CORPORATE GOVERNANCE 89 2.1 Directors, senior management and employees 90 2.2 Full disclosure on executive compensation and share ownership 106 2.3 Major shareholders and related party transactions 130 2.4 The offer and listing 138
APPENDICES 329 Appendix I Chairman of the Board of Directors’ report 330
Appendix II Management’s annual evaluation of internal control over fi nancial reporting 339
as well as in Article 222-3 of the AMF General Regulations (Règlement Général de l’AMF) (please refer to the table on page 395 of this Annual Report which indicates the relevant sections of this Registration Document corresponding to disclosures required under Article 222-3 of the AMF General Regulations), and (ii) all disclosure matters required to be included in the Board of Directors’ Report to AXA’s Shareholders’ Meeting to be held on April 30, 2013, established pursuant to Articles L.225-100 and L.225-100-2 of the French Commercial Code (Code de commerce) (the relevant sections of this Registration Document corresponding to these required disclosures have been approved by AXA’s
Anonyme organized under the laws of France, which is the publicly traded parent C ompany of the AXA Group, and (ii) “AXA
You should read it in conjunction with the consolidated fi nancial statements and related notes for the years ended December 31, 2012 and 2011 included in Part 4 – “Consolidated Financial
(a) As described in Note 1.2.1 of Part 4 – “Consolidated Financial Statements”, comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs. The fi nal assessment of the restatement led to slighly adjust comparative restated amounts published on June 30, 2012.
(c) The calculation of net income per share is based on the weighted average number of outstanding shares for each period presented. The calculation of net income per share from discontinued operations or not is presented in Note 27 “Net Income per Ordinary Share” to AXA’s consolidated fi nancial statements.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on its outstanding undated debt securities, and, in each of the past several years, with the exception of 2009, AXA has paid aggregate dividends in a general range of 40% to 50% of this amount. While Management currently intends to maintain this dividend policy over the longterm, the dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors (as noted above) and, consequently, may fall outside the target 40% to 50% range in any given year. In assessing the dividend to be paid in any given year, Management tries to strike the appropriate balance between (i) prudent capital management, (ii) reinvestment of previous results to support business development and (iii) an attractive dividend for shareholders.
(d) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2010.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2013. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.29 per share for fi scal year 2012.
Dividends not claimed within fi ve years after the payout date become the property of the French Treasury Department.
AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation, until
December 31, 2059. The Company’s number in the Paris Trade and Companies Register is 572 093 920.
Incorporated (United States), which subsequently changed its name to AXA Financial, Inc. (“AXA Financial”).
Sale by AXA UK to Resolution Ltd of part of its Life and
Sale of the Australian & New Zealand operations and acquisition of the AXA APH Asia Life operations.
research); ■ FTSE4GOOD (based on EIRIS research); ■ Europe 120 and France 20 (based on Vigeo research).
(a) Defi nition of Vigeo ratings: --: least advanced; -: companies that fall below the average for their sector; =: companies that are within the average for their sector; +: active companies; ++: the most committed companies in the sector.
(b) New Business Value (NBV): The value of new business issued during the current year which consists of the Value In Force of new business at the end of the year plus the statutory profi t result of the business during the year. NBV is Group share.
Fees and charges relating to investment contracts with no participating feature 334 350
(b) Following the disposal of the Australia & New-Zealand operations on April 1st, 2011, Australia & New-Zealand only contribute to the fi rst quarter of 2011.
America (Mexico). The products in these markets are offered through various distribution channels. See the “Distribution channels” section below.
The nature and level of competition vary among the countries in which AXA operates for all the types of Individual and Group
The principal competitive factors affecting the Life & Savings business include: ■ size, strength and quality of the distribution channels, in particular the quality of advisors; ■ range of product lines and product quality, feature functionality and innovation; ■ price; ■ quality of service; ■ investment management performance; ■ historical levels of bonuses with respect to participating contracts; ■ crediting rates on general account products; ■ reputation, visibility and recognition of brand; ■ ratings for fi nancial strength and claims-paying ability; and
Gross written premiums by main product lines Years ended December 31, (b)
■ Exclusive agents are individuals or fi rms commissioned by a single insurance company to sell its products exclusively (or principally) on its behalf. Tied agents are generally exclusive agents; ■ Salaried sales forces are salespeople employed by a single insurance company (or an affi liated company) to sell the
Company’s products on an exclusive basis; ■ Direct sales relate to all sales made through mail, telephone or internet; ■ Brokers are independent fi rms that negotiate with insurance companies on behalf of customers seeking coverage. As opposed to exclusive agents, brokers usually work with different insurance companies; ■ Independent Financial Advisors (IFAs) are individuals or fi rms that provide fi nancial advice to customers and negotiate related policies with insurance companies on behalf of customers. IFAs usually work with different insurance companies; ■ Aligned distributors are independent individuals or fi rms who have chosen AXA to provide them with a full range of dealership services. They negotiate, on behalf of customers, policies of various insurance companies among a range of products selected by AXA; ■ 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 other industries. This may take the form of a joint venture between the insurance company and its partner or a pure contractual distribution arrangement.
The Group has built up an organization by Global Business lines since early 2010 to support a new stage of its development.
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).
(1) Some countries classify Health activity in the Property & Casualty segment, while other countries classify it in the Life & Savings segment.
In the Property & Casualty segment, AXA operates mainly in the largest Western European markets. AXA also offers Personal and Commercial Property & Casualty insurance products in other countries in Central and Eastern Europe as well as in
The nature and level of competition vary among the countries where AXA operates. AXA competes with other insurers in each of its Property & Casualty products and in all the markets where it operates. In general, the Property & Casualty insurance industry tends to be cyclical with surplus underwriting capacity leading to lower premium rates.
AXA’s Property & Casualty insurance operations offer 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 Continental Europe, the same distribution channels may be used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the “Distribution channels” section in the Life &
Global Business line of the Group. In that context, AXA Global
are two intra-Group reinsurance companies in charge of analysis, structure and placement of reinsurance treaties on behalf of AXA Group insurance companies after a selection of third party reinsurers. AXA Global P&C activity is mainly driven by its Property pool which provides AXA entities with cover on natural catastrophes; ■ AXA Assistance provides both emergency and daily services and health management through a new range of products and claims management. AXA Assistance has developed its expertise in managing crisis situations, whether they are of a political nature, health-related nature or linked to natural disasters; ■ AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios. This entity manages the internal run-off portfolios of AXA UK, AXA Germany and AXA Belgium, as well as some accident and health run-off portfolios in the
Managers also manages the run-off of Colisée RE for all periods prior to and including 2005 when Colisée RE’s business was sold; ■ AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in runoff, notably managing a book of reinsurance contracts of
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 is amongst the top fi ve players in Europe.
Solutions Assurance underwrites large insurance risks such as property damage, liability, construction risks, motor fl eet, marine and aviation. AXA also offers loss-prevention and risk management services.
The table below presents the International Insurance segment’s gross revenues and gross insurance liabilities by major product for the periods and at the dates indicated: GR OSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
& Casualty (ex-AXA Cessions) on behalf of AXA’s insurance subsidiaries (2011: €856 million), mainly for Property & Casualty business but also for Life & Savings business.
For the years ended December 31, 2012 and 2011, the Asset management segment accounted for €3.3 billion, or 4% of
The table below sets forth the total assets managed by AllianceBernstein and AXA Investment Managers, including assets managed on behalf of third parties, and the fees earned by such companies on these assets for the indicated dates and periods.
AllianceBernstein, a 65.5% subsidiary, is a leading global investment management fi rm based in the United States.
The operations in the Banking segment are conducted primarily in Belgium, France, Germany and Central & Eastern
Bank Europe is ranked sixth on the Belgian banking market where the four major banks represent approximately 70% of the market.
AXA Bank targets private customers in retail banking and is an important element of pension and asset management business of AXA Germany. The Bank had approximately 52,000 clients at year-end 2012. The major activities of AXA Bank are deposits and Mutual funds. These products are mainly sold through the tied agent network of AXA Germany.
AXA Bank Europe in January 2009. Acquired in July 2007, it works in collaboration with AXA’s insurance operations in
Life insurance market which grew signifi cantly following the positive evolution of Individual unit-linked products in the fi rst 9 months of 2012 (+115%), and the Swiss market which slightly increased due to the success of Individual life products.
Variable Annuity industry, while the low interest rate environment and concerns about new business capital strain muted fi xed
In Japan, the market recovered from the impact of the Great
East Japan Earthquake in March 2011 and grew in terms of premiums. This was particularly observed in Bancassurance and Protection segments, while the Variable Annuity market decreased due to a stagnating economic environment.
Please fi nd below AXA’s ranking and market shares in the main countries where it operates: Ranking Market share (%) Ranking Market share (%)
(a) Source: FFSA as of January 24, 2013; FFSA as of December 2010 for the ranking and FFSA as of December 2011 for the market share.
(d) Source: Life Insurance Association of Japan data base and Insurance Research Institute (exc. Kampo Life). For the 12 months ended September 30, 2011 and 2012.
(h) Source: Spanish Association of Insurance Companies. ICEA as of September 30, 2012 and 2011.
(i) Source: Portuguese Insurance Association as of September 30, 2012 and 2011.
(k) Source: Hellenic Association of Insurance Companies as of June 30, 2012 and 2011.
(o) Source: LIA statistics report as of September 30, 2012 and 2011 (measured on APE).
(r) Source: Towers Watson 2012 report (measured on total premium income).
In 2012, the Property & Casualty market grew in most mature countries as strong tariff increases in both individual and commercial lines more than offset lower car registration or reduced coverage, except for Italy, Spain, Portugal and Greece, still impacted by an unfavorable economic environment. In high growth countries, the Property and Casualty industry experienced a strong performance across the board.
Note: The acquisition of HSBC portfolio would position AXA as the number one P&C player in Hong Kong and number two in Singapore.
(e) Source: Estimation SIA (Swiss Insurance Association) for 2012 and Offi cial FINMA for 2011; Market share is based on statutory gross written premiums.
(f) Source: Assuralia (Belgium Professional Union of Insurance companies). Based on September 30, 2012 and 2011. Figures (measured on gross written premiums).
(j) Source: Hellenic Association of Insurance Companies as of June 30, 2012 and 2011.
(n) Source: KSA Tadawul website/Dubai stock exchange/Results of all listed companies/Regulator report Dec. 31, 2009 and 2011.
(o) Source: Monetary Authority of Singapore as of September 2012 and 2011.
(p) Source: ISM (Insurance Services Malaysia Berhad) as of September, 30 2012 and December 31, 2011.
Players 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,
Mutual fund fl ows, which got off to a reasonable start in the fi rst few months of the year and lost momentum in the second quarter as the Eurozone debt crisis was showing no sign of easing, displayed a glimmer of life in Q3 which further intensifi ed during the last quarter of the year. Although both equities and bonds delivered double digit performance over the full year, 2012 was very much a bond affair from an investor’s point of view: across Europe, corporate high-yield bonds, emerging market bonds and global corporate bonds attracted the strongest infl ows.
Liability Driven Investment strategy for the management of their assets suffered from a signifi cant deterioration of their Solvency or Funding ratios under the strong policy actions implemented by Central Banks that lowered interest rates to unrecorded levels. In this context, European institutions increased their allocations to credit, moving deeper in the credit universe as much as permitted by their regulation, without returning yet to
In the United States and in Europe, economic indicators generally improved over the fi rst quarter of 2012. In the United
After an encouraging fi rst quarter for the global state of the economy, a generalized slowdown affected developed as well as developing economies in the second quarter. In the
The landslide victory was achieved on a platform promising aggressive monetary easing and a commitment towards fi ghting defl ation, the scourge of the Japanese economy in the past 20 years.
The Dow Jones Industrial Average Index in New York increased by 7% in 2012 and the S&P 500 Index by 13%. The FTSE 100
Index in London increased by 6%. The CAC 40 Index in Paris increased by 15% and the Nikkei Index in Tokyo appreciated by 23%.
Index appreciated by 15%. The S&P 500 implied volatility Index decreased from 23.4% to 18.0% between December 31, 2011 and December 31, 2012.
Belgium government bond ended the year at 2.06%, a 203 bps decrease compared to December 31, 2011.
In the United States, the CDX Main spread Index decreased by 26 bps to 94 bps.
Compared to December 31, 2011, the US Dollar decreased by 2% against the Euro (closing exchange rate moved from $1.30 at the end of 2011 to $1.32 at the end of 2012). The
Euro (closing exchange rate moved from £0.835 at the end of 2011 to £0.811 at the end of 2012). The Swiss Franc gained 0.6% against the Euro (closing exchange rate moved from CHF
On an average rate basis, the US Dollar gained 7% against the Euro (from $1.39 over 2011 to $1.29 over 2012). The Yen gained 9% against the Euro (from Yen 112.9 for the twelve months ending September 2011 to Yen 102.3 for the twelve months ending September 2012). The Pound Sterling gained 6% (from £0.866 over 2011 to £0.814 over 2012) and the
Swiss Franc gained 2% against the Euro (from CHF 1.24 over 2011 to CHF 1.21 over 2012).
AXA and HSBC long-term partnership in Property & Casualty in Asia and Latin America
On November 5, 2012, AXA announced it has completed the acquisition of HSBC’s P&C businesses in Hong Kong and Singapore, and that it has consequently launched its exclusive P&C bancassurance cooperation with HSBC in these countries. The acquisition of HSBC P&C operations in Mexico will be completed in due course, as well as the launch of the
For several years, the AXA Group has been offering its employees in and outside France, the opportunity to subscribe to shares issued by way of a capital increase reserved for employees. In 2012, employees invested a total of €0.3 billion which led to a total of approximately 30 million newly issued shares. Employee shareholders represented 7.4% of the outstanding share capital as of December 31 , 2012.
On July 19, 2012, ICBC-AXA Life, a Life Insurance joint-venture between Industrial and Commercial Bank of China Co. Ltd
AXA-Minmetals and became the majority shareholder of the company. AXA owns 27.5% and Minmetals owns 12.5%.
(b) Excluding (i) net realized capital gains or losses and (ii) change in fair value of assets under fair value and of options and derivatives, net banking revenues and total consolidated revenues would respectively amount to €460 million and €90,120 million for full year 2012 and €479 million and €86,101 million for full year 2011.
In particular, comparable basis for revenues and APE (1) in this document means including, in both periods, acquisitions, disposals and business transfers, and net of intercompany transactions.
The restatements to a comparable basis were mainly driven by the depreciation of Euro against most of major currencies
(€+2,414 million or +2.8 points) and the impact of the disposal of Australia and New Zealand operations in 2011 (€-355 million or -0.4 point).
Total Life & Savings New Business APE amounted to €6,170 million, up 8% on a reported basis or 3% on a comparable basis. This was mainly driven by the United
(€+129 million) as a consequence of both higher (i) non GMxB
investment only product sales (+48% or €+77 million) driven by the availability of Structured Capital Strategies product and the new Retirement Gateway product in the wholesale channel, and (ii) fi xed and fl oating rate GMxB product sales (+22% or €+52 million), mainly on new Accumulator 11 product.
Japan APE increased by €78 million (+17%) to €598 million driven by higher sales of Variable Annuity products (+37%
or €+38 million) as well as sales of G/A Protection & Health products (+12% or €+40 million) driven by Term Rider and
South-East Asia, India and China APE increased by €65 million (+21%) to €463 million mainly driven by (i) Thailand
Protection & Health products refl ecting the launch of the ICBC-
& Health products (+25% or €+40 million) in both agency and bancassurance networks.
France APE increased by €38 million (+3%) to €1,378 million, mainly driven by (i) an increase in G/A Protection & Health sales
Funds (-49% or €-36 million) as a result of the change in regulation in Poland and (ii) lower unit-linked sales (-29% or €-32 million) mainly in Czech Republic due to the end of the cooperation with low quality brokers and in Poland due to the diffi cult market environment.
Germany APE decreased by €52 million (-10%) to €454 million, mainly driven by (i) G/A Savings (-23% or €-37 million) as a result of lower sales of short term investment products and
Mediterranean and Latin American Region APE decreased by €31 million (-7%) to €402 million mainly due to mature markets (€-28 million) refl ecting (i) a signifi cant decrease in
Property & Casualty gross revenues were up 5% to €28,315 million or up 3% on a comparable basis. Personal lines increased by 3% especially in Germany, the United
and Non-Motor (+4%), primarily as a result of tariff increases in mature markets and higher volumes in high growth markets.
Motor revenues grew by €169 million or +2% mainly driven by: ■ Germany (+7%) mainly as a result of tariff increases and successful turn of the year business; ■ Mediterranean and Latin American Region (+4%), primarily driven by Turkey (+29%) with higher volumes and tariff increases notably in the second half of 2012, Mexico
United Kingdom as a result of portfolio pruning and repricing leading to lower volumes and retention, a 7% decrease in
Non-Motor revenues increased by €277 million or +4% mainly due to: ■ the United Kingdom & Ireland (+4%) mainly in household, driven by the United Kingdom with new partnerships and improved retention; ■ Germany (+4%) and France (+4%) mainly due to tariff increases in household; ■ D irect business (+24%) across the board.
Commercial lines (40% of P&C gross revenues) increased by 3% on a comparable basis with Motor and Non-Motor up by 7% and 2% respectively.
Motor revenues increased by €156 million or +7%, mainly driven by: ■ the Mediterranean and Latin American Region (+8%)
notably in Mexico (+8%) fuelled by positive portfolio developments and tariff increases, and in Turkey (+32%)
refl ecting competitive products, partly offset by cancellations in Spain and pruning actions in Portugal; ■ France (+12%) mainly as a result of both tariff increases and higher volumes; ■ the United Kingdom (+11%) mainly driven by tariff increases and increased retained business in Motor fl eet.
refl ecting growth in: ■ the United Kingdom (+6%) primarily due to Health portfolio development in the United Kingdom and abroad; ■ France (+1%) mainly following tariff increases in Construction and Property, partly offset by lower volumes; ■ the Mediterranean and Latin American Region (+2%)
Asset Management gross revenues increased by 2% or decreased by 3% on a comparable basis to €3,343 million, mainly driven by a decrease in management fees at
(i) €-6 billion foreign exchange rate impact, (ii) €-4 billion net outfl ows and (iii) €-5 billion change in scope due to the disposal of AXA Canada and AXA Australia operations.
(iv) €-9 billion change in scope mainly related to the partial sale of the UK Life & Savings operations.
Net banking revenues were down 4% to €466 million or down 3% on a comparable basis, mainly driven by France (-23%)
Fees and revenues from investment contracts without participating feature 334 350 350
Net investment result excluding fi nancing expenses (a) (d) 28,770 14,914 15,114
Net income from investments in affi liates and associates 136 85 85
Net realized capital gains or losses attributable to shareholders 297 (312) (312)
(a) For the periods ended December 31, 2012 and December 31, 2011, the change in fair value of assets backing contracts with fi nancial risk borne by policyholders impacted the net investment result for respectivly €+14,186 million and €-4,977 million, and benefi ts and claims by the offsetting amounts respectively.
(b) Restated means comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs. The impact on 2011 net income was €134m.
(b) Restated means comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs.
Asset Management and Property & Casualty, partly offset by a decrease in International Insurance.
On a constant exchange rate basis Life & Savings underlying earnings were up €397 million (+19%). On a comparable scope basis, restated for the sale of Bluefi n and portfolios transferred in November 2011 to Resolution in the UK, and for the AXA
and the United States (€+28 million), (ii) higher investment income, mainly due to higher asset base, as well as lower allocation to policyholders in Switzerland (€+71 million)
Latin American Region (€+23 million) mainly due to an exceptional release of policyholder bonus; (ii) Higher fees & revenues (€+91 million or +1%) mainly driven by: a. unit-linked management fees were stable refl ecting a stable average asset base, as decrease in average asset base in the United States was offset by increases in
(€+29 million), as well as (iii) strong growth in Protection &
(€-86 million) mainly due to higher commissions from higher unit-linked sales as well as higher DAC amortization refl ecting increase in surrenders, (iii) France (€-75 million)
mainly driven by: (i) Higher net technical result (including expenses) up €108 million (or +19%) driven by: a. current year loss ratio improving by 0.6 point driven by tariff increases, lower claims frequency and lower Nat Cat charge (-0.3 point), partly offset by higher large claims, notably from freeze, as well higher severity, b. lower positive prior year reserve developments by 0.5 point, including worse prior year reserve developments in Turkey (€-168 million) due to the increase in both frequency and average costs of legal claims in Motor and
Liability, c. lower expense ratio improving by 0.2 point to 26.8%, refl ecting (i) stable acquisition ratio mainly driven by productivity gains, partly offset by an increase in commission rate driven by a change in product and distribution mix, and (ii) 0.2 point reduction in administrative expenses ratio benefi ting from various effi ciency programs net of infl ation, d. as a result, the combined ratio improved by 0.3 point to 97.6%; (ii) Investment result decreased by €51 million to €2,007 million mainly driven by lower revenues on fi xed income assets in France and Germany; (iii) Higher income tax expense and minority interests (up €36 million) mainly driven by higher pre-tax underlying earnings as well as lower favorable tax one-offs
AXA Liabilities Managers, down €52 million, following lower gains on the Property & Casualty run-off portfolios mainly as a result of lower positive settlements, as well as AXA Global
+1%) refl ecting higher revenues and lower expenses, driven by a positive impact from the closure of AXA Rosenberg litigations, partly offset by additional tax charges mainly driven by the nonrecurrence of a 2011 positive tax impact.
mainly driven by (i) UK holding (€+21 million) mainly driven by more favorable tax one-offs (ii) the Mediterranean and Latin
American Region (€+17 million) due to lower fi nancial charges, partly offset by (iii) AXA SA (€-41 million) due to an increase in fi nancial charge and a lower income from net participation in
Group net capital gains attributable to shareholders amounted to €297 million. On a constant exchange rate basis,
Group net capital gains and losses attributable to shareholders were up €607 million mainly due to: (i) €+126 million higher realized capital gains, to €+815 million in 2012, mainly driven by higher realized gains on equities (€+103 million), fi xed income assets
As a result, adjusted earnings amounted to €4,548 million. On a constant exchange rate basis, adjusted earnings increased by €952 million (+28%).
Net Income amounted to €4,152 million. On a constant exchange rate basis, net income decreased by €155 million
(ii) higher adjusted earnings up €952 million; (iii) lower goodwill and related intangibles charges: down from €-1,167 million in 2011 to €-103 million in 2012, mainly refl ecting the non repeat of 2011 goodwill reduction in the
December 31, 2011 are presented in the table below: (In Euro million) 2011 published
Adjusted earnings (Euro per Ordinary Share) 1.82 1.81 1.38 1.37 1.43 1.43 32% 32%
Underlying earnings (Euro per Ordinary Share) 1.69 1.69 1.51 1.51 1.57 1.57 12% 12%
(c) Restated means comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs.
Profi t or loss on fi nancial assets (under FV option) & derivatives 152 269 273
South-East Asia, India and China (d) 86 50 50 of which high growth markets 352 281 295 of which mature markets 2,283 1,857 1,973
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 152 269 273
Profi t or loss on fi nancial assets (under FV option) & derivatives 185 (84) (83)
Gross revenues increased by €93 million (+1%) to €13,751 million. On a comparable basis, gross revenues increased by €108 million (+1%) mainly due to: ■ unit-linked sales rose by €129 million (+8%), despite market contraction over 2012 (-13%) (1), refl ecting the strong sales performance of unit-linked structured funds (34% of total unit-linked Individual sales), with a strong acceleration during last quarter. Unit-linked share in Savings premiums increased by 2 points to 23% above market at 13%, G/A
APE increased by €38 million (+3%) to €1,378 million: ■ -unit-linked sales rose by €13 million (+7%) mainly driven up by the positive performance of AXA unit-linked structured funds in a downward oriented French Individual unit-linked
Savings market; ■ G/A Protection and Health increased by €36 million (+6%)
Investment margin increased by €100 million (+9%) to €1,210 million as lower investment income (€-15 million) was more than offset by lower amounts allocated to policyholders.
Fees & revenues increased by €39 million (+3%) to €1,559 million. Excluding a €+43 million adjustment on URR
reserves (fully offset in DAC), fees and revenues decreased by €4 million driven by lower loadings on premiums due to change in business mix, partly offset by higher volumes and higher fees on unit-linked business.
Net technical margin rose by €65 million (+14%) to €514 million mainly driven by higher positive prior year developments, mainly in Group Protection business.
As a result, the underlying cost income ratio decreased by 4.0 points to 70.0%.
Profi t or loss on fi nancial assets (under FV option) & derivatives (103) 326 330
Gross revenues increased by €1,572 million (+16%) to €11,229 million. On a comparable basis, gross revenues increased by €773 million (+8%): ■ v ariable Annuity revenues (60% of gross revenues) increased by 23% refl ecting strong sales results for non-GMxB
investment only products, and fi xed and fl oating rate GMxB
APE increased by €226 million (+22%) to €1,244 million. On a comparable basis, APE increased by €138 million (+14%): ■ v ariable Annuity increased by 27% to €633 million refl ecting higher sales of non GMxB investment only products and fi xed and fl oating rate GMxB products, partially offset by lower sales of employer sponsored products. Non-GMxB
Reserve (more than offset in DAC amortization) and by lower unit-linked management fees from lower average Separate
GMxB portfolio in accumulation phase to a risk neutral long term discount rate of 3% and as a result interest rate hedging was reduced by 25%. At the same time, policyholder behavior assumptions were revised, which is expected to reduce the risk of future signifi cant reserve strengthening.
implemented in 2011 and 2012; ■ DAC amortization increased by €167 million to €-53 million mainly following lower GMxB losses.
Amortization of VBI decreased by €2 million to €-3 million. On a constant exchange rate basis, amortization of VBI decreased by €2 million.
Income tax expense increased by €180 million from a tax benefi t of €54 million to a tax expense of €-126 million. On a constant exchange rate basis, income tax expense increased by €171 million which refl ects higher underlying earnings and the less favorable impact of tax one-offs, primarily tax settlements (€47 million in 2012 vs. €91 million in 2011).
Underlying earnings increased by €287 million (+122%) to €522 million. On a constant exchange rate basis, underlying earnings increased by €250 million (+107%).
2011 underlying earnings amounted to €-6 million, corresponding approximately to €41 million from the sold business and €-47 million from the retained business.
Protection business and €17 million increased revenues on the Elevate wrap platform and Architas funds business. This was partially offset by €9 million lower revenues through the
platform market. This platform growth was more than offset by reductions in sales of individual pensions and Offshore Bonds due to unfavorable market conditions.
Investment margin decreased by €12 million (-81%) to €3 million. On a constant exchange rate and on a comparable scope basis, the investment margin decreased by €2 million
Net technical margin decreased by €19 million (-84%) to €4 million. On a constant exchange rate and on a comparable scope basis, net technical margin decreased by €11 million
Expenses decreased by €43 million (-9%) to €-411 million. On a constant exchange rate and on a comparable scope b asis, expenses decreased by €18 million (-4%) due to expense savings refl ecting continued cost management, partly offset by investment in Wealth business growth and infl ation.
Income tax benefits increased by €17 million (+46%) to €54 million. On a constant exchange rate and on a comparable scope basis, income tax benefi ts increased by €13 million
(€+37 million) and of 2011 accelerated amortization related to customer intangibles (€+38 million), partly offset by higher severance costs related to the restructuring of the Wealth management business incurred to date (€-7 million).
Net capital gains or losses attributable to shareholders net of income tax 13 12 12
Profi t or loss on fi nancial assets (under FV option) & derivatives 28 19 19
Gross revenues increased by €977 million (+17%) to €6,725 (1) million. On a comparable basis, revenues increased by €345 million (+6%): ■ Protection revenues (37% of gross revenues) increased by €28 million (+1%) mainly due to increased new business sales of Term , Term Rider and Whole life products (€+155 million), partly offset by lower revenues from Increasing Term products
(€-84 million) and Endowment products (€-17 million) which were not actively promoted; ■ Investment & Savings revenues (34% of gross revenues)
increased by €325 million (+19%) mainly due to increased sales of Variable Annuity products driven by a continuous expansion of the bank partnerships; (1) €6,725 million after intercompany eliminations.
(Chamber of Commerce and Industry) and agents channels; ■ Investment & Savings (26% of APE) increased by €+38 million
Net technical margin declined by €8 million to €-31 million. On a constant exchange rate basis, net technical margin declined by €5 million mainly driven by lower surrender margin following improved retention, partly offset by model and assumption changes as well as the non-repeat of 2011 impact of the Great
On a constant exchange rate basis, expenses increased by €11 million (+1%) mainly driven by higher commissions due to increased new business volumes, partly offset by ongoing expenses control management and non-repeat of 2011 expenses related to the Great East Japan earthquake.
amortization increased by €24 million (+43%) mainly driven by a revision of the underlying investment assumptions.
As a result, the underlying cost income ratio deteriorated by 2.7 points to 68.7%.
Underlying earnings increased by €70 million (+23%) to €373 million or increased by €35 million (+12%) on a constant exchange rate basis.
(€+35 million) and a favorable change in mark-to-market of credit derivatives, partly offset by non repeat of 2011 foreign exchange gain due to stable foreign exchange market.
Net capital gains or losses attributable to shareholders net of income tax 5 (42) (42)
■ Life revenues (62% of gross revenues) decreased by €458 million (-10%) to €4,124 million due to lower single premiums from G/A short term investment products, conventional annuities and Variable Annuity product
■ Life decreased by €59 million (-16%) to €302 million, mainly due to lower new business from unit-linked products attributable to the curtailment of “Twinstar” Variable Annuity product and to the current market conditions, as well as decreasing single premiums from G/A short term investment products, partly compensated by higher new business from
Pure Protection; ■ Health increased by €7 million (+5%) to €152 million, driven by strong sales supported by brokers’ anticipation of a change in regulation capping their commissions effective
products (down €51 million to €-66 million), largely driven by higher interest rate volatility, and (ii) a Life reserve strengthening further to a German Federal Supreme Court ruling on surrender values impacting the whole German Life insurance market.
Income tax expenses increased by €12 million (+34%) to €-46 million mainly as a result of lower positive tax one-offs
(€+21 million) resulting from the new product Protect Star and overall lower maturities and surrenders.
Investment margin increased by €76 million (+65%) to €193 million. On a constant exchange rate basis, investment margin increased by €71 million (+61%) as a result of lower interest credited (€+49 million) and a higher investment income
(€+21 million) mainly attributable to income from mortgages and loans as well as a higher asset base.
Fees & revenues increased by €13 million (+5%) to €278 million. On a constant exchange rate basis, fees & revenues increased by €6 million (+2%) mainly resulting from higher regular premiums in Group Life business and from
Net technical margin fell by €74 million (-27%) to €196 million.
On a constant exchange rate basis, net technical margin decreased by €79 million (-29%), mainly due to the non repeat of 2011 exceptional mortality and disability experience in Individual Life, as well as of 2011 €8 million gain from the cancellation of a large internal co-insurance contract (offset by a corresponding VBI amortization).
Life (€+26 million) as well as the cancellation of the above mentioned internal co-insurance contract in 2011 (€+8 million).
Adjusted earnings increased by €60 million (+21%) to €340 million. On a constant exchange rate basis, adjusted earnings increased by €52 million (+18%) driven by higher underlying earnings as well as higher net capital gains mainly on equities.
Gross revenues decreased by €55 million (-3%) to €2,088 million (1): ■ Individual Life & Savings decreased by 4% (or €-70 million) to €1,494 million mainly driven by the decrease in G/A Savings products by €126 million (-11%) mainly on Crest products, partly offset by an increase in unit-linked savings products by €72 million (+64%) refl ecting positive market trends; ■ Group Life & Savings revenues increased by 3% (or €+15 million) to €594 million.
Expenses decreased by €13 million (-5%) to €-265 million, mainly due to lower acquisition expenses (€+15 million), following lower general acquisition expenses and the non repeat of 2011 update of actuarial assumptions on deferred acquisition costs.
Administrative expenses increased by €2 million mainly due to a non-recurring benefi t in 2011 (€-8 million) compensated by cost reduction initiatives and by lower commissions, mainly driven by the disposal of “Vie Populaire” product portfolio.
Amortization of VBI increased by €7 million to €-12 million, as a result of update of fi nancial assumptions.
Mutual funds and other assets (€+160 million), mainly driven by decrease in interest rates and corporate spreads, partly offset by the disposal of “Vie Populaire” product portfolio
On a comparable basis, gross revenues decreased by €31 million (-6%), mainly driven by lower unit-linked revenues in Czech Republic, Slovakia and Hungary (€-27 million) and by the decrease in Pension Fund products sales in Poland
Underlying earnings decreased by €8 million to €1 million. On a constant exchange rate basis, underlying earnings decreased by €9 million mainly due to the accelerated amortization of deferred acquisition costs and value of business inforce
(€-11 million) and higher administrative expenses (€-6 million, mainly due to the curtailment of a proprietary distribution network, partly offset by productivity actions), partly compensated by an improved technical margin (+10 million).
Net income decreased by €14 million to €-8 million. On a constant exchange rate basis, net income decreased by €14 million mainly driven by lower adjusted earnings and by the accelerated amortization of customer intangible assets
Net capital gains or losses attributable to shareholders net of income tax 9 (80) (80)
(+1%) on a comparable basis to €4,836 million: ■ mature markets were up €26 million (+1%), mainly driven by an increase of €1,132 million in unit-linked Savings products due to higher sales driven by the success of new “Protected
(€-842 million) mainly in Italy, in a context of high competitive environment from banks, and the curtailment of Variable
APE decreased by €30 million (-7%) or €31 million (-7%) on a comparable basis to €402 million: ■ mature markets were down €28 million (-7%) to €348 million, mainly refl ecting a strong decrease in G/A Savings products
AXA MPS (€+49 million), in line with the strategy to focus on improving the business mix; ■ high growth markets decreased by €3 million (-5%) to €54, million mainly driven by selective underwriting in
AXA MPS) and by (ii) high growth markets (€+3 million) thanks to higher asset base in Mexico (€+3 million).
Fees & revenues increased by €53 million (+17%) or €52 million
(+16%) on a comparable basis to €372 million largely driven by
(+93%) on a comparable basis to €141 million: ■ mature markets increased by €62 million, mainly driven by a higher GMxB margin (€+44 million) mainly due to improved basis risk and higher surrenders, as well as a higher mortality margin (€+26 million) driven by better claims experience in
Protection; ■ high growth markets increased by €6 million, mainly driven by Morocco (€+4 million) notably from the launch of a Group
Protection product this year. Mexico was up €+2 million, refl ecting improved mortality margin in Protection.
(+13%) on a comparable basis to €-507 million: ■ mature markets up €51 million driven by AXA MPS refl ecting higher deferred acquisition costs amortization following higher surrenders; ■ high growth markets up €7 million mainly due to Mexico refl ecting non recurring commissions adjustments.
Amortization of VBI was stable on a comparable basis at €-14 million.
Income tax expenses increased by €0 million (+2%) or €1 million (+2%) on a comparable basis to €-53 million refl ecting higher pre-tax underlying earnings and a lower tax on technical reserves at AXA MPS.
Adjusted earnings increased by €150 million (+691%) or €150 million (+691%) on a comparable basis to €171 million mainly driven by higher realized capital gains and lower impairment charges mainly on governments bonds, as well as a positive impact from new tax law in Greece on the deductibility of 2011 losses generated by the Private Sector Involvement
(+495%) on a comparable basis to €129 million, refl ecting higher adjusted earnings partly compensated by unfavorable change in fair value of derivatives at AXA MPS mainly related to decrease in interest rates.
Profi t or loss on fi nancial assets (under FV option) & derivatives (10) (49) (49)
Gross revenues increased by €258 million (+18%) to €1,723 million. On a comparable basis, gross revenues increased by €131 million (+9%) mainly due to higher revenues from G/A Protection & Health products (€+130 million) driven by strong renewals and a higher agency focus in the context of strategic shift towards protection business, partly offset by lower revenues from unit-linked products (€-8 million) in line with the Hong Kong market trend.
Investment margin increased by €5 million (+118%) to €9 million. On a constant exchange rate basis, investment margin increased by €4 million (+102%) mainly driven by higher investment income as a result of a higher asset base, partly offset by a lower average asset yield.
Fees & revenues increased by €59 million (+15%) to €444 million. On a constant exchange rate basis, fees & revenues increased by €26 million (+7%) mainly driven by an increase in loadings on premiums (€+31 million) stemming from new business and growing in-force.
Net technical margin fell by €3 million (-7%) to €42 million. On a constant exchange rate basis, net technical margin decreased by €6 million (-14%) mainly due to reserve adjustment in
As a consequence, the underlying cost income ratio increased by 8.5 points to 49.1%.
Adjusted earnings increased by €76 million (+38%) to €273 million. On a constant exchange rate and scope basis, adjusted earnings increased by €15 million (+6%) due to higher realized capital gains (€+15 million).
(€+13 million), partially offset by losses incurred on the closures of Taiwan Representative Offi ce (€-14 million) and two distribution networks (€-10 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives (1) 4
Thailand, 2 additional months for India and 3 additional months for Indonesia and China.
Gross Revenues increased by €41 million (+16%) to €295 million (1). On a comparable basis, gross revenues increased by €6 million (+3%) mainly driven by higher revenues from both G/A Protection & Health and unit-linked products in
APE increased by €137 million (+42%) to €463 million. On a comparable basis, APE increased by €65 million (+21%) mainly driven by: ■ strong sales of G/A Protection with Savings and Whole life products in Thailand (€+41 million); ■ higher sales of G/A Protection & Health products in China
Underlying earnings increased by €36 million (+73%) to €86 million. On a constant exchange rate and scope basis (2), underlying earnings increased by €22 million (+41%) mainly due to: ■ Indonesia (€+13 million), Thailand (€+10 million) and
Philippines (€+4 million) driven by both inforce and new business growth; ■ China (€-5 million) due to a change in accounting methodology, partly offset by the business growth.
Adjusted earnings increased by €33 million (+64%) to €85 million. On a constant exchange rate and scope basis (1), adjusted earnings increased by €21 million (+37%), primarily driven by underlying earnings growth.
(1) Adjusted for AXA APH minority interests buy-out in April 2011 (€4 million), and excluding the additional contribution from reporting period alignment with the Group in 2012 (€13 million).
The following tables present the operating results for the other Life & Savings operations of AXA: Consolidated Gross Revenues
Underlying earnings as well as adjusted earnings and net income increased by €7 million (+27%) to €-19 million mainly due to higher commissions received.
Variable Annuity products through third party partnerships, specifi cally large banks. The P&L of AXA Global Distributors VA business written on a Freedom of Services basis is consolidated within France L&S segment (€0.7 million underlying earnings in 2012) and UK L&S (€1.2 million underlying earnings in 2012)”. In the tables, AXA Global Distributors notably includes AXA Life Europe.
Net capital gains or losses attributable to shareholders net of income tax 171 (62)
Profi t or loss on fi nancial assets (under FV option) & derivatives 89 (90)
Contribution to consolidated gross revenues 28,315 27,046 of which high growth markets 3,843 3,335 of which Direct 2,215 2,102 of which mature markets 22,257 21,609
(a) Mediterranean and Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region and Mexico.
Net realized capital gains or losses attributable to shareholders 171 (62)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 89 (90)
Profi t or loss on fi nancial assets (under FV option) & derivatives 39 (14)
Enlarged expense ratio was down by 1.5 points to 30.9%, driven by the improved expense ratio as well as the decrease of claims handling cost mainly refl ecting lower claims frequency.
Net capital gains or losses attributable to shareholders net of income tax 41 (26)
Motor was up 4% to €1,607 million. Property was up 6%
Personal Other was down 1% to €347 million due to diffi cult trading conditions partially offset by a new travel scheme; ■ Commercial lines (47% of the total gross revenues) were up 7% to €1,914 million. Motor was up 11% to €373 million mainly driven by rate increases in UK Fleet and new business in UK Non Fleet. Non-Motor was up 6%. Property was up 5% to €503 million refl ecting a strong performance in a highly competitive market. Health was up 6% to €786 million mainly refl ecting continued growth in UK and International
Net technical result increased by €28 million (+2%) to €1,209 million. On a constant exchange rate basis, net technical result decreased by €36 million (-3%): ■ current accident year loss ratio increased by 1.8 points to 69.4% mainly due to increased reinsurance costs (+0.5 point)
Property following tariff increases and underwriting activity were offset by a change in business mix and an increase in bodily injury costs; ■ all accident year loss ratio increased by 2.5 points to 70.5%
refl ecting the movement in current year loss ratio as well as a net strengthening of prior year reserves.
Expense Ratio decreased by 0.2 point to 30.2% with the administrative expense ratio down 0.4 point to 8.3%, largely due to the sale of Denplan in December 2011 and the expense effi ciencies embedded through restructuring programs. The acquisition ratio was up 0.2 point to 21.9% refl ecting an increase in commission ratio (+0.4 point) due to higher profi t share payments to Corporate Partners and the impact of product and distribution mix. Non-commission acquisition expense ratio decreased (-0.2 point) following restructuring programs in the second half of 2011 and during 2012.
to €233 million. On a constant exchange rate basis, net investment result decreased by €3 million (-1%) due to lower equity and government bond income, partly offset by higher corporate bond income as a result of a portfolio repositioning as well as increased income from alternative assets.
Underlying earnings decreased by €56 million (-27%) to €154 million. On a constant exchange rate basis, underlying earnings decreased by €61 million (-29%).
On a constant exchange rate basis, net income increased by €53 million (+55%) due to the improvement in adjusted earnings, a reduction in restructuring costs (€+5 million), a less unfavorable change in the fair value of derivatives (€+95 million), partly offset by the profi t from the sale of Denplan in 2011
Net income from investments in affi liates and associates - 2
Net capital gains or losses attributable to shareholders net of income tax 5 (49)
Profi t or loss on fi nancial assets (under FV option) & derivatives 53 25
Gross revenues increased by €187 million (+5%) to €3,824 million (1): ■ Personal lines (57% of gross revenues) increased by 6%
Net investment result decreased by €38 million (-10%) to €332 million due to lower distribution from private equity, lower reinvestment yields on fi xed income assets as well as the non recurrence of 2011 exceptional coupons payments from profi t participating notes.
Adjusted earnings increased by €83 million (+48%) to €255 million, mainly due to lower equity impairments and higher realized gains in fi xed income.
to €1,470 million as a consequence of volume growth in all major business lines; ■ Commercial lines (47% of the gross revenues) slightly decreased to €1,281 million mainly resulting from a focus on profi tability.
Expense ratio decreased by 0.6 point to 25.5% mainly driven by lower administrative expenses refl ecting ongoing strict cost management as well as lower acquisition expenses.
Income tax expenses increased by €2 million (+2%) to €-104 million. On a constant exchange rate basis, income tax expenses decreased by €1 million (-1%) driven by a higher positive tax settlement in 2012 (€+2 million), partly offset by higher pre-tax underlying earnings.
Gross revenues decreased by €13 million (-1%) to €2,087 million (1): ■ Personal lines (49% of the gross revenues) were up 1% to €1,045 million following tariff increases on both Motor and household partly offset by negative net new contracts; ■ Commercial lines (48% of the gross revenues) were down 2% to €1,020 million, the decreases in Health (€-27 million)
due to an improved current accident year loss ratio and higher positive prior year reserve developments (mainly in
Adjusted earnings decreased by €7 million (-3%) to €233 million, mainly driven by lower realized capital gains, especially on real estate and equities, partly offset by higher underlying earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 10 2
(+7%) driven by the positive development in proprietary networks, partly offset by lower premiums in bancassurance channels.
Underlying earnings as well as adjusted earnings and net income remained stable at €1 million on a constant exchange rate basis. The combined ratio deteriorated by 3.1 points to 105.4% due to a change in product mix and a higher claims frequency in Motor Third Party Liability business.
Net income increased by €29 million to €46 million on a constant exchange rate basis, due to higher adjusted earnings
Net income from investments in affi liates and associates 0 -
Profi t or loss on fi nancial assets (under FV option) & derivatives 19 14
Spain. Non-Motor lines were up 2% (or €+20 million) driven by Health (€+29 million), mostly related to both volume and tariff increases in Mexico, more than compensating Property
Turkey (€+50 million) and Mexico (€+40 million) from portfolio developments and tariff increases, partly offset by high level of cancellations in Spain (€-15 million) and pruning actions in Portugal (€-11 million). Non-Motor lines were up 2% (or €+32 million) driven by high growth markets (€+70 million)
with new business in Health in the Gulf Region (€+61 million)
Net technical result decreased by €110 million (-6%) to €1,775 million. On a constant exchange rate basis, net technical result decreased by €126 million (-7%) due to Turkey
with worse prior year reserve developments (€-248 million), mainly in Turkey (€-168 million), due to the increase in both frequency and average costs of legal claims in Motor and
and Turkey (€+5 million), partly offset by a lower asset base in
Income tax expenses decreased by €25 million (-15%) to €-138 million. On a constant exchange rate basis, income tax expenses decreased by €26 million (-16%) due to lower pre-tax underlying earnings, partly offset by an increase of effective tax rate refl ecting an unfavorable country mix.
Adjusted earnings decreased by €64 million (-19%) to €272 million. On a constant exchange rate basis, adjusted earnings decreased by €68 million (-20%), refl ecting (i) lower underlying earnings and (ii) a decrease in the impact of equity hedging derivatives, partly offset by (iii) lower impairments as well as higher realized capital gains and (iv) a positive impact from new tax law in Greece on the deductibility of 2011 losses generated by the Private Sector Involvement (PSI) on government bonds.
On a constant exchange rate basis, net income decreased by €77 million (-25%) mainly refl ecting lower adjusted earnings combined with additional restructuring costs in mature markets.
Gross revenues increased by €113 million (+5%) to €2,215 million (1). On a comparable basis, gross revenues increased by €32 million (+2%): ■ Personal Motor (87% of gross revenues) was down €20 million (-1%) to €1,931 million driven by (i) the UK
driven by higher net new contracts leading to €+74 million in continental Europe (with strong growth in France, Italy and
Poland, partly offset by Spain) and €+25 million in Japan; ■ Personal Non-Motor (13% of gross revenues) was up €52 million (+24%) to €278 million mainly supported by growth in the UK and in France.
Net technical result increased by €138 million (+43%) to €459 million. On a constant exchange rate basis, net technical result increased by €122 million (+38%): ■ current accident year loss ratio decreased by 1.6 points to 78.9% as a result of selective underwriting and lower frequency in Motor, partly offset by unfavorable weather conditions in the UK leading to a higher Nat Cat charge
(+0.2 point); ■ all accident year loss ratio decreased by 5.2 points to 79.0%
as a result of the decrease in current accident year loss ratio and less unfavorable prior year reserve developments.
Expense ratio increased by 0.4 point to 21.6% (with a stable acquisition ratio and an administrative expense ratio up 0.4 point) refl ecting an increase in aggregators commission ratio and higher IT costs in the UK, partly offset by operational leverage outside the UK following portfolio growth.
Net investment result increased by €12 million (+14%) to €98 million. On a constant exchange rate basis, net investment result increased by €9 million (+10%) mainly refl ecting a higher asset base.
(€+9 million) with the growth of Personal Accident in Malaysia and Health in Hong Kong; ■ Commercial lines (53% of the gross revenues) were up €31 million (+13%) mainly driven by (i) new large accounts in Health (€+8 million) in Malaysia and Singapore, Motor
and Industrial business leading to higher Property business in Malaysia (€+5 million).
due to no events recorded in 2012; ■ all accident year loss ratio decreased by 0.8 point to 67.6%.
Enlarged expense ratio decreased by 0.8 point to 31.0% on a constant scope basis.
On a constant exchange rate and scope basis, net investment result increased by €2 million mainly from a higher asset base in Malaysia.
On a constant exchange rate and scope basis, underlying earnings increased by €6 million.
Net income decreased by €16 million to €-1 million. On a constant exchange rate basis, net income decreased by €16 million driven by higher adjusted earnings, more than offset by €23 million integration costs incurred to date from the HSBC
(+17%) and Property (+9%), both mainly driven by portfolio development and tariff increases, and Motor (+2%), partly offset by a decrease in Aviation (-6%, mainly due to tariff decrease following favorable trend on large claims) and Liability (-2%, mainly due to the non renewal of a large contract).
Net technical result increased by €3 million (+1%) to €363 million. On a constant exchange rate basis, net technical result increased by €4 million (+1%): ■ current accident year loss ratio improved by 1.2 points to 83.6% due to tariff increases in all lines of business (except in
The enlarged expense ratio was down by 0.2 point to 19.5%.
As a result, the combined ratio was down by 0.2 point to 97.8%.
Income tax expenses increased by €3 million (+4%) to €-93 million, mainly refl ecting a less favorable corporate tax rate mix.
Adjusted earnings decreased by €13 million (-9%) to €142 million. On a constant exchange rate basis, adjusted earnings decreased by €13 million (-8%) mainly due to lower underlying earnings and lower realized capital gains mainly on real estate assets.
Underlying earnings decreased by €33 million to €22 million, mainly driven by the non-repeat of €32 million positive prior year reserve developments due to favorable weather events in 2011.
Adjusted earnings decreased by €32 million to €21 million, as a result of lower underlying earnings.
Underlying earnings decreased by €1 million to €20 million mainly driven by positive developments in France and improvement on Travel business offset by higher development costs and slowdown in Mexico.
(1) Gathers both central teams from Life & Savings and Property & Casualty global business lines in addition to Group reinsurance operations.
Net realized capital gains or losses attributable to shareholders (4) (2)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 13 (25)
Profi t or loss on fi nancial assets (under FV option) & derivatives 4 (7)
Assets under Management (“AUM”) increased by €14 billion from year-end 2011 to €349 billion at December 31, 2012 as a result of €28 billion market appreciation partly offset by net outfl ows of €-4 billion (€-10 billion net outfl ows from Institutional clients and €-7 billion net outfl ows from Private Clients, partly offset by €13 billion net infl ows from Retail clients), €-5 billion unfavorable change in scope due to the sale of AXA Australia and AXA Canada and a €-6 billion unfavorable foreign exchange rate impact.
Gross revenues increased by €60 million (+3%) to €2,097 million. On a comparable basis, gross revenues decreased by €87 million (-4%) primarily due to lower investment management fees resulting from a 3% decrease in average AUM combined with lower average bps (-3.1 bps)
refl ecting a change in business mix from equity services to fi xed income services.
On a constant exchange rate basis, net investment result increased by €30 million due to higher unrealized gains related to deferred compensation obligations, offset in general expenses, combined with a decrease in fi nancing debt expenses.
As a result, the underlying cost income ratio improved by 4.8 points to 79.7%.
Income tax expenses increased by €8 million (+12%) to €-76 million. On a constant exchange rate basis, income tax expenses increased by €3 million (+4%) due to higher pre–tax underlying earnings and lower positive tax one-offs
(+50%) to €159 million. On a constant exchange rate basis, underlying and adjusted earnings increased by €42 million
Net income increased by €126 million to €88 million. On a constant exchange rate basis, net income increased by €120 million due to the increase in adjusted earnings and to lower restructuring costs driven by the real estate lease writeoff in 2012 (€-68 million) and the non repeat of a restructuring of compensation plans in December 2011 (€+136 million).
Assets under Management (“AUM”) increased by €41 billion from year-end 2011 to €554 billion at the end of 2012 as a result of €45 billion favorable market impact, €3 billion net infl ows and €2 billion favorable foreign exchange impact, partly offset by €-9 billion negative scope impact, mainly related to the partial sale of the UK Life & Savings operations. Net infl ows amounted to €3 billion in 2012 mainly driven by infl ows on Retail
Gross revenues increased by €14 million (+1%) to €1,577 million (1). On a constant exchange rate basis and excluding distribution fees (retroceded to distributors), net revenues increased by €6 million (+1%) to €1,201 million mainly driven by (i) higher management fees (€+53 million), in line with higher average AUM, and (ii) higher performance fees
(€-36 million) mainly from AXA Real Estate, and (iv) lower AXA
On a constant exchange rate basis, net investment result decreased by €1 million mainly driven by lower dividends.
On a constant exchange rate basis and excluding distribution fees, general expenses decreased by €28 million (-3%) owing to a €22 million positive impact in 2012 as a result of the closure of AXA Rosenberg coding error issue.
Income tax expenses increased by €34 million (+43%) to €-113 million. On a constant exchange rate basis, income tax expenses increased by €31 million (+40%) mainly due to a higher tax basis and €12 million non-recurring positive tax impacts in 2011.
On a constant exchange rate basis, net income increased by €30 million (+15%) mainly driven by a more favorable change in fair value of unrealized carried interests (€+18 million) and a more favorable mark-to-market of fi xed income funds
Net realized capital gains or losses attributable to shareholders (5) (5)
Net banking revenues decreased by €16 million (-5%) to €312 million. On a comparable basis(1), net banking revenues increased by €34 million (+13%) mainly driven by higher portfolio revenues (€+25 million) driven by a growing investment portfolio while the lower interest rate environment resulted in lower funding cost (€+21 million) partly offset by lower commission margin (€-7 million). Net New Money collection reached €1.4 billion due to successful marketing campaigns early in the year.
Adjusted earnings decreased by €26 million (-51%) to €25 million mainly due to the decrease in underlying earnings.
Net income increased by €5 million (+20%) to €33 million mainly driven by a higher foreign exchange result (€+14 million), the deconsolidation of Switzerland (€+8 million refl ecting the transfer of the client portfolio to Bank z weiplus on January 1st 2012) and lower restructuring costs (€+12 million), partly offset by lower adjusted earnings (€-26 million).
Underlying earnings decreased by €15 million to €-15 million, following the decrease in operating revenues, in a context of stable cost of risk and slightly increasing expenses to support growth.
On a comparable basis (1), net banking revenues decreased by €26 million mainly driven by lower interest income following the discontinuation of the lending activity and higher funding cost.
Net banking revenues remained fairly stable (-1%) at €23 million. On a comparable basis (1), net banking revenues increased by €2 million (+7%).
Underlying earnings as well as adjusted earnings and net income increased by €2 million to €-6 million mainly driven by higher commercial margin, partly offset by higher distribution commissions.
AXA Bank Switzerland closed its operations on January 1, 2012 following the transfer of its customer portfolio to Bank
Excluding 2011 exceptional items with (i) €+1,519 million exceptional gain related to disposals of the Australia & New
Insurance Co. Ltd, net income decreased by €120 million mainly driven by: ■ €-250 million unfavorable change in fair value of derivatives not eligible to hedge accounting; ■ €+67 million linked to the sale of Canadian operations in respect of contingent consideration based on profi tability metrics; ■ €+70 million increase in adjusted earnings.
The Company continued to reinforce its foreign currency hedging policy through a better balancing in the level of protection of net asset value, fi nancial charge, liquidity and solvency positions.
Underlying earnings decreased by €7 million to €-24 million mainly due to higher tax expenses (€-5 million) resulting from higher inter-company dividends received.
Adjusted earnings increased by €16 million to €-15 million mainly driven by underlying earnings.
Net income increased by €57 million to €-21 million as a consequence of a lower allowance due to the restructuring of the participation in Bharti AXA General Insurance (€17 million in 2012 vs. €53 million in 2011), as well as adjusted earnings evolution.
Adjusted earnings decreased by €27 million (-21%) to €-158 million. On a constant exchange rate basis, adjusted earnings decreased by €16 million (-12%), in line with the underlying earnings evolution.
On a constant exchange rate basis, net income remained stable refl ecting adjusted earnings evolution offset by a more favorable change in fair value of cross currency swaps.
(€+8 million) and reduction of costs relating to exceptional operations (€+9 million).
Adjusted Earnings increased by €60 million to €-17 million mainly due to higher underlying earnings and lower impairment charges.
Adjusted earnings decreased by €5 million (-40%) to €-17 million, mainly due to higher impairments.
Underlying earnings increased by €17 million (+25%) to €-51 million. On a constant exchange rate basis, underlying earnings increased by €17 million (+25%) refl ecting lower fi nancial charges.
On a constant exchange rate basis, net income decreased by €12 million (-21%) driven by negative impact of additional litigation charges in Italy and unfavorable change in fi nancing hedges, partly offset by the increase in underlying earnings.
In a context of a still uncertain economic outlook and a low interest rates environment, AXA will remain focused on the execution of the three strategic priorities of its Ambition AXA
plan: selectivity in mature markets, acceleration in high growth markets and effi ciency everywhere.
In Property & Casualty, the technical result should continue to improve, thanks to a combination of underwriting measures and increased productivity. In Life & Savings, a continued focus on the more profi table Protection & Health segment as well as a higher proportion of unit-linked business in savings should lead to a more profi table new business mix. In Asset Management, the positive net fl ows momentum of the last quarter together with a continuing focus on investment performance should drive an improved business performance.
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.
Net capital gains or losses attributable to shareholders include the following elements net of tax: ■ realized gains and losses and change in impairment valuation allowance (on assets not designated under fair value option or trading assets); ■ cost at inception, intrinsic value and pay-off of derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds; ■ related impact on policyholder participation (Life & Savings business); ■ DAC and VBI amortization or other reactivity to those elements if any (Life & Savings business) and net of hedging if any.
The calculation is prepared with the following principles: ■ for net income ROE: c alculation is based on consolidated fi nancial statements, i.e. shareholders’ equity including undated subordinated debt (“Super Subordinated Debts”
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
“Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis; ■ for investment contracts without DPF: (i) deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines “Fees & Revenues” and “Net Technical margin”; (ii) change in UFR (Unearned Fees Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
Underlying Fees & Revenues include: (i) revenues derived from mutual fund sales (which are part of consolidated revenues); (ii) loadings charged to policyholders on premiums/deposits and fees on funds under management for separate account (unit-linked) business; (iii) loadings on (or contractual charges included in) premiums/
Underlying Expenses are: (i) acquisition expenses, including commissions and general expenses allocated to new business, related to insurance products as well as to other activities (e.g., mutual fund sales); (ii) capitalization of acquisition expenses linked to new business: Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF;
Costs (DAC) and net rights to future management fees only for investment contracts without DPF; (iv) administrative expenses; (v) claims handling costs; (vi) policyholder bonuses if the policyholder participates in the expenses of the Company.
Underlying net technical result is the sum of the following components: (i) earned premiums, gross of reinsurance; (ii) claims charges, gross of reinsurance; (iii) change in claims reserves, including claims handling costs reserves, gross of reinsurance, excluding the recurring interests credited to insurance annuity reserves; (iv) claims handling costs; (v) net result of ceded reinsurance.
All accident year loss ratio net of reinsurance is the ratio of: (i) all accident years claims charge gross of reinsurance
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 cashsettled margin calls from banks relating to collateral agreements on derivatives, and the Company’s statutory (parent only)
At year-end 2012, AXA consolidated its liquidity position with: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 to the
As of December 31, 2012, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €30.1 billion, net of bank overdrafts of €0.4 billion; ■ a debt profi le characterized by (i) a slight decrease in total net fi nancing debt (1) from €13.4 billion at year-end 2011 to €13.0 billion at year-end 2012, (ii) debt mostly subordinated and with a long maturity profi le with €4.0 billion of debt repayments over the next two years, estimated taking into account the fi rst date of step-up calls on subordinated debt, out of which €1.6 billion have been refi nanced by anticipation in January 2013, and (iii) stable debt ratios (debt gearing (2): 26% at year-end 2012, versus 27% (3) at year-end 2011; interest coverage (4 ): 9.3x at year-end 2012, versus 9.1x at year-end 2011); ■ broad access to various markets via standardized debt programs: for example, at the end of 2012, this included a maximum envelope of €6 billion of French commercial paper, of $1.5 billion of US commercial paper and of €14 billion under an EMTN program.
AXA has a robust liquidity risk management framework that it reviews on a regular basis. Its assessment is performed through a quarterly monitoring of liquidity and solvency requirements in stressed environments both at local and Group level. At yearend 2012, Group entities held altogether more than €80 billion government bonds issued by Eurozone countries, which allows to address any local liquidity need through highly liquid ECB
eligible assets. The Group also held €12.1 billion of committed undrawn credit lines at year-end 2012. The Group has its own liquidity requirements which are mainly coming from solvency needs from Group entities under severe stress scenarios and collateralized derivatives held by AXA SA. This derivatives book is monitored and managed on a daily basis by the AXA Group
In addition, as part of its risk control system, AXA remains 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.
(1) Total net fi nancing debt = senior debt and commercial paper outstanding net of cash available at central holdings’ levels + dated subordinated debt + undated subordinated debt.
On a consolidated basis, dated subordinated debt (including derivative instruments) totaled €7,317 million at December 31, 2012 after taking into account all intra-group eliminations and excluding undated subordinated debt (TSS/TSDI, which are included in shareholders’ equity, as described in Note 1.12.2 of Part 4 — Consolidated Financial Statements), compared to €7,108 million at December 31, 2011. The increase was €210 million, or €212 million on a constant exchange rate basis.
AXA has purchased from a banking counterparty call options on the AXA ordinary share with an automatic exercise feature.
Movements in these items are described in Note 17 of Part 4
At December 31, 2012, other debt instruments issued totaled €2,384 million, down from €3,407 million at the end of 2011. The decrease of €1,023 million mainly resulted from €996 million repayment of commercial paper.
(including interest payments on its outstanding debt 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 2012 in respect of the 2011 fi nancial year totaled €1,626 million, or €0.69 per share, versus €0.69 per share paid in 2011 in respect of the 2010 fi nancial year (€1,601 million in total). All of these dividends were paid in cash.
(€44.3 billion at December 31, 2011) 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: €28.8 billion
(€17.5 billion at December 31, 2011); (iii) admitted subordinated debt: €12.1 billion (€11.8 billion at
December 31, 2011); (iv) locally admitted assets: €2.5 billion (€2.6 billion at
AllianceBernstein as it is part of its net consolidated book value) of €21.4 billion (€22.8 billion at December 31, 2011)
and less the net consolidated book value of its equity interests in credit institutions, investment companies and other fi nancial institutions: €3.7 billion (€3.9 billion at
Company may, at its option, defer interest payment upon the occurrence of certain events (e.g. absence of dividend payment voted in the preceding annual Shareholders’ Meeting or receipt by the Company or by certain of its principal subsidiaries of a regulatory demand to restore their applicable minimum solvency margin level). Payment of deferred interest becomes due in certain specifi ed cases (e.g. payment of a dividend, notifi cation of the end of a regulatory demand to restore solvency, liquidation or redemption of the TSDI).
In accordance with the methods of calculation implemented by AXA in line with existing regulations, AXA’s consolidated solvency ratio was estimated at 233% at December 31, 2012 compared to 188% at the end of 2011. This change resulted mainly from the 2012 Underlying Earnings and from unrealized capital gains on fi xed income. This 2012 solvency margin calculation will be reviewed by the Autorité de Contrôle
Management closely monitors the Group’s ratings and currently expects that these ratings should remain at levels suffi cient for the Company and its insurance subsidiaries to compete effectively. Given continuing high volatility and uncertainty in fi nancial markets and general economic conditions, however, management cannot predict with any degree of certainty the timing and/or magnitude of future ratings actions.
AXA adopted, in 2008, the AFEP/MEDEF Code (defi ned below) as its Corporate Governance Code of reference.
The AFEP/ MEDEF Code consists, in particular, of recommendations issued by the AFEP and the MEDEF in a report dated October 2003 and recommendations dated
In order to preserve well balanced governance structures and debates, the Board of Directors’ Bylaws require that a majority of the Board be composed of independent directors, that certain Board Committees (including Audit and Compensation
& Human Resources) be composed entirely of independent directors and that the Board have an independent Vice-
■ grants stock options and/or performance shares to Group employees and corporate offi cers within the framework of the authorizations it receives from the Extraordinary
The Board of Directors meets as often as it deems necessary.
Group’s principal activities and issues. These sessions focus on a variety of issues including the fi nancial structure, the strategy, the governance and the Group’s primary operating businesses and subsidiaries.
Directors 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 with a value equal to the gross director’s fees earned in respect of the previous fi scal year. For this purpose AXA shares are valued using the closing price of the AXA share on December 31 of the preceding fi scal year.
Board members became members of the Company’s new unitary Board of Directors for the remaining duration of their term of offi ce.
On December 31, 2012, the Board of Directors was comprised of fi fteen members. Currently, fi ve members of the Board of
Board’s composition therefore complies with the provisions of the law of January 27, 2011 as well as the recommendations contained in the AFEP/MEDEF Code regarding gender balance on Boards.
While the Company is currently in compliance with applicable legal and regulatory requirements, the Ethics & Governance
Directors (currently Mrs. Doina Palici-Chehab) is the employee shareholders’ representative. This representative is appointed by shareholders every four years from a list of candidates selected by the Group’s employee shareholders. The Board of
Each year, the Board of Directors assesses the independence of all of its members on the basis of the recommendations contained in the AFEP/MEDEF Code. On February 20, 2013, the Board of Directors determined that, on December 31, 2012, eleven of the fi fteen Board members were independent after assessing the criteria of the AFEP/MEDEF Code: Mmes. Isabelle
Anthony Hamilton, Stefan Lippe, François Martineau, Ramon de Oliveira and Marcus Schenck.
The Company’s Charter and Bylaws provide for the mandatory appointment of a Vice-Chairman acting as Lead Independent
Chief Executive Offi cer are held by a single individual. On
Independent Director has a number of specifi c powers including supervising the contribution of the independent directors to the
Management to the extent necessary or appropriate. He is also consulted by the Chairman of the Board of Directors on the agenda and planning of every Board meeting.
More particularly, the Lead Independent Director has the power to attend and participate in all meetings of Board Committees
Offi cer and the Deputy Chief Executive Offi cer (these meetings called “Executive Sessions” are chaired by the Vice-Chairman and may be held at any time at the Vice-Chairman’s discretion).
Norbert Dentressangle (58) Chairman of Dentressangle Initiatives (SAS) 30bis, rue Sainte-Hélène – 69287 Lyon Cedex 02 – France French nationality
Jean-Pierre Clamadieu (54) Chairman of the Executive Committee and director of Solvay (Belgium) Rue de Ransbeek 310 – 1120 Brussels – Belgium French nationality
Jean-Martin Folz (65) Companies’ director AXA - 25, avenue Matignon – 75008 Paris – France French nationality
Anthony Hamilton (71) Non-executive Chairman of AXA UK plc (United Kingdom) 5 Old Broad Street – London EC2N 1AD – United Kingdom British nationality
François Martineau (61) Attorney at Law Lussan / Société d’avocats 282, boulevard Saint Germain – 75007 Paris – France French nationality
Independent director Member of the Compensation & Human Resources Committee Member of the Ethics & Governance Committee
Ramon de Oliveira (58) Managing Director of Investment Audit Practice, LLC (United States) 580 Park Avenue – New York – NY 10065 – United States French nationality
Mrs. Doina Palici-Chehab (55) Chief Executive Offi cer of AXA Business Services Pvt. Ltd. (India) 16/2, Residency Road – Bangalore – 560025 India German nationality
Michel Pébereau (70) Honorary Chairman of BNP Paribas 3, rue d’Antin – 75002 Paris – France French nationality
Director Member of the Finance Committee Member of the Ethics & Governance Committee
Mrs. Dominique Reiniche (57) Chairman Europe of The Coca-Cola Company 27, rue Camille Desmoulins – 92784 Issy-les-Moulineaux Cedex 9 France French nationality
Marcus Schenck (47) Member of the Management Board and Chief Financial Offi cer of E.ON AG (Germany) Platz 1 – 40479 Düsseldorf – Germany German nationality
The Shareholders’ Meeting to be held on April 30, 2013 will be asked to vote on the reappointment of two members of the Board of Directors whose term of offi ce will end
(Mr. Ramon de Oliveira and Mrs. Dominique Reiniche) on the ratifi cation of the cooptation of a member of the Board of
Directors (on October 10, 2012, the AXA Board of Directors decided to appoint Mr. Jean-Pierre Clamadieu as director, replacing Mr. Giuseppe Mussari who resigned on June 2012) as well as on the appointment of two new members of the Board of Directors, replacing Mr. Anthony Hamilton and Mr. Michel
Pébereau whose term of offi ce will end. In this context, the
Board of Directors proposed, based on the recommendation of the Ethics & Governance Committee: ■ the re-appointment as director of Mr. Ramon de Oliveira and Mrs. Dominique Reiniche for a four-year term (their biographies are presented below in this Section 2.1); ■ the ratifi cation of the cooptation of. Mr. Jean-Pierre Clamadieu, as director, for the remainder of his predecessor’s term of offi ce (his biography is presented below in this Section 2.1); ■ the appointment of Mrs. Deanna Oppenheimer as director for a four-year term, replacing Mr. Anthony Hamilton whose term of offi ce will end. Mrs. Deanna Oppenheimer’s (54 years old) candidacy was selected due to her international profi le as well as her knowledge of the fi nance industry, in particular the marketing and distribution areas. Mrs. Deanna
Oppenheimer spent over 25 years in the banking industry, in the United States and in Europe, fi rst at Washington
Mutual and then within the Barclays Group where she was, among other positions, Chief Executive of Europe Retail and
Directors a valuable perspective on digital industry which has been identifi ed as a strategic priority for AXA.
Board focused, in particular, on the following matters during 2012: review of the Group’s strategy, examination of the 2011 fi nancial statements and the 2012 half-year fi nancial statements, review of the Board Committee reports, review of the signifi cant proposed acquisitions and disposals, review of the Group’s portfolio of businesses, review of capital allocation, review of the composition of Board Committees, election of the employee shareholders representative, self-assessment of the
Initiatives, the family-owned holding company which, in addition to his majority stake in Norbert Dentressangle S.A., also holds equity interests in real estate, industrial and business services fi rms. From April 2008 to April 2010, Mr. Norbert Dentressangle was Vice-Chairman of the AXA Supervisory Board. Since
Mr. Denis Duverne is a graduate of the École des Hautes
Colbert, in charge of operations. In 1995, Mr. Denis Duverne joined the AXA Group and assumed responsibility for supervision of AXA’s operations in the US and the UK and managed the reorganization of AXA companies in Belgium and the United Kingdom. From February 2003 until December 2009,
Supérieure (ENS-Ulm), engineer of the Corps des Mines and holds an aggregation in Physics. From 1997 to 1999, she was in charge of budget of Telecommunication and Defense at the French Ministry of Economy. From 1999 to 2002, she was Advisor on Industrial Affairs of the French Prime
Chief Executive Offi cer of Lyonnaise des Eaux. From 2009 to
Beginning in 2005, he led Swiss Re’s Property & Casualty and
and Acqufi n AG and serves currently as Vice-Chairman of the
Mr. François Martineau is a graduate of the University Paris IV
(Germany). In 2000, she became Head of Group Reinsurance of AXA Global P&C in Paris (France). Since 2010, she has been
Chief Executive Offi cer of AXA Business Services Pvt. Ltd. in
Bangalore (India). On April 25, 2012, Mrs. Doina Palici-Chehab was elected the employee shareholder member of the AXA
Mr. Michel Pébereau is a graduate of the École Polytechnique and the École Nationale d’Administration (ENA). In 1967, he started his career as auditor at the Treasury (inspecteur des finances). He then held various management positions at the
Mr. Michel Pébereau was Chairman of the Board of Directors of BNP Paribas. Since December 2011, Mr. Michel Pébereau has been Honorary Chairman of BNP Paribas.
Non-voting member of the Board (Censor): Société Anonyme des Galeries Lafayette
Chairman: Conseil de Direction de l’Institut d’Études Politiques de Paris, Fondation BNP Paribas
(Germany). In 1991, he joined McKinsey & Co. in Germany as consultant. Initially, he worked on assignments in different industries including steel, tourism, retail and banking. As a
E.ON AG (Germany) in charge of accounting, controlling, fi nance, risk, taxes and M&A and is also a member of the
Certain members of the Board of Directors, however, are corporate offi cers and/or directors of companies that may have agreements or enter into transactions from time to time with the AXA Group including extensions of credit, purchases of securities (for their own account or for third parties), underwriting of securities and/or furnishing of other types of services or goods. These agreements or deals are generally fully negotiated and performed on arm’s length terms and conditions. Consequently, AXA does not believe that any of these agreements or transactions give rise to confl icts of interests between (i) the director’s duties towards AXA and
To the best of the Company’s knowledge based on information reported to it, none of the members of its Board of Directors have been, during the last fi ve years (i) subject to any conviction in relation to fraudulent offences or to any offi cial public incrimination and/or sanction by statutory or regulatory authorities, (ii) disqualifi ed by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer, or (iii) associated as a member of the administrative, management or supervisory bodies with any company that has declared bankruptcy or been put into receivership or liquidation, provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated affi liated companies in connection with these or similar transactions and certain members of AXA’s Board of Directors may have been associated with other companies that have undertaken similar solvent liquidations.
At the end of 2012, the Chairman of the Ethics & Governance
Each Committee is empowered to undertake or commission specifi c studies or reviews, if necessary by requesting external consulting expertise, within the scope of its responsibilities.
They may also invite external participants to attend their meetings. Committee Chairmen report to the Board of Directors on a regular basis following Committee meetings.
The Board of Directors reviewed the qualifi cations of all Audit Committee members in terms of their fi nancial expertise and business experience and believes that all members have the requisite expertise, experience and qualifi cations to fulfi ll their assignments as Audit Committee members.
The scope of the Audit Committee’s responsibilities is set forth in its Terms of Reference which are reviewed and approved each year by the Board of Directors. The Audit Committee assists the oversight of the: ■ adequacy and effectiveness of the internal control and risk management frameworks; ■ fi nancial reporting process and the integrity of the publicly reported results and disclosures made in the fi nancial statements; ■ effectiveness, performance and independence of the internal and external auditors.
The Audit Committee met seven times in 2012. The average attendance rate was 96.30%. The Committee focused, in particular, on the following issues: ■ full year fi nancial statements for 2011; ■ 2011 Annual Report (Document de
Référence); ■ half-year fi nancial statements for 2012; ■ risk management framework, appetite and reporting; ■ results of the Group’s Internal Financial
Control (IFC) program; ■ results of internal and external audit work; ■ results of regulatory compliance reviews; ■ internal and external fraud events; and ■ internal and external audit plan and resources.
Composition on December 31, 2012: Ramon de Oliveira, Chairman Jean-Martin Folz Suet Fern Lee Doina Palici-Chehab Michel Pébereau Dominique Reiniche
• to propose distribution of the annual profi t and the payment of the dividend for the year ended to the Ordinary Shareholders’ Meeting,
• to set the dates of payment of the dividend and, if any, of interim dividends; ■ to examine any proposed signifi cant fi nancing transaction for the Company or its subsidiaries, management of the Group’s proprietary assets 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 Management policy as well as any signifi cant implications of these orientations and limits on AXA’s principal subsidiaries; and
■ to review the risk appetite framework developed by the Executive Management for fi nancial, insurance and operational exposures.
(guarantees); ■ review of the proposed capital increase reserved for the employees of the AXA Group (“SharePlan 2012”).
■ to formulate proposals to the Board of Directors, for the appointment of: • members of the Board of Directors, its
Board of Directors; ■ to examine in more depth certain governance matters related to the operation and organization of the Board of Directors (planning of the meetings, quality of the information provided to the Board by the Management, Board assessment, communication with shareholders…); ■ to review the AXA Group Compliance and Ethics Guide; ■ to examine the Group’s strategy on corporate responsibility and related issues; ■ to examine every year the Company’s policy with respect to professional equality as well as equal pay.
The Ethics & Governance Committee met four times in 2012. The average attendance rate was 76.92%. The Committee focused, in particular, on the following issues: ■ process of selection of the future directors; ■ process of selection of the employee shareholders’ representative; ■ composition of the Board and its
Board; ■ self-assessment of the Board of Directors; ■ share ownership requirements for members of the Board of Directors; ■ corporate responsibility; ■ Group diversity policy.
Composition on December 31, 2012: Norbert Dentressangle, Chairman Jean-Martin Folz Anthony Hamilton Isabelle Kocher François Martineau
• the amount of the directors’ fees for the members of the Board of Directors to be submitted to the Shareholders’ Meeting,
• the number of Company stock options or performance shares/units to be granted to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee; ■ to formulate an opinion on the proposals of the Chairman & Chief Executive Offi cer concerning: • the principles and conditions for the determination of the compensation of the executives of the AXA Group,
• the overall annual allocation of Company stock options or performance shares/units to be granted to employees of the AXA Group.
Executive Offi cer and the Deputy Chief Executive Offi cer. A
The Chairman & Chief Executive Offi cer is vested with the broadest powers to act on behalf of the Company and represents the Company vis-à-vis third parties. He exercises these powers within the scope of the corporate purpose and subject to the powers expressly assigned by law to the Shareholders’ Meetings and to the Board of Directors.
Committee. Its principal mission is to review and defi ne the
(QBRs), during which the performance of the AXA Group is assessed. These QBRs were introduced in 2000 to provide a clear and consistent framework for: ■ reviewing operational performance and monitoring the progress of key projects using defi ned quantifi able standards of measurement; ■ assessing the status of Group transversal projects; ■ exchanging ideas and information on key Group strategic orientations.
AXA Technology, AXA Group Solutions, AXA Business Services (k) 6,741 7,423 6,602
(a) A portion of the employees of AXA’ s French affi liates are included in GIEs. In addition, the employees included in insurance and fi nancial services activities in France are included in the «cadre de convention» of four not consolidated «mutuelles».
(b) In 2012, decrease by 318 in France mainly due to a decrease in commercial staff.
(f) In 2012, decrease by 367 in Germany due to productivity programs.
(j) In 2012, decrease by 446 in AllianceBernstein due to a global staff reduction plan.
AXA’s executive compensation policy is designed to: ■ attract, develop, retain and motivate the best talents; ■ drive superior performance; ■ align compensation levels with the Company’s business performance.
It follows three guiding principles: ■ compensation competitiveness; ■ internal equity, based on individual and collective performance; ■ the fi nancial results and capacity of the Company.
Executive compensation is structured to foster and reward performance: ■ at both the individual level and collective level (local business entity and AXA Group); ■ with a short-term, medium-term and long-term focus.
Executive compensation includes a fi xed and a variable component. The fi xed component is targeted to be at or above the median of the market. The variable component is linked to AXA’s global performance, local entity performance, and the attainment of the executive’s individual objectives and demonstrated leadership. The variable portion is designed to represent a substantial component of the executive’s annual global compensation such that, in cases where an executive attains or exceeds the objectives, the compensation levels of
The AXA Board of Directors based on the recommendation of its Compensation & Human Resources Committee decided to maintain unchanged in 2012 the total cash compensation target of the AXA Group Chairman & Chief Executive Offi cer, Mr. Henri de Castries, at €3.3 million and of the AXA Group Deputy Chief
Compensation & Human Resources Committee, then approved by the Board of Directors on the basis of specifi c strategic objectives set at the beginning of the year.
The variable compensation amounts awarded to Mr. Henri de Castries since he was appointed Chairman of the Management Board in May 2000 demonstrate the demanding objectives and the genuine variability of this compensation component: Executive compensation and director’s fees Target Actual % Target
The performance of operational entities is determined on the basis of the following performance indicators: ■ underlying earnings; ■ customer satisfaction index; ■ Protection & Health annual premium equivalent; ■ Life & Savings New Business Value; ■ economic expenses; ■ Life & Savings Operating Free Cash Flow; ■ Life & Savings Operating return on STEC; ■ P&C revenues; ■ current year combined ratio.
For each performance indicator that measures Group and/or the operational entities’ performance, targets, fl oors and caps are defi ned at the beginning of the year: ■ a target, aligned with the strategic plan, the attainment of which will deliver 100% of the variable component linked to the indicator; ■ a fl oor, below which no variable component linked to the indicator will be paid; ■ a cap, above which the variable component linked to the indicator is generally capped at 150%.
The individual performance is assessed both on (i) the achievement of results for each predetermined individual objective (the “what”) and (ii) demonstrated leadership of the executive (the “how”).
The variable compensation paid to the Management Committee members for 2010, 2011 and 2012 was: VARIA BLE COMPENSATIONS PAID TO MANAGEMENT COMMITTEE MEMBERS
T otal of the other M anagement C ommittee members 2,419,331 2,410,736 100% 3,237,792 3,234,801 100% 4,239,737 3,681,547 87%
" % Target" corresponds to the achievement of performance objectives related to the year.
Human Resources Committee and the Board of Directors took into account the following measures: (1) the strong increase in the underlying earnings, (2) return on equity (Solvency II internal model) which is lower than target, and (3) the improvement of the customer scope index.
deferral mechanism, while not required, further aligns AXA with the evolving regulatory environment on executive pay in the fi nancial services sector both in France and internationally.
In the tables of this section, compensation not paid in euro was converted into euro on the basis of the following yearly average exchange rates for 2012: USD/EUR 0.776336; GBP/
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 2,083,482 351,450 775,170 - 3,210,102 2,220,691 255,360 1,006,848 - 3,482,899
T otal of the other M anagement C ommittee members 8,346,443 734,140 809,622 809,622 10,699,827 8,003,952 484,120 839,040 1,069,776 10,396,888
On March 16, 2012, the fair value of one option was €2.14 for options without performance conditions, €1.33 for options with performance conditions, and the fair value of one performance share/unit was €8.74.
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2012
Chairman & Chief Executive Offi cer France 950,000 2,270,153 - 61,440 4,150 3,285,743 950,000 2,034,171 - 61,440 4,150 3,049,761
T otal of the other M anagement C ommittee members 3,084,279 3,681,547 - 586,434 651,693 8,003,953 3,025,019 3,685,878 - 586,434 651,693 7,949,024
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations France 750,000 1,292,542 - 36,790 4,150 2,083,482 750,000 1,186,453 - 36,790 4,150 1,977,393
The total annual amount of directors’ fees to be allocated to the members of the Board of Directors was set by the
Due to the importance of their role and the signifi cant demand on their time, members of the Audit Committee receive a higher proportion of directors’ fees.
Within the global limit authorized by the Shareholders’ Meetings, the Board of Directors approves all stock option programs prior to their implementation.
Key executives and talents, including technical experts across all entities in the Group are selected to participate in the stock option program based on selection criteria that include: ■ importance of the position ➮ role
Management Board until 2010), (ii) Group Executive Committee members, and (iii) since 2007, to any other benefi ciary receiving a grant of 5,000 options or more. Pursuant to this performance condition, the last 1/3rd of the options granted become exercisable only if the AXA share performs at least as well as the EuroStoxx Insurance index.
If the performance condition has not been met at the expiry date of the options, the options subject to performance conditions are automatically cancelled.
In 2012, AXA stock options were granted as follows: 4,584,469 subscription options at a weighted average price of €12.17 granted to 468 employees, representing 0.19%
(disregarding the dilution related to the exercise of these options). Given the nature of stock options, the decision was taken to restrict the scope of stock options grants to Group senior executives, which explains the reduction in the number of benefi ciaries.
The portion of options granted in 2012 to the E xecutive O ffi cers
(Chairman & CEO and Deputy CEO) represented 8.99% of the total number of options granted.
On the basis of the AXA share price on December 31, 2012, i.e. €13.35, only 12,204,951 subscription or purchase options are in the money, i.e. 16.36% of the outstanding stock options
Grant date (Board of Directors or Management Board) 27/02/2002 14/03/2003 14/03/2003 02/04/2003 26/03/2004 14/04/2004 29/03/2005 29/03/2005 06/06/2005 27/06/2005
or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (c) 844,314 762,301 675,028 - 968,927 - 812,127 646,371 - 39,049
Expiry date of options 27/02/2012 14/03/2013 14/03/2013 02/04/2013 26/03/2014 14/04/2014 29/03/2015 29/03/2015 06/06/2015 27/06/2015
Grant date (Board of Directors or Management Board) 01/07/2005 21/09/2005 31/03/2006 31/03/2006 31/03/2006 25/09/2006 25/09/2006 13/11/2006 10/05/2007 10/05/2007
Total number of benefi ciaries 1 6 2,418 861 1,002 10 29 5 2,866 876
or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (b ) - - 830,960 656,518 227,593 53,733 36,684 - 645,899 246,161
Start date of exercise 01/07/2007 21/09/2007 31/03/2008 31/03/2008 31/03/2010 25/09/2008 25/09/2010 13/11/2010 10/05/2009 10/05/2009
Expiry date of options 01/07/2015 21/09/2015 31/03/2016 31/03/2016 31/03/2016 25/09/2016 25/09/2016 13/11/2016 10/05/2017 10/05/2017
Subscription or purchase price of options (a) 19.91 20.97 27.75 27.93 27.93 28.03 28.03 29.59 32.95 33.78
Date of the Shareholders’ Meeting 20/04/2005 20/04/2005 20/04/2005 20/04/2005 24/04/2005 20/04/2005 20/04/2005 22/04/2008 22/04/2008 22/04/2008
Grant date (Board of Directors or Management Board) 10/05/2007 24/09/2007 24/09/2007 19/11/2007 19/11/2007 01/04/2008 01/04/2008 19/05/2008 19/05/2008 22/09/2008
Start date of exercise 10/05/2011 24/09/2009 24/09/2011 19/11/2009 19/11/2011 01/04/2010 01/04/2012 19/05/2010 19/05/2012 22/09/2010
Expiry date of options 10/05/2017 24/09/2017 24/09/2017 19/11/2017 19/11/2017 01/04/2018 01/04/2018 19/05/2018 19/05/2018 22/09/2018
Subscription or purchase price of options (a) 33.78 29.72 29.72 28.53 28.53 21.00 21.00 23.42 23.42 21.19
or purchased, from which to be subscribed or purchased by: Executive Directors: The fi rst 10 employees benefi ciaries (b ) 21,250 - 293,954 51,018 84,309 20,317 615,165 47,753 - 18,280 742,217
Start date of exercise 22/09/2012 24/11/2012 20/03/2011 20/03/2013 02/04/2011 10/06/2013 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012
Grant date (Board of Directors or Management Board) 19/03/2010 18/08/2010 18/08/2010 13/10/2010 13/10/2010 22/12/2010 18/03/2011 18/03/2011 04/04/2011 16/03/2012 13/06/2012
Start date of exercise 19/03/2014 18/08/2012 18/08/2014 13/10/2012 13/10/2014 22/12/2014 18/03/2013 18/03/2015 04/04/2013 16/03/2014 13/06/2014
Subscription or purchase price of options (a) 15.43 13.89 13.89 13.01 13.01 12.22 14.73 14.73 14.73 12.22 9.36
Number of options exercised at 31/12/12 - - - - - - - - - - -
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 16, 2012, the fair value of one option was €2.14 for options without performance conditions, €1.33 for options with performance conditions.
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations - - - - - - - -
Stock options on AXA or any eligible AXA Group’s subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who exercised the highest number of stock options (aggregate information) 382,740 10.47
Henri de Castries Chairman & Chief Executive Offi cer 3,783,331 -
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 56,088 -
AXA share in the medium-term (3 to 4 years); ■ reduce shareholder dilution by granting less subscription options.
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; ■ during the performance period, the Performance Units/
shares which are restricted from sale during a 2-year period; ■ 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
Performance Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant.
Offi cers of each business unit and by the Group functional department heads. These recommendations are reviewed by the Executive Management to ensure coherence and fairness.
Human Resources Committee, decided on December 22, 2010 that the total number of Performance Shares granted to the executive offi cers (Chairman & Chief Executive Offi cer and
Deputy Chief Executive Offi cer) each year may not exceed 10%
(c) The acquisistion period for those units will end on March 20, 2013.
(f) The acquisition period for those units will end on June 10, 2013.
(g) The 1,482,911 units acquired (from which 6,700 units acquired by anticipation due to deceased or disabled benefi ciaries) by 3,504 benefi ciaries of the March 19, 2010 plan have been settled as €18.1 million.
(i) 390 units of the April 4, 2011 plan acquired by anticipation related to deceased benefi ciaries.
(c) From which 461 shares of the May 10, 2007 Plan, 506 shares of the April 1st, 2008 Plan and 975 shares of the March 19, 2010 Plan acquired by anticipation related to deceased benefi ciaries.
Chairman & Chief Executive Offi cer earning -net income per share
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 to the 2012 “Consolidated
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 01/04/2008 1,559 01/04/2012
Board decided to implement, as from January 1st, 2007, a shareholding policy applicable to all members of the
Board of Directors have decided that, as long as an executive offi cer (Chairman & Chief Executive Offi cer and Deputy Chief
E xecutive O ffi cers and other employees must refrain from any purchase or sale of AXA securities during specifi c time periods
(“blackout periods”) prior to the earnings releases. These blackout periods generally begin about 30 days before its annual or half-year earnings releases and about 15 days before its quarterly fi nancial information releases. Depending on the circumstances, these blackout periods could be declared at other times or be longer.
Governance Committee and to the AXA Supervisory Board at the beginning of 2010. The Committee noted the advantages of this type of arrangement in avoiding any potential risk of insider trading and the associated reputation risks for the Company and executives.
To the best knowledge of the Company and based on information reported to it, each AXA Board of Directors member held, on
To the best of the Company’s knowledge and based on the information reported to it, several members of the Board of Directors made the following disclosures in the course of 2012 concerning their transactions involving Company securities. Detailed information about all of these transactions, as well as individual disclosures fi led in accordance with Articles 223-22 and 223-25 of the AMF
Henri de Castries and Denis Duverne) participate, as all other executive employees (directeurs) of AXA Group entities in France, in a supplementary pension scheme with defi ned benefi ts.
Under this scheme, a supplementary pension is paid to executives who retire immediately upon leaving the AXA
Group, and who have a minimum length of service of 10 years, of which at least 5 years as an executive. Executives whose employment is terminated by the Company after the age of 55 may also benefi t from the scheme provided that they do not resume any professional activity before retiring.
The amount of the supplementary pension is designed, for a minimum executive seniority of 20 years within the AXA Group, to achieve a global pension equivalent to: ■ 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual Social s ecurity ceilings (1); ■ 50% of the average gross compensation of the past 5 years preceding the retirement date, if this average is inferior to 8 annual Social s ecurity ceilings; ■ 2.4 Social s ecurity 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 s ecurity ceilings.
Reduced rates apply for an executive seniority of less than 20 years. As an example, with 10 years of executive seniority, the supplementary pension allows to reach a global pension equivalent to 34% instead of 40%. This rate is reduced to 20%
for an executive seniority of 5 years, and no supplementary pension is paid for an executive seniority of less than 5 years.
The Company’s commitments as regard to pension or retirement to the aforementioned executives was €38.1 million on December 31, 2012.
The evolution of these commitments between December 31, 2011 and December 31, 2012 is due to the cost attributable to one year of additional service within the AXA Group and the evolution of technical and tax hypothesis.
Mr. Henri de Castries decided in 2010, on an individual and voluntary basis but in consultation with the Board of Directors, to limit the compensation to be taken into account in order to calculate his global pension. For information purposes, as of today considering his length of service within the Group (more than 23 years on the date of this Annual Report), the part of his global pension that would be paid under the supplementary pension scheme would represent approximately 32% of his current annual target compensation.
(1) For information, the annual Social s ecurity ceiling for 2013 is equal to €37,032.
(health insurance, life insurance, disability insurance, retirement, etc.) to which Messrs. de Castries and Duverne were entitled as employees of AXA. In this context, the Supervisory
In this context, on February 17, 2010, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized that, following the termination of their employment contracts, Messrs. Henri de Castries and Denis Duverne will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement, etc.) on terms equivalent to those of all other director-level employees of the AXA Group in France; ■ the Supervisory Board authorized a contractual severance benefi t for Messrs. de Castries and Duverne designed to replicate the benefi ts to which they were entitled as AXA
AXA share price at least equal to the Dow Jones Eurostoxx
The initial amount of the severance benefi t would be equal to 19 months of the average compensation (fi xed and variable)
Shareholder’s M eeting of April 29, 2010, and will continue so long as they remain executive offi cers of AXA (including under renewed mandates); ■ Messrs. Henri de Castries and Denis Duverne also renounced the indemnities to which they were entitled as employees, pursuant to the 1993 collective agreement, (i) at the time of their retirement (indemnités de départ en retraite) and
On December 31, 2012, AXA’s fully paid up and issued share capital amounted to €5,469,919,153.36 divided into 2,388,610,984 ordinary shares, each with a par value of €2.29 and eligible for dividends as of January 1st, 2012.
and is generally consulted on all signifi cant matters relating to the Mutuelles AXA including their collective shareholding in
To the best of the Company’s knowledge, no shareholder held more than 5% of the Company’s share capital or voting rights on December 31, 2012 except as indicated in the table above.
“Voting rights” Section of this Annual Report. Of the Company’s 2,388,610,984 outstanding ordinary shares on December 31, 2012, 500,960,603 shares entitled their holders to double voting rights as of that date.
Signifi cant changes in the Company’s share capital ownership between December 31, 2010 and December 31, 2012 are set forth in the table below: On December 31, 2012 (a) On December 31, 2011 (a) On December 31, 2010 (a)
On December 31, 2012, to the best of the Company’s knowledge based on the information available to it, the
Company had approximately 11,011 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
As a result, on December 31, 2012 the total number of treasury shares, all allocated for hedging purposes, was 57,048, corresponding to 0.00% of AXA’s share capital at the yearend closing date, acquired for an aggregate purchase price of €740,558.70 (with a par value of €2.29 per share).
Stock subscription warrants related to the SharePlan operation in Germany 2,121,050
Conversion Starting February 17, 2000: 4.41 (b) shares for 1 bond
In countries that met the legal, regulatory and tax requirements to participate in SharePlan, two investment options were offered to the Group employees in 2012: ■ the traditional plan, offered in 39 countries; ■ the leveraged plan, offered in 37 countries.
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 17.19% 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’ personal investment is guaranteed by a bank, and employees also benefi t from a portion of the share appreciation, as compared to the non-discounted reference price.
On December 31, 2012, AXA employees and agents held 7.43% of the share capital and 8.97% of the voting rights.
These shares will vest upon completion of a two or four year vesting period (i.e., in 2014 or 2016) depending on applicable local regulations, and subject to fulfi lment of certain conditions.
In July 2007, the AXA Group launched its fi rst worldwide allemployee free share grant to over 100,000 employees.
In force for a period of three years starting from August 5, 2010, this agreement is renewable automatically for successive periods of one year thereafter, unless one of the two parties decides to terminate the agreement earlier, in which case the terminating party is required to give a three month notice prior to the next renewal date.
In accordance with Article L.225-40 of the French Commercial Code, we were advised of the following agreement which were previously authorized by your Board of Directors.
entities of the Group (National Mutual International Pty Ltd (NMI), AXA India Holdings and Philippines AXA Life Insurance Corporation).
These transfers are a consequence of the internal corporate reorganization which started in 2011 following the repurchase by your
Company, on April 1st, 2011, of the Asian Life, Savings and Retirement businesses held by its former subsidiary AXA Asia Pacifi c
On August 3, 2010, the AXA Board of Directors authorized the signing of an agreement between AXA, on the one hand, and BNP
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 amount of the supplementary pension is calculated at the time of retirement and is in addition to the total amount of retirement pensions paid under mandatory schemes (Social S ecurity, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within or outside the AXA Group.
Social S ecurity ceilings; ■ 50% of the average gross compensation of the past 5 years preceding the retirement date, if this average is inferior to 8 annual
Nature, purpose, terms and conditions: On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Denis Duverne of his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Denis Duverne holds the position of
The Supervisory Board was concerned that the decision of Mr. Denis Duverne to renounce his employment contract, in accordance with the AFEP/MEDEF recommendations, would not jeopardize the continuity of his accrued and future social benefi ts. Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Denis Duverne will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group’s director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized that Mr. Denis Duverne would be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the AFEP/MEDEF
March 26, 2010, the Company’s ADSs are traded on the U.S.
Eurozone. In addition, the Company’s ordinary shares are also included in the EURO STOXX Insurance, the insurance related index for companies within the Eurozone, and in the EURO
3.2 RISK FACTORS 143 3.3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK FACTORS 156
REGULATION, RISK FACTORS Certain disclosures about market risk and related matters
AXA Group, is also subject to extensive regulation as a result of its listing on NYSE Euronext Paris and its interest in numerous regulated insurance and asset management subsidiaries.
des marchés financiers (“AMF”), which is the French financial market regulator, and the Autorité de contrôle prudentiel
While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s insurance subsidiaries operate have laws and regulations governing standards of solvency, levels of reserves, permitted types and concentrations of investments, and business conduct to be maintained by insurance companies as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or fi ling of rates. In certain jurisdictions, regulations limit sales commissions and certain other marketing expenses that may be incurred by the insurer. In general, insurers are required to fi le detailed annual fi nancial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or unexpected examinations of the insurers’ operations and accounts and make requests for particular information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. This holding company legislation typically requires periodic disclosure concerning the corporation that controls the licensed insurer and other affi liated companies, including prior approval of transactions between the insurer and other affi liates such as inter-corporate transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory schemes are designed to protect the interests of policyholders rather than shareholders.
cover, among other matters, valuation of assets and liabilities, the treatment of insurance groups, the definition of capital and the overall level of required capital. A key aspect of Solvency II
is that the assessment of risks and capital requirements would be aligned more closely with economic capital methodologies, and could allow the Group to make use of its internal economic capital models, if approved by AXA’s lead supervisor ACP, to enable a better understanding of risks and an appropriate risk management.
Group has aligned its global executive compensation practices with these standards and principles and conducts regular reviews of its compensation practices and policies in light of these standards as well as applicable legal and regulatory requirements. The uneven application of these principles and standards to the different actors in the financial sector (e.g.
Group does business raises competitive issues for the Group, including our ability to attract and retain top-rate talents.
Policyholders liabilities and related assets are currently accounted for according to IFRS 4 phase I which generally allows the continuation of accounting policies applied prior to the conversion to IFRS. The IASB issued a Discussion Paper in May 2007 and an Exposure Draft in July 2010 in order to defi ne principles to be applied for IFRS 4 phase II. A new
While no fi nal determinations have yet been made as to which insurance groups may be designated as globally systemically important insurers (“G-SIIs”), management believes that the
October 2012 provides insights into the likely consequences which include (1) additional capital buffers for business deemed non-traditional/non-insurance, (2) greater regulatory authority over holding companies, (3) various measures to promote “structural self-suffi ciency” of group companies and reduce group interdependencies, and (4) in general, a greater level of regulatory scrutiny for G-SIIs (including a requirement to prepare recovery and resolutions plans) which will entail signifi cant new reporting and compliance burdens (and costs).
These measures, if implemented, could have far reaching regulatory and competitive implications for the AXA Group. For additional information see “Designation of the AXA Group as a Global Systemically Important Insurer may adversely impact our capital requirements, profi tability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position” in Section 3.2 “Risk Factors” of this
Finally, management expects the regulatory landscape with respect to insurance and fi nancial markets will continue to evolve in 2013 and beyond with further legislative and regulatory initiatives, including completion of the European Commission’s review of the Insurance Mediation Directive (IMD), the Markets in Financial Instruments Directive (MiFID) and implementation of the European Market Infrastructure Regulation (EMIR).
European states and/or the replacement of the Euro by one or more successor currencies, the availability and cost of credit, the stability and solvency of fi nancial institutions and other companies, the risk of future infl ation as well as defl ation in certain markets, volatile energy costs, and geopolitical issues have contributed to increased volatility in fi nancial markets
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 volume of trading activities, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. While m anagement has put in place a liquidity risk management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, if our internal sources of liquidity prove to be insuffi cient or if our liquidity requirements change so as to require additional funding, we may not be able to successfully obtain additional fi nancing (whether on favorable terms or otherwise).
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. On December 31, 2012 the
its insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position.
Claims paying and credit strength ratings have become increasingly important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. In February 2012,
December 2012, S&P downgraded the fi nancial strength rating on the core operating entities of the AXA Group from AA- to
A downgrade or the potential for a downgrade of our ratings could have a variety of negative impacts on us including (i)
damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our cost of obtaining reinsurance,
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, 2011, m anagement concluded a reduction of €943 million to the carrying value of the goodwill asset on our US life insurance business, attributable to the Accumulator Variable Annuity book of business, was required.
Under the reinsurance arrangements, other insurers or reinsurers assume a portion of the losses and related expenses under policies we issue; however, we remain liable as the direct insurer on all risks reinsured. Consequently, ceded reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. While we evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound 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.
Recognized at Fair Value” in the 2012 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 9.10.
Changes in prevailing interest rates may also negatively affect our business. Our exposure to interest rate risk relates primarily to the market price and cash fl ow variability associated with changes in interest rates. Changes in the interest rates may negatively affect the value of our assets and our ability to realize gains or avoid losses from the sale of those assets, all of which also ultimately affect earnings.
■ our investment earnings may decrease due to a decline in interest earnings on our fi xed income investments.
Conversely, in periods of increasing interest rates; ■ surrenders of life insurance policies and fi xed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns; ■ obtaining cash to satisfy these obligations following such surrenders may require us to liquidate fi xed maturity investments at a time when market prices for those assets are depressed because of increases in interest rates which may result in realized investment losses and decrease our net income; ■ accelerated surrenders may also cause us to accelerate amortization of deferred policy acquisition costs, which would reduce our net income; ■ our fee income may decrease due to a decline in the value of
Fluctuations in currency exchange rates may affect notably our reported earnings
Euro. For the year ended December 31, 2012, 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
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations and cash fl ows. For example, a strengthening or weakening of the Euro against the US Dollar and/or certain other currencies in 2013 and future periods may adversely affect AXA’s results of operations and the price of its securities. In addition, the currency hedges used by AXA to manage foreign exchange rate risk may signifi cantly impact its cash position.
(iii) negatively impact the ability of our asset management subsidiaries to retain and attract assets under management, as well as the value of assets they do manage, which may negatively impact their results of operations. In addition, in the context of certain Property & Casualty risks underwritten by our insurance subsidiaries (particularly “long-tail” risks), a sustained increase in infl ation 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,
European regulatory initiatives, it is possible that the Board of Governors of the Federal Reserve System (the “Federal
Reserve”) and/or European authorities could impose similar or other restrictions on the transfer of funds which could negatively impact the fungibility of our capital. These factors may adversely impact the Company’s liquidity position and capacity to pay dividends on its ordinary shares. For further details, see the Section 1.4 “Liquidity and capital resources” and Part 4 –
Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position”.
The profi tability of AXA’s Accumulator series of Variable Annuity products depends, among other factors, on AXA’s ability to effectively hedge the Accumulator guarantees. The Company has implemented and continues to pursue a number of initiatives, including re-design and re-pricing of certain product features, designed to improve the profi tability of these products and limit future hedging losses on the Accumulator guarantees.
and/or EEV. For example, our NBV is sensitive to interest rate movements and, consequently, an adverse evolution of interest rates may have a signifi cant impact on our NBV and a corresponding impact on the trading price of our securities.
We continually review the adequacy of the established claims reserves, including emerging claims development, and actual claims compared to the original assumptions used to estimate gross claims reserves. Based on the current information available, we believe that our claims reserves are suffi cient; however, because the establishment of claims reserves is an inherently uncertain process involving numerous estimates including the impacts of any regulatory and legislative changes and changes in economic conditions, there can be no assurance that ultimate losses will not materially exceed our claims reserves and have a material adverse effect on our results of operations. For additional information regarding the reserves with respect to asbestos claims, see “Asbestos” in
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, hacking incidence and/or other unauthorized intrusions into our websites and/or information systems, 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.
Designation of the AXA Group as a Global Systemically Important Insurer may adversely impact our capital requirements, profi tability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position
The proposed methodology is intended to identify those insurers whose distress or disorderly failure, because of their size, complexity and interconnectedness, would cause signifi cant disruption to the global fi nancial system and economic activity. Management believes that the AXA Group is likely to be among the insurance groups so designated and expects fi nal designations to be made and publicized during
These measures, if implemented, could have far reaching regulatory and competitive implications for the AXA Group and adversely impact our capital requirements, profi tability, the fungibility of our capital and ability to provide capital/fi nancial support for Group companies, our ability to grow through future acquisitions and our overall competitive position in relation to insurance groups that are not designated G-SIIs. Based on the information obtained from the IAIS, the Financial Stability
These competitive pressures could result in increased pricing pressures on a number of our products and services, particularly as competitors seek to win market share, and may harm our ability to maintain or increase our profi tability. The fi nancial crisis resulted in a number of AXA’s direct competitors receiving substantial capital injections from government authorities. While many of these institutions continue to be controlled by government authorities or to benefi t from direct or indirect government support, others have been recapitalized by their governments and subsequently sold to our competitors or re- privatized through initial public offerings or similar mechanisms. This situation may negatively impact the competitive position of AXA in certain markets and adversely affect its results of operations and fi nancial condition.
regulations in the jurisdictions where we do business. The fi nancial turmoil over the past several years gave rise to numerous legislative and regulatory initiatives (many of which focus on the fi nancial services industry) across many of the principal jurisdictions where the Group does business. While management cannot predict with certainty at this time whether or when approximately future legislative or regulatory proposals may ultimately be enacted and the fi nal form they will take, certain of these proposals, if enacted, could have a material adverse impact on our business activities, results of operations and fi nancial conditions. We expect that the multitude of new laws and regulations will increase our legal and compliance costs. In recent years there has been an increase in the number of legislative/regulatory initiatives and enforcement actions in the areas of anti-money laundering, trade sanctions and antibribery and a number of global fi nancial institutions have been the subject of well publicized enforcement actions that have resulted in very signifi cant monetary and other sanctions in these areas. These are complex areas of law that evolve on a continuing basis and which carry signifi cant fi nancial and reputational risk for non-compliance. In addition, as a global company operating in more than 50 countries around the world, we are subject to various tax regimes and regulations.
Section 3.1 “Regulation” of this Annual Report for additional information on these matters.
Interpretations Committee interpretations that were defi nitive and effective as of December 31, 2012 as adopted by the
As the IASB’s work is ongoing, m anagement cannot predict with any certainty at this time the potential impact of these proposed changes (or of other potential future modifi cations to the Standards); however, any signifi cant modifi cations to the Standards may adversely impact the Company’s results of operations and fi nancial condition.
AXA has delisted the AXA ADS from the New York Stock
or the depositary fails to meet its obligations under the Deposit
As a result of these factors, you may not be able to resell your
This framework is based on the fi ve following pillars, cemented by a strong risk culture: 1. Risk Management independence and comprehensiveness: Chief Risk Offi cers are independent from operations (“fi rst line of defense”) and Internal Audit Departments (“third line of defense”). Risk Management Department, together with Legal, Compliance, Internal Financial Control, Human
2. Shared risk appetite framework: Chief Risk Offi cers are responsible for ensuring that the top management reviews and approves the risks they carry in their company, understand the consequences of an adverse development of these risks, and have actionable plans in case of unfavourable developments.
Annuity products with guarantees, the review is centralized, and submitted to the Management Committee.
5. Robust economic capital model: AXA’s economic capital model (STEC – Short Term Economic Capital) offers a concrete and powerful metric to control and measure exposure to most risks, broadly in line with the Solvency II
Chief Risk Offi cer who reports to the Group Deputy CEO, is responsible for developing the Enterprise Risk Management framework in terms of limits/thresholds (covering fi nancial, insurance and operational risks), standards, minimum requirements or processes.
Casualty; Life & Savings), and centralize the Group’s purchasing of reinsurance. The PBRC Department also contributes to Risk
(for Life Internal Model Reviews) or independently (Life economic reserves parallel runs).
Local Chief Risk Offi cers head the local Risk Management teams within each operational entity and report both to a member of their Executive Committee (CEO/CFO) and to the Group
Line management and staff are responsible for day to day risk management and decision making and have primary responsibility for establishing and maintaining an effective control environment (fi rst line of defense).
In order to effi ciently manage local and global risks, the decision process within the risk governance structure is divided into 2 main levels: 1. the Management Committee defi nes business objectives and capital allocation with respect to investment return and risk. It also defi nes the Group appetite for risks in terms of impact on its key fi nancial indicators. The Group
Group Deputy CEO and the CEO of AXA France. This committee defi nes the implementation of investment strategy, steers tactical asset allocation, evaluates new investment opportunities and monitors the Group’s investment performance.
Group-wide community of local CIOs. His role encompasses aligning AXA’s investment strategy with the broader Group strategy, fostering closer co-operation among local entities, and enhancing methodology and decision support. The Group
ALM studies are performed by Investment & ALM Departments of all major local insurance companies, with the support of internal asset managers and local Risk Management
Departments. They use methodologies and modeling tools that develop deterministic and stochastic scenarios of the possible behaviour of the liabilities on one side, and of the behaviour of fi nancial markets and the related impacts on the assets on the other side. On the asset side in particular, such studies attempt to maximize the expected investment return of the portfolio, while limiting instability of earnings over time. Furthermore, a series of additional constraints needs to be considered, such as earnings stability, protection of the solvency margin, preservation of liquidity, as well as local and consolidated capital adequacy.
AXA’s local insurance companies are also subject to local regulatory requirements in all jurisdictions in which AXA
ALM constraints are also taken into account when new products are being designed as part of the product approval process (see Section “Insurance risk – Product approval”).
Committee, subject to an opinion from local risk management and respecting all predefi ned risk appetite limits. The strategic asset allocation allows for taking a tactical stance within a given leeway.
New investment opportunities that lack any precedent in the past, like new strategies or new structures, are subject to an
Investment Approval Process (IAP). The IAP ensures that key characteristics of the investment are thoroughly analysed, such as risk and return expectations, experience, and expertise of the investment management teams, as well as accounting, tax legal and reputational issues. The IAP is done at Group level if several local entities are investing in the same investment. In that case, the successful completion of an IAP is subject to a sign-off from GRM. The IAP is used and completed at local level.
Products that involve hedging programs based on derivative instruments are designed with the support of dedicated teams at AXA Bank Europe, AXA IM and AllianceBernstein. In a similar way, this set-up ensures that all entities benefi t from the technical expertise, legal protection and good execution of such transactions within the following governance framework.
Legal risk is addressed by defi ning a standardized master agreement. AXA business units may trade derivatives only if they are covered by legal documentation which complies with the requirements set out in this Group standard. Any change to certain mandatory provisions (defi ned in the Group standard)
The operational risk related to derivatives is measured and managed in the context of AXA’s global operational risk framework. Furthermore, four mandatory centers of expertise have been selected to centralize execution and management of derivatives and reduce operational risk: AXA Investment
AXA local companies mandate the day-to-day management of their asset portfolios primarily to the two AXA subsidiaries
guarantees; ■ a regular monitoring of the fi nancial risks on the economic and solvency position of the Company; ■ reinsurance also offers solutions to mitigate certain fi nancial risks; AXA’s exposure to market risk is strictly monitored. It is mitigated by: ■ its broad range of operations and geographical positions, which provides a high level of diversifi cation; and
■ a rise in yields on fi xed-income investments (linked to interest rates or in spreads) reduces the market value of fi xed-income investments and could impact adversely the solvency margin, and increase policyholder’s surrenders due to competitive pressures; ■ a decline in asset market value (equity, real estate, alternatives, etc.) could adversely impact the solvency margin, as well as available surplus; ■ a rise in fi nancial market volatility may increase the cost of hedging the guarantees associated with certain products
The Group policies put in place to manage these risks are tailored to each product type and the risks relating to it.
The main fi nancial risks for the AXA Group are as follows: ■ i nterest-rate, spread risk and equity risk related to the operating activities of Group subsidiaries; ■ e xchange-rate risk related to the operating activities of
foreign exchange exposure and debt; ■ c redit risk. Please read the next part “Credit risk” included in the Part 3 – Section 3.3 – “Quantitative and Qualitative
The AXA Group analyzes sensitivity to movements in interest rates and equity markets looking at two different measures: ■ s ensitivities of European Embedded Value (EEV) in the Life &
“Embedded Value” (EV) is a valuation methodology often used for long term insurance business. It attempts to measure the present value of cash available to shareholders now and in the future and accordingly is presented net of taxes and minority interests. “European Embedded Value” (EEV) is a refi nement of this methodology based on Principles issued by the CFO
IFRS shareholders’ equity at December 31 45,449 8,215 53,664 42,272 6,290 48,562
Net unrealized capital gains/losses, not included in IFRS shareholders’ equity 1,031 2,520 3,551 1,337 2,080 3,417
Unrealized capital gains projected in VIF & other stat-GAAP adjustments (6,923) - (6,923) (2,125) - (2,125)
Life & Savings Value of Inforce (VIF) 22,581 - 22,581 17,098 - 17,098
EV provides a crucial link to processes that impact total Group value but cannot be seen within the Life & Savings segment, such as hedging strategies executed at the Group level and also the impact of leverage on the Group.
However, cash fl ows are projected not only in a single scenario, but rather a stochastic set of scenarios is created, with the set maintaining the market-consistent condition that Euro 1 of any asset projected into the future gives a present value of Euro 1.
Future earnings available to shareholders are assessed across this range of stochastic scenarios, with the present value being the Life & Savings VIF. Our major assumptions include: ■ a ctuarial assumptions refl ect best estimates based on recent experience; ■ n o productivity gains in the future are assumed, while a 2.0%
The sensitivities of the Group EV to changes in major economic assumptions were calculated as follows for the 2011 and 2012 values: ■ Upward parallel shift of 100 basis points (bps) in reference interest rates simulates a sudden shock to the initial conditions. This means changes to: 1) the current market values of fi xed-interest assets, with related possible changes to projected capital gains/losses and/or fee revenues, 2) future reinvestment rates for all asset classes, and 3) risk-discount rates. Infl ation rates are not changed.
■ Downward parallel shift of 100 basis points in reference interest rates is the same as above but with a shift downward. Where the shift of 100 basis points would drop rates below 0%, they are fl oored at zero.
Upward parallel shift of 100bps in risk-free rates 2,360 6% (1,266) (3%) 1,093 3% 1,231 4% (1,487) (5%) (256) (1%)
10% higher value of equity markets at start of projection 1,211 3% 393 1% 1,604 4% 959 3% 389 1% 1,348 4%
10% lower value of equity markets at start of projection (1,271) (3%) (409) (1%) (1,680) (5%) (1,031) (3%) (373) (1%) (1,404) (4%)
Savings business of 6% to upward 100 bps and --14% to downward 100 bps (2011: 4% and -11%) show an asymmetry predominantly driven by guaranteed interest rates having higher value when interest rates decrease, while higher reinvestment rates would need to be shared with policyholders limiting shareholders’ gains in a higher rate environment.
However this classical pattern is not followed everywhere, as for certain type of business with signifi cantly low interest rate guarantees, the EEV behaves more like a portfolio of fi xedincome assets. In addition, higher interest rates affect the value both positively through higher investment rate and negatively through lower starting value of fi xed income assets and higher discount rates for future profi ts. For different product types these interactions produce different results. EEV became more sensitive to changes in interest rates, primarily as a result of the updates to policyholder behavior assumptions for Variable
2012 interest rate sensitivities (% of Group EV) for other-thanlife businesses of -3% to upward 100 bps and 4% to downward 100 bps (2011: -5% and 5%) refl ect mainly the impacts on fi xed-income assets, partly offset by derivatives and sensitivities to changes in debt value, should interest rates curve move, with all debt classifi ed as liabilities and re-measured at market value. The majority of other-than-life reserves in the fi nancial statements and therefore in TNAV is generally not sensitive to interest rate changes as not discounted in most cases.
EXCHANGE RATE RISK RELATED TO THE OPERATING ACTIVITIES OF GROUP SUBSIDIARIES
Group assets at December 31, 2012 (88% in 2011), assets and liabilities with foreign currency exposure were generally matched or hedged.
At the end of 2012, the total assets denominated in foreign currencies (mainly US Dollars) represented an amount of €16,312 million (€16,687 million in 2011). Excluding assets backing Unit-Linked contracts, the corresponding exchangerate risk was fully hedged through the use of derivatives.
AXA Germany hold €4,216 million investments denominated in foreign currencies (versus €3,799 million in 2011), both directly and indirectly through investment funds, with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments are mainly denominated in US Dollars and amounted to €3,921 million
Dollar and Swiss Francs to a lesser extent. Exchange-rate risk exposure is hedged using forwards for a notional amount of €3,837 million (notional amount of €3,459 million in 2011) and currency swaps for a notional amount of €372 million (notional amount of €403 million in 2011).
Swiss market. As a result, the entities hold foreign exchange exposure on equity securities as well as on fi xed maturities denominated in currencies other than Swiss Francs. However, the main part of the exposure is hedged back into Swiss Francs with foreign exchange swaps, options and forwards.
AXA Hong Kong holds investments denominated in foreign currencies €6,302 million (€5,716 million in 2011), both directly and indirectly through investment funds, with the aim of diversifying its investments. These investments are mainly in
US Dollar and amounted to €6,199 million (€5,583 million in 2011). Exchange-rate risk exposure is partially hedged using foreign exchange forwards.
At the end of 2012, these countries accounted for 99% of the
France controls and limits its exposure to exchange-rate risk by using forwards in all these currencies (notional of €444 million vs. €464 million in 2011).
In Belgium, parts of AXA Belgium’s reinsurance portfolio liabilities are denominated in US Dollar for an amount of €88 million
Pound Sterling, Australian Dollar and Swiss Francs exchangerate risk. AXA Germany controls and limits its exchange-rate risk by using forwards for a notional amount of €746 million
(notional €949 million in 2011), currency swaps for a notional amount of €176 million (notional €227 million in 2011) and congruent coverage for €11 million (€59 million in 2011).
Healthcare subsidiaries, which operate in pound sterling, and AXA Ireland; those entities have however diversifi ed their investment portfolios in line with asset liability management objectives as follows: • directly owned foreign-currency investments and cash of €1.21 billion (€635 million in 2011), of which €1.14 billion
(mainly fi xed income) is hedged through foreign exchange forward or cross currency swaps. Net exposure amounted to €70 million, mainly from investments in foreign equities and cash,
• EUR/USD denominated Credit Default Swaps with a nominal value of €3.2 billion (€143 million in 2011) and with minor foreign exchange exposure. Of the €3.2 billion, €1.9 billion relate to a Strategic Hedging Program put in place during Q2 2012.
These countries accounted for 92% at the end of 2012 (93% in 2011) of the Group’s Property & Casualty companies’ assets.
■ As regards holding companies (6% of Group assets at the end of 2012, same as 2011), AXA SA has, since 2001, adopted a hedging policy on net investments denominated in foreign currencies, which aims at protecting the Group’s consolidated shareholders’ equity against currency fl uctuations, using derivatives instruments and foreigncurrency debt.
At December 31, 2012, the main hedging positions were as follows: Foreign currency hedging
These limits aim to manage the default risk of a given issuer, depending on the weighted average credit rating of all the bonds pertaining to this issuer (corporate, government, stateowned companies and agencies) and take into account all
Compliance to the limits is ensured by the Group through defi ned governance. The Group Credit Risk Committee handles, on a monthly basis, the issuer exposure breaching the
At December 31, 2012, the breakdown of the debt security portfolio (€389.8 billion) by credit rating category was as follows: BBB
in AA, 22% in A, 11% in BBB, 3% in BB and lower, and 5%
At December 31, 2012, the breakdown of government and government related bonds fair values (€225 billion) by country was as follows: Switzerland
At December 31, 2012, the economic breakdown of the total value of ABS (€10.1 billion excluding assets held for sale as well as CMOs and agency pool ABS) was: Prime Residential
(a) Mainly consumer loan ABS (plus some leases and operating ABS assets)
At December 31, 2011, AXA’s invested assets included a net exposure to US subprime residential and Alt-A mortgage loans of approximately €0.7 billion (10% equaling or above AA rating).
The AXA Group, as part of its investment and credit risk management activities, use strategies that involve credit derivatives (mostly Credit Default Swaps or CDS), which are mainly used as an alternative to debt security portfolios, when coupled with government debt securities, but also as a protection on single corporate names or specifi c portfolios.
protection on the same name (negative basis trade strategy) mostly in corporate bonds mainly in Japan
The breakdown of these net CDS’s underlying debt securities by rating is as follows: High Yield/NR
At December 31, 2011, the breakdown of reserves ceded to reinsurers (€10.7 billion) by reinsurer rating was: 2% in AAA, 56% in AA, 14% in A, 11% in BBB/BB/B, and 17% in others.
At year end 2012, total invested assets of the banking segment
Credit risks are regularly reviewed by the Management Board of each bank, and are subject to regulation. For instance, AXA
Bank Europe’s internal capital adequacy assessment and strategic planning processes take into account capital required to mitigate all material risks, capital required for expected business growth, intra-risk diversifi cation benefi ts, liquidity requirements and stress testing results.
has developed and deployed common models and metrics to measure risks consistently throughout the Group (in particular via its economic capital framework). This is designed to check that the Group’s exposure is within the Group’s consolidated risk appetite limits, along a number of dimensions (earnings, value, capital and liquidity).
For the Property & Casualty and Life & Savings operations, reinsurance programs are set up as follows: ■ r einsurance placement is mainly handled centrally by AXA
P&C, AXA Global Life and GRM to optimize the quality and cost of reinsurance cover. They measure frequency risks as well as specifi c severity risks in P&C (natural catastrophes, storms, fl oods, earthquakes) and Life (mortality, geographical concentration risk); ■ e stimates of P&C catastrophic risks are carried out through the use of several catastrophe modelling softwares available in the market. Although these softwares are key to foster discussions with reinsurers, they are regularly assessed within GRM and adjusted to the specifi c features of AXA’s portfolio.
Claims reserves are estimated and booked on a fi le by fi le basis by the claims handlers. Additional reserves for incurred but not reported (IBNR) claims, along with reserves for incurred but not enough reported (IBNER) claims are also booked by reserving actuaries using various statistical and actuarial methods. These calculations are initially carried out locally by the technical departments in charge, and are then reviewed for a second opinion by local risk management teams or external technical experts.
Actuaries in charge of assessing reserves for P&C claims payable do not use a single method but a selection of approaches such as: ■ methods based on the development of claims (paid or incurred) using triangulation methods (e.g. chain ladder and link ratio) for which past experience is applied to each loss occurrence or underwriting year, in order to make reserves projections until their estimated fi nal development; ■ methods based on claims ratios (such as the ultimate claims ratio); ■ hybrid methods combining internal and exogenous data; ■ methods based on frequency and severity estimates.
The breakdown of P&C and international insurance technical reserves is mentioned in Note 21 of the notes to the consolidated fi nancial statements.
■ 11% at the end of 2012 (10% at the end of 2011) of the
■ 15% at the end of 2012 (15% at the end of 2011) cover savings products without guaranteed cash values upon surrender; ■ 21% at the end of 2012 (21% at the end of 2011) are related to savings products offering one-year guaranteed rates that are updated every year. The risks arising from a sustained fall in interest rates in the fi nancial markets are limited for these types of products. Hedging programs have been implemented to cover long-term fi xed maturities from the risk of an increase in interest rates; ■ 34% at the end of 2012 (36% at the end of 2011) cover other products. These reserves cover surrender guarantees and, in some cases, a guaranteed long-term rate. Related risks are managed in the following ways: • products that are not surrender-sensitive are usually backed by fi xed-income investments with maturities and interest rates generally suffi cient to cover guaranteed benefi ts, so as to reduce as much as possible the reinvestment risk; • derivatives may be used to hedge the risk of a fall (fl oor) or a rise (cap) in interest rates; • other products are managed with the surplus required to cover guarantees.
Through its Emerging Risks initiative, AXA has established processes to qualify and quantify emerging risks which could develop over-time and become signifi cant. This initiative also allows expertise to be shared within the underwriting and risk communities and ensures adequate underwriting policies are defi ned.
to review a specifi c risk and its potential impact in terms of insurance.
AXA has defi ned a framework to identify and measure its operational risks that may arise from a failure in its organization, systems and resources or from external events. Ensuring an adequate mitigation of these risks across the Group is a key pillar of the R isk M anagement functions.
■ the most critical operational risks of each entity and a set of transversal Group stress scenarios are assessed following a forward-looking and expert opinion approach. These risks are then aggregated using actuarial methods to estimate the capital allocation needed to cover operational risks based on advanced models. Operational Risk profi le is embedded into local governance through senior management validation to ensure adequate corrective and pre-emptive action of the main risks.
Several years ago, AXA adopted the AXA Group Compliance and Ethics Guide (“the Guide”). The Guide has been updated in 2006 and again partly in 2011. The current version of the Guide is available on the Group’s website (www.axa.com). The Guide defi nes rules for day-to-day professional conduct and covers a variety of matters, including specifi c rules concerning confl icts of interest, transactions involving AXA securities and those of its listed subsidiaries, confi dentiality and control of sensitive information as well as record keeping and retention.
Anti-Money Laundering Charter that was initially adopted in 2002. In line with this Charter, each AXA Group company is required to maintain procedures based on Group standards and principles, in addition to those required by applicable local regulations, and to appoint an anti-money laundering offi cer.
With respect to its employment practices, AXA’s key challenge is to retain employees and position itself as an employer that is able to attract top talent.
liability, professional liability and fraud and are: ■ Group-wide insurance programs covering all AXA Group entities with the exception of AXA Financial and its subsidiaries, which traditionally arrange cover within local market; ■ Reviewed and approved annually by the Management
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 4 4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
6 Value of purchased business in force (c) 2,685 3,074 3,105 7 Deferred acquisition costs and equivalent (b) 19,047 18,624 16,766
Reinsurers’ share in insurance and investment contracts liabilities 10,558 10,698 11,096 14 Deferred policyholders’ participation assets 4 1,247 636
Assets held for sale including discontinued operations 181 360 22,848 12 Cash and cash equivalents 30,546 31,072 22,095
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders (c) 113,921 104,642 108,587
Liabilities arising from investment contracts with discretionary participating features 36,350 37,858 37,233
Derivative instruments relating to insurance and investment contracts (2,053) (2,056) (742)
Payables arising from direct insurance and inward reinsurance operations 8,955 7,212 7,472
(b) As described in Note 1.2.1, comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs. The fi nal assessment of the restatement led to slightly adjust comparative restated amounts published on June 30, 2012.
Liabilities arising from investment contracts with no discretionary participating features and where the fi nancial risk is borne by policyholders 29,983 26,336 25,006
Liabilities arising from investment contracts with no discretionary participating features 251 380 720
Total Liabilities arising from other insurance and investment contracts 398,979 396,384 380,512
Fees and charges relating to investment contracts with no participating features 334 350
Net realized gains and losses and change in fair value of investments at fair value through profi t and loss (g) 14,210 (3,406)
of which change in fair value of assets with fi nancial risk borne by policyholders (h) 14,186 (4,977)
Amortization of the value of purchased business in force (188) (249)
Change in goodwill impairment and other intangible assets impairment (128) (1,206)
(a) As described in Note 1.10, the result of 2011 discontinued Canadian operations is classifi ed on a separate line of the income statement.
(f) As of December 31, 2011, notably includes impairment releases on investments sold and net realized gains on sale of Autralian and New Zealand operations (€742 million gross or €626 million net) and stake in Taikang Life (€830 million gross or €798 million net).
(k) Refer to Note 27 for the split of earnings per share between continuing and discontinued operations.
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 4 4.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Employee benefi ts actuarial gains and losses (d) - - - - -
Shareholders’ equity closing December 31, 2011 Restated (b) 2,357,198 2.29 5,398 20,471 (385)
Shareholders’ equity opening January 1, 2012 Restated (b) 2,357,198 2.29 5,398 20,471 (385)
Capital in excess of nominal value - - - 230 -
Financial expenses - Undated subordinated debt - - - - -
(a) Mainly undated subordinated debts (TSS, TSDI), and equity components of compounded fi nancial instruments (e.g convertible bonds) (see Note 13.1.1.c).
Notably dilution impact from AllianceBernstein deferred compensation (€+30 million group share offset in minority interests) and €-185 million from open-market purchase of AllianceBernstein holding units (€-121 million group share and €-64 million minority interests .
Charges related to the partial disposal of UK Life & Savings operations - 38
Net change in liabilities arising from insurance and investment contracts (e) 22,585 6,446
Income arising from investments in associates – Equity method (119) (62)
Adjustment for reclassifi cation to investing or fi nancing activities 986 (6,501)
Net cash provided by other assets and liabilities (h) (135) 21
Purchase of subsidiaries and affi liated companies, net of cash acquired (139) 11
Sales and/or repayment of loans and other assets (h) (j) 26,912 24,484
CONSOLIDATED FINANCIAL STATEMENTS FULL YEAR 2012 4 4.5 CONSOLIDATED STATEMENT OF CASH FLOWS
Purchases of equity instruments and non controlled investment funds (h) (i) (20,853) (15,430)
Net cash related to purchases and issuance of investments (h) (i) (j) (113,319) (141,739)
Net cash related to sales and purchases of tangible and intangible assets (319) (363)
Net cash impact of assets lending/borrowing collateral receivables and payables (1,392) 1,144
Other fi nancing cash impact and non cash adjustment - -
Impact of change in consolidation method and of reclassifi cations as held for sale (3) (189)
(j) Includes sales/purchases of assets backing insurance & investment contracts where the fi nancial risk is borne by policyholders.
(k) Includes net cash impact of interest margin relating to hedging derivatives on fi nancing debt.
December 31. However, certain entities within AXA have a different reporting year end, in particular AXA Life Japan, whose fi nancial year ends at September 30.
■ the Group would not have used their earlier adoption options as of today.
As a consequence, the consolidated fi nancial statements also comply with IFRSs as issued by the International Accounting
Insurance Contracts Phase II project in 2011 as well as change in US GAAP (ASU-2010-26) applicable as at January 1, 2012 for companies applying US GAAP indicated that accounting standards were moving to lower capitalization and therefore deferral of acquisition expenses. In this context, the Group changed its accounting policy on deferred acquisition costs as of January 1, 2012 and retrospectively restated comparative information related to previous periods. The change applied was in line with the updated draft wording provided at the
The adjustments on previous periods affected the following line items of the fi nancial statements: (In Euro million)
(b) Compared to restated amounts published on June 30, 2012, the fi nal assessment of the impact of the change in accounting policy led to an additional decrease in the gross amount of deferred acquisition costs of €62 million as of January 1, 2011 with a net negative impact of €41 million on shareholders equity.
The application of the following amendments to standards and interpretations as of January 1, 2012 had no material impact on the Group’s consolidated fi nancial statements: The amendment to IFRS 7 – Disclosures – Transfers of Financial
The amendment to IAS 1 – Presentation of Financial Statements, published on June 16, 2011, requires entities to group together items presented within Other Comprehensive Income based on whether they are potentially reclassifi able to profi t or loss in a subsequent period. The amendment also preserves the requirement that items in Other Comprehensive Income and profi t or loss should be presented as either a single statement or two consecutive statements. The amendment is effective for annual periods beginning on or after July 1, 2012, with early application permitted, and it is not expected to have a material impact on the Group’s consolidated fi nancial statements.
The amendment will eliminate the corridor method that allows the deferral of recognition of gains and losses. However, this method is not applied by the Group since all actuarial gains and losses are recognized through equity. The amendment will also replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defi ned benefi t liability (asset). In the 2013 Annual Report of the Group, this change will lead to a restatement in 2013 of comparative information in respect to the 2012 period. The estimated impact would be €-0.1 billion on AXA Group’s Underlying Earnings, which will be fully offset by a positive adjustment in Other Comprehensive Income
(OCI). In addition, the amendment no longer allows the deferral of past service costs, which will result in a negative but nonmaterial restatement of shareholders’ equity as of January 1, 2012. The Group does not expect any other material effect on its consolidated fi nancial statements.
The amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014 and are not expected to have a material impact on the Group’s consolidated fi nancial statements. The amendments to IFRS 7 require disclosure of
AXA’s share of equity associates’ post-acquisition profi t or loss is recognized in the income statement, and its share of post-acquisition movements in reserves is stated under “Other reserves”.
1.3.2. Business combinations and subsequent changes in the Group ownership interest
Other identifi able intangible assets such as the value of customer relationships should be recognized. The value of customer relationships intangible represents the value of future cash fl ows expected from renewals and the cross-selling of new products to customers known and identifi ed at the time of the acquisition. These projections include assumptions regarding claims, expenses and fi nancial revenues, or they can be estimated on the basis of the New Business Value. In line with accounting practices in force before the adoption of
VBI. For business combinations that occurred before January 1, 2009, any contingent element was included in the cost of the combination to the extent the adjustment was probable and could be measured reliably. If the future events do not occur or the estimate needs to be revised, the cost of the business combination continues to be adjusted accordingly, taking account of the impact in terms of additional goodwill and/or adjustments of the valuation of acquired assets and liabilities.
If, after the period of twelve months, a deferred tax asset, initially considered as not recoverable, fi nally meets the recognition criteria, the corresponding tax benefi t is recorded in the consolidated statement of income without a corresponding adjustment in goodwill.
This asset is tested for recoverability and any amount above future estimated gross profi ts is expensed. DAC are also tested through the liability adequacy test (see paragraph 1.13.2).
(DOC) (see Note 7) but limited to costs directly attributable to the provision of investment management services. This asset is amortized by taking into account projections of fees collected over the life of the contracts. The amortization of
DOC is reviewed at each closing date to refl ect changes in assumptions and experience. This asset is also tested for recoverability.
At inception, the option to designate fi nancial investments and liabilities at fair value with change in fair value recognized through income statement is mainly used by the Group in the following circumstances: ■ fi nancial investments when electing the fair value option allows the Group to solve accounting mismatch, and in particular: • assets backing liabilities arising from contracts where the fi nancial risk is borne by policyholders,
Assets designated as available-for-sale, trading assets, investments designated as at fair value through profi t or loss and all derivatives are measured at fair value, i.e. the amount for which an asset could be exchanged, between knowledgeable, willing parties in an arm’s length transaction. The Group applies the IAS 39 fair value hierarchy as detailed in Note 9.10 .
AXA assesses at each balance sheet date whether a fi nancial asset or a group of fi nancial investments at (amortized) cost or designated as “available for sale” is impaired. A fi nancial asset or group of fi nancial investments is impaired when there is objective evidence of impairment as a result of one or more events and this event has an impact on the estimated future cash fl ows of the asset(s) that can be reliably estimated.
The Group also documents the hedge effectiveness, both at inception and on an ongoing basis, indicating the actual or expected effi ciency level of the derivatives used in hedging transactions in offsetting changes in the fair values or cash fl ows of hedged underlying items.
concerned are measured at the lower of net carrying value and fair value net of selling costs. They are presented in separate asset and liability items on the balance sheet. The liabilities of subsidiaries (excluding shareholders’ equity) held for sale are entered separately on the liability side of the consolidated balance sheet, with no netting against assets.
A number of insurance and investment contracts contain discretionary participating features. These features entitle the contract holder to receive additional benefi ts or bonuses on top of these standard benefi ts: ■ they are likely to represent a signifi cant portion of the overall contractual benefi ts; ■ their amount or timing is contractually at the discretion of the
The main characteristics of the accounting principles applied prior to IFRS and retained after the conversion to IFRS are as follows: ■ r eserves must be suffi cient; ■ l ife reserves cannot be discounted using a discount rate higher than prudently estimated expected assets yield; ■ a cquisition costs are deferred to the extent recoverable and amortized based on the estimated gross profi ts emerging over the life of the contracts; ■ p roperty and Casualty claims reserves represent estimated ultimate costs. Post claims reserves are generally not discounted, except in limited cases (a detail of discounted reserves is shown in Note 14.9).
Some guaranteed benefi ts such as Guaranteed Minimum Death or Income Benefi ts (GMDB or GMIB), or certain guarantees on return proposed by reinsurance treaties, are covered by a risk management program using derivative instruments. In order to minimize the accounting mismatch between liabilities and hedging derivatives, AXA has chosen to use the option allowed under IFRS 4.24 to re-measure its provisions: this revaluation is carried out at each accounts closing based on guarantee level projections and considers interest rates and other market assumptions. The liabilities revaluation impact in the current period is recognized through income, symmetrically with the impact of the change in value of hedging derivatives. This change in accounting principles was adopted on the fi rst time application of IFRS on January 1, 2004 for contracts portfolios covered by the risk management program at that date. Any additional contracts portfolios covered by the risk management program after this date are valued on the same terms as those that applied on the date the program was fi rst applied.
Shadow accounting and Deferred policyholders Participation Asset (DPA) or Liability (DPL)
The estimated discretionary participating feature of such contracts is fully recognized in the liabilities. As a consequence, there is no component recognized as an equity component and AXA does not need to ensure the liability recognized for the whole contract is not less than the amount that would result from applying IAS 39 to the guaranteed element.
When net deferred participation asset is recognized, the Group uses liquidity analyses performed by the entities to assess the capacity to hold assets showing unrealized loss position, if any, generating such debits. The Group then performs projections to compare the value of assets backing policyholders’ contracts with expected payments to be made to policyholders.
charged to policyholders, i.e. profi t sharing between policyholders and shareholders.
Depending on the type of business, the future investment cash fl ows and discounting may be based on a deterministic best estimate rate, with corresponding participation, or in the case of Guaranteed Minimum Benefi ts, stochastic scenarios. Testing is performed either by a comparison of the reserve booked net of related assets (DAC, VBI, etc. ) directly with discounted cash fl ows, or by ensuring that the discounted profi t net of participation from release of the technical provisions exceeds net related assets.
Sensitivities to interest rate risk and equity risk are disclosed in
This category includes mainly Unit-Linked contracts that do not meet the defi nition of insurance or investment contracts with discretionary participating features. For these Unit-Linked contracts, the liabilities are valued at current unit value, i.e. on the basis of the fair value of the fi nancial investments backing those contracts at the balance sheet date together with Rights to future management fees, also known as Deferred origination costs (DOC, described in paragraph 1.6.3).
The measurement of deferred tax liabilities and deferred tax assets refl ects the expected tax impact, at the balance sheet date. That would follow the way the Group expects to recover or settle the carrying amount of its assets and liabilities. When income taxes are calculated at a different rate if dividends are paid, deferred taxes are measured at the tax rate applicable to undistributed profi ts. The income tax consequences of dividends are only accounted when a liability to pay the dividend is recognized.
(Autorité des Normes Comptables). The cost of the leveraged formula plan is valued by taking into account the fi ve-year lock-up period for the employees (as in the traditional plan) but adding the value of the advantage granted to the employees by enabling them to benefi t from an institutional derivatives-based pricing instead of a retail pricing.
(including any embedded surrender option, i.e. without taking into account the “insurance” component); ■ the Group accounting methods do not otherwise require to recognize all obligations and rights arising from the “deposit”
Changes in unearned premium reserves net of unearned revenues and fees include both the change in the unearned premiums reserve reported as a liability (see “Unearned premiums reserves” in paragraph 1.13.2) and the change in unearned revenues and fees. Unearned revenues and fees correspond to upfront charges for future services recognized over the estimated life of insurance and investment contracts with discretionary participating features (see “Unearned revenues reserves” in paragraph 1.13.2) and investment contracts with no discretionary participating features (see paragraph 1.13.3 “Unearned fees reserves”).
Revenues from other activities mainly include: ■ commissions received and fees for services relating to asset management activities; ■ insurance companies revenues from non insurance activities, notably commissions received on sales or distribution of fi nancial products; and
AXA Affi n General Insurance Berhad (b) 42.41 42.41 42.41 42.41
Servis Life SA Merged with AXA Belgium SA - - 100.00 100.00
AXA Aurora Vida, S.A. de Seguros (Spain) 99.96 99.78 99.96 99.78
(a) Change in scope for UK Life and savings in 2012: SBJ Group Limited is deconsolidated (since July 1, 2012) following Bluefi n Corporate Consulting (BCC) sale in April 2012.
(b) AXA Group has a full control given the shareholders’ agreements.
(a) The increase in the Group share of interests is due to the buy-back from the Mutuelles of AXA Investment Managers holding units to fund share-based compensation programs,
(b) The increase in the Group share of interest is due to the open-market purchase of holding units to fund deferred and share-based compensation programs.
As of December 31, 2012, investment funds represented a total of €104,031 million invested assets (€95,961 million at the end of 2011), corresponding to 261 investment funds mainly in
2.1.3. Main investments in companies accounted for using the equity method
ICBC-AXA Life Insurance Co. Ltd (previously AXA Minmetals Assurance Co Ltd) (a) 27.50 27.50 51.00 51.00
In 2008, AXA France invested in Arche Finance, an investment vehicle dedicated to credit investments, which entered the scope of consolidation in June 2008 with a loan of €200 million.
In 2009, AXA set up a Group fi nancing and cash management
The Property & Casualty Global business line is responsible for: ■ defi ning common Property & Casualty strategy; ■ accelerating effi ciency gains; ■ building common platforms; ■ leveraging global technical expertise.
The Life & Savings segment aggregates nine geographic operating components: France, the United States, the
Property & Casualty: This segment includes a broad range of products including mainly m otor, h ousehold, property and general liability insurance for both personal and commercial customers (commercial customers being mainly small to medium-sized companies). In some countries, this segment includes h ealth products. The Property & Casualty segment aggregates seven geographical operating components (France,
Solutions Assurance. These products provide coverage to large national and international corporations. This segment also includes assistance activities, life reinsurance activities in run-off primarily AXA Corporate Solutions Life Reinsurance
The Banking segment includes banking activities (mainly retail banking, mortgage loans, savings) conducted primarily in France, Belgium, Germany and Central & Eastern Europe
The Holding companies segment (that includes all nonoperational activities), also includes some investment vehicles including certain Special-Purpose Entities (SPE).
Net revenues from banking activities - - - - 468 - (8) 460
Net realized gains and losses and change in fair value of other investments at fair value through profi t or loss (c) 14,753 (49) 18 53 - (574) 8 14,210 of which change in fair value of assets with fi nancial risk borne by policyholders 14,195 - - - - - (9) 14,186
(a) Revenues net of intercompany eliminations amounted to €55 billion for Life & Savings, €28 billion for Property and Casualty and €3 billion for International Insurance (see Note 21).
(c) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’equity.
Change in tangible assets impairment 19 (1) - - - 1 - 19
Charges related to the partial disposal of UK Life & Savings operations - - - - - - - -
Other operating income and expenses (79,801) (27,966) (3,011) (3,152) (506) (610) 638 (114,410)
Net revenues from banking activities - - - - 523 1 (45) 479
Net realized gains and losses relating to investments at cost and at fair value through shareholders’equity (e) 2,006 373 54 (4) - 723 - 3,153
Net realized gains and losses and change in fair value of other investments at fair value through profi t or loss (f) (2,861) (150) (26) (77) - (258) (34) (3,406)
of which change in fair value of assets with fi nancial risk borne by policyholders (4,968) - - - - - (8) (4,977)
(f) Includes net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’equity.
Net consolidated income - Minority interests 126 31 2 (8) 2 38 - 190
(b) As described in Note 1.2.1, comparative information related to previous periods was retrospectively restated for the voluntary change in accounting policy on deferred acquisition costs.
Please refer to pages 156 to 159 of the “Quantitative and
An analysis of goodwill is presented in the table below: (I n Euro million) Transaction year
The total goodwill Group share amounted to €14,783 (1) million as of December 31, 2012 and €14,845 (1) million as of December 31, 2011.
Rosenberg and other AXA IM transactions 1999 & 2005 184 - - - 184 (d) -
In this table, goodwill excludes goodwill related to entities accounted for using the equity method (see Note 10).
Other cash-generating units wich have a goodwill below €30 million 37
(a) Includes €-141 million from the disposal of Canadian operations (translated by using exchange rate as of September 23, 2011) and €-80 million from the disposal of Denplan.
Group’s business is subject. For each CGU, sensitivity analyses were performed with regards to the discount rate: an increase of 0.5% points in the discount rate would lead to an impairment loss for none of the CGU as the recoverable amount would still exceed the carrying value for each of them.
Kong. The value of the distribution agreement is recognised as an intangible asset of €142 million in Hong Kong and €3 million in Singapore and will be amortized over 10 years.
(1) Translated from US Dollar to Euro using the exchange rate as of December 31, 2012.
Deferred acquisition costs and equivalent relating to Property & Casualty and International Insurance 1,803 1,686
Life & Savings deferred acquisition costs and equivalent net carrying value as of January 1 16,102 836 14,248 723
Life & Savings deferred acquisition costs and equivalent net carrying value as of December 31 16,312 932 16,102 836
The value of Life & Savings deferred acquisition costs and equivalent, net of amortization, unearned revenue reserves and unearned fee reserves, was as follows: (I n Euro million)
Unearned revenues and unearned fees reserves 2,335 562 2,475 501 of which shadow unearned revenues reserves (416) - (138) -
Intangible assets recognized in business combinations 3,058 617 53 2,388 2,378
(a) Includes the intangible asset recognized following the 2010 pension law reform in France.
The amortization period for intangible assets recognized in business combinations with a fi nite useful life ranges from 10 to 20 years.
Investment in real estate properties at amortized cost 20,348 15,968 2.64%
Investment in real estate properties designated as at fair value through profi t or loss (a) 1,224 1,224 0.20%
Debt instruments (at cost) that are not quoted in an active market (c) 6,191 5,998 0.99%
Non consolidated investment funds designated as at fair value through profi t or loss (a) 5,326 5,326 0.88%
Each investment item is presented net of the effect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges) except derivatives related to macro-hedges which are shown separately. Detailed effects of derivatives are provided in Note 20.3.
Debt instruments designated as at fair value through profi t or loss (a) (b) 25,775 25,775 4.53%
Non consolidated investment funds designated as at fair value through profi t or loss (a) 5,010 5,010 0.88%
Investments (excluding those backing contracts where the fi nancial risk is borne by policyholders) 440,103 434,826 76.41%
Breakdown of the carrying value and fair value of investments in real estate properties at amortized cost, excluding the impact of all derivatives: (I n Euro million)
Managers in which AXA has no material investment but exercises control under IFRS principles.
Debt instruments (at cost) that are not quoted in an active market 6,010 6,203 6,010 232 39 6,791 6,742 6,791 97 146
Non consolidated investment funds available for sale 5,513 6,368 6,368 940 84 6,020 6,820 6,820 895 96
Debt instruments (at cost) that are not quoted in an active market 1,817 1,817 1,817 - - 4,364 4,364 4,364 - -
Debt instruments available for sale 317,299 351,430 351,430 36,545 2,414 321,961 334,490 334,490 20,785 8,255
Debt instruments (at cost) that are not quoted in an active market 7,827 8,020 7,827 232 39 11,155 11,106 11,155 97 146
Equity instruments available for sale 12,655 15,241 15,241 2,637 52 11,749 13,636 13,636 2,291 404
Non consolidated investment funds available for sale 5,899 6,754 6,754 940 84 6,195 7,000 7,000 900 96
(b) Includes fi xed maturity investment funds and debt securities related to reverse repo.
Fair value Carrying value Fair value Carrying value 9.5. CONTRACTUAL MATURITIES AND EXPOSURE TO INTEREST RATE RISK
Equity instruments as of December 31, 2012 8,645 5,162 1,234 1,319 1,505 1,088 921 2,458 22,332
Equity instruments as of December 31, 2011 7,415 4,030 1,404 1,275 1,605 1,024 758 1,980 19,490 9.7. TRANSFERS OF FINANCIAL ASSETS NOT QUALIFYING FOR DERECOGNITION
The Group is party of repurchase agreements and securities lending transactions under which fi nancial assets are sold to a counterparty, subject to a simultaneous agreement to repurchase these fi nancial assets at a certain later date, at an agreed price.
While substantially all of the risks and rewards of the fi nancial assets remain with the Group over the entire lifetime of the transaction, the Group does not derecognize the fi nancial assets. The proceeds of the sale are reported separately. Interest expense from repurchase and security lending transactions is accrued over the duration of the agreements.
The breakdown of fi nancial assets/liabilities not qualifying for derecognition at December 31, 2012 was as follows: (I n Euro million)
Other non consolidated investment funds 5,584 477 6,061 7,022 254 7,276
Debt instruments available for sale 317,609 (1,340) 316,269 34,067 350,336 323,801 (2,474) 321,327 12,227 333,554
Debt instruments (at cost) that are not quoted in an active market 7,806 - 7,806 9 7,815 11,144 - 11,144 9 11,153
The Group applies the IAS 39 fair value hierarchy as described below for both assets measured at fair value and assets at cost for which fair value is disclosed in the previous Notes.
The amount of assets for which fair value is determined in whole directly by reference to an active market is disclosed in l evel 1 of the table shown below in Note 9.10.2.
Valuation techniques are subjective in nature and signifi cant judgment is involved in establishing fair values for fi nancial assets. They include recent arm’s length transactions between knowledgeable willing parties on similar assets if available and representative of fair value and involve various assumptions regarding the underlying price, yield curve, correlations, volatility, default rates and other factors. Unlisted equity instruments are based on cross checks using different methodologies such as discounted cash fl ows techniques, price earning ratios multiples, adjusted net asset values, taking into account recent transactions on instruments which are substantially the same if concluded at arm’s length between knowledgeable willing parties, if any. The use of valuation techniques and assumptions could produce different estimates of fair value.
based on quoted market prices for similar instruments or underlyings (index, credit spread, etc.) whenever such directly observable data are available and valuations are adjusted for liquidity and credit risk.
The breakdown by valuation method of fi nancial assets recognized at fair value excluding derivatives (detailed in Note 20.3 and
Note 20.5) and assets backing contracts where the fi nancial risk is borne by policyholders is as follows: (I n Euro million)
Financial investments and loans available for sale 228,597 140,472 4,356 373,425 175,848 175,181 4,097 355,126
Other assets held by consolidated investment funds designated as at fair value through profi t or loss 1,522 2,327 903 4,752 1,801 2,804 809 5,414
TOTAL FINANCIAL INVESTMENTS AND LOANS ACCOUNTED FOR AT FAIR VALUE 251,700 161,171 10,123 422,994 192,381 197,572 10,200 400,153
Note 9.10.1 above. The Group applies the IAS 39 fair value hierarchy.
Fair values determined in whole directly by reference to an active market relate to prices which are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis, i.e. the market is still active. Such assets are categorized in the l evel 1 of the IAS 39 fair value hierarchy.
The common characteristic of l evel 2 and 3 assets is that their related market is considered as inactive. Their value is generally based on mark to market basis, except when there is no market or when the market is distressed, in which case a mark to model approach is used. Assets not quoted in an active market which are marked to market are classifi ed in l evel 2. For all assets not quoted in an active market/ no active market and for which a mark to model approach is used, the classifi cation between l evel 2 and l evel 3 depends on the proportion of assumptions used supported by market transactions and observable data: ■ assumed to be used by pricing services, or