internal Revenue Service have indicated that they intend to address through regulations the methodology to be followed in determining the dividends received deduction
The DRD reduces the amount of dividend income subject to tax and is a signifi cant component of the difference between
In particular, the proposals would change the method used to determine the amount of dividend income received by a life insurance company on assets held in separate accounts established to support variable life insurance and Variable
made after December 31, 2012 (or such later date as may be permitted under IRS guidance) to non-U.S. fi nancial institutions
U.S. fi nancial entities) that fail (or that have 50% affi liates which are also non-U.S. fi nancial institutions that fail) to provide certain information regarding their U.S. accountholders and/ or certain U.S. investors (such U.S. accountholders and
Revenue Service (the “IRS”). For non-U.S. fi nancial institutions that fail to comply, such withholding would apply without regard to whether the benefi cial owner of a withholdable payment is a U.S. person or would otherwise be entitled to an exemption from withholding tax under either an applicable tax treaty or federal tax law. “Withholdable payments” generally include, among other items, payments of U.S.-source interest and dividends and the gross proceeds from the sale or other disposition of property that may produce U.S.-source interest and dividends.
policyholders and annuitants. While signifi cant regulatory guidance remains to be issued, the most recent IRS proposal requires non-U.S. fi nancial institutions seeking to avoid the withholding tax to follow a multi-step process to identify their reportable U.S. accountholders. The proposed steps are generally focused on the information that non-U.S. fi nancial institutions have in their records (or that they customarily request), but in a number of circumstances additional information will need to be requested from accountholders, policyholders, annuitants and certain other investors.
(including as a result of local laws prohibiting information sharing with the IRS, as a result of contracts or local laws prohibiting withholding on certain payments to accountholders, policyholders, annuitants or other investors, or as a result of the failure of accountholders, policyholders, annuitants or other investors to provide requested information), certain payments to the Group may be subject to U.S. withholding tax under the legislation. The possibility of such withholding tax and the need for accountholders, policyholders, annuitants and investors to provide certain information may adversely affect the sales of certain of the Group’s products. In addition, entering into agreements with the IRS and compliance with the terms of such agreements and with the legislation and any regulations or other guidance promulgated thereunder may substantially increase the Group’s compliance costs. Because most of the regulatory guidance remains to be written, it is diffi cult to accurately estimate the impact of this law on the
Other Proposals. The US Congress may also consider proposals for, among other things, the comprehensive overhaul of the Federal tax law and/or tax incentives targeted particularly to lower and middle-income taxpayers. For example, as part of defi cit reduction ideas being discussed, there may be renewed interest in tax reform options, which could present sweeping changes to many longstanding tax rules. One possible change includes the creation of new tax-favoured savings accounts that would replace many existing qualifi ed plan arrangements. Others would eliminate or limit certain tax benefi ts currently available to cash value life insurance and deferred annuity products. Enactment of these changes or similar alternatives would likely adversely affect new sales, and possibly funding and persistency of existing cash value life insurance and deferred annuity products. Finally, current legislative proposals may introduce signifi cant increases on the taxation of fi nancial institutions, including taxes on certain fi nancial institutions to compensate for the funds dispersed during the fi nancial crisis, taxes on fi nancial transactions, and taxes on executive compensation, including bonuses. The current, rapidly changing economic environment and projections relative to government budget defi cits may increase the likelihood of substantial changes to federal tax law.
This statement of interest is intended to protect AXA against future civil litigation in the US by Holocaust claimants and to encourage judges handing this type of litigation to dismiss these claims. While this statement of interest provides AXA
brought by Holocaust claimants. Legislation has recently been introduced in the US House of Representatives that is designed to validate the constitutionality of various state laws which impose (1) substantial reporting requirements with respect to insurance policies that were in effect during the World War II
Germany, and (2) signifi cant penalties on US insurers and their affi liates that fail to comply with these reporting requirements.
Asia-Pacifi c Region could be subject to regulatory orders limiting, restricting or terminating their regulated business activities in the event they fail to meet local regulatory requirements. In addition to licensing requirements, AXA’s insurance operations in these jurisdictions are also generally regulated with respect to currency, policy terms and language, amount and types of security deposits, amount and types of reserves, amount and type of local investment and the share of profi ts to be paid to policyholders on participating policies.
Asia-Pacifi c Region have broad discretion in their application of regulation and to investigate licensed insurers, on an individual or sector basis, to examine specifi c issues. For example, in
Japan, the FSA ordered an extensive examination of claims payment practices in the life insurance sector during 2007. As part of this investigation, AXA Japan reviewed several hundred thousand life insurance payments over the prior 5 years to determine whether benefi ts had been paid correctly. The investigation uncovered a limited number of incidents, which have since been fully addressed, and the FSA decided not to pursue any administrative action against AXA Japan. In addition, in the fourth quarter of 2008 the FSA launched a formal investigation into the circumstances surrounding the collapse of an independent agent that was a distributor of AXA
Life Japan products. The agent is alleged to have engaged in certain fraudulent and illegal sales practices over a period of several years and the FSA requested that AXA Life submit a detailed report describing its relationship with the agent, whether AXA Japan and its personnel had any knowledge of the agent’s sales practices and proposed improvements to AXA Life Japan’s internal controls and procedures to more closely monitor and quickly detect questionable sales practices by independent agents that distribute its products.
This investigation, with which AXA Japan fully cooperated, has now been concluded, and is periodically monitored. In 2008, the Government of Japan also enacted a new Insurance Law which became effective in 2010. The main intent of the law is to further protect policyholders’ interest and to increase transparency for the policyholders. AXA Japan is implementing measures to comply with the law and to minimize the potential adverse impact on its business. The Japanese solvency regime is also being revised. The FSA released a draft of the revised solvency rules in late 2009. The revision is intended to be part of a roadmap to an economic solvency margin and the new solvency margin ratio is to be published by insurers from the fi scal year ending March 2011 and will become effective from March 2012.
AllianceBernstein and certain of its subsidiaries as well as certain US subsidiaries of AXA Investment Managers and AXA
or AXA Investment Managers to the AXA Group insurance companies (and other types of transactions between these companies), are subject to various insurance laws and regulations in the various jurisdictions where these insurance companies’ clients are domiciled. These regulations generally require that the terms of transactions between the investment manager and its client be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to unaffi liated clients for similar services or, in certain cases, which include ancillary service agreements, based on cost reimbursement.
Section of the Advisers Act imposing aiding and abetting liability in certain actions brought by the SEC on any person that knowingly or recklessly has aided, abetted, counselled, commanded, induced or procured a violation of any provision of the Advisers Act or rules thereunder; authorizing the SEC
Euronext Paris, the Company must comply with the relevant rules for listing and trading on this exchange and with a number of other laws and regulations including French securities laws administered and enforced by the AMF in
France. These listing rules, other laws and regulations govern a wide variety of matters including (i) timely and accurate disclosure of information to investors, (ii) presentation of fi nancial information in accordance with IFRS requirements,
Financial Statements for the year ended December 31, 2010 included in Part 4 of this Annual Report summarizes the signifi cant amendments and interpretations of the Standards effective in 2010. There are continuing discussions at the
In addition to these matters, a number of recent legislative and regulatory initiatives in France, at the EU level or in other jurisdictions where AXA operates have potential implications for AXA and its subsidiaries. Certain of these initiatives may help create more uniform practices across the EU and facilitate the development of more open and accessible European market for international companies like AXA. For instance, the European takeover directive, implemented into French law in 2006, provides a more uniform takeover regime within the EU, and the European directive relating to cross-border mergers, which was implemented into French law in 2008, considerably simplifi es the regulatory framework applicable to these mergers. However, other initiatives may increase the compliance burden, associated expense and regulatory risk for AXA and other market participants, including the following: ■ Anti-money laundering and anti-terrorism legislations have been enacted and continue to evolve in the many jurisdictions in which AXA and its subsidiaries operate.
Insurance and Annuities in 2009, industry sales slightly improved in 2010: ■ In the Life insurance market, total sales grew by 4% in 2010 over 2009. Industry Variable Life product sales increased by 4%, after dropping 49% in 2009. Corporate-owned, bankowned and private placement sales are above the market average increase. Industry Universal Life sales gained 8% from 2009 levels, attributable to growth in products featuring both long-term secondary guarantees as well as non-guaranteed products. Whole Life sales increased by 13% and remain an attractive offer during uncertainty in the marketplace. Term Insurance sales decreased by 10%, most notably due to price increases and withdrawals in product offerings; ■ In the Annuity market, total sales decreased by 9%
In Life, AXA ranked 15th with a 2.5% market share. In Variable
United Kingdom Wealth management market (5) has increased by 1% (3) with business through Independent Financial Advisers
Japan (7). The insurance market grew by 6.1%, mainly due to the recovering economy and bancassurance sourced saving products’ sales such as traditional general account savings.
However those players started to refrain from selling in the extremely low interest rate environment towards the end of the year. Term products with tax deductibility grew along with the market recovery whereas the Medical segment remained
(4) Annual Premium Equivalent (APE) is new regular premiums plus 10% of single premiums.
increase in single premiums (2), especially retirement pension insurance up 82% while other collective insurance increased by 64% (3) driven by single premiums. Retirement products with low surrender charges and distributed by banks enjoyed increasing popularity; short-term and medium-term investment products slightly decreased (-3.1% (4)) affected by regulatory volume limits. German Private Health insurance market grew by 5% (5). In 2009, AXA ranked 5th in the Life market with a 5.2% market share and 4th in the Health market with a 6.9%
increased by 9%. However, full year market growth expectations are lower since competition from short term banking products increased during the last quarter. Market growth in Individual
Group Life market volumes kept growing moderately, still limited by legal requirements on pension contracts. AXA maintained its third position with a market share of approximately 13% (8).
In Mexico, the market increased by 3% (15) mainly coming from protection business.
In Spain, AXA ranked 12th (9), in Italy 8th (10), in Portugal 9th (11), in
In Spain, AXA market share was 3% (9), in Italy 5% (10), in Portugal 2% (11), in Greece 4% (12), in Turkey 3% (13), in Morocco 9% (14) and
(7) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2010 fi gures based on gross written premiums.
(9) Spanish Association of Insurance Companies (ICEA) as of September 2010.
(10) Source: Istituto per la vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP) as of September 2010. Ranking as of December 2009
(cross border business not included), source Associazione Nazionale Imprese Assicuratrici (ANIA); considering cross border fi gures related to
AXA MPS Financial (part of AXA MPS Group), the estimated rank of AXA in Italy would raise to the 7th position in 2009.
(12) Source: Hellenic Association of Insurance Companies as of September 2010.
(13) Source: Turkish Association of Insurance Companies as of September 2010.
(15) Source: AMIS Asociación Mexicana de instituciones de Seguros as of September 2010.
Australia & New Zealand. In 2010, the total managed funds market increased by 5% (1) to AU$ 1.4 trillion, driven by superannuation funds and life insurance general account’s assets. AXA ranked 5th by assets under management (2) and 12th by net new money (3). The Australian fi nancial protection market was relatively resilient with in-force annual premiums increasing by 11.7% (4). In Australia, AXA ranked 6th by Annual Premium
AXA’s position in the New Zealand fi nancial protection market remained strong ranking 3rd by in-force annual premiums in a market that grew by 9.3% from the previous year (6).
ranked 5th by in-force premiums (8) with a 9.1% market share (7).
Such increase was mainly attributed to the continuing expansion of the middle-class driven by strong economic growth. AXA ranked 2nd with a market share of 12.4%.
and ranked 39th amongst all insurers and 16th amongst foreign insurers.
in Poland, by 6% in Hungary and by 14% in Czech Republic and
(7) Source: Offi ce of the Commissioner of Insurance, in-force (weighted) business 2009Q3YTD and 2010Q3YTD.
(10) Source: TLAA statistics report as of November 30, 2010, measured on collected premium basis.
France (1). The market grew by 1.5% in 2010. Commercial and Personal Motor business increased by 2% (after a 0.5%
decrease in 2009). Household market increased by 5%, notably driven by the rise of the construction index. In Commercial lines (other than Motor), Property increased by 1.5% whereas
and became 1st in Motor with a market share of 19.1% (4). AXA’s market share has grown steadily in Ireland since 2008 refl ecting its competitiveness in the market. Tariffs rose across the Irish market in 2009 and into 2010.
Property premiums increased by 0.5%, and Engineering was up 3% (6). AXA ranked 4th in the Property & Casualty market in 2009 with a market share of 5.6%.
Belgium. The market increased by 1,5% like in 2009 (8). The
mainly as a result of a record number of new car sales even though price competition in this segment remained strong.
(+3%). The Household & Property market segment declined by 1% while Workers Compensation market decreased by 4%.
AXA remained the market leader with a 21% (9) market share.
Mediterranean and Latin American Region. In Spain (10) the persistent economic weakness caused the market to decline by 0.5% despite an increase of car sales (+3% in 2010). In Italy (11), the market grew by 2% on a comparable basis driven by Motor
notably in the Motor market, only two companies experienced growth among top 5 insurers. In Greece (13), the market grew by 4% driven by Motor (7%). Some competitors in the market focused on volumes, capturing customers from collapsed companies. Commercial lines were negatively impacted by the plummeting public and private investments. In Turkey (14), the market increased by 11% driven by Motor (14%), remaining unprofi table for many players despite the liberalization of the
(8) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2010 fi gures.
(10) Source: Spanish Association of Insurance Companies. ICEA as of September 2010.
(11) Sources: Istituto per la vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP) as of September 2010. Published ISVAP fi gures excluded cross border business from their scope. Reported basis would show a decrease by 3%. Ranking as of December 2009, source: Associazione Nazionale Imprese Assicuratrici (ANIA).
(13) Source: Hellenic Association of Insurance Companies as of September 2010.
(14) Source: Turkish Association of Insurance Companies as of September 2010.
In Spain, AXA ranked 2nd (1), in Italy 7th (2), in Portugal 2nd (3), in
Saudia Arabia 5th (6) and in United Arab Emirates 6th (6).
Motor insurance declined by 1%. AXA ranked 2nd in the direct insurance market, with a market share of around 17% or 13th among all insurers for Motor insurance. Singapore (12). The insurance market grew by 16%. AXA ranked 3rd in Motor, 2nd in Marine Cargo and 1st in Health. AXA’s market share stood at 7%. Malaysia (13). The insurance market grew by 9% driven by
Hong Kong (14). The insurance market grew by 9% driven by all lines of business. AXA ranked 9th with a 3% market share in 2009. Canada. In 2010, overall premiums grew by 6% (15), the market continued to be very fragmented and competitive.
Property & Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance, is amongst the top fi ve players in Europe. After several years of soft underwriting conditions, corporate risks insurance pricing conditions tightened in 2010.
New regulations have already started to create opportunities and challenges for the industry in the aftermath of the crisis.
Insurers and banks continued to move towards a more cautious approach to asset allocation in light of Solvency II and Basel III.
In the asset management market, AXA Investment Managers ranked 14th (17) and AllianceBernstein 20th (17) on volume of assets under management basis. On a combined basis, AXA
(1) Source: Spanish Association of Insurance Companies. ICEA as of September 2010.
(2) Sources: Istituto per la vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP) as of September 2010. Published ISVAP fi gures excluded cross border business from their scope. Reported basis would show a decrease by 3%. Ranking as of December 2009, source: Associazione Nazionale Imprese Assicuratrici (ANIA).
(4) Source: Hellenic Association of Insurance Companies as of September 2010.
(6) Sources: KSA Tadawul website, Dubai stock exchange (Abu Dhabi stock exchange), as of December 2009.
(8) Source: AMIS: Asociacion Mexicana de Instituciones de Seguros as of September 2010.
(9) GIAK (General Insurance Association of Korea) website as as of November 2010.
(10) Source: General Insurance Association of Japan as of November 2010.
(13) Source: ISM: Insurance Services Malaysia Berhad as of December 2009. Ranking AXA inlcuding BHI.
in 2010, notably as a result of sustained domestic demand, coupled with rising commodity prices.
In industrialised countries, central banks maintained their accommodative monetary policies. In order to support economic expansion, in the US, the Fed once more showed its fl exibility and pragmatism, announcing a second round of quantitative easing in November 2010.
in common currency terms. The S&P 500 implied volatility index decreased from 21.7% to 17.8% between December 31,
Market concerns regarding economic growth source and sustainability of public debt in Europe combined with monetary policy that remained anchored at very low levels, sent yields for long-dated benchmark bonds to historical lows (around 2.5%
The US 10-year T-bond ended the year at 3.32%, a decrease of 52 bps compared to December 31, 2009 and the 10-year
against the Euro (closing exchange rate moved from CHF 1.48 at the end of 2009 to CHF 1.25 at the end of 2010).
On an average rate basis, the US Dollar gained 4% against the
Franc gained 8% against the Euro (from CHF 1.51 over 2009 to CHF 1.39 over 2010).
for a consideration of €240 million to be paid by AXA. The
AXA Rosenberg from Barr Rosenberg and Kenneth Reid. This buy-out closed in November 2010.
Following the rejection by the ACCC (Australia’s antitrust authority) of a proposed transaction with NAB and reopening of discussion with AMP, AXA announced, on November 15, 2010, a joint proposal (“Proposal”) with AMP to AXA APH whereby
AXA would dispose of its 54% stake in AXA APH to AMP and would acquire AXA APH Asian operations.
Under the Proposal, AXA APH shareholders will receive the equivalent of AU$ 6.43 per share, consisting of cash and AMP
The proposal (excluding the above dividend) comprises 0.73 AMP shares (worth AU$ 3.88 per share) and AU$ 2.55 cash per AXA APH share (4). AXA APH minority shareholders will receive full protection for a decline of AMP’s Post Scheme
VWAP (5) down to AU$ 4.50 with additional cash to be provided to maintain the offer price equivalent of AU$ 6.43 (6). AXA
APH minority shareholders will also participate in 50% of any increase in the AMP Post Scheme VWAP above AU$ 5.60.
The offer is designed to give AXA APH shareholders price protection against movements in AMP share price, and will vary depending upon AMP’s Post Scheme VWAP measured over a 10-day period (on an ex-dividend basis) immediately after completion of the scheme.
well as the experience from AXA Sigorta in Turkey, who will supervise its activities in this new market.
Corporation (Minmetals) have reached agreement on the equity transfer of AXA-Minmetals Assurance Co. Ltd (AXA-MM).
& Casualty Belarussian insurance market, B&B Insurance enjoys a 10% market share overall (€29 million revenues in 2009), leveraging a network of ca. 260 exclusive agents. The closing of this operation is subject to regulatory approvals and is expected to take place in the fi rst quarter 2011.
On December 18, 2009, AXA announced the strengthening of its position in Central and Eastern Europe through the buyout of the non-controlling interests held by the European Bank for
AMP whereby AXA would acquire 100% of AXA APH’s Asian businesses while AMP would acquire 100% of AXA APH’s
took note of an offer made by National Australia Bank Limited
This sale is consistent with AXA’s intention to focus on growing its Wealth management business in the UK Life &
Notes, which bear an effective interest rate of 6.5% per annum and are repayable in instalments over an 8 year period (4 years duration). The face value of the Notes and consequently the consideration may be reduced by up to £0.2 billion depending on the amount of inherited estateas as of December 31, 2010, which is found to be releasable from the AXA Sun Life long term fund following testing aiming fi rst half of 2011.
Wealth management business and to redeploying capital more effi ciently throughout the AXA Group, while maintaining a strong balance sheet.
This transaction had an impact on AXA Group of €-1.6 billion exceptional capital loss accounted for in net income.
On September 15, 2010 AXA announced that this sale had been successfully completed.
On April 14, 2010, AXA announced the issuance of €1.3 billion subordinated debt (maturity 2040, 5.25% annual coupon, spread of 205 bps over Euribor 3M), to anticipate the reimbursement before the end of 2010 of maturing subordinated debts. The transaction has been structured to comply with the latest Solvency II advice for Tier 2 capital treatment.
As of December 31, 2010, AXA total share capital amounted to 2,320,105,237 shares.
Cessions) announced the successful placement of €275 million catastrophe bonds due January 2014 (the “Bonds”) to institutional investors. The Bonds are issued by Calypso
Capital Limited, an Irish special purpose company, under a €1.5 billion catastrophe bond program set up by AXA Global
P&C. The Bonds represented the largest Euro denominated catastrophe bond issuance. This structure provides AXA Global
On January 25, 2010, AXA announced its intention to voluntarily delist its ADSs from the New York Stock Exchange
(“NYSE”) and to voluntarily deregister with the U.S. Securities and Exchange Commission (“SEC”). AXA’s delisting from the
International Premier market and (ii) AXA intends to maintain its fi nancial reporting discipline through an annual program to test the effectiveness of its internal fi nancial controls going forward.
On August 6, 2010, AXA announced the renewal of the 2005 agreement with BNP Paribas consistent with their longstanding relationship over many years through various industrial projects. In this context, a new agreement has been concluded on August 5, 2010 for a period of 3 years, and it includes the principal terms of the December 15, 2005 agreement.
However, in order to take into account the anticipated regulatory developments for fi nancial institutions, BNP Paribas and AXA
In March 2011, AXA APH announced the following: (i) on March 1, 2011, AXA APH announced that it has been notifi ed that the proposed merger of AXA APH’s Australian and
(in Euro million) 2010 2009 2010/2009 of which Gross written premiums 54,962 55,899 -1.7%
of which Fees and revenues from investment contracts with no participating feature 518 547 -5.2%
Consolidated gross revenues for full year 2010 reached €90,972 million, up 1% compared to 2009.
in a context of aggressive competition on rates and a more selective approach focused on profi tability, and (iii) a decrease in Protection and Health business (€-30 million or -5%) due to a decrease in Individual Health (€-32 million or -22%) partly offset by an increase in Individual Protection (€+11 million or +49%).
primarily in the Wholesale channel, refl ecting repricing and redesign actions in 2009, (ii) Life up 3% refl ecting increased
Medical Whole Life products new business partly offset by a €4 million increase (+5%) in Investment & Savings mainly due to Variable Annuity products.
Belgium APE decreased by €45 million (-17%) to €218 million mainly due to the decrease both in (i) Individual Life & Savings sales (€-41 million or -18%) mainly driven by general accounts products following a decrease in guaranteed rates in the second half of 2010 and in (ii) Group Life & Savings products
United Kingdom APE (2) increased by €140 million (+36%) to €545 million driven by mutual funds sales with the success of the Elevate wrap platform (€+71 million) and Investment and Savings products (€+69 million), mainly offshore bonds
and Group Life business (€+3 million) in Thailand as well as
to €274 million driven by (i) Poland (€+34 million) mainly due to an increase in Pension funds (€+32 million), (ii) Hungary
Kingdom & Ireland (+34%), due to the combination of tariff increases and an increase in volumes on both UK Direct and intermediaries channels, (ii) France (+3%) mostly due totariff increases, (iii) Canada with increased average premium (+4%)
and (iv) Asia (+4%) mainly due to net new infl ows in Japan and tariff increases in Singapore and Malaysia as well as an increase in Health in South Korea, partly offset by (v) Germany
(1) « Annual Premium Equivalent » (APE) is a new regular premiums plus are tenth of single premiums, inline with EEV methodology. APE is Group share.
Health following tariff increases in Mexico and Spain as well as
Mediterranean & Latin American Region down 4% refl ecting the current economic context, (iii) Belgium down 7% resulting from the economic slowdown and (iv) Switzerland (-3%) mainly resulting from a focus on profi tability.
(-4%) and Liability (-3%)) partly offset by positive developments in Motor (+11%), Construction (+6%) and Marine (+1%), and
AllianceBernstein revenues were up 7% to €2,109 million due to management fees up 8% in line with 6% higher average
(+15% mainly due to higher interest margin driven by mortgage and consumer loans portfolio growth), Hungary (+25% mainly due to loans and deposits portfolio growth) and France (+13%
Profi t or loss on fi nancial assets (under fair value option) & derivatives 210 485
(a) For the periods ended December 31, 2010 and December 31, 2009, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectively €+13,788 million, and €+23,861 million, and benefi ts and claims by the offsetting amounts respectively.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 210 485
Group underlying earnings amounted to €3,880 million. On a constant exchange rate basis, underlying earnings decreased by €112 million (-3%), driven by Asset Management, Holdings and Property & Casualty, partly offset by an increase in Life &
All comparative fi gures mentioned in the below paragraphs are presented at constant exchange rate basis and adjusted for reclassifi cations between margins including the reclassifi cation from net technical margin to commissions in 2009 refl ecting contractual changes in Group Protection contracts in France
On a constant exchange rate basis, Life & Savings underlying earnings were up €34 million (+1%) mainly attributable to
France (€+137 million), Japan (€+103 million), partly offset by the United States (€-86 million), Belgium (€-61 million), the
with higher fees following equity market appreciation and France (€+15 million) partly offset by the United
Kingdom (€-45 million) as a result of the partial business disposal in September 2010, b. Other fees were up €53 million driven by the United
Kingdom (€-65 million); (iii) Net technical margin was down €1,116 million (-56%)
Variable Annuity products hedging margin, primarily as a result of the non-repeat of interest hedging gains and the impact of credit spread tightening, additional reserve adjustment following lower lapse assumptions in the
United States partly offset by lower volatility cost, (ii) nonrecurring prior year gain from the internal restructuring of an annuity portfolio in the United Kingdom (€165 million), and (iii) €68 million non-repeat of 2009 positive prior year reserve developments in Group Retirement in France;
(iv) Lower expenses decreased by €625 million driven by: a. €197 million in the United Kingdom mainly as a result of the partial business disposal in September 2010, b. acquisition expenses down €422 million (-11%) mainly driven by lower DAC amortization notably following lower technical margin in the United States, c. administrative expenses remained stable (down €7 million or 0%); (v) Higher tax expenses and minority interests (up €144 million or +17%) driven by both higher pre-tax earnings and lower positive tax one-offs (€76 million in the
United States and €13 million in Australia & New Zealand in 2010 compared to €129 million in 2009).
mainly due to: (i) Lower net technical result (including expenses) down €49 million (or -18%) due to: a. An all year loss ratio up 0.3 point to 71.1% mainly due to (i) 1.9 points lower current year loss ratio driven by 2.0 points reduction following tariff increases and lower
Nat Cat charge (-0.2 point) more than offsetby (ii) lower positive prior year developments (+2.2 points), b. An expense ratio slightly down 0.1 point to 28.0%, c. as a result, the combined ratio was up 0.2 point to 99.1%; (ii) Stable investment result (€+9 million or 0%) mainly refl ecting higher dividend yield on equities and higher distribution from alternative assets partly offset by the negative impact of lower interest rates; (iii) Lower income tax expense and minority interests
International Insurance underlying earnings amounted to €290 million. On a constant exchange rate basis, underlying earnings remained stable (€+1 million or 0%) mainly driven by
Asset Management underlying earnings amounted to €269 million. On a constant exchange rate basis, underlying earnings decreased by €93 million (-26%). Excluding both €62 million last year tax one-off at AllianceBernstein and €66 million net provision related to AXA Rosenberg coding error at AXA IM, underlying earnings increased by €34 million
AllianceBernstein, partly offset by (ii) €127 million higher general expenses at (i) AllianceBernstein (€-105 million) following higher compensation expenses and higher distribution fees and
As a result, adjusted earnings amounted to €4,317 million. On a constant exchange rate basis, adjusted earnings increased by €707 million (+20%).
have been offset by negative impact from lower interest rates and credit spread evolution on other fi xed income assets and derivatives (€-131 million), b. €+194 million positive performance from private equity, equity and hedge funds, net of derivatives, c. €-19 million foreign exchange negative impact mainly in
As of December 31, 2010, consolidated shareholders’ equity totaled €49.7 billion. The movements in shareholders’ equity since
(a) EPS calculation takes into account interest payments related to undated debts classifi ed in shareholders equity with retrospective application.
(a) Including adjustement to refl ect net fi nancial charges related to perpetual debt (recorded through shareholders’ equity).
(b) Excluding fair value of invested assets and derivatives and perpetual debt (both recorded through shareholders’ equity).
Fees and revenues from investment contracts without participating feature 518 547
Change in unearned premium reserves net of unearned revenues and fees (331) (162)
Net income from investments in affi liates and associates 39 3
Net realized capital gains or losses attributable to shareholders 279 (73)
Profi t or loss on fi nancial assets (under fair value option) & derivatives 347 (52)
Net capital gains or losses attributable to shareholders net of income tax 247 91
Profi t or loss on fi nancial assets (under FV option) & derivatives 63 281
APE decreased by €217 million (-14%) to €1,384 million: ■ Group Retirement decreased by 64% or €-120 million due to a non-recurring level of new business in 2009 on both general accounts and unit-linked contracts; ■ Individual Savings decreased by 8% or €-69 million, due to lower volumes of large contracts, driven by a selective underwriting. General accounts decreased by 13% or €-100 million while unit-linked contracts increased by 27%
or €31 million; ■ Protection and Health decreased by 5% or €-30 million due to a decrease in new business (-22% or €-32 million)
Protection (+49% or €+11 million), due to a very strong increase in new contracts.
Investment margin increased by €221 million (+25%) to €1,105 million mainly as a result of a higher asset base as well as lower investment income allocated to policyholders.
Net technical margin decreased by €201 million (-26%) to €561 million mainly as a result of (i) €-101 million impact of the change in Retirement regulation in Group Protection offset by non-recurring positive prior year reserve developments,
As a result, the underlying cost income ratio decreased by 5.2 points to 72.7%.
partly offset by an unfavorable change in intrinsic value of equity hedging positions (€-59 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives 73 (555)
Gross revenues increased by €74 million (+1%) to €9,460 million. On a comparable basis, gross revenues decreased by €316 million (-3%): ■ Variable Annuity premiums (53% of gross revenues)
Sensitive Life sales, as well as the impact of the new Indexed unit-linked product launched in August, partially offset by the impact from the removal of certain Universal Life guaranteed features in the fi rst quarter of 2009; ■ Fees on Asset Management business (7% of gross revenues)
increased by 16% driven by higher average separate account balances resulting from equity market increases over the past year;
Wholesale channel, refl ecting repricing and redesign actions in 2009 partially offset by the introduction of Retirement
Cornerstone; ■ Life APE increased by 3% refl ecting increased Term
Insurance and Interest Sensitive Life sales partly offset by the removal of certain Universal Life guaranteed features in the fi rst quarter of 2009; ■ Mutual funds APE increased by 26% refl ecting higher sales under improved market conditions.
Investment margin increased by €56 million (+12%) to €505 million. On a constant exchange rate basis, investment margin increased by €35 million (+8%). Investment income decreased by €12 million refl ecting lower yields on fi xed income assets partly offset by higher distribution from alternative investments. Interests and bonus credited decreased by €46 million primarily refl ecting lower balances.
Fees & revenues increased by €250 million (+16%) to €1,804 million. On a constant exchange rate basis, fees & revenues increased by €176 million (+11%) primarily due to higher fees on unit-linked balances following equity market appreciation compared to last year.
GMxB reserve adjustment for lower lapse assumptions, the non-repeat of 2009 interest hedging gains and credit spread tightening partly offset by lower volatility cost in 2010.
On a constant exchange rate basis, expenses decreased by €510 million (-29%): expenses, net of capitalization (including commissions and DAC
As a result, the underlying cost income ratio decreased by 0.3 point to 70.6%.
Underlying earnings decreased by €66 million (-12%) to €478 million. On a constant exchange rate basis, underlying earnings decreased by €86 million (-16%).
Gross revenues decreased by €744 million (-27%) to €2,040 million. On a constant exchange rate and comparable scope basis, gross revenues decreased by €1 million.
Investment and Savings products (€+69 million), mainly offshore bonds (€+38 million) and Individual pensions (€+ 50 million).
(28%) mainly due to: ■ a €8 million increase in shareholder participation in with-profi t bonuses of the sold business, as a result of improved market conditions; ■ a €11 million increase in the investment income on shareholder assets; ■ a €12 million increase as a result of a non-recurring reclassifi cation into fees and revenues in 2009.
Fees & revenues decreased by €103 million (-17%) to €506 million. On a constant exchange rate and comparable scope basis, fees & revenues increased by €4 million (1%)
mainly due to: ■ a €24 million increase as a result of higher fees on account balance driven by positive market conditions; ■ a decrease in loadings of €10 million as a result of lower volumes of Creditor business, fully offset in expenses; ■ a €12 million decrease as a result of a non-recurring reclassifi cation from investments in 2009.
(-72%), mainly driven by the non repeat of 2009 one-off items of the sold business, notably as a result of the internal restructuring of an annuity portfolio.
On a constant exchange rate and comparable scope basis, the expense margin decreased by €35 million (-6%) mainly due to: ■ a €46 million decrease due to a non-recurring release of policyholder tax reserve; ■ a €10 million decrease due to lower commissions from lower volumes of Creditor business; ■ partly offset by €35 million non-recurring employee pension scheme curtailment last year.
Amortization of VBI decreased by €2 million (-34%) to €-3 million.
As a consequence, the underlying cost income ratio increased by 6.5 points to 83.6%.
Adjusted earnings decreased by €20 million (-13%) to €128 million. On a constant exchange rate basis, adjusted earnings decreased by €24 million (-16%) largely due to the underlying earnings movement, partly offset by €28 million lower net impairments.
On a constant exchange rate basis, net income decreased by €1,386 million. In addition to the changes in adjusted earnings, the year on year movement in net income included: ■ €1,642 million loss related to the partial sale of the Life &
Savings business, partly offset by; ■ a €123 million favorable adjustment for undiscounting tax on unrealised gains attributable to policyholders in unit-linked life funds; ■ a €71 million favorable change in fair value of fi xed income and equity derivatives; ■ a €29 million increase in relation to foreign exchange movements.
Gross revenues increased by €122 million (+2%) to €5,560 million. On a comparable basis, revenues decreased by €222 million (-4%): ■ Protection revenues (39% of gross revenues) decreased by €157 million (-7%) negatively impacted by products not actively promoted (Endowment and Whole life) and lower premiums from Increasing Term and Group Life products; ■ Investment & Savings revenues (31% of gross revenues)
revenues of Group Pension partly offset by increased sales of Variable Annuity products (€+58 million); ■ Health revenues (31% of gross revenues) increased by €9 million (+1%) mainly resulting from higher regular premiums of Nursing Care and Medical Whole life products following improved retention (€+75 million), partly offset by
APE decreased by €67 million (-13%) to €465 million. On a comparable basis and excluding the Cancer products’
discontinuation impact (€85 million), APE decreased by €11 million (-3%). This was driven by (i) €13 million (-8%)
decrease in Health mainly as a result of lower new business of Medical Whole life products, (ii) €2 million (-1%) decrease in Protection due to lower sales of Group Life and Increasing
Variable Annuity products (partly offset by lower amortization of deferred acquisition costs) notably refl ecting improved market conditions and higher margins. Excluding this impact, fees and revenues declined by €31 million mainly due to lower revenues from products not actively promoted (Endowment and Whole life) partly offset by higher fees from Health.
On a constant exchange rate basis, net technical margin increased by €24 million mainly driven by: ■ change in assumptions €+89 million following the change in investment assumptions on the legacy book of business in 2009; ■ surrender margin down €-43 million mainly driven by independent agent LINA’s shock lapses in 2009 and improved client retention; ■ mortality margin down €-23 million mainly driven by less favorable mortality experience in Protection and Savings products.
amortization mainly due to non-repeat of 2009 negative impact of assumption and model changes and LINA shock lapses,
(ii) €30 million lower staff expenses as a result of last year’s early retirement plan, (iii) €29 million cost savings from other cost reduction initiatives partly offset by (iv) €21 million higher investments to support future growth.
amortization decreased by €116 million (-65%) mainly driven by the non-repeat of 2009 negative impact of assumption and model changes (€96 million) and better client retention
On a constant exchange rate basis and excluding the €+106 million reversal in 2009, net income increased by €39 million, mainly due to (i) €88 million higher adjusted earnings, (ii) favorable change in fair value of alternative assets partly offset by lower favorable change in mark-to-market of corporate bonds and CDS investments.
Gross revenues increased by €164 million (+2%) to €6,880 million (1): ■ Life (67% of gross revenues) increased by €88 million (+2%)
Fees & revenues increased by €5 million (+2%) to €306 million due to lower fees and revenues allocated to policyholders partly offset by lower loadings on general account premiums and on unit-linked regular premiums in line with the new business development.
Net technical margin rose by €61 million to €98 million mainly due to improved hedging margin on GMxB products
As a result, the underlying cost income ratio decreased by 3.3 points to 49.0%.
Income tax expenses increased by €15 million (+24%) to €-75 million due to higher pre-tax underlying earnings and nonrecurring positive items in 2009.
Net capital gains or losses attributable to shareholders net of income tax 34 (1)
Profi t or loss on fi nancial assets (under FV option) & derivatives 69 (19)
Fees & revenues increased by €24 million (+11%) to €231 million. On a constant exchange rate basis, fees & revenues increased by €5 million (+3%) mainly refl ecting the increase in gross revenues in Group Life.
Amortization of VBI increased by €16 million (+56%) to €-43 million. On a constant exchange rate basis, amortization of VBI increased by €12 million (+44%) mainly resulting from assumptions unlocking in Group Life in 2010 (€-7 million).
(+47%) while Crest products remained stable; ■ Group Life & Savings revenues decreased by 10% (or €-64 million) to €589 million due to an exceptional premium on a large existing contract in 2009. Excluding this nonrecurring item, Group Life revenues were stable (+1%).
Fees & revenues decreased by €6 million (-4%) to €153 million mainly due to lower URR (Unearned Revenues Reserves)
amortization (€-4 million) and lower loadings on general accounts products (€-2 million).
Adjusted earnings decreased by €17 million (-6%) to €239 million as a result of lower underlying earnings and lower net realized capital gains mainly on fi xed income partly offset by lower impairments mainly on equities and a less unfavorable impact of hedging equity derivatives.
Net income decreased by €174 million (-40%) to €265 million mainly driven by a less favorable change in fair value of fi xed income Mutual funds mainly due to credit spreads.
Net capital gains or losses attributable to shareholders net of income tax 35 4
Profi t or loss on fi nancial assets (under FV option) & derivatives (24) 20
MPS (€+331 million or +10%), reinforced by Antonveneta and a favorable context, notably tax amnesty until April 2010, and by higher sales of Variable Annuity products (€+95 million or
mainly driven by (i) higher contribution of general account savings products (€+26 million or +9%) mainly in AXA MPS
Fees & revenues increased by €29 million (+10%) to €332 million. On a constant exchange rate basis, fees & revenues increased by €20 million (+7%) as a result of volume growth mainly in AXA MPS.
As a result, the underlying cost income ratio decreased by 1.0 point to 68.7%. On a constant exchange rate basis, underlying cost income ratio decreased by 1.5 points.
On a constant exchange rate basis, net income decreased by €12 million (-9%) mainly due to a negative change in fair value of mutual funds, partly offset by higher adjusted earnings.
Other countries 460 352 o/w South East Asia (b) 244 164
Net realized capital gains or losses attributable to shareholders 22 (12)
(b) South East Asia earnings include Indonesia, Thailand, Philippines, Singapore and India.
Gross revenues increased by €19 million (+1%) to €1,551 million. On a comparable basis, gross revenues decreased by €262 million (-17%): ■ Gross written premium and fees (70% of gross revenue)
(€-259 million) due to lower demand for conservative investment products than last year; ■ Revenues from mutual funds and advice business (30%
of gross revenues) increased by €15 million (+4%) to €461 million due to higher assets under management levels mainly resulting from improved fi nancial market conditions.
mainly due to a drop in Guaranteed Savings Account and mutual funds sales of €-13 million and €-20 million respectively.
On a constant exchange rate basis, investment margin increased by €36 million due to higher fi xed income yield and higher average asset base, as well as the restructuring of inter-company loans; ■ Fees & revenues increased by €188 million (+29%) to €840 million. On a constant exchange rate basis, fees & revenues increased by €39 million (+6%) driven by growth in average asset balances within mutual funds businesses and higher fees from Protection products; ■ Net technical margin fell by €23 million to €-25 million.
On a constant exchange rate basis, income tax benefi ts increased by €11 million, due to one-off tax benefi ts in 2010
Adjusted earnings increased by €48 million (+164%) to €77 million. On a constant exchange rate basis, adjusted earnings increased by €34 million (+117%) due to the improvement in underlying earnings and higher realized capital gains following improved markets conditions.
APE increased by €37 million (+30%) to €159 million. On a comparable basis, APE increased by €30 million (+25%) due to higher sales of Protection products driven by the successful launch of new products and improved productivity in the agents channel.
Adjusted earnings increased by €25 million (+18%) to €161 million. On a constant exchange rate basis, adjusted earnings increased by €18 million (+14%) mainly refl ecting higher underlying earnings and lower equity hedging costs.
On a constant exchange rate basis, net income increased by €23 million (+18%) mainly due to higher adjusted earnings and non-repeat of 2009 losses on credit derivatives strategies.
Gross revenues increased by €45 million (+10%) to €515 million. On a comparable basis, gross revenues increased by €21 million (+5%) mainly driven by Life business in Poland and Hungary, partly offset by lower Pension Funds revenues in
APE increased by €106 million (+63%) to €274 million. On a comparable basis, APE increased by €35 million (+16%) driven by Pension Funds (€+26 million or +21%) and Life and Savings
(€+9 million or +9%) benefi ting from unit-linked products sales acceleration. The main countries contributing to growth were
(1) AXA interest in AXA Asia Pacifi c Group is 54.03% broken down into 53.93% direct interest holding and an additional 0.10% owned by the AAPH
Adjusted earnings decreased by €6 million to €10 million. On a constant exchange rate basis, adjusted earnings decreased by €7 million mainly as a result of lower underlying earnings.
Gross revenues increased by €16 million (+14%) to €132 million. On a constant exchange rate basis, gross revenues remained stable.
primarily in Indonesia (€+30 million) mainly driven by new unit-linked products launched through the joint-venture with
Group Life business (€+3 million), as well as growth across all channels in China (€+8 million) partly due to continuing increased geographical coverage.
Underlying earnings increased by €5 million to €3 million. On a constant exchange rate basis, underlying earnings increased by €4 million mainly driven by earnings improvement in
Indonesia (€+5 million) and Thailand (€+5 million), partly offset by higher operational losses in India (€-6 million) and nonrecurring adjustments in Singapore (€-1 million).
Adjusted earnings increased by €5 million to €6 million. On a constant exchange rate basis, adjusted earnings increased by €5 million primarily driven by growth in underlying earnings.
Net income decreased by €31 million to €-45 million. On a constant exchange rate basis, net income decreased by €23 million mainly refl ecting residual past losses in India (€28 million) partly offset by growth in adjusted earnings.
(1) AXA Global Distributors was formed in March 2009 and is 100% owned by AXA SA. The AXA Global Distributors’ initiative aim is to distribute
P&L excluding infrastructure costs are refl ected within AXA France and AXA UK Life & Savings segments.
The presentation between current and prior year loss ratio have been harmonized throughout the Group. 2009 current year loss ratios by country presented hereafter incorporate such change (1) to ensure suffi cient comparability. The all accident year loss ratio, combined ratio, earnings and reserves are not impacted by this change in presentation.
Fees and revenues from investment contracts without participating feature - -
Net income from investments in affi liates and associates 33 18
Net realized capital gains or losses attributable to shareholders 111 (264)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 27 187
Net capital gains or losses attributable to shareholders net of income tax 36 (26)
Profi t or loss on fi nancial assets (under FV option) & derivatives (6) 65
(€-50 million) driven by credit spread evolution and €-20 million foreign exchange impact.
Net capital gains or losses attributable to shareholders net of income tax (9) (58)
Non-Motor was up 1% to €1,486 million. Property was up 6% to €619 million following growth in UK Direct, new affi nity schemes as well as the implementation of tariff increases.
Net technical result decreased by €73 million (-6%) to €1,129 million. On a constant exchange rate basis, net technical result decreased by €106 million (-9%): ■ Current accident year loss ratio increased by 0.4 point to 74.4% refl ecting severe Nat Cat charge in 2010 partly offset by lower large losses notably in Property; ■ All accident year loss ratio increased by 3.1 points to 73.0%
Expense ratio decreased by 1.4 point to 30.9% with an acquisition ratio down 2.8 points to 22.1%, largely refl ecting a decrease in commissions (-2.4 points) driven by renegotiation of broker commission rates, reduced exposure to highly commissioned Delegated Authority business and an increase in UK Direct business share. The administrative expense ratio increased by 1.3 point to 8.8% due to the non-repeat
Income tax expenses decreased by €23 million (-88%) to €-3 million. On a constant exchange rate basis, income tax expenses decreased by €23 million (-88%) mainly refl ecting lower pre-tax underlying earnings and the geographical mix between the United Kingdom and Ireland.
Net technical result decreased by €218 million (-19%) to €930 million: ■ Current accident year loss ratio increased by 2.2 points to 74.3% due to higher attritional losses as a consequence of the severe winter, as well as higher Nat Cat charge
As a result, the combined ratio increased by 5.9 points to 104.6%.
Net investment result increased by €22 million (+6%) to €375 million. Excluding €21 million non-recurring reversal of interest arrears, net investment result remained stable as higher alternative funds distributions was offset by lower income on fi xed income assets.
Net income decreased by €17 million (-8%) to €190 million, mainly due to less favorable change in fair value following credit spreads evolution partly offset by non-repeat of unfavorable change in fair value of alternative funds in 2009.
Net capital gains or losses attributable to shareholders net of income tax (15) (25)
■ Personal lines (51% of gross revenues) were up 2% driven by
Nat Cat charge increase (+2.0 points or €42 million); ■ All accident year loss ratio decreased by 2.5 points to 67.2%
refl ecting the improvement of current loss ratio and increase in prior year reserve developments (mainly in Workers’
Expense ratio rose by 1.2 point to 31.3% mainly driven by higher administrative expenses (+1.3 point) notably refl ecting investments to further improve quality of service.
As a result, the combined ratio decreased by 1.3 point to 98.5%.
Net investment result increased by €3 million (+2%) to €199 million mainly as a result of a higher asset base.
Income tax expenses increased by €42 million to €70 million resulting from the 2009 non-recurring impact of the favorable court decision for insurance companies on RDT (Revenus
Adjusted earnings remained stable at €144 million as a result of lower impairments mainly on equities partly offset by lower capital gains on fi xed income and lower underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 22 (44)
Profi t or loss on fi nancial assets (under FV option) & derivatives 13 22
Gross revenues increased by €207 million (+3%) to €6,928 million (1). On a comparable basis, gross revenues were stable or driven by the diffi cult economic environment in mature markets (-3%) fully offset by positive performance in high growth markets (+5%): ■ Personal lines (64% of gross revenues) were up +3% to €4,416 million increasing in all lines of business driven by (i) Health (+8% or €+43 million) with tariff increases across the region and positive volume impact in Turkey and Spain, (ii) Property (+4% or €+26 million) benefi ting from the rebound on bank mortgage activity in AXA MPS
Spain where tariff increases drove negative volume evolution; ■ Commercial lines (36% of gross revenues) were down -5% to €2,476 million mainly driven by Non-Motor (-4%
As a result, the combined ratio down by 1.4 point to 97.7%.
Underlying earnings increased by €33 million (+10%) to €358 million. On a constant exchange rate basis, underlying earnings increased by €26 million (+8%).
Adjusted earnings increased by €99 million (+35%) to €380 million. On a constant exchange rate basis, adjusted earnings increased by €93 million (+33%) refl ecting the increase in underlying earnings combined with higher realized capital gains (€26 million) notably on equities and lower impairments
On a constant exchange rate basis, net income increased by €86 million (+31%) refl ecting adjusted earnings evolution partly offset by less favorable change in fair value of mutual funds.
Net capital gains or losses attributable to shareholders net of income tax 40 (13)
Gross revenues increased by €175 million (+8%) to €2,336 million (1). On a comparable basis, gross revenues decreased by €9 million (0%) mainly due to: ■ Personal lines (52% of gross revenues) were up 1% to €1,220 million mainly driven by positive net infl ows in Motor and Property and higher insured sums in Property; ■ Commercial lines (48% of gross revenues) were down 2% to €1,122 million mainly resulting from a focus on profi tability.
As a result, the combined ratio decreased by 5.1 points to 88.8%.
Income tax expenses increased by €41 million (+77%) to €-95 million. On a constant exchange rate basis, income tax expenses increased by €34 million (+63%) mainly driven by higher pre-tax underlying earnings and a €9 million positive tax one-off in 2009.
Underlying earnings increased by €99 million (+38%) to €359 million. On a constant exchange rate basis, underlying earnings increased by €71 million (+27%).
Adjusted earnings increased by €152 million (+61%) to €400 million. On a constant exchange rate basis, adjusted earnings increased by €121 million (+49%) mainly driven by higher underlying earnings, higher realized capital gains mainly on equity securities (€+29 million) and lower impairments
(in Euro million) 2010 2009 o/w Central and Eastern Europe (b) 109 31
Net realized capital gains or losses attributable to shareholders 28 7
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (1) 3
Underlying earnings increased by €52 million (+60%) to €139 million. On a constant exchange rate basis, underlying earnings increased by €34 million (+39%) refl ecting a 2.7 points improvement of combined ratio to 91.8% as a result of better weather conditions, tariffs increases in Personal lines (mainly in
Gross revenues increased by €203 million (+25%) to €1,023 million (3). On a comparable basis, gross revenues increased by €55 million (+7%): ■ Personal lines (80% of gross revenues) were up 6% or €+39 million due to €26 million in Motor benefi ting from net new infl ows in Japan (+61,000), tariffs increases in Singapore and Malaysia as well as €8 million increase in Health in South
Korea; ■ Commercial lines (20% of gross revenues) were up +4% or €6 million attributable to Motor in Singapore and Hong Kong.
Net technical result increased by €4 million (+2%) to €212 million. On a constant exchange rate basis, net technical result decreased by €17 million (-8%): ■ Current accident year loss ratio increased by 1.4 point to 75.6% mainly as a result of a deterioration in Motor in South
Korea due to a higher claims frequency, partly offset by an improvement in Singapore and Hong Kong in Motor; ■ All accident year loss ratio increased by 4.8 points to 78.9%
attributable to unfavorable prior year reserve developments in Singapore and Malaysia (€22 million) as well as €6 million reserve strengthening in South Korea and Japan.
Expense ratio decreased by 0.7 point to 24.6% with the administrative expense ratio down 0.8 point refl ecting a tight management of administrative expenses.
Net investment result increased by €2 million (+9%) to €23 million. On a constant exchange rate basis, net investment result decreased by €1 million (-3%).
Underlying earnings and adjusted earnings increased by €2 million to €-8 million mainly refl ecting higher net technical result mainly driven by operational leverage in Poland.
Underlying earnings, adjusted earnings and net income increased by €13 million (+71%) to €30 million. On a constant exchange rate basis, underlying earnings, adjusted earnings and net income increased by €10 million mainly driven by a decrease in loss ratio and to a lower extent a lower expense ratio.
Net realized capital gains or losses attributable to shareholders 53 19
As a consequence, the all accident year loss ratio decreased by 2.5 points to 81.5%.
As a result, the combined ratio decreased by 2.2 points to 96.9%.
On a constant exchange rate basis, net income increased by €31 million (+20%) refl ecting higher adjusted earnings and a more favorable change in fair value on Mutual funds
Adjusted earnings increased by €21 million to €18 million refl ecting higher underlying earnings.
Adjusted earnings increased by €3 million (+25%) to €17 million mainly refl ecting higher underlying earnings and €3 million higher realized capital gains net of impairment.
Underlying earnings decreased by €45 million (-32%) to €95million. On a constant exchange basis, underlying earnings decreased by €48 million (-34%) driven by lower results on
Adjusted earnings decreased by €8 million (-6%) to €142 million. On a constant exchange basis, adjusted earnings decreased by €11 million (-7%) as a result of €48 million lower underlying earnings and lower realized capital gains partly offset by a €+45 million positive impact following a change in the French tax regulation on the “réserve de capitalisation”
(1) Gathers both central teams from Life & Savings and Property & Casualty global business lines in addition to existing Group reinsurance operations.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 21 49
Profi t or loss on fi nancial assets (under FV option) & derivatives 0 20
Assets under management (“AUM”) increased by €16 billion from year-end 2009 to €362 billion at the end of 2010 driven by market appreciation of €31 billion, positive exchange rate impact of €24 billion and €6 billion change in scope from the acquisition of SunAmerica Alternative Investment Group, partly offset by net outfl ows of €44 billion (€37 billion from Institutional clients, €6 billion from Retail and €1 billion from Private Clients).
Gross revenues increased by €230 million (+12%) to €2,203 million (1). On a comparable basis, gross revenues increased by €135 million (+7%) driven by higher management fees (+8%) due to 6% higher average AUM and higher distribution fees (+22%) from higher Retail AUM.
(i) higher compensation expenses (6% or €55 million) due to higher deferred compensation obligations and (ii) higher promotion and servicing expenses (13% or €43 million) due to higher distribution fees (from higher average Retail AUM).
On a constant exchange rate basis, net income decreased by €94 million (-46%) as a result of lower adjusted earnings combined with €20 million less favorable change in fair value of fi nancial assets, together with €-29 million lease write-off following restructuring plans implemented in previous years.
(2) The provision related to AXA Rosenberg coding error was reported in AXA SA underlying earnings in half year 2010.
AXA Rosenberg coding error, the underlying cost income ratio would have increased by 0.5 point to 73.6%.
Minority interests decreased by €65 million to €39 million, or by €63 million on a constant exchange rate basis. Excluding the €53 million minority interests in the provision related to the
Underlying earnings decreased by €46 million (-27%) to €125 million at both current and constant exchange rate bases. Excluding the €66 million net provision related to the AXA Rosenberg coding error (1), underlying earnings increased by €19 million (+11%) as lower contribution from
AXA Rosenberg (€-29 million or -87%) was more than offset by €49 million higher underlying earnings (+35%) from other expertises of AXA IM.
Net income decreased by €66 million (-32%) to €139 million on both current and constant exchange rate bases. Excluding the €66 million net provisionrelated to the AXA Rosenberg coding error (1), net income was fl at, as higher adjusted earnings were offset notably by an unfavorable foreign exchange impact on
Net realized capital gains or losses attributable to shareholders (3) (4)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 9 (8)
(b) Includes commercial activities in Belgium for €32 million and shared services of AXA Bank Europe (treasury and support functions) for €32 million.
Net income decreased by €1 million to €2 million, refl ecting less favorable change in fair value of macro-hedge derivatives instruments following lower interest rates decrease.
Underlying earnings as well as adjusted earnings and net income decreased by €2 million to €-14 million on a constant exchange rate basis.
The Holdings and other companies consist of AXA’s non-operating companies, including mainly AXA parent company, AXA France
Net realized capital gains or losses attributable to shareholders 2 (64)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (226) 288
Adjusted earnings increased by €83 million to €-549 million mainly driven by underlying earnings evolution and net higher realized capital gains by €34 million, including €-18 million premium amortization on equity calls option.
Net income decreased by €149 million to €-691 million mainly driven by: ■ €-379 million unfavorable change in fair value of interest rates and foreign exchange derivatives instruments which are not eligible to hedge accounting mainly due to interest rates decrease; ■ €-61 million on time value related to equity derivatives; ■ partly offset by the adjusted earnings evolution of €+83 million, and a partial release by €92 million of deferred tax liability due to a more favorable tax rate (short term to long term tax regime) related to the potential sale of the
Underlying earnings, adjusted earnings and net income increased by €14 million to €-9 million mainly due to lower tax expenses (€13 million) resulting from lower inter-company dividends received.
Underlying earnings decreased by €30 million to €-32 million mainly refl ecting a €-17 million operational losses in India related to the Property & Casualty activity which is not consolidated and an increase in fi nancial charges.
Adjusted earnings decreased by €21 million to €-35 million mainly driven by underlying earnings evolution partly offset by lower impairments.
Net income decreased by €32 million to €-47 million driven by adjusted earnings evolution and residual past losses in India
Adjusted earnings decreased by €50 million (-43%) to €-165 million. On a constant exchange rate basis, adjusted earnings decreased by €43 million (-37%), in line with underlying earnings evolution.
On a constant exchange rate basis, net income decreased by €93 million (-75%) due to lower adjusted earnings and an unfavorable fair value of a cross currency swap.
Underlying earnings decreased by €12 million to €-23 million. On a constant exchange rate basis, underlying earnings decreased by €8 million due to the restructuring of inter-company loans, higher Asian corporate expenses offset by lower fi nancial charges on lower debt levels.
Net income decreased by €45 million to €-32 million. On a constant exchange rate basis, net income decreased by €39 million due to the decrease in adjusted earnings combined with lower foreign exchange gains on USD denominated inter-company debt, costs associated with the probable sale of the Australia &New Zealand operations.
(3) AXA interest in AXA Asia Pacifi c Group is 54.03% broken down into 53.93% direct interest holding and an additional 0.10% owned by the AAPH
Underlying earnings decreased by €9 million (-37%) to €-32 million. On a constant exchange rate basis, underlying earnings decreased by €8 million (-32%) mainly due to lower tax one-offs (€-18 million), partially offset by €17 million lower fi nancial charges refl ecting lower interest rates and repayment of a Euro-denominated inter-company debt in July 2009.
On a constant exchange rate basis, net income decreased by €40 million (-129%) refl ecting adjusted earnings evolution together with a signifi cant decrease of €43 million on exchange rate gains following the repayment of a Euro-denominated inter-company debt partially offset by the unwind of interest rate swaps (€+11million) following the redemption of subordinated debt.
Adjusted earnings increased by €36 million to €18 million mainly driven by the increase of underlying earnings and lower impairments on equities.
Net income increased by €21 million to €9 million due to higher adjusted earnings partly offset by unrealized losses on derivatives in 2010 and a non-recurring gain on the sale of a stake in a sales company in 2009.
Net income increased by €6 million to €1 million mainly due to the price adjustment on Dutch activities sale in 2009.
On a comparable exchange rate basis, underlying earnings increased by €9 million due to lower fi nancial charges on fl oating rate loans.
Underlying earnings, adjusted earnings and net income decreased by €-19 million (-67%) to €9 million driven by less favorable run-off developments.
Global economic growth should remain robust in 2011 and monetary policies could gradually become less accommodative, leading to higher interest rates.
In Property & Casualty, the underwriting cycle should continue to gradually improve which, combined with our pricing actions, should lead to better current year loss ratios, allowing our current year combined ratio to converge to 100% in 2011.
before the impact of: (i) Exceptional operations (primarily change in scope and discontinued operations); (ii) Integration and restructuring costs related to material newly acquired companies as well as restructuring and associated costs related to productivity improvement plans; (iii) Goodwill and other related intangibles; and
(iv) Profi t or loss on fi nancial assets accounted for under fair value option (excluding assets backing liabilities for which the fi nancial risk is borne by the policyholder), foreign exchange impacts on assets and liabilities, and derivatives related to invested assets.
Earnings per share (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.
Statement of Income in accordance with IFRS. As a result, the operating income under the Margin Analysis is equal to that reported in AXA’s Statement of Income for the segment.
Technical Margin”; (ii) policyholders’ interest in participating contracts is refl ected as a change in insurance benefi ts in the Statement of Income. In the Margin Analysis, it is allocated to the related margin, i.e. primarily “Investment Margin” and
“Net Technical Margin”; (iii) the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above) as well as changes in specifi c reserves linked to invested assets’ returns and to exclude the fees on
Underlying Fees & Revenues include: (i) revenues derived from mutual fund sales (which are part of consolidated revenues); (ii) loading charged to policyholders on premiums / deposits and fees on funds under management for separate account (unit-linked) business; (iii) loading on (or contractual charges included in) premiums
Underlying Net Technical margin includes the following components: (i) mortality/morbidity margin: The amount charged to the policyholder in respect of mortality/morbidity for the related period less benefi ts and claims. It is equal to the difference between income for assuming risk and the actual cost of benefi ts. This margin does not include the claims handling costs and change in claims handling cost reserves; (ii) surrender margin: The difference between the benefi t reserve and the surrender value paid to the policyholder in the event of early contract termination; (iii) GMxB (Variable Annuity guarantees) Active Financial
Risk Management is the net result from GMxB lines corresponding to explicit charges related to these types of guarantees less cost of hedge. It also includes the unhedged business result; (iv) policyholder bonuses if the policyholder participates in the risk margin; (v) ceded reinsurance result; (vi) other changes in insurance reserves are all the reserves strengthening or release coming from changes in valuation assumptions, additional reserves for mortality risk and other technical impacts such as premium defi ciency.
Purchased Life Business In-force) amortization related to underlying margins, as well as amortization of other intangibles related to the in-force business.
“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).
& Casualty and Asset Management operations, as well as from capital raising activities, and confi rmed bank credit lines.
Each of the major operating subsidiaries is responsible for managing its liquidity position, together with the Company if appropriate. The Company, as the holding company for the AXA
Holdings, AXA UK Plc. and AXA Mediterranean Holding SA are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating entities 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 banks relating to collateral agreements on derivatives, and the
Life & Savings and Property & Casualty insurance contracts are disclosed in Note 14.9.1 of Part 4 — Consolidated Financial
Liquidity needs can be affected by fl uctuations in the level of surrenders, withdrawals, maturities and guarantees to policyholders including guarantees in the form of minimum income benefi ts or death benefi ts, particularly on Variable
AXA continued in 2010 to manage its liquidity risk carefully and conservatively, and proved its resilience in terms of its liquidity position.
Bank tenders (of which €27 billion immediately available) at year-end 2010, representing an increase by respectively €3 and €2 billion compared to year-end 2009, creating a substantial alternative source of refi nancing.
In addition, as part of its risk control system, AXA remains constantly vigilant regarding contractual provisions, such as ratings triggers or restrictive covenants, in fi nancing and other documentation that may give lenders, security holders or other counterparties, rights to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse effect on its consolidated fi nancial position. At year-end 2010, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
(2) (Total net fi nancing debt) / (Shareholders’ equity excluding unrealized gains & losses recorded through shareholders’ equity + total net fi nancing debt excluding undated subordinated debt).
The increase of €714 million, or €701 million on a constant exchange rate basis, mainly resulted from the €413 million unfavorable change in market value of currency swaps and interest rate swaps at AXA SA, €1,300 million increase arising from AXA SA’s issue of dated subordinated debt in April 2010 partly offset by € 1,070 million decrease at AXA refl ecting repayment of a US registered redeemable subordinated debt.
At December 31, 2010, the amount of debt owed by AXA
and its subsidiaries to credit institutions was €887 million versus €921 million at the end of 2009. The decrease of €62 million on a constant exchange rate basis was mainly due to reimbursement of outstanding loans in the Mediterranean and Latin America Region.
At December 31, 2010, other debt owed to credit institutions totaled €3,218 million (including €1,079 million of bank overdrafts), a decrease of €450 million compared to €3,668 million at the end of 2009 (including €1,356 million of bank overdrafts).
For several years, the AXA Group has offered to its employees, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2010, employees invested a total of €330 million leading to a total of 30.1 million newly issued shares. Employee (including agent) shareholders represented 6.5% of the outstanding share capital and 7% of the voting rights at December 31, 2010.
Dividends received by the Company from its subsidiaries amounted to €4,031 million in 2010 (2,718 million in 2009), of which €986 million were in currencies other than the Euro
Ltd. Excluding this exceptional dividend, dividends received from subsidiaries remained stable in 2010.
(including interest payments on its outstanding debts and borrowings) and dividend payments during each of the next three years. AXA expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash fl ow remaining after payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses as well as future issues of debt and equity instruments.
Dividends paid to AXA SA’s shareholders in 2010 in respect of the 2009 fi nancial year totaled €1,259 million, or €0.55 per share, versus €0.40 per share paid in 2009 in respect of the 2008 fi nancial year (€836 million in total). All of these dividends were paid in cash.
(€37.7 billion at December 31, 2009) of which: (i) consolidated shareholders’ equity after dividend proposal: including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and undated subordinated debt; (ii) gross unrealized capital gains and other: €17.4 billion
AllianceBernstein as it is part of its net consolidated book value) of €24.2 billion (€24.5 billion at December 31, 2009)
The Company has issued dated subordinated notes, undated subordinated notes (“TSDI”), and undated deeply subordinated notes (“TSS”), which include provisions designed to allow the
This 2010 solvency margin calculation will be reviewed by the Autorité de Contrôle Prudentiel (ACP), which controls the application of these directives in France.
A downgrade or the potential for a downgrade of our ratings, could have a variety of negative impacts on us including
Shareholders’ Meeting that will be held on April 27, 2011. The dividend will be payable on May 4, 2011 with an ex-dividend date of April 29, 2011. For individuals whose fi scal residence is in France, this dividend gives rise to a 40% tax relief equal to €0.28 per share. These individuals may, barring certain exceptions, opt to have an 19% fl at deduction at source, leading to the loss of the 40% tax relief mentioned earlier. The 12.3% welfare taxes (CSG, CRDS and welfare deduction) due by the persons who are deemed to be French residents for tax purposes are, in any case, paid at the date of the dividend payout.
Employees 133 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 134
Implementing sound corporate governance principles has been a priority at AXA for many years. Subject to prevailing corporate governance requirements and practices in France,
AFEP/MEDEF Code consists, in particular, of recommendations issued by the AFEP and the MEDEF in a report dated October 2003 and recommendations dated January 2007, October 2008 and
Offi cer are held by the same person. The Lead Independent
Deputy Chief Executive Offi cer or to inform the Chairman and the Board of Directors about potential confl icts of interests, and a variety of other powers designed to ensure that the
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 notably exercises the following powers: ■ chooses between the two forms of Executive Management
Board of Directors’ works and the internal control and risks management procedures set up by the Company; ■ convenes Shareholders’ Meetings;
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, missions and obligations of the Board of Directors and its Committees.
Offi cer on a regular basis about the Company’s fi nancial condition, cash position and commitments as well as any signifi cant events or transactions involving the Company or the Group.
To ensure that their interests and those of the Company are appropriately aligned, the Board’s Bylaws provide that each member of the Board of Directors must hold, within two years following his/her fi rst appointment, AXA shares whose value, on the basis of the closing price of the AXA share on
December 31 of the preceding fi scal year, shall correspond to an amount at least equivalent to the gross director’s fees earned in respect of the previous fi scal year.
Shareholders’ Meeting for four years. However, following the change in the Company’s governance structure on April 29, 2010, the terms of all Supervisory Board members automatically terminated and most Supervisory Board members became members of the Company’s new unitary Board of Directors for the remaining duration of their terms, in order to allow a spreading of the terms within the Board of Directors
(one year for Messrs. Jean-Martin Folz, Giuseppe Mussari and Ezra Suleiman; two years for Ms. Wendy Cooper and
Mr. Norbert Dentressangle). In addition, four new Directors were appointed by the Shareholders’ Meeting for a term of four years: Mmes. Isabelle Kocher and Suet Fern Lee as well as Messrs. Henri de Castries and Denis Duverne.
Gérard Mestrallet, whose terms of offi ce as members of the
Supervisory Board ended by anticipation on April 29, 2010, were not proposed as members of the Company’s new Board of Directors.
Currently, fi ve members of the Board of Directors are nationals of countries other than France and four members are women.
Group’s employee shareholders. The Board of Directors does not have any non-voting member (censor).
Executive Offi cer are held by one person. On April 29, 2010, the Board of Directors appointed Mr. Norbert Dentressangle as Lead Independent Director. This Lead Independent Director has a number of specifi c powers including supervising the contribution of the independent directors to the Board’s deliberations and acting as their spokesperson with Executive
(regardless of whether he is a Committee member); ■ inform the Chairman and the Board of Directors about any potential confl icts of interests; ■ report to the Company’s Shareholders’ Meetings with respect to all corporate governance related matters.
Denis Duverne (57) Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations
Member of the Board of Directors Non-executive Chairman of AXA UK plc (United Kingdom) and AXA Equity and Law plc (United Kingdom)
Member of the Board of Directors Senior Director of Stamford Law Corporation
Member of the Board of Directors Attorney at Law Lussan & Associés 250 bis, boulevard Saint Germain 75007 Paris - France
ROC Partners 580 Park Avenue New York, NY 10065 United States
The Shareholders’ Meeting to be held on April 27, 2011 will be asked to vote on the reappointment of two members of the Board of Directors whose terms will end as well as the appointment of a new director. In this context, the Board of
Ethics and Governance Committee, (i) the re-appointments as directors of Messrs. Jean-Martin Folz and Giuseppe Mussari as well as (ii) the appointment of Mr. Marcus Schenck in replacement of Mr. Ezra Suleiman, whose term will expire at the close of this Shareholders’ Meeting.
Mr. Marcus Schenck’s candidacy was selected due to his fi nancial knowledge and experience. Mr. Schenck has been a member of the Management Board and Chief Financial Offi cer of E.ON AG (Germany) since 2006 after spending nine years at Goldman Sachs and six years at McKinsey & Co. The
In 2010, the Board met twelve times (four times as Supervisory
Independent Director as well as their powers; ■ Approval of the new Bylaws of the Board of Directors; ■ The structure of the Committees; ■ Authorization of the main projects with respect to acquisitions and disposals; ■ Review of the Group’s portfolio of businesses and activities; ■ Self-assessment of the Board of Directors; ■ Independence of the Board Members.
Corporate Finance Department on September 1, 1989. He was appointed Corporate Secretary in 1991 and Senior Executive
Vice-President for the Group’s asset management, fi nancial and real-estate businesses in 1993. In 1997, Mr. de Castries was appointed Chairman of The Equitable Companies
Incorporated (now AXA Financial, Inc.). From May 2000 to April 2010, Mr. de Castries was Chairman of the AXA
Management Board. Since April 2010, Mr. Henri de Castries has been Chairman & Chief Executive Offi cer of AXA.
Chairman of the Board of Directors: ■ AXA Assurances IARD Mutuelle
École Nationale d’Administration (ENA), he started his career in 1984 as commercial counsellor for the French
Consulate General in New York before becoming director of the Corporate Taxes Department for the French Ministry of Finance in 1986. In 1988, he became Deputy Assistant
Management Board member in charge of Finance, Control and Strategy. From January 2010 until April 2010, Mr. Duverne assumed broader responsibilities as Management Board member in charge of Finance, Strategy and Operations. Since
Chief Executive Offi cer of AXA, in charge of Finance, Strategy and Operations.
BOURBON – 33, rue du Louvre – 75002 Paris – France
Insurance Department. In May 1995, she joined The Equitable, which became AXA Equitable, as Vice-President & Associate
AXA, member of the Board of Directors representing the employee shareholders
PSA in February 2007. From June 2007 to March 2010, he was Chairman of the AFEP.
AXA UK plc – 5 Old Broad Street – London EC2N 1AD –
Wainwright. In 1978, he joined Fox-Pitt, Kelton and was appointed Chief Executive Offi cer in 1994. In 1993, he became a non-executive director of AXA Equity and Law plc
UK plc. Since September 2000, Mr. Anthony Hamilton has been non-executive Chairman of AXA UK plc.
Lyonnaise des Eaux – Tour CB 21 – 16, place de l’Iris –
In 2002, she joined the Suez Group. She then held various positions: from 2002 to 2005, at Strategy & Development; from 2005 to 2007, director of Performance and Organisation; from 2007 to 2008, Deputy Chief Executive Offi cer of
Stamford Law Corporation – 9 Raffl es Place # 32-00 Republic
(Philosophy Degree), University Paris I (Law Master), and of l’Institut d’Études Politiques de Paris. Mr. François Martineau has been Attorney since 1976. In 1981, he was “Secrétaire de la Conférence”. In 1985, he was a lecturer at the University
Bar School (EFB) and since 1998, he is Honorary Professor at the Law and Political Sciences School of Lima (Peru). In 1996, he became an Expert at the Council of Europe and fulfi lled various missions in Eastern Europe countries regarding the reform of the Code of the Judicial Organization, the reform of the magistrates’ and lawyers’ training and the revision of the Code of Civil Procedure. He also teaches professionals at the Ecole Nationale de la Magistrature (ENM). Since 1987,
Siena since 1993). In 1998, he became Deputy Chairman of the Criminal Section of the Court of Siena and then in 2000
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
the new fi rm with operating responsibilities. Between 2002 and 2006, Mr. de Oliveira was an Adjunct Professor of Finance at Columbia University. Mr. Ramon de Oliveira is the Managing
Director or member of the Supervisory Board: ■ American Century Company, Inc (United States)
Chief Executive Offi cer of BNP, which he privatized, and after the merger with Paribas in 2000, Chairman and Chief Executive
Offi cer of BNP Paribas. Since 2003, Mr. Michel Pébereau has been Chairman of the Board of Directors of BNP Paribas.
CIAA (Confederation of the Food and Drink Industries of the EU) (Belgium), member of the Executive Committee and member of the Board
Member of the Editorial Committee: ■ La Revue des Deux Mondes
Executive Offi cer do not currently exercise any professional activity or hold any directorships outside the AXA Group, other than functions within non-profi t organizations. Certain members of the Board of Directors, however, are corporate offi cers and/or directors of companies that may have agreements or dealings from time to time with the AXA Group
Consequently, AXA does not believe these agreements or dealings give rise to any confl icts of interests between (i) the duties to AXA of the Board of Directors members and (ii) the private interests and/ or other duties of these individuals.
Directors has ensured that independent directors have a major role on all Board Committees. In this context: ■ each of the four Committees is chaired by an independent director; ■ all members of the Audit Committee and the Compensation and Human Resources Committee are independent directors.
Each Committee issues opinions, proposals or recommendations to the Board of Directors on matters within the scope of its responsibilities but, under French law, Board Committees do not have any formal decision making power.
All members of the Audit Committee were determined by the Board to be independent in accordance with the criteria contained in the AFEP/MEDEF Code. In addition to assessing independence, the Board of Directors also reviewed the qualifi cations of all Audit Committee members in terms of their fi nancial expertise and business experience and believes that all members have the requisite expertise, experience and qualifi cations to fulfi l their duties as Audit Committee members.
The scope of the Audit Committee’s responsibilities is set forth in an Audit Committee Charter which defi nes the Committee’s principal missions, including the following: ■ Reviewing annual and half year fi nancial statements; ■ Monitoring the statutory audit of AXA’s annual and consolidated fi nancial statements; ■ Providing for recommendations on proposals for appointment of the Statutory Auditors as well as monitoring their independence; ■ Overseeing the compensation of the Statutory Auditors; ■ Overseeing the activities and systems of internal control over events that expose the Group to signifi cant risk; ■ Monitoring the fi nancial reporting process; ■ Reviewing professional and regulatory developments and understanding their impact on the fi nancial statements; ■ Monitoring the effectiveness of the systems of internal control as well as reviewing the policy and the procedures for risk management; ■ Reviewing the risk appetite with regard to fi nancial, operational, insurance and other exposures; ■ Overseeing the performance of the Group’s internal audit function.
Auditors on the Group’s consolidated fi nancial position and results of operations which includes the Auditors’ views on the accounting choices adopted by management. The Committee also receives a presentation from the Group Chief Financial
Offi cer, the Head of the Group Audit Department as well as the Chief Risk Offi cer attend each Committee’s meeting. The
Five of these members were determined by the Board to be independent in accordance with the criteria set forth in the
• to propose distribution of annual profi t and the payment of the dividend for the year ended to the Ordinary
& Chief Executive Offi cer, originating with a company that is directly or indirectly controlled by the Company, as well as the directions given in the management of the assets of the AXA Group and, more generally, any issue involving the fi nancial management of the AXA Group; ■ To review the impact on capital and solvency at Group level of the main orientations and limits of the Asset-Liability
The Finance Committee met fi ve times in 2010 (two times as
Four of these members were determined by the Board to be independent in accordance with the criteria set forth in the
The Ethics and Governance Committee meets at least once a year.
Directors and its Chairman; ■ To organize the periodic self-assessment of the Board of
Committee were determined to be independent by the Board in accordance with the criteria set forth in the AFEP/MEDEF
It has the following principal missions: ■ To issue proposals to the Board of Directors for the fi xing of: • the compensation of the Chairman & Chief Executive
Chief Executive Offi cer concerning: • the principles and conditions for the determination of the compensation of the executives of the AXA Group,
• overall annual allocation of Company’s stock options or performance shares to employees of the AXA Group; ■ To issue proposals on the appointments of the members of the Executive Management. The Committee is also informed of the appointments of the main executives of the
Offi cer in order to prepare the succession of the members of the Executive Management; ■ To examine in more depth certain Group human resources issues (Group training and development policy, international mobility…).
Resources Committee of the Supervisory Board). The average attendance rate was 84.38% and the Committee focused, in particular on the following matters: ■ Compensation policy and principles; ■ Compensation paid to members of the Management Board and the Executive Committee; ■ Stock option and performance share allocation; ■ Organization & Talent Review (OTR) and succession plan; ■ Shareholding requirement for the Chairman & Chief
In the context of the change in AXA’s governance structure, the Board of Directors appointed, on April 29, 2010,
Mr. Henri de Castries to hold the position of Chairman in addition to his functions as Chief Executive Offi cer, for the duration of his term of offi ce as director, i.e. four years.
Executive Offi cer and require prior Board’s approval for certain signifi cant transactions (sales or acquisitions over €500 million; signifi cant fi nancing operations or other type of transactions that are not in line with the Company’s announced strategy…).
The Chairman & Chief Executive Offi cer has decided to establish a Management Committee to assist him in the operational management of the Group. The Management
Management Committee currently comprises seven members and generally meets once a week (1). Every month, the
(1) During the year 2010, until the change in the governance structure which took place on April 29, 2010, the Management Board met almost every week to discuss issues related to Group strategy and activities.
Christopher Condron (a) President and Chief Executive Offi cer of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health
(a) Mr. Christopher Condron decided to retire as from January 1st, 2011. Mr. Mark Pearson was appointed President and Chief Executive Offi cer of AXA Financial, Inc. replacing Mr. Christopher Condron, and joined the Management Committee on January 1st, 2011.
(b) As of January 1st, 2011, Mr. Jacques de Vaucleroy, in addition to his preceding position, became Global Head of Life & Savings and Health replacing Mr. Christopher Condron.
Members of the Management Committee devote substantially all of their professional time to the management of the Group and do not hold outside directorships or engage in professional activities outside the AXA Group that would interfere with or impede in any material way their availability to focus on the
Management from the University of Scranton. In 1989, he became head of the Private Client Group of The Boston
April to December 2010, he has been a member of the AXA
Management Committee. Mr. Christopher Condron decided to retire as from January 1st, 2011.
Chairman of the Strategy Committee. In 2008, Mr. Kraus was appointed executive vice-president at Merrill Lynch, where he was responsible for overseeing the fi rm’s business strategy
Mr. Peter Kraus joined AllianceBernstein in December 2008 as Chairman and Chief Executive Offi cer. Since April 2010, he has been a member of the AXA Management Committee.
Mr. Nicolas Moreau is a graduate of the Ecole Polytechnique and has an actuarial degree from the Centre d’Etudes
Paris Dauphine, Mr. François Pierson joined AGP in 1974 and became Sales director. In 1990, he became General Manager of the South-East Region of AXA Assurances in France and director of Distribution. In 1995, he was appointed Deputy
From November 2001 to April 2010, Mr. François Pierson was a member of the AXA Management Board as well as Chief
April 2010, he has been a member of the AXA Management
Chairman of the Board of Directors: ■ AXA Corporate Solutions Assurance
Managing Director, member of the Executive Committee of ING Belgium (formerly Banque Bruxelles Lambert), responsible for Retail/Private Banking and Insurance activities in Belgium as well as in Luxembourg, France, Switzerland,
Mr. de Vaucleroy joined ING Insurance in the United States as
Dealers business units. From April 2006 to May 2009, he was Member of the Executive Board of ING Group and Chief
Europe business unit in March 2010. He is also in charge of
Director or member of the Supervisory Board or member of the Management Committee: ■ AXA Technology Services (SAS)
John R. Dacey Chief Executive Offi cer for the Japan, Asia-Pacifi c business unit
Mark Pearson President and Chief Executive Offi cer of AXA Financial, Inc. (United States)
AXA’s principal subsidiaries to establish an Audit Committee and a Compensation Committee in addition to any other
Board Committees that they consider necessary or appropriate for their specifi c businesses or that are required by local regulators. The role, duties, and composition of these
Asset Management 7,226 6,694 - AXA Investment Managers (g) 2,857 2,438
(e) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the bank activities. Consequently, split is not available.
(f) Mainly due to new consolidated companies notably in Ukraine (+1,150 salaried employees), and in Poland (+393 salaried employees).
(g) In order to harmonise the calculation of FTE throughout the Group, full year 2010 FTE data don’t include IT contractors.
Resources Committee of the AXA Board of Directors. These principles apply to all executives of the Group and are adapted to local regulations, as appropriate, under the supervision of the Boards of Directors and compensation committees of the
Condron, Denis Duverne and François Pierson, members of the AXA Management Board until then, became, after the Meeting, members of
The Board of Directors met for the fi rst time on April 29, 2010 following the Shareholders’ Meeting that approved the change in AXA’s governance, and appointed Mr. Henri de Castries
The Board of Directors subsequently determined the compensation of Messrs. Henri de Castries and Denis Duverne in connection with their new functions.
The Board of Directors decided to maintain unchanged the total cash compensation target of Mr. Henri de Castries at €3.3 million and to adjust Mr. Denis Duverne’s to €2.2 million as a consequence of his broader responsibilities.
May 1st, 2010 taking into account a variety of factors including a study carried out in 2009 and at the beginning of 2010 by an external consulting fi rm relative to compensation practices for similar functions in selected CAC 40 companies and other major European insurance companies as well as the recommendations of the G20, the European Commission and the Financial Stability Forum.
Savings and customer scope index; ■ Individual performance, which is evaluated by the
Mr. Henri de Castries since he was appointed in May 2000
Variable compensation for the year 2000 paid en 2001 €1,750,000 €1,381,373 79%
Variable compensation for the year 2002 paid en 2003 €2,000,000 €1,419,277 71%
Variable compensation for the year 2003 paid en 2004 €2,000,000 €1,824,277 91%
Variable compensation for the year 2007 paid en 2008 €2,500,000 €2,644,366 106%
Savings and customer scope index; ■ Performance of the business unit or functional area of responsibility, measured against objectives set at the beginning of the year; ■ Their individual performance, evaluated on the basis of predetermined strategic objectives.
For the Management Committee member who has a functional responsibility (Mr. Denis Duverne), the proportion of his variable compensation linked to the AXA Group results accounts for 40%, the proportion linked to the performance of his functional area of responsibility for 30% and the proportion linked to his individual performance for 30%.
The assessment of the leadership behaviors is based on the dimensions of the AXA leadership model: ■ Catalyze high performance – Change and Team leadership; ■ Build to grow – Strategic vision and Building capability; ■ Focus on customers; ■ Share to succeed; ■ Lead through actions – Results orientation and Living through AXA values.
Chairman & Chief Executive Offi cer France €2,700,000 €1,846,304 68% €2,700,000 €2,599,327 96% €2,466,667 €2,061,087 84%
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France €1,350,000 €1,052,337 78% €1,350,000 €1,485,480 110% €1,416,667 €1,265,910 89%
In reviewing the Group component of the variable compensation of Messrs. de Castries and Duverne, the Compensation and
Human Ressources Committee and the Board of Directors took into account the following measures: (1) the 12% increase of the New Business Value in Life & Savings in 2010, (2) the customer scope index, which was higher than expected,
Chief Executive Offi cer of AXA France France £750,000 £618,000 £800,000 £650,000 €832,790 €749,511
Global Head of Property & Casualty France €1,200,000 €988,174 €1,200,000 €1,188,967 €1,052,000 €1,030,467
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit Belgium - - - - €802,083 €786,000
(a) Mr. Alfred Bouckaert decided to retire as of April 29, 2010.
(b) Mr. Christopher Condron decided to retire as of January 1st, 2011.
(c) Mr. Jacques de Vaucleroy joined AXA Group on February 1st, 2010, he has been appointed CEO for the Northern, Central and Eastern Europe business unit as of March 15, 2010 and from January 1st, 2011 took the global responsibility for the Group AXA’s Life & Savings and Health businesses.
Management Board) are subject, meaningful comparisons of the compensation and benefi ts earned are uneasy. For information, the relevant marginal tax rates are as follows: Belgium: 53.5% (50% corresponding to federal taxes and 3.5%
Members of the Management Committee (or previously the Management Board) Country
Chairman & Chief Executive Offi cer France 3,284,364 819,848 1,021,189 - 5,125,401
“President” & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health USA 4,457,540 1,030,225 - 1,283,293 6,771,058
CEO for the Northern, Central and Eastern Europe business unit Belgium - - - - -
(a) Mr. Alfred Bouckaert decided to retire as from April 29, 2010.
(c) Mr. Jacques de Vaucleroy joined AXA Group on February 1st, 2010, he has been appointed CEO for the Northern, Central and Eastern Europe business unit on March 15, 2010 and from January 1st, 2011 took the global responsibility for the Group AXA’s Life & Savings and Health businesses.
On March 19, 2010, the fair value of one option was €2.50 for options without performance conditions, €1.68 for options with performance conditions, and the fair value of one performance share/unit was €10.53.
SUMMARY OF THE MANAGEMENT COMMITTEE (OR PREVIOUSLY MANAGEMENT BOARD) MEMBERS’ COMPENSATION FOR THE YEAR 2010
Peter Kraus Chairman & Chief Executive Offi cer of AllianceBernstein USA 205,689 - 0 0 396,232 601,921
Global Head of Property & Casualty France 578,000 1,030,467 0 17,893 6,034 1,632,394
Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit Belgium 641,667 786,000 0 217,446 1,601 1,646,713
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 480,000 1,485,480 0 36,790 4,150 2,006,420
Board fees paid for board memberships in AXA Group companies or in external companies when representing AXA, are deducted by 70% from the variable compensation of the same year.
In addition, Mr. Christopher Condron benefi ts from a credit of fl ight hours from use of a private plane, Mr. Nicolas Moreau benefi ts from accommodation allowance paid in respect of his expatriate status in the UK until September 30, 2010 and Mr.
During the fi scal year 2010, the members of the Supervisory
Board until April 29, 2010 and then members of the Board of
Deputy Chief Executive Offi cer, didn’t receive compensation from the Company, with the exception of a fee for attending meetings. The amount of directors’ fees paid to each AXA
(a) Total amount of directors’ fees (Supervisory Board and Board of Directors).
For the 2010 fi scal year and as from April 29, 2010, it was decided to distribute among the members of the Board of
No directors’ fees are paid to directors exercising executive functions (i.e. Chief Executive Offi cer and Deputy Chief
In addition of his directors’ fees, Mr. Jacques de Chateauvieux received as Chairman of the Supervisory Board from
USD 529,315 paid by AXA Equitable in the US in connection with her position there as Senior Vice-President and
Associate General Counsel. This compensation consists of USD 254,315 of fi xed compensation and USD 275,000 of variable compensation.
Messrs. Anthony Hamilton and Ezra Suleiman received in 2010, as directors of several companies of the Group, director’s fees for a gross amount of GBP 250,000 and USD 52,200 for
Since 1989, AXA has promoted a stock option program, for its directors, offi cers and employees in France and abroad, aimed at rewarding their performance and aligning their interests with those of the Group by linking them to AXA’s stock performance over the long term.
Within the global cap authorized by the Shareholders’ Meetings, the Board of Directors approves all stock option programs prior to their implementation.
Group are published. As such, in 2010, the annual consolidated earnings were published on February 18, 2010 and the option grants took place on March 19, 2010. The strike price, equal to the average of the share price during the 20 trading days before the grant date, has been fi xed at €15.43.
Options may be granted during the year normally only in the
United States to newly-hired or newly-promoted employees or when the performance measures that give rise to option grants are available after the fi rst quarter of the year.
Since 2009, this performance condition applies to all options granted to Executive Offi cers (members of the Management
Board) and to the last tranche of the options granted to the
Following the governance change on April 29, 2010, it was decided to apply this performance condition to all the options granted to Management Committee members.
December 22, 2010 that the total number of options granted to the Executive Offi cers (Chairman & CEO and Deputy CEO)
In 2010, AXA stock options were granted as follows: 8,028,795 subscription or purchase options at a weighted average price of €15.41 granted to 5,572 employees, representing 0.35% of the share capital as of
The portion of options granted in 2010 to the members of the
Management Board represented 14.28% of the total number of options granted.
Executive Directors: The fi rst 10 employees benefi ciaries (c) 672,928 - 160,253 55,145
Grant date (Board of Directors or Management Board) 26/03/2004 14/04/2004 (b) 29/03/2005 29/03/2005
Total number (a) of shares to be subscribed or purchased, from which to be subscribed or purchased by: 10,725,180 496,049 8,855,437 3,697,059
Executive Directors: The fi rst 10 employees benefi ciaries (c) 968,927 - 812,127 646,371
Subscription or purchase price of options (a) 16.90 15.00 19.70 19.95
(e) Mr. Christopher Condron decided to retire as from January 1st, 2011.
03/05/2002 03/05/2002 03/05/2002 20/04/2005 20/04/2005 20/04/2005 06/06/2005 27/06/2005 01/07/2005 21/09/2005 31/03/2006 31/03/2006 06/06/2007 27/06/2007 01/07/2007 21/09/2007 31/03/2008 31/03/2008 06/06/2015 27/06/2015 01/07/2015 21/09/2015 31/03/2016 31/03/2016
Total number (a) of shares to be subscribed or purchased, from which to be subscribed or purchased by: 1,223,253 53,733 22,805 7,409
Executive Directors: The fi rst 10 employees benefi ciaries (b) 227,593 53,733 36,684 -
(c) Mr. Alfred Bouckaert decided to retire as from April 29, 2010.
Grant date (Board of Directors or Management Board) 19/11/2007 01/04/2008 01/04/2008 19/05/2008
Total number (a) of shares to be subscribed or purchased, from which to be subscribed or purchased by: 8,205 8,056,370 1,240,890 6,004
Executive Directors: The fi rst 10 employees benefi ciaries (b) - 592,194 265,967 -
Subscription or purchase price of options (a) 28.53 21.00 21.00 23.42
22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 19/05/2008 22/09/2008 22/09/2008 24/11/2008 20/03/2009 20/03/2009 19/05/2012 22/09/2010 22/09/2012 24/11/2012 20/03/2011 20/03/2013 19/05/2018 22/09/2018 22/09/2018 24/11/2018 20/03/2019 20/03/2019
Grant date (Board of Directors or Management Board) 02/04/2009 10/06/2009 10/06/2009 21/09/2009
22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 08/12/2009 08/12/2009 19/03/2010 19/03/2010 18/08/2010 18/08/2010 08/12/2011 08/12/2013 19/03/2012 19/03/2012 18/08/2012 18/08/2014 08/12/2019 08/12/2019 19/03/2020 19/03/2020 18/08/2020 18/08/2020
The fi rst 10 employees benefi ciaries (b) - 21,364 -
CEO for the Northern, Central and Eastern Europe business unit 19/03/2010 subscription or purchase 19/03/2010
Note 26.3.1 to the 2010 consolidated fi nancial statements 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 19, 2010, the fair value of one option was €2.50 for options without performance conditions, €1.68 for options with performance conditions.
STOCK OPTIONS EXERCISED BY EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS (OPTIONS GRANTED BUT NOT EXERCISED AS AT DECEMBER 31, 2010)
Alfred Bouckaert (a) CEO for the Northern, Central & Eastern Europe business unit 1,544,188 -
Christopher Condron (b) “President” & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health 2,737,119 1,540,823
Jacques de Vaucleroy CEO for the Northern, Central and Eastern Europe business unit 82,500 -
Wendy Cooper Representative of employee shareholders at the Board of Directors 40,106 73,899
Units/Shares. This number will be used to calculate the actual number of units or shares that will defi nitely be granted at the end of a 2-year performance period; ■ Each year during the performance period, half of the
Performance Units/Shares initially granted is subject to collective performance conditions measuring both the performance of the AXA Group and the benefi ciary’s operational business unit performance, based on predetermined targets; ■ For benefi ciaries in operating business units, their operational business unit performance carries a weighting of 2/3 while the AXA Group performance carries a weighting of 1/3. For benefi ciaries in Group support functions, the performance is measured at AXA Group level only; ■ In 2006 and 2007, the performance indicators were for both the AXA Group and the operational business units: underlying earnings, P&C revenues and new business value in Life & Savings; ■ In 2008 and 2009, the performance indicators were: • for the operational business units performance: underlying earnings, P&C revenues and new business value in Life &
Savings; ■ For the Performance Units and Performance Shares granted in 2010, the cumulated performance in 2010 and 2011 will be measured over a two year period, based on the following performance indicators: • For the operational business units performance: underlying earnings and net income,
shares which are restricted from sale during a 2-year period, in order to develop employees’ share ownership and align employees and shareholders’ interests; ■ For the Performance Units granted in 2010, 50% of the units defi nitely granted at the end of the 2-year acquisition period will be subject to an additional 1-year acquisition period, and will be valued on the basis of the average closing price of the
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 2-year performance period are restricted from sale during a 2-year period.
Performance Shares, even if shares ultimately delivered to benefi ciaries are newly issued shares (until now, AXA has always delivered existing shares), represent less shareholder dilution than stock options, due to the smaller volume of the grant.
Executive Offi cer and Deputy Chief Executive Offi cer) each year may not exceed 10% of the aggregate number of
The acquisition period of the Performance Unit plan launched on March 20, 2009 with 2,957,911 Performance Units initially granted to 3,608 benefi ciaries outside France will end on
The acquisition period of the Performance Shares plan launched on April 1, 2008 with 1,401,587 Performance
(the 23,634 acquired share being restricted for another 2-year period, i.e. until April 28, 2012), and will end on April 28, 2012 for 23,051 Performance Shares granted to 6 employees outside France (the acquired shares will not be subject to any restriction period).
The acquisition period of the Performance Shares plan launched on March 20, 2009 with a total of 1,528,418 Performance
March 20, 2011 and the acquired shares will be subject to a 2-year restriction period until March 20, 2013.
March 19, 2010 and 1,940,338 Performance Shares were initially granted to 1,777 benefi ciaries in France. The 2-year acquisition period of this plan will end on March 19, 2012 and the acquired shares will be subject to a 2-year restriction period until March 19, 2014.
(b) The 902,288 units acquired by 2,046 benefi ciaries of the May 10, 2007 plan have been settled as €9.3 million and 152,364 shares restricted until May 10, 2011.
(e) 3,810 units of the March 19, 2010, acquired by anticipation related to deceased benefi ciaries.
(c) from which 461 shares of the May 10, 2007 Plan and 506 shares of the April 1st, 2008 Plan acquired by anticipation related to deceased benefi ciaries.
The numbers of Performance Shares indicated from the April 1st, 2008 plan onwards (excluding the March 19, 2010 plan) have been adjusted to take into account the impact of the share capital increase with preferential subscription rights of December 4, 2009.
PERFORMANCE SHARES GRANTED TO EXECUTIVE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS DURING 2010
Deputy CEO in charge of Finance, Strategy and Operations earnings - net income per share
Global Head of Property & Casualty earnings - net income per share
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.
Members of the Management Committee (or previously the Management Board) Plan date
PERFORMANCE SHARES BECOMING UNRESTRICTED DURING 2010 FOR EACH EXECUTIVE OFFICER AND MANAGEMENT COMMITTEE MEMBERS
Henri de Castries Chairman & Chief Executive Offi cer 31/03/2006 59,075 31/03/2010
François Pierson Global Head of Property & Casualty 31/03/2006 33,100 31/03/2010
Jacques de Vaucleroy CEO for the Northern, Central and Eastern Europe business unit
Chairman & Chief Executive Offi cer - - - - - -
CEO for the Northern, Central and Eastern Europe business unit earnings - net income per share
“President” & CEO of AXA Financial, Inc. (United States) and Global Head of Life & Savings and Health
Chief Executive Offi cer, the Deputy Chief Executive Offi cer, the members of the Management Committee and the members of the Executive Committee.
Commercial Code, the Supervisory Board and then the Board of Directors have decided that, as long as an Executive
January 1, 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 will have to be held during the whole term of offi ce of the Executive Offi cer; ■ For Performance Shares granted after January 1, 2007, the
These restrictions do not apply if an Executive Offi cer is in compliance with his/her Minimum Shareholding Requirement.
Company’s Executive Offi cers already met their Minimum Shareholding Requirement such as described in the above Section “Share ownership policy for executives of the Group”. The following table summarizes compensations granted to Execuitve Offi cers during the fi scal year 2010: Compensation paid in 2010 Shareholding requirement Shareholding at 12/31/2010
Executive Offi cers must refrain from any purchase or sale of AXA
Governance Committee and to the AXA Supervisory Board at the beginning of 2010. It has been considered that this type of agreement was likely to prevent insider trading offences or defaults and, therefore, protect the rightful interests of relevant executives of the Company.
Henri de Castries – Chairman & Chief Executive Offi cer 1,535,778 -
Subscription to units of AXA Group Mutual funds invested in AXA shares (Number) Subscription to AXA
(i) noted that Messrs. de Castries and Duverne have been long-standing employees of the AXA Group (for 20 years and 14 years, respectively) and had the same social benefi ts as all other director-level employees of AXA in France (with no special benefi ts or arrangement designed specifi cally for them), and (ii) was concerned that the decision of Messrs. de Castries and Duverne to renounce their employment contracts in accordance with the AFEP/MEDEF recommendations would not jeopardize the continuity of their accrued and future social benefi ts.
employees under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of new performance conditions in accordance with the AFEP/MEDEF recommendations. A severance benefi t would be applicable, except in the case of gross or wilful misconduct, solely in the event of dismissal, non-renewal or resignation within 12 months following a change in the
Since 1993, the AXA Group has promoted employee shareholding by offering each year to its employees an opportunity to become shareholders through a special share capital increase reserved exclusively to them (“SharePlan”).
The traditional plan allowed employees to subscribe through a personal investment to AXA shares (either through Mutual funds (FCPE) or through direct share ownership, depending on countries) with a 20% discount. The shares are held within the Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable laws). Employees are subject to the share price evolution, up or down, as compared to the subscription price.
(either through Mutual funds (FCPE) or through direct share ownership, depending on countries) with a 16.71% discount in 2010. The shares are held within the Group Company
New Mutual funds (FCPE) with direct voting rights have been created since 2005 to allow benefi ciaries, in most cases, to directly exercise their voting rights during the Company’s
The table below sets forth the number of AXA shares and the percentage of shares directly (treasury shares) or indirectly (treasury shares held by the subsidiaries) held by the Company.
approval on April 27, 2011 are the following: a) optimizing the liquidity of AXA ordinary shares, and notably to foster regular and liquid trading through a liquidity contract that complies with the AMAFI (Association
Française des Marchés Financiers) Code of conduct approved by the AMF, and agreed to with an investment service provider, in compliance with market practices accepted by the AMF; b) (i) hedging stock options offered to some or all employees or corporate offi cers of the Company and/or affi liated entities or economic interest groups as defi ned in Article L.225180 of the French Commercial Code, (ii) granting free shares (actions gratuites), in accordance with legal provisions, to some or all present or former employees, corporate offi cers and general insurance agents pursuant to the discount and/or contribution (abondement) within an employee savings plan sponsored by the Company or the AXA Group, (iii) granting free shares (actions gratuites)
Company and/or its affi liated entities or economic interest groups in particular Pursuant to Article L.225-197-2 of the French Commercial Code, in connection with the provisions of Articles L.225-197-1 et seq of the French
Commercial Code, and (iv) assigning shares to some or all present or former employees, corporate offi cers and
MAXIMUM PERCENTAGE OF SHARE CAPITAL, MAXIMUM NUMBER AND TYPES OF SECURITIES THAT MAY BE REPURCHASED BY THE COMPANY AND MAXIMUM PURCHASE PRICE
18 months, subject to the approval of the program by the
In connection with its share repurchase programs, which were approved respectively by AXA’s shareholders at their General
General Meeting held on April 29, 2010 (11th resolution), AXA, in accordance with the provisions of Article L.225-209 of the
French Commercial Code, has continued the liquidity contract dated May 16, 2005 that complies with the AMAFI Code of
As a result, on December 31, 2010 the number of treasury shares held under the liquidity contract was 3,000,000 and the number of treasury shares, allocated for hedging purposes, was 5,273,983, i.e. a total of 8,273,983 shares held directly by the Company, equal to 0.36% of AXA’s share capital at the year-end closing date, acquired for an aggregate purchase price of €113,743,411.21 (with a par value of €2.29 per share).
(1) On February 18, 2011, AXA announces the termination of the liquidity contract initially entered into on May 16, 2005 with Crédit Agricole Cheuvreux.
As of December 31, 2010, AXA’s fully paid up and issued share capital amounted to €5,313,040,992.73 divided into 2,320,105,237 ordinary shares, each with a par value of €2.29 and eligible for dividends as of January 1st, 2010.
(b) AXA Assurances IARD Mutuelle (10.93% of capital ownership and 17.16% of voting rights) and AXA Assurances Vie Mutuelle (3.01% of capital ownership and 4.72% of voting rights).
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights as of December 31, 2010 except as indicated in the table above.
Signifi cant changes in ownership of the Company’s share capital between December 31, 2008 and December 31, 2010 are set forth in the table below: As of December 31, 2010 (a)
Treasury shares held by Company subsidiaries (directly and indirectly) (d) 17,372,038 0.75% [30,875,964] (c) [1.08%] (c)
(c) These share will be entitled to vote when they cease to be treasury shares (e.g. upon their sale or other transfer to an unaffi liated third party).
Stock subscription warrants related to the SharePlan operation in Germany 4,370,360
As of December 31, 2009 (a) As of December 31, 2008 (a)
Early redemption – The Company may purchase the bonds on any Stock Exchange or otherwise in accordance with applicable law, including by way of tender for purchase or exchange; – At the option of the issuer, in cash, from January 1st, 2007 at a price with a gross 6% actuarial yield, if the Company’s share average over 10 consecutive days is above 125% of the anticipated repayment price; – At any time, at the option of the issuer, at €269.16 if the number of bonds in circulation is below 10% of the number of bonds issued.
For information concerning related party transactions, please see Part 4 – “consolidated fi nancial statements” – Note 28
By virtue of the authorization granted by the shareholders at the Annual General Meeting of April 29, 2010 (12th resolution), the Board of Directors increased the Company’s share capital in one offering, through the issue of shares to Group employees under the SharePlan 2010 program. The shareholders waived their preferential subscription rights to facilitate this offering to employees. In the countries that met the legal and tax requirements for participation in SharePlan, two investment options were offered in 2010: ■ The traditional plan, offered in 39 countries; ■ The leveraged plan, offered in 38 countries.
SharePlan 2010, and participating employees invested a total of more than €330 million, as follows: ■ €20.8 million in the traditional plan; and
As of December 31, 2010, AXA employees and agents held 6.50% of the Company’s share capital and 7.56% of the voting rights. These shares are owned through Mutual funds or directly either in the form of ordinary shares or ADSs in the framework of the Group employee stock purchase plans.
In order to reward its employees for the results obtained in 2005 and 2006 and to foster their engagement to the success of its
By virtue of the authorization granted by the shareholders at the General Shareholders’ Meeting on May 14, 2007, the
shares to 111,738 employees in 54 countries. The vesting conditions and compulsory holding periods applicable to these shares (generally four years) vary depending on local regulations. These shares are not fully vested and available to employees before the fourth anniversary of the grant date.
■ This agreement contains provisions in terms of information requirements in case of change in the cross-shareholdings between the two Groups.
In accordance with Article L.225-30 of the French Commercial Code, we were advised of the following commitments and regulated agreements, approved during previous fi scal years, which remained in force in 2010.
With the BNP Paribas Group - agreement fi xing the relationship with the BNP Paribas Group (authorized by the Supervisory Board of June 29, 2005)
replaces the agreement in force since December 15, 2005 authorized by the AXA Supervisory Board of June 29, 2005.
The agreement had been made public by the AMF (Autorité des marchés financiers) on May 31, 2006.
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 in the same conditions that apply to director-level employees of the AXA Group in France.
The current pension scheme’s rules were approved by the Supervisory Board on October 7, 2009, after having been presented for advice to all work councils and central work councils in France during the third quarter of 2009.
Social Security ceilings; ■ 2.4 Social Security ceilings + 20% of the average gross compensation of the past 5 years preceding the retirement date, if this average is between 8 and 12 annual Social Security ceilings.
In case of departure from the Group before retirement, no supplementary pension is paid.
recommendations and the applicable laws and regulations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Denis Duverne as employee.
I Markets The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris. Since the delisting of ADS
(American Depositary Shares, each representing one AXA ordinary share) from the New York Stock Exchange on March 26, 2010, the Company’s ADSs are traded on the U.S. over-the-counter market and are listed on the OTC QX platform under the symbol
(a) Following the issue of new shares with preferential subscription rights closed by AXA in December 2009 (see Euronext notice n° PAR-20091109-05426-EUR published on November 9, 2009). Share prices prior to the listing of new shares were adjusted on the basis of the theoretical value of the right (see Euronext notice n°2009-252 published on November 9, 2009).
(a) Following the issue of new shares with preferential subscription rights closed by AXA in December 2009 (see Euronext notice n° PAR-20091109-05426-EUR published on November 9, 2009). Share prices prior to the listing of newly issued shares were adjusted on the basis of the theoretical value of the right (see Euronext notice n° 2009-252 published on November 9, 2009).
(from higher to lower) of the risk for the AXA Group. While the management devotes very substantial resources to risk management on an on-going basis as described in Section 3.2 of this Annual Report, the Group’s risk management activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Section 3.1 or the losses that may be incurred in connection with these risks.
Continuing diffi cult conditions in the global fi nancial markets and the economy as well as concerns over certain sovereign debt and the Euro may materially adversely affect our business and profi tability, and these conditions may continue
The global fi xed-income markets continue to experience both volatility and limited market liquidity conditions, which have affected a broad range of asset classes and sectors. In addition, concerns over the quality of certain sovereign debt and the sustainability of certain sovereign credit ratings have
Eurozone countries may withdraw from the currency union. As a result of these and other factors, the market for fi xed income instruments (including government bonds and other forms of sovereign debt) has continued to experience increased price volatility, credit downgrade events, and increased probability of default and global currency markets, particularly Euro foreign exchange rates against other major currencies, have become increasingly volatile. Global equity markets, while improved from 2008, continue to be volatile, with many major markets ending the year still down signifi cantly from their peak.
These events and the continuing market volatility, have had and may continue to have an adverse effect on our revenues and results of operations in part because we have a large investment portfolio and are also dependent upon customer behavior and confi dence. In our Life & Savings business, these conditions could affect the sales of our participating life insurance and pension products, Mutual funds, asset management services and products with fi nancial risk borne by the policyholders
Life products. In particular, protracted or steep declines in the stock or bond markets typically could reduce the popularity of unit-linked products. Also, the account value of these products could be affected by a downturn in fi nancial markets and decreased account values will decrease the fees generated by these products. In our Asset Management business, these adverse market conditions may impact the fl ow of investment capital into or from assets under management or supervision and could negatively impact the way customers allocate capital among money market, equity, fi xed income, or other investment alternatives.
Adverse capital and credit market conditions may signifi cantly affect our ability to meet liquidity needs, access to capital and cost of capital
We need liquidity to pay our operating expenses (including claims and surrenders), interest on our debt, dividends on our capital stock and to refi nance certain maturing debts and other liabilities. In addition, we need liquidity in connection with certain derivatives transactions to which we are party which require us to post cash collateral and/or subject us to margin calls in certain circumstances. A lack of suffi cient liquidity and/
or access to fi nancing over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position. The principal sources of our liquidity are insurance premiums, annuity considerations, deposit funds, asset management fees, cash fl ows from our
In the event our current resources do not 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 general availability of credit, 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 shortterm 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 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 additional funding, we may not be able to successfully obtain additional fi nancing on favorable terms.
The Company’s insurance subsidiaries are subject to the regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specifi c regulatory capital requirements (including defi nition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly signifi cantly, during periods of declining equity markets and/or lower interest rates.
(taking into account the proposed 2010 dividend payment of €0.69 per share) which represented a €19.3 billion capital surplus at that date: (i) €23.4 billion of required capital (1), versus (ii) €42.7 billion of available capital (2). The Company’s year-end 2010 solvency margin is higher than its consolidated solvency margin at December 31, 2009 (171%) and at
of the gross premiums written or earned, in each case, subject to various adjustments.
Bank notifi ed the Company that it was considering potential regulatory action against AXA Life Europe (ALE), a wholly owned subsidiary of the Company based in Ireland, in connection with various issues including its solvency position, controls over its branch network across Europe, MIFID compliance, anti-money laundering controls and various other matters. The
de Contrôle des Assurances et des Mutuelles) undertook a review of Variable Annuity products sold in France as well as the Group’s hedging platforms and processes used to hedge certain risks associated with its Variable Annuity business.
or a reduction in the level of their regulatory capital that may negatively impact their competitive position may also result in the Company having to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position. For example, in 2008, the Company provided signifi cant amounts to its subsidiaries through loans, capital contributions or other mechanisms including approximately €2.4 billion loaned to its US subsidiary AXA
Rating agencies also take into account the Company’s consolidated solvency margin and the regulatory capital position of its insurance subsidiaries in assessing our fi nancial strength and credit ratings. Rating agencies may make changes to their internal models from time to time that may increase or decrease the amount of capital we must hold in order to maintain our current ratings. For example, certain rating agencies are currently considering adjusting their criteria for recognizing certain subordinated debt as eligible capital which may negatively impact their opinion on the Company’s capital position and consolidated solvency margin. To the extent our regulatory capital levels are deemed insuffi cient to meet rating agency criteria, our fi nancial strength and credit ratings may be downgraded.
Management has developed various contingency plans designed to ensure that the Company’s consolidated solvency margin and the regulatory capital levels of its insurance subsidiaries remain well in excess of regulatory minimum requirements and at levels that leave the Company and its subsidiaries well positioned from a competitive point of view. These plans may involve use of reinsurance, sales of investment portfolio and/or other assets, measures to reduce capital strain of new business, issuance of preference shares or other measures. There can be no assurance, however, that these plans will be effective to achieve their objectives and any failure by the Company and/or its insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse affect on our business, liquidity, credit ratings, results of operations and fi nancial position.
There are continuing uncertainties around the evolution and fi nal implementation measures that will be adopted under the Solvency II regime which could have potentially adverse impacts on the Group
Lamfalussy process. Under this process, Directives related to fi nancial institutions must be developed on the basis of a four level approach intended to complement the principles of the
since January 1st, 2011) published a number of consultation papers covering advice to the European Commission. The
At this stage, signifi cant uncertainties on some of the implementing measures remain. In particular, there is continuing risk that the effect of the fi nal measures adopted could depart from the initial objective of the Directive (i.e. setting an economic framework) and end up being more focussed on prudence driven principles which could be adverse for the Group in many respects. In addition, the application of
While AXA is actively participating in the various consultation processes through its involvement in industry bodies and trade associations, there is continuing risk that the effect of the fi nal measures adopted could depart from the initial objective of the Level I Framework Directive (i.e. setting an economic framework) and end up more focussed on prudence driven principles which could be adverse for the Group in many respects.
March 2010, (i) Standard & Poor’s lowered ratings on the core operating entities of the AXA Group to AA- stable outlook from
AXA’s principal insurance subsidiaries and its A2 counterparty credit rating on the Company and maintained its stable outlook.
In December 2010, Fitch Ratings affi rmed the fi nancial strength ratings of AXA’s principal insurance subsidiaries at AA- and revised its outlook on these ratings from negative to stable.
“Intangible Assets” (including Note 1.6.1 “Goodwill and impairment of goodwill”) and an analysis of the goodwill asset refl ected on our consolidated balance sheet is set forth in Note 5 “Goodwill” to the 2010 Consolidated fi nancial statements included in this 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 DAC and VBI amortization and the value of our deferred tax assets and deferred participation assets. The value of certain of our businesses including, in particular, our US asset management and US unit-linked life insurance and Variable
Annuity businesses, is signifi cantly impacted by such factors as the state of the fi nancial markets and ongoing operating performance. For the year ended December 31, 2010, management concluded that no impairment to the carrying value of our goodwill asset was required, however, to the extent that the operating performance of our businesses or market
Losses due to defaults by fi nancial institution counterparties and other third parties including potential sovereign debt defaults or restructurings, impairment of our investment assets and unrealized losses could all negatively affect the value of our investments and reduce our profi tability
by the time their fi nancial obligation becomes due. The reinsurance market has become increasingly concentrated following recent mergers and acquisitions, which have reduced the number of major reinsurance providers. The inability of any reinsurer to meet its fi nancial obligations to us could negatively impact our results of operations. In addition, the availability, amount and cost of reinsurance depend on general market conditions and may fl uctuate signifi cantly. Reinsurance may not be available to us in the future at commercially reasonable rates and any decrease in the amount of our reinsurance will increase our risk of loss. In certain cases, the price of reinsurance for business already insured may also increase, adversely affecting our results of operations.
Our accounting principles and policy with respect to the determination of allowances and impairments on our investments is set forth in Note 1.7.2 “Financial instruments classifi cation” in the 2010 consolidated fi nancial statements included in this Annual Report. The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
In considering impairments, management considers a wide range of factors including those described in Note 1.7.2 and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, management’s evaluation involves a variety of assumptions and estimates about the operations of the issuer and its future earnings potential. Management updates its evaluations regularly and refl ects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that management has accurately assessed the level of impairments taken and allowances refl ected in our fi nancial statements and additional impairments and/or allowances may have a material adverse effect on our consolidated results of operations and fi nancial position.
Recognized at Fair Value” in the 2010 consolidated fi nancial statements included in this Annual Report. The determination of fair values in the absence of quoted market prices is based on a variety of factors including those described in Note 9.9.
Our exposure to interest rate risk relates primarily to the market price and cash fl ow variability associated with changes in interest rates.
During periods of declining interest rates, life insurance and annuity products may be relatively more attractive to consumers, resulting in increased premium payments on products with fl exible premium features, and a higher percentage of insurance policies remaining in force from
During a low interest rate period, our investment earnings may be lower because the interest earnings on our fi xed income investments will likely have declined. In addition, mortgages and fi xed maturity securities in our investment portfolios will be more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Consequently, we may be required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, during periods of declining interest rates, our profi tability may suffer as the result of a decrease in the spread between interest rates credited to policyholders and returns on our investment portfolios.
Euro. For the year ended December 31, 2010, 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 and Australian Dollars. AXA’s obligations are denominated either in Euro or other currencies, the value of which is subject to foreign currency exchange rate fl uctuations.
sustained increase in the infl ation rate in our principal markets would have multiple impacts on AXA and may negatively affect our business, solvency position and results of operations. For example, a sustained increase in the infl ation rate may result in an increase in market interest rates which may (i) decrease
(particularly “long-tail” risks), a sustained increase in infl ation with a resulting increase in market interest rates may result in (i) claims infl ation (i.e. an increase in the amount ultimately paid to settle claims several years after the policy coverage period or event giving rise to the claim), coupled with (ii) an underestimation of corresponding claims reserves at the time of establishment due to a failure to fully anticipate increased infl ation and its effect on the amounts ultimately payable to policyholders, and, consequently, (iii) actual claims payments signifi cantly exceeding associated insurance reserves which would negatively impact our results of operations. In addition, a failure to accurately anticipate higher infl ation and factor it into our product pricing assumptions may result in a systemic mispricing of our products resulting in underwriting losses which would negatively impact our results of operations. For additional information, please see Section 3.2 “Quantitative and qualitative disclosures about market risk and risk factors”
We expect that future acquisitions and strategic investments will be funded from available cash fl ow remaining after the payment of dividends and operating expenses (including interest expenses), cash on hand from previous securities offerings, proceeds of future offerings of securities, and proceeds from the sale of non-core assets. Certain of our signifi cant subsidiaries, including AXA France Assurance,
Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from all our subsidiaries. In particular, our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affi liates. Moreover, should we be designated as “systemically signifi cant” pursuant to the US
Part 1 and the Part 4 – Note 29.3 “Other items: Restrictions on Dividend Payments to Shareholders” of this Annual Report.
and/or Withdrawal for Life Benefi ts (“GMWB”), available under our Accumulator series of Variable Annuity products
The Company has implemented and continues to pursue a number of initiatives, including re-design and re-pricing of certain product features, designed to improve the profi tability of these products and avoid future hedging losses on the
We use numerous assumptions to determine the appropriate level of insurance reserves and deferred acquisition costs (DAC) and to calculate certain widely used industry measures of value such as Life & Savings New Business Value (NBV) and European Embedded Value (EEV), which involve a signifi cant degree of management judgment and predictions about the future that are inherently uncertain; if these assumptions are not correct, it may have adverse impact on our results of operations and/or performance indicators, such as NBV, that may adversely affect the price of our securities
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 Inforce and deferred participations assets) and the establishment of DAC, NBV and
calculations are done on a market consistent basis which is more conservative in many respects than traditional NBV and
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, incorrect assumptions about future interest rates may have a signifi cant impact on our NBV and a corresponding impact on the trading price of our securities.
If our established loss reserves for our Property & Casualty and International Insurance businesses are insuffi cient, our earnings will be adversely affected
The process of estimating the insurance claims reserves is based on the most current information available at the time the reserves are originally established. However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as: ■ Development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience; ■ Changes arising due to the time lag between the occurrence of the insured event, notifi cation of the claim (from the insured party, a third party or a ceding company) and the fi nal settlement (payment) of the claim, primarily attributable to long-tail casualty claims that may take several years to settle due to the size and nature of the claim, and the occurrence of large natural catastrophes late in the fi nancial year for which limited information may be available at year-end; ■ Judicial trends; ■ Expenses incurred in resolving claims; ■ Regulatory and legislative changes; ■ Changes in economic conditions, including infl ation and foreign currency fl uctuations; and
Note 14 to AXA’s consolidated fi nancial statements included in Part 4 of this Annual Report.
and for the insurers that cover these risks (i.e. property, agricultural, business interruption, civil liability, marine & aviation, life, health, etc.). The evolution of these risks poses major challenges for the insurance sector over the coming years and could adversely affect our business and operating results due to potential increases in claims, the emergence of new types of liability and growing uncertainties about the size of maximum potential losses, which have become harder to assess and to predict on the basis of past events.
Other risks, such as an outbreak of a pandemic disease, like the Avian Infl uenza A Virus (H5N1), or the A Flu (H1N1), could also adversely affect our business and operating results. While outbreaks of the Avian Flu have occurred among poultry or wild birds in a number of countries in Asia, parts of Europe, and in Africa, transmission to humans has been rare. If the virus mutates to a form that can be transmitted from human to human, it has the potential to spread rapidly worldwide and result in mortality and morbidity rates that far exceed the assumptions that we have used in pricing certain of our products. Both the contagion and mortality rates regarding any mutated H5N1 virus that can be transmitted from human to human are highly speculative at this point in time and we continue to monitor this situation. A signifi cant global outbreak could have a material adverse effect on our life insurance business, operating results and liquidity due to increased mortality and morbidity rates.
In addition, our ability to sustain growth consistent with rates we have achieved in the recent past may be adversely affected by regulatory changes, including changes in the tax laws applicable to our Life & Savings products and operations.
The Group has implemented global product “reuse” and distribution initiatives designed to drive product innovation and reuse of successful products across major markets where we operate around the world. Our Life & Savings products, often involve complex features and guarantees that are not easily translated and transposed into the legal, regulatory and tax regimes across multiple jurisdictions. Our inability to successfully execute these product reuse initiatives and/
Operational risk is inherent in our business and can manifest itself in various ways, including business interruption, poor vendor performance or default (including under signifi cant outsourcing arrangements), information systems malfunctions or failures, regulatory breaches, human errors, employee misconduct, and external fraud. We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other fi nancial intermediaries we use to facilitate our securities transactions.
disposition of AXA RE’s (now called “Colisée RE”) business, our reinsurance subsidiary, but retained the risk related to adverse deviation of claims reserves for all accident years prior to January 1, 2006.
We may also, from time to time and in the course of our business provide guarantees and enter into derivative and other types of off-balance sheet transactions that could result in income statement charges. For additional information, see Part 4 – Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” and also Note 20
In addition, underperforming information systems could cause us to become subject to a higher number of customer, provider and agent disputes which may increase our litigation and regulatory exposure and make us incur higher administrative expenses, including remediation costs.
In the United States, for example, the Dodd-Frank Act has imposed comprehensive changes to the regulation of fi nancial services in the United States and has implications for non-US
In such an instance, the Group would become subject to the oversight of the Federal Reserve. If the Group becomes subject to the examination, enforcement and supervisory authority of the Federal Reserve, the Federal Reserve would have authority to impose capital requirements on the Group and its subsidiaries. Management cannot predict what capital regulations the Federal Reserve will promulgate under these authorizations, either generally or as applicable to insurance−based organizations, nor can management predict how the Federal Reserve will exercise potential general supervisory authority over the Group as to its business practices or those of its subsidiaries. If designated as systemically important by the FSOC, the Group would become subject to unspecifi ed stricter prudential standards, including stricter requirements and limitations relating to risk− based capital, leverage, liquidity and credit exposure, as well as overall risk management requirements, management interlock prohibitions and a requirement to maintain a plan for rapid and orderly dissolution in the event of severe fi nancial distress. The Group may become subject to stress tests to be promulgated by the Federal Reserve in consultation with the newly created Federal Insurance Offi ce
(discussed below) to determine whether, on a consolidated basis, the Group has the capital necessary to absorb losses as a result of adverse economic conditions. Management cannot predict how the stress tests will be designed or conducted or whether the results thereof will cause the
Group to alter its business practices or affect the perceptions of regulators, rating agencies, customers, counterparties or investors about the Group’s fi nancial strength. The FSOC
■ Title II of Dodd-Frank provides that a fi nancial company may be subject to a special orderly liquidation process outside the federal bankruptcy code, administered by the
■ Dodd-Frank seeks to increase effi ciency, reduce transaction costs and improve consumer access in the non admitted property and casualty insurance market (excess and surplus lines) and to reform the regulation of the reinsurance markets.
The Group’s activities, results of operation and fi nancial condition may also be affected by regulatory developments in France and the European Union. For example, signifi cant efforts towards establishing a more cohesive and streamlined
European Systemic Risk Board and a European Insurance and Occupational Pensions Authority, may affect the Group’s operations. In addition, the enactment of additional prudential requirements on fi nancial institutions with respect to capital, liquidity, leverage and business activities could each impact the Group in ways that management cannot predict with certainty at this time.