CONSOLIDATED FINANCIAL STATEMENTS 191 4.1 Consolidated statement of fi nancial position 192 4.2 Consolidated statement of income 194 4.3 Consolidated statement of comprehensive income 195 4.4 Consolidated statement of changes in equity 196 4.5 Consolidated statement of cash fl ows 200 4.6 Notes to the Consolidated Financial Statements 202 4.7 Report of the Statutory Auditors on the Consolidated Financial Statements 336
CERTAIN ADDITIONAL INFORMATION 339 5.2 Description of AXA’s share capital 344
as well as in Article 222-3 of the AMF General Regulations (Règlement Général de l’AMF) (please refer to the table page 408 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, 2015, 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
Board of Directors and are presented in the table page 405 of this Annual Report).
anonyme organized under the laws of France, which is the publicly traded parent company of the AXA Group, and (ii) “AXA
“Euronext Paris”. The Company’s American Depositary Shares are referred to in this Annual Report as “ADS”. Since the delisting of AXA’s ADS from the New York Stock Exchange on March 26, 2010, AXA’s ADS are traded on the U.S. over-the-counter market and are quoted on the OTCQX platform under the ticker symbol
The average and closing exchange rates used in the preparation of the C onsolidated F inancial S tatements, to translate into Euro the results of operations of the principal subsidiaries that are not denominated in Euro, are set out in the table below: E nd of Period Exchange Rate Average Exchange Rate
Cautionary statements concerning the use of non-GAAP measures and forward-looking statements
This Annual Report includes certain terms that are used by AXA
Subsequent events after December 31, 2014 impacting AXA’s liquidity 92 1 THE AXA GROUP
The selected historical consolidated fi nancial data presented below has been derived from AXA’s consolidated fi nancial statements and related notes for the years ended December 31, 2014 and 2013 in accordance with IFRS.
(b) Includes investment income net of investment management costs, impairment, net realized investment gains and losses and net unrealized investment gains and losses on assets with fi nancial risk borne by the policyholders and on assets designated as at fair value through profi t & loss.
(d) Shareholders’ equity per share is calculated based on the actual number of outstanding shares at each period-end presented. The calculations deduct shares held by AXA and its subsidiaries (i.e. treasury shares) in the calculation of outstanding shares. Undated debt is excluded from shareholders’ equity for this calculation.
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,
A dividend of €0.95 per share for the 2014 fi scal year will be proposed to the Shareholders’ Meeting to be held on April 30, 2015.
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2015.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2015. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.38 per share for fi scal year 2014.
AXA is a French société anonyme (a corporation) existing under the laws of France. The Company’s registered offi ce is located at 25 avenue Matignon, 75008 Paris, France and its telephone number is +33 (0) 1 40 75 57 00. AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The
by AXA’s asset management subsidiary Alliance Capital, which subsequently changed its name to AllianceBernstein; (2) the minority interest in AXA Financial; and (3) Japanese life insurance company, Nippon Dantaï Life Insurance Company.
Sale of (1) AXA’s Australian & New Zealand operations and acquisition of the AXA APH Asia Life operations; and (2) AXA
Launch of ICBC-AXA Life, a new life insurance joint venture in
Sale of the mandatory Pension business in Hong Kong to The
At March 11, 2015, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
December 31, 2014 of €1,277 billion. Based on available information at December 31, 2014, AXA was the world’s 10th largest asset manager (1).
Pacifi c Region and, to a lesser extent, in other regions including the Middle East, Africa, and Latin America.
(1) Ranking established by AXA based on the information available as of September 30, 2014.
AXA offers a broad range of Life & Savings products including Individual and Group savings products, as well as Life and Health products for both individual and commercial clients.
Fees and charges relating to investment contracts with no participating feature 327 323
(b) Includes Spain, Italy, Portugal, Turkey, Greece, Morocco, Mexico and Colombia.
Western Europe, the United States and Asia-Pacifi c. In addition, AXA offers Investment and Saving products as well as Life and Health products in a number of other jurisdictions including Latin America, Central and Eastern Europe and
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
Life & Savings products offered by AXA include Term life, Whole life, Universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. The Health products offered include critical illness and permanent health insurance products. The types and specifi cities of the products offered by AXA vary from market to market.
Gross written premiums (a) by main product lines-Years ended December 31,
Proprietary channels include exclusive agents, salaried sales forces and direct sales. Non-proprietary channels include brokers, independent fi nancial advisors, aligned distributors or wholesale distributors and partnerships.
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, in return of a commission, 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 an exclusive or non exclusive distribution arrangement.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2014 and 2013, is presented below: Based on gross revenues in 2014
AXA is present; ■ become a leader in the international health insurance niche; and
The table below summarizes AXA’s Property & Casualty consolidated gross revenues (after inter-segment eliminations) and gross insurance liabilities by geographic region for the periods and at the indicated dates.
The principal competitive factors are as follows: ■ price; ■ quality of service; ■ distribution network; ■ brand recognition; ■ ratings for fi nancial strength and claims-paying ability; and
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)
(Marine, Aviation, Space) worldwide; ■ AXA Global Life and AXA Global Property & Casualty are in charge of analysis, structuring and placement of reinsurance treaties on behalf of AXA Group insurance companies to 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 is the Group subsidiary committed to helping its customers in diffi cult situations. AXA Assistance operates through four Business Lines (Vehicle, Travel, Health and Home) to offer customer focused services; ■ AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios; ■ AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in run-off, notably managing a book of reinsurance contracts of Variable
AXA Corporate Solutions Assurance: In the global risks market, AXA Corporate Solutions Assurance and its competitors 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. AXA Corporate
AXA Assistance is one of the leading worldwide assistance companies (1), in a market where traditional assistance companies are developing their activities outside their home markets, while new players are focusing on limited product lines. AXA Assistance provides services to banking and insurance companies, tour operators, telecommunications operators, gas, water and electricity utilities and automobiles manufacturers.
The table below presents the International Insurance segment’s gross written premiums and gross insurance liabilities by major product for the periods and at the dates indicated: GROSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
Years ended December 31, Gross insurance liabilities at December 31, 20142014 2013
The table below sets forth the total assets managed by AXA’s asset 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 provides diversifi ed investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA and its insurance subsidiaries (which collectively are AllianceBernstein’s largest client). AllianceBernstein Holding L.P., “AB Holding” is listed on the New York Stock Exchange under the ticker symbol “AB”.
At December 31, 2014, AllianceBernstein had €412.6 billion of assets under management, including €300.0 billion of assets managed on behalf of third party clients (2013: €345.9 billion and €250.8 billion, respectively). AllianceBernstein accounted for €2,175 million or 65% of the asset management segment consolidated gross revenues for the year ended December 31,
AXA IM, headquartered in Paris, is a signifi cant player in the international asset management business. AXA IM provides its clients with a wide range of global products and expertise principally via Mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom Mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and Unit-Linked fund backing insurance products. AXA IM’s expertises include (i) AXA Fixed Income,
At December 31, 2014, AXA IM had €623.0 billion of assets under management, including €222.3 billion of assets managed on behalf of third party clients (2013: €546.7 billion and €187.7 billion, respectively). AXA IM accounted for €1,151 million or 35% of asset management segment consolidated gross revenues for the year ended December 31,
The operations in the Banking segment are conducted primarily in Belgium, France and Germany. For the years ended December 31, 2014 the Banking segment accounted for €564 million (2013: €524 million), or less than 1% of AXA’s consolidated gross revenues (2013: less than 1%).
AXA Bank products and services in Belgium are mainly distributed by a network of 671 exclusive independent (1) bank agents. The bank’s products and offers are linked with insurance business and are primarily focused on retail products.
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 44,000 clients (1)
at year-end 2014. The major activities of AXA Bank are loans and deposits. These products are mainly sold through the tied agent network of AXA Germany.
(1) Information established by AXA based on data available for the year 2014.
The Life & Savings market experienced a strong premium income growth in mature markets, driven by both in-force premiums and new business. In Europe, despite the low interest rates environment, the Life & Savings market experienced a strong growth in 2014, notably in France, Italy and the UK, supported by the increased attractiveness of both Unit-Linked products and G/A Savings hybrid products (1) in a strong equity market environment. The US market experienced a more moderate growth, with demand impacted by both higher prices and low income growth. In a declining interest rates environment both in
Growth accelerated signifi cantly in most emerging markets, especially in China, India and most other Asian countries. In
China, insurers have expanded into new distribution channels and exploited cross-selling opportunities. In Latin America, the Life & Savings market experienced a deceleration and the growth turned negative in Central and Eastern Europe led by the decline in the single premium business in Poland as a result of regulatory changes and new guidelines in the bancassurance segment.
France 3 8.8 3 8.7 FFSA as of December 31, 2014 and 2013.
Germany Life - - 8 3.8 Market Factbook 2013. 2014 information not available.
Belgium 3 12.1 3 14.0 Assuralia (Belgium Professional Union of Insurance companies). Based on September 30, 2014 and 2013. Figures measured on gross written premiums.
Portugal 11 1.1 11 1.2 Portuguese Insurance Association as of September 30, 2014 and 2013.
Indonesia 2 10.5 2 13.5 AAJI Statistic as of September 2014 for 2014 and December 31, 2013 for 2013 (measured on Weighted New Business Premium).
China 14 1.0 12 0.9 CIRC statistics as of November 30, 2014 and 2013 (measured on total premium income).
Philippines - - 3 10.7 Insurance Commission as of December 31, 2013 (measured on total premium income). 2014 information not available.
In 2014, the global Property & Casualty (P&C) market experienced a more moderate growth than in 2012 and in 2013.
In mature countries, the P&C market experienced a limited slowdown, with growth sustained by moderate tariff increases in both Individual and Commercial lines, especially in Germany,
Ireland - 1 Central Bank of Ireland Statistical Review 2013. 2014 information not available.
Germany - - 4 5.9 Market Factbook 2013. 2014 information not available.
Portugal 4 7.5 4 7.6 Portuguese Insurance Association as of September 30, 2014 and 2013.
Mexico 1 13.3 1 13 AMIS (Asociacion Mexicana de instituciones de Seguros) as of September 30, 2014 and 2013.
Morocco - - 3 15.4 Moroccan Association of Insurance Companies as of December 31, 2013. 2014 information not available.
The Gulf Region - - 4 4.1 Regulator report as of December 31, 2013. 2014 information not available.
Hong Kong 1 - 1 6.0 Offi ce of the Commissioner of Insurance (OCI) as of September 2014 and as of December 2014. Market share not available as of September 2014.
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, AXA’s subsidiary dedicated to worldwide Property, Liability, Aviation, Marine and
Space insurance, prevention and claims management of large national and multinational corporations, ranks amongst the main carriers worldwide (1).
Risky assets witnessed a year of mixed performance. Growing optimism marked the fi rst half with a decent performance of just below +10%. However, the Ukrainian crisis unsettled markets, in particular after the summer recess as growth angst rose due to weaker than expected Eurozone macro data and the subsequent downward revisions of growth forecasts by the IMF in early October which were received negatively by the markets. Hopes that the monetary policy would again ‘save the day’ helped stock markets recover and end the year on a positive note returning +10% for global investors, roughly
In this context, retail investors have turned their attention to US
Managers ranked 20th (2) and AllianceBernstein 27th (2) based on the volume of assets under management. On a combined basis, AXA ranked 10th (2).
(1) Ranking established by AXA based on information available at the end of 2014.
The Dow Jones Industrial Average Index in New York increased by 7.5% and the S&P 500 index increased by 11.4% in 2014.
Index increased by 2.5%. The S&P 500 implied volatility Index increased from 13.7% on December 31, 2013 to 19.2% on
The US 10-year T-bond ended 2014 at 2.17%, a decrease of 87 bps compared to December 31, 2013. The 10-year German
The 10-year Japanese government bond ended 2014 at 0.33%, a decrease of 41 bps compared to December 31, 2013. The 10-year Belgium government bond ended 2014 at 0.82% (174 bps decrease compared to December 31, 2013).
In Europe, the iTRAXX Main spreads decreased by 7 bps to 63 bps compared to December 31, 2013 while the iTRAXX
Crossover increased by 59 bps to 346 bps. In the United
States, the CDX Main spread Index increased by 4 bps to 66 bps.
In this context, Euro depreciated against main currencies compared to 2013, as shown below: End of Period Exchange Rate Average Exchange Rate
(a) Yen average exchange rate used for the fi fteen months ending December 31, 2013 used for full year 2013 accounts profi t or loss.
On April 24, 2013, AXA announced it had entered into an agreement with Tian Ping Auto Insurance Company Limited
On February 20, 2014, AXA announced the completion of the acquisition. The acquired operations have been integrated in the scope of the Asian Region and accounted for using the
equity method since February 20, 2014. The fi nal acquisition cost was RMB 4.1 billion (or €495 million (1)), corresponding to a 50% stake. AXA and Tian Ping’s current shareholders jointly control Tian Ping. AXA’s previously existing Chinese P&C
On November 11, 2013, AXA announced it had entered into an agreement with Grupo Mercantil Colpatria to acquire a 51% stake in its composite insurance operations in Colombia
Life & Savings. It benefi ts from a strong position in Property &
The cash consideration would amount to PLN 570 million upfront (or €136 million (6)), subject to price adjustment at completion, and an additional deferred consideration of up to PLN 31 million (or €7 million), subject to achieving certain targets and meeting certain conditions.
This transaction would allow AXA to strengthen materially its distribution reach in Poland through access to mBank’s innovative and fast-growing multi-channel distribution model, while shifting its business mix towards more Property &
Protection and Household Insurance. It is a fast-growing company with 17% annual premium growth from 2010 to 2014. With most of its motor policies sold online, it would allow
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to take place in the fi rst half of 2015.
On December 8, AXA announced that it had completed the acquisition of 100% of Assur Africa Holdings (8) (“AAH”) which held a 77% stake in the composite insurance company
Mansard Insurance plc, for a total consideration of €198 million (9). The acquired operations have been included within the Mediterranean & Latin American Region.
(6) EUR 1 = PLN 4.1936 as of September 10, 2014.
Mansard is the #4 insurance provider in Nigeria with operations in both Property & Casualty (#4 with 5% market share) and Life
AXA completed the sale of its Hungarian Life & Savings insurance operations
On June 3, 2014, AXA announced it completed the sale of its
This transaction triggered an exceptional capital loss of €50 million, which was accounted for in Net Income in 2013.
AXA to sell its mandatory Pension business in Hong Kong to The Principal Financial Group
On November 7, 2014, AXA announced it had entered into an agreement with The Principal Financial Group (“The
businesses in Hong Kong. In conjunction, The Principal would enter into an exclusive distribution agreement with AXA
ORSO mandatory schemes, for 15 years. Under the terms of the agreement, the total cash consideration payable at closing would amount to HKD 2.6 billion (or €270 million) (4).
On December 18, 2014, AXA announced it had entered into an agreement with Certinvest and SIF Transilvania to sell its Life & Savings insurance operations in Romania and exit the Romanian market. Under the terms of the agreement,
Certinvest would acquire a stake of 70% in AXA’s Romanian subsidiary, AXA Life Insurance S.A., while SIF Transilvania would acquire the remaining stake of 30%.
The parties agreed not to disclose the terms and conditions of the transaction.
Termination of the sale and purchase agreement between AXA and Astra Asigurari
(4) EUR 1 = HKD 9.6200 as of November 6, 2014.
(5) Source: Industry research, MPF Market Shares Report for December 2013.
January 2034 and fl oating thereafter with a step up of 100 bps.
The notes are treated as capital from a regulatory and rating agencies’ perspective within applicable limits. The transaction has been structured to comply with the expected eligibility criteria for Tier 2 capital treatment under Solvency II.
On May 16, 2014, AXA announced the successful placement of EUR 1 billion of Reg S undated subordinated notes to institutional investors. The initial spread over swap was 225 bps. The initial coupon was set at 3.875% per annum. It will be fi xed until the fi rst call date in October 2025 and reset thereafter every 11 years with a 100 bps step-up.
The notes are treated as capital from a regulatory and rating agencies’ perspective within applicable limits. The transaction has been structured to comply with the eligibility criteria for the 50% perpetual subordinated debt limit under Solvency 1 and in order to be eligible as Tier 1 grandfathered capital under
o/w. fees and revenues from investment contracts with no participating feature 327 323 323 -
shareholders’ equity of AXA in Switzerland and on earnings translation in 2015. In addition, the decisions of the SNB are expected to affect signifi cantly the fi nancial and economic environment of AXA Winterthur including long term government bond yields, stock market performance and economic growth in Switzerland.
European Central Bank (ECB) announced on January 22, 2015 an extension of its asset (sovereign bonds, covered bonds and
Private Equity in 2013 (€+0.2 billion or +0.2 point), (v) the acquisition of Colpatria’s insurance operations in Colombia in 2014 (€-0.6 billion or -0.7 point) and (vi) the restatement of the retrospective application of IFRS 10 and 11 in 2013 as mentioned above.
Total Life & Savings New Business APE amounted to €6,477 million, up 2% on a reported basis or up 6% on a comparable basis, with signifi cant growth in all main business lines. The increase in sales in Unit-Linked and G/A Savings products was mainly driven by the success of hybrid products (3)
in Continental Europe as well as exceptional deals in France, while the growth in Protection & Health products was primarily due to higher sales in France, Thailand, Hong Kong and China, partially offset by lower volumes in Switzerland following the repositioning of the Group Life product mix.
China (+16% or €+66 million), partly offset by a slowdown in
as a result of higher sales of short term Protection with
Savings products and the successful launch of a new whole life product, (iii) Hong Kong (+17% or €+37 million) due to successful marketing campaigns and the launch of new products, (iv) China (+31% or €+22 million) resulting from an increase in sales of individual regular and single premium participation endowment products and (v) Mexico (+46% or €+17 million) as a result of two large Government contracts underwritten in August 2014, partly offset by (vi) Switzerland
from the anticipation of a change in regulation and (viii) the
mainly driven by (i) the United Kingdom (+13% or €+47 million)
both due to the successful launch of new hybrid products (1),
(v) the United States (+4% or €+29 million) refl ecting the continued success of the fl oating roll up rate GMxB product, partly offset by (vi) Belgium (-28% or €-18 million) due to a decrease in Structured products and Oxylife hybrid products (1) and (vii) Indonesia (-12% of €-10 million) due to lower productivity in the Bancassurance channel.
■ General Account Savings APE (15% of total) was up 11% (or €+96 million) mainly driven by (i) France (+15% or €+79 million) and (ii) AXA MPS (+131% or €+52 million) both from higher sales of hybrid products (1), partially offset by
Motor revenues grew by €77 million or +1% as a result of tariff increases in mature markets and higher volumes in
Japan and France, improved retention in the United Kingdom and in South Korea, partly offset by a slowdown in Spain in a diffi cult market environment;
■ France (+3%) driven by both tariff increases and higher volumes; ■ Germany (+2%) driven by tariff increases; ■ Switzerland (+1%) driven by higher volumes; partly offset by Mediterranean and Latin American Region
Health in Mexico and in the Gulf Region; ■ Switzerland (+5%) refl ecting tariff increases in Property and
Health in South Korea and Household in France; partly offset by the United Kingdom & Ireland (-2%) refl ecting diffi cult market conditions and exit from unprofi table schemes and partnerships in the second half of 2013.
Commercial lines (41% of P&C gross revenues) increased by 2% on a comparable basis mainly driven by tariff increases across the board as well as volume increases in high growth markets.
Non-Motor revenues increased by €249 million or +3% mainly driven by: ■ Mediterranean and Latin American Region (+5%) mainly driven by both positive portfolio developments and tariff increases in Health in the Gulf Region and in Mexico and by positive portfolio developments in Turkey; ■ the United Kingdom & Ireland (+4%) as a result of tariff increases and new business development in Property and
Property; ■ Asia (+9%) mainly driven by Health in Malaysia and Singapore and Property in Hong Kong, Singapore and Malaysia.
Motor revenues decreased by €14 million or -1%, mainly driven by: ■ Mediterranean and Latin American Region (-7%) mainly due to lower volumes in Mexico and Turkey and lower renewals in Spain; partly offset by the United Kingdom & Ireland (+9%) principally due to higher new business and a better retention; ■ France (+5%) mainly due to tariff increases.
Global P&C and AXA Global Life up 67% to €102 million mainly due to new quota share and excess reinsurance treaties with AXA entities in emerging markets, partly offset by (iii) AXA
Corporate Solutions Assurance down 1% to €2,131 million as a consequence of lower volumes in Liability, Aviation & Space and Marine, partly offset by positive portfolio developments in
Excluding distribution fees (retroceded to distributors) and on a comparable basis, gross revenues increased by €70 million
resulting from higher average AUM (+5%), partly offset by lower performance fees (€-17 million) mainly from structured fi nance.
AXA Investment Managers AUM increased by 14% (or €+76 billion) from year-end 2013 to €623 billion, mainly driven by (i) €+45 billion market appreciation mainly on AXA’s insurance companies assets as a result of the decrease in interest rates, rising stock markets since end of 2013 and reinvestment of dividends, (ii) €+19 billion net infl ows and (iii) €+13 billion favorable foreign exchange rate impact.
Fees and revenues from investment contracts without participating feature 327 323 323
Change in unearned premium reserves net of unearned revenues and fees (289) (296) (298)
Amortization of value of purchased life business in force (120) (167) (167)
Net realized capital gains or losses attributable to shareholders 442 434 434
Profi t or loss on fi nancial assets (under fair value option) & derivatives 225 (317) (317)
(a) Restated means comparative information related to previous periods was retrospectively restated for the application of IFRS 10 and 11.
(€+16 million) driven by lower policyholders’ crediting rates and (iv) the United States (€+11 million) primarily due to lower corporate interest expense following the repayment of surplus notes; ■ higher Fees and Revenues (€+310 million or +4%): • Unit-Linked management fees were up €173 million mainly driven by (i) the United States (€+87 million) and
(ii) France (€+56 million) as a consequence of higher average Separate Account balances,
• loadings on premiums and Mutual funds were up €102 million mainly driven by (i) Hong Kong (€+68 million)
Revenues Reserves amortization as a result of higher surrenders at AXA MPS and (iv) Germany (€+29 million)
• other revenues were up €36 million mainly driven by higher Mutual funds fees in the United States; ■ higher net technical margin (€+84 million or +13%) mainly attributable to (i) Japan (€+151 million) driven by the nonrepeat of 2013 unfavorable model and assumption changes,
& Health business and (iii) Hong Kong (€+27 million) due to both higher surrender margin from Unit-Linked products and a better claims experience for G/A Protection & Health products, partly offset by (iv) the United States (€-242 million)
primarily from lower GMxB margin refl ecting the non-repeat of 2013 model and assumption changes including the GMxB
and the United Kingdom & Ireland (€+23 million), partly offset by France (€-60 million) and Switzerland (€-12 million) mainly resulting from: ■ lower net technical result (€-97 million or -10%) driven by: • current year loss ratio deteriorated by 0.3 point mainly as a result of higher Nat Cat charges (+1.1 points) that amounted to €561 million largely as a result of Ela hailstorm
Nat Cat risks pool program in 2014 whereas 2013 was impacted by Bavaria and Saxony fl oods (€-53 million charge at Group level) as well as several other hailstorms and windstorms, in particular Norbert (€69 million) and
(ii) 0.2 point decrease in the administrative expense ratio benefi tting from various effi ciency programs,
• as a result, the combined ratio deteriorated by 0.4 point to 96.9% while current year combined ratio improved by 0.2 point to 97.6%; ■ higher investment result (€+87 million or +4%) mainly driven by (i) France (€+67 million) driven by higher exceptional distributions from Mutual funds and (ii) the Mediterranean and Latin American Region (€+52 million) mainly in Turkey refl ecting higher interest rates and increased average asset base; ■ lower tax expenses and minority interests (€+33 million or -3%) mainly driven by lower pre-tax underlying earnings in
Corporate Solutions Life Reinsurance and (ii) higher new business in AXA Assistance, partly offset by (iii) higher staff costs and lower technical result at AXA Global P&C and AXA
Asset Management underlying earnings amounted to €403 million. On a constant exchange rate basis, underlying earnings were stable. On a comparable scope basis, restated for the sale of AXA Private Equity, Asset Management underlying earnings were up €43 million (+12%) attributable to
(€+19 million) as a result of increased interest margin and fee income and (ii) France (€+3 million) due to the decrease in general administrative expenses.
Holdings and other companies underlying earnings amounted to €-947 million. On a constant exchange rate basis, underlying earnings decreased by €97 million mainly attributable to AXA SA (€-91 million) mainly refl ecting (i) Group investments to support brand advertising campaigns and increase digital capabilities, (ii) lower dividends received from non-consolidated entities and (iii) an increase in the French tax on dividends of 3% due to higher dividend paid by the Company.
following the non-repeat of the sale of a 3.9% equity stake in
Net income amounted to €5,024 million. On a constant exchange rate basis, net income increased by €536 million
• €+226 million from the change in fair value of hedging derivatives not eligible for hedge accounting under IAS 39, mainly attributable to interest rates decrease,
• €-183 million from the change in fair value of assets accounted for under fair value option; ■ lower restructuring costs (€+93 million) to €-170 million mainly driven by the non-repeat of 2013 real estate lease write-off in the United States; ■ higher negative impact from exceptional operations (€232 million) to €188 million mainly driven by the non-repeat of the 2013 realized gain from the disposal of AXA Private
Hungary Bank (€-101 million) as a result of the law voted in
December 31, 2013 are presented in the table below: Shareholders’ Equity
Net income (Euro per Ordinary Share) 1.95 1.94 1.76 1.75 11% 11%
Underlying earnings (Euro per Ordinary Share) 1.96 1.95 1.86 1.85 5% 5%
AXA’s Life & Savings segment for the periods indicated: LIFE & SAVINGS SEGMENT
Net capital gains or losses attributable to shareholders net of income tax 292 332
(c) South-East Asia revenues include Singapore and non bancassurance subsidiaries in Indonesia.
Underlying earnings 3,132 2,793 o/w. high growth markets 459 394 o/w. mature markets 2,673 2,399
(c) South-East Asia earnings include Indonesia, Thailand, Philippines, China, India and Singapore.
Net capital gains or losses attributable to shareholders net of income tax 108 295
Profi t or loss on fi nancial assets (under FV option) & derivatives 6 47
Gross revenues increased by €1,017 million (+7%) to €15,148 million: ■ Unit-Linked revenues (16% of gross revenues) rose by €225 million (+10%), mainly as a result of increased commercial efforts. The Unit-Linked share in Individual
Savings premiums increased by 3 points to 31%, above the market average of 17% (1); ■ G/A Savings revenues (41% of gross revenues) increased by €587 million (+11%), mainly as a result of two large contracts underwritten in Group Retirement (+26%), and growth in hybrid products (2) sales in Individual Savings (+8%); ■ G/A Protection & Health revenues (43% of gross revenues) increased by €195 million (+3%) mainly driven by a €136 million increase in Group Protection & Health, from both tariff and volume increases, and a €36 million increase in Individual Protection refl ecting positive portfolio developments. Individual Health increased by €22 million driven by tariff increases.
(+15%), mainly as a result of two large contracts underwritten in Group Retirement (+46%) and from growth in hybrid products (2 ) sales in Individual Savings (+10%); (1) Source FFSA December 2014.
(2) Hybrid products: savings products allowing clients to invest in both Unit-Linked and General Account funds.
Group Protection & Health refl ecting positive developments in both international (Employee Benefi ts and Mortgages)
and traditional French businesses. Individual Protection sales rose by €6 million (+8%), refl ecting volume growth and increase in average premiums. Individual Health decreased by €16 million (-13%), ahead of a change in regulation
Investment margin increased by €16 million (+1%) to €1,195 million as the decrease in investment income, driven by the low interest rates environment, was more than offset by the decrease in interest credited to policyholders as well as the non-repeat of the increase in the unallocated policyholders’
Fees & revenues increased by €41 million (+3%) to €1,624 million mainly due to higher fees on both Unit-Linked
(€+56 million), driven by a higher average asset base and Group
Protection & Health (€+64 million), driven by revenues growth, partly offset by a €-93 million change in Unearned Revenues
Reserves) and an increase in deferred acquisition costs capitalization, partly offset by higher commissions (€94 million) in the Group Protection & Health and Individual
Savings businesses, in line with business growth; ■ administrative expenses rose by €71 million (+8%) to €-920 million, mainly due to higher commissions on Savings
Net capital gains or losses attributable to shareholders net of income tax (14) (47)
(a) Before intercompany eliminations. Gross Revenues amounted to € 11,469 million net of intercompany eliminations as of December 31, 2014.
MONY portfolio transaction. In 2013, MONY generated €193 million of Gross Revenues and €43 million of underlying earnings. Commentary below on a comparable basis refl ects the exclusion of MONY and a constant exchange rate.
(+4%). The increase is mainly due to sales growth in fl oating rate GMxB products as well as the success of the non-GMxB investment only individual product launched in
November 2013. Non-GMxB investment only and fl oating rate GMxB products launched since 2010 represented a combined 63% of full year 2014 Variable Annuity sales;
Fees & revenues decreased by €26 million (-1%) to €2,185 million. On a comparable basis, fees & revenues increased by €8 million mainly driven by higher fees (€+94 million)
Income tax expenses decreased by €105 million to €-81 million. On a comparable basis, income tax expenses decreased by €74 million, refl ecting a €128 million benefi t from a tax settlement in 2014, partially offset by higher pre-tax underlying earnings.
Adjusted earnings increased by €235 million (+46%) to €746 million. On a comparable basis, adjusted earnings increased by €286 million (+62%) driven by the increase in underlying earnings and lower impairments on fi xed income assets.
Net income increased by €649 million to €782 million. On a comparable basis, net income increased by €701 million due to (i) higher adjusted earnings, (ii) a favorable change in the fair value of economic hedge derivatives not eligible for hedge accounting mainly attributable to lower interest rates and
APE increased by €57 million (+9%) to €704 million. On a comparable basis, APE was up 4% compared to prior year, mainly driven by higher sales in the Corporate Pension
Investment business (+19%) due to increased regular premium and a signifi cant new scheme in 2014, partially offset by the exit from the Bancassurance channel in 2013 and by stable volumes in other products in the face of challenging market conditions.
Fees & revenues increased by €21 million (+7%) to €316 million.
On a constant exchange rate basis, fees & revenues increased by €7 million (+2%). The growth of regular fees from Elevate business and revenues on the SunLife protection business has been partially offset by the reduction in initial revenues following the exit from the Bancassurance channel and the impact of the industry Retail Distribution Review.
On a constant exchange rate basis, expenses decreased by €30 million due to recurring savings and a reduction in costs following the exit from the Bancassurance channel, partly offset by increases due to business growth.
Income tax benefits increased by €7 million (+51%) to €19 million. On a constant exchange rate basis, income tax benefi ts increased by €6 million (+44%) due to a €14 million increase in one-off tax benefi ts.
(a) The contribution of AXA Life Japan to the AXA consolidated result for 2013 annual accounts exceptionally covered a period of fi fteen months.
For consistency reasons, a twelve months period in 2013 adjusted for foreign exchange rates movement has been compared with 2014. This is referred to as the “comparable basis” in the comments below.
■ Health revenues (39% of gross revenues) increased by €48 million (+3%) driven by higher revenues from the in-force portfolio, partly offset by lower new business sales; ■ Investment & Savings revenues (16% of gross revenues)
APE decreased by €144 million (-28%) to €361 million. On a comparable basis, APE increased by €13 million (+3%): ■ Protection sales (54% of APE) increased by €44 million
Long Term Life products (€-20 million) to the Low Cash Value
Whole Life product (€+15 million) following a repricing driven by a change in regulation; ■ Health sales (41% of APE) decreased by €18 million (-10%)
mainly refl ecting the non-repeat of the successful launch of the Disability product in 2013 (€-15 million); ■ Investment and Savings sales (5% of APE) decreased by €14 million (-40%) due to lower sales of Variable Annuity products in the bancassurance channel following the abovementioned product redesign.
Fees & revenues decreased by €432 million (-25%) to €1,264 million. On a comparable basis, fees & revenues increased by €67 million (+5%) mainly due to higher loadings driven by a better business mix and increased retention in G/A
to €363 million or increased by €52 million (+14%) on a comparable basis.
Profi t or loss on fi nancial assets (under FV option) & derivatives 51 11
APE decreased by €12 million (-3%) to €373 million: ■ Life sales (70% of APE) increased by €12 million (+5%) to €260 million due to the above mentioned launch of a new hybrid savings product (1), partly compensated by decreasing
Investment margin increased by €46 million (+67%) to €116 million mainly due to a change in regulation in Life leading to a change in allocation of policyholder participation from investment margin to net technical margin.
Fees & revenues increased by €33 million (+12%) to €303 million due to a lower share of policyholder participation mainly in Health.
Expenses increased by €53 million (+34%) to €-211 million mainly from lower DAC amortization in 2013 as a result of model refi nements, partly offset by lower general acquisition and administrative expenses due to the cost savings program.
As a result, the underlying cost income ratio was stable at 50.1%.
Income tax expenses increased by €17 million (+34%) to €-68 million due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax 43 41
(a) Before intercompany eliminations. Gross Revenues amounted to € 6,720 million net of intercompany eliminations as of December 31, 2014.
APE decreased by €101 million (-24%) to €329 million. On a comparable basis, APE decreased by €105 million (-24%): ■ Group Life sales (66% of APE) decreased by €114 million
Fees & revenues increased by €17 million (+6%) to €305 million.
Net technical margin rose by €19 million (+14%) to €162 million. On a constant exchange rate basis, net technical margin increased by €18 million (+12%) mainly due to a favorable development of disability claims experience, both in
Amortization of VBI increased by €1 million (+9%) to €-7 million. On a constant exchange rate basis, amortization of
Underlying earnings increased by €30 million (+11%) to €307 million. On a constant exchange rate basis, underlying earnings increased by €27 million (+10%).
On a constant exchange rate basis, net income increased by €100 million (+35%) mainly driven by higher adjusted earnings as well as a positive change in the fair value of forex hedging instruments not eligible for hedge accounting and in the fair value of economic interest rate hedge derivatives not eligible for hedge accounting.
and lower renewals in Group Life Protection (€-9 million); ■ Unit-Linked revenues (25% of gross revenues) decreased by €144 million (-24%) mainly due to a decrease in sales of structured products (€-79 million), Oxylife hybrid products (1)
As a result, the underlying cost income ratio increased by 4.0 points to 55.8%.
resulting from a declining market environment and in Poland (€12 million) due to the implementation of a pension fund reform in February 2014, partly offset by strong sales in G/A Protection
APE decreased by €26 million (-24%) to €82 million. On a comparable basis, APE decreased by €19 million (-18%)
Underlying earnings increased by €8 million (+26%) to €40 million. On a constant exchange rate basis and excluding the Hungarian Life & Savings operations sold in 2014, underlying earnings increased by €5 million (+13%) mainly driven by the one-off partial release of the guaranteed fund following a change of regulation in the Polish Pension Funds, partly offset by lower fees & revenues from Unit-Linked business.
Adjusted earnings increased by €9 million (+27%) to €40 million. On a constant exchange rate basis, adjusted earnings increased by €9 million (+28%) mainly driven by higher underlying earnings.
Net income increased by €96 million to €38 million. On a constant exchange rate basis, net income increased by €97 million mainly driven by the non-repeat of the realized loss
(a) Before intercompany eliminations. Gross Revenues amounted to € 6,384 million net of intercompany eliminations as of December 31, 2014.
Morocco and Colombia are fully consolidated; (ii) Colombia has been fully consolidated since April 2, 2014.
Gross revenues increased by €808 million (+14%) or €601 million (+10%) on a comparable basis to €6,389 million: ■ mature markets revenues (90% of gross revenues) were up €609 million (+12%) with higher sales of G/A Savings products (€+1,168 million) mainly driven by increased volumes in both hybrid and traditional products at AXA MPS, as well as lower competition from bank deposit products in
product sales at AXA MPS; ■ high growth markets revenues (10% of gross revenues)
decreased by €8 million (-1%) mainly due to lower sales of Individual Protection products in Turkey, partly offset by higher sales of Individual Protection products in Mexico and growth in the newly consolidated entity in Colombia.
on a constant exchange rate basis to €570 million: ■ mature markets sales (87% of APE) were up €110 million
Investment margin decreased by €4 million (-2%) to €242 million. Excluding Colombia and on a constant exchange rate basis, investment margin decreased by €2 million (-1%)
mainly due to AXA MPS driven by a lower average asset base as a consequence of 2013 high level of surrenders.
(+11%) mainly driven by a positive one-off reserve adjustment at AXA Italy and higher mortality and morbidity margin in high growth markets.
Excluding Colombia and on a constant exchange rate basis, expenses increased by €43 million (+8%): ■ mature markets expenses increased by €33 million mainly driven by AXA MPS refl ecting higher deferred acquisition costs amortization in line with increased surrenders; ■ high growth markets expenses increased by €10 million primarily due to lower deferred acquisition costs capitalization in Mexico.
As a result, the underlying cost income ratio increased by 1 point to 62.1%. Excluding Colombia and on constant exchange rate basis, the underlying cost income ratio decreased by 0.4 point to 60.7%.
Income tax expenses increased by €11 million (+15%) to €-86 million. On a constant exchange rate basis, income tax expenses increased by €11 million (+15%) mainly due to higher pre-tax underlying earnings at AXA MPS.
Underlying earnings increased by €19 million (+11%) to €193 million. On a constant exchange rate basis, underlying earnings increased by €19 million (+11%).
Adjusted earnings increased by €31 million (+16%) to €222 million. On a constant exchange rate basis, adjusted earnings increased by €31 million (+16%) driven by higher underlying earnings and higher net realized capital gains mainly in Spain.
On a constant exchange rate basis, net income increased by €6 million (+3%) due to higher adjusted earnings partly offset by an unfavorable change in the fair value of interest rate derivatives not eligible for hedge accounting mainly at AXA
Net capital gains or losses attributable to shareholders net of income tax - 0
Profi t or loss on fi nancial assets (under FV option) & derivatives (10) 18
Average exchange rate : €1.00 = Hong Kong Dollar 10.328 10.291
Linked products (€+38 million) due to strong IFA sales more than offsetting the exit from a bancassurance partnership, partly offset by lower revenues from G/A Savings products (€38 million) mainly due to a decrease in retirement product sales driven by the planned divestment of the retirement business.
Health products (€+37 million) driven by successful marketing campaigns and the launch of new Pure Protection & Health products, partly offset by (iii) lower Mutual funds retirement products sales (€-9 million) mainly due to the above mentioned divestment.
Investment margin decreased by €4 million (-57%) to €3 million. On a constant exchange rate basis, investment margin decreased by €4 million (-57%) mainly driven by steady in-force growth in participating products, partially offset by a higher investment income boosted by higher average assets.
Fees & revenues increased by €63 million (+13%) to €541 million. On a constant exchange rate basis, fees & revenues increased by €65 million (+14%) driven by an increase in loadings on premiums stemming from both new business and in-force growth.
Amortization of VBI increased by €7 million to €-13 million. On a constant exchange rate basis, amortization of VBI increased by €7 million mainly due to assumption changes.
Adjusted earnings increased by €30 million (+12%) to €282 million. On a constant exchange rate basis, adjusted earnings increased by €31 million (+12%) due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax (0) 0
(a) Before intercompany eliminations. Gross Revenues amounted to € 336 million net of intercompany eliminations as of December 31, 2014.
Scope: (i) for gross revenues: Singapore and nonbancassurance subsidiaries in Indonesia, on a 100% share basis; (ii) for APE, underlying earnings, adjusted earnings and net income: China, India, Indonesia, Thailand, Philippines and
Singapore, on a group share basis. Malaysia operations are not consolidated.
Gross Revenues increased by €68 million (+25%) to €336 million. On a comparable basis, gross revenues increased by €84 million (+31%) driven by higher revenues from G/A
Protection & Health (€+47 million) mainly in Singapore refl ecting a full year consolidation of the employee benefi ts business acquired from HSBC in the last quarter of 2013, as well as higher renewals. Unit-Linked business recorded a growth of €+37 million primarily from strong single premium sales and renewals in Singapore.
■ partly offset by a decrease in Unit-Linked sales in Indonesia
Thailand (€+17 million) and Indonesia (€+9 million); ■ improved business mix towards longer term G/A Protection &
Adjusted earnings increased by €26 million (+28%) to €118 million. On a comparable basis, adjusted earnings increased by €38 million (+42%) mainly driven by underlying earnings growth.
(1) AXA Life Invest Services aim to promote Unit-Linked products with guarantees through thid party bank patnerships.
Net capital gains or losses attributable to shareholders net of income tax 142 108 108
(b) Before intercompany eliminations. Gross Revenues amounted to € 29,460 million net of intercompany eliminations as of December 31, 2014.
Contribution to consolidated gross revenues 29,460 28,791 28,763 o/w. high growth markets 4,721 4,520 4,520
(d) Asia includes India, Hong Kong, TianPing, Malaysia, Singapore and Thailand.
Net capital gains or losses attributable to shareholders net of income tax 56 32
(a) Before intercompany eliminations. Gross Revenues amounted to € 6,034 million net of intercompany eliminations as of December 31, 2014.
Gross revenues increased by €159 million (+3%) to €6,101 million: ■ Personal lines (57% of gross revenues) were up 3% to €3,445 million mainly driven by tariff increases in all segments and refl ecting positive net new contracts in Motor while the portfolio remained stable in Household; ■ Commercial lines (43% of gross revenues) were up 3% to €2,589 million mainly driven by tariff increases, partly offset by lower volumes notably in Construction in a context of selective underwriting.
Odile hurricane in Mexico) and a less favorable frequency in Bodily Injury in Personal Motor, partly offset by a lower frequency in Household; ■ the all accident year loss ratio increased by 3.3 points to 74.2% due to an increase of the current accident year loss ratio, as well as lower prior year reserve developments notably in Construction, partly offset by positive developments in
Expense ratio decreased by 0.7 point to 23.0%, mainly driven by a lower cost base refl ecting continuous efforts to reduce expenses.
driven by an improved expense ratio offset by an increase in claims handling costs reserve.
As a consequence, the combined ratio was up by 2.6 points to 97.2%.
(€+29 million), partly offset by a €-9 million non-recurring tax adjustment.
Adjusted earnings decreased by €36 million (-6%) to €528 million driven by lower underlying earnings (€-60 million), partly offset by €+24 million higher net realized capital gains mostly on real estate and equities, and despite higher impairments mainly on BMPS.
Net capital gains or losses attributable to shareholders net of income tax (2) 10
Profi t or loss on fi nancial assets (under FV option) & derivatives (9) 17
(a) Before intercompany eliminations. Gross Revenues amounted to € 4,034 million net of intercompany eliminations as of December 31, 2014.
Gross revenues increased by €226 million (+6%) to €4,132 million. On a constant exchange rate basis, gross revenues increased by €63 million (+2%): ■ Personal lines (47% of gross revenues) were down 2% at €1,928 million as a result of the ongoing strategy to focus on profi table growth. Motor was stable at €537 million with lower new business volumes within Northern Ireland as a result of strict pricing discipline in a softening market, partially offset by AXA’s improved competitiveness in Great
GB. Health was up 5% at €684 million following growth in the UK and internationally. Personal Other was down 12%
to €242 million following the continued withdrawal from unprofi table schemes and the exit from the Pet insurance market in 2013; ■ Commercial lines (52% of gross revenues) were up 5% to €2,140 million. Motor was up 9% to €446 million principally due to strong retention and increased new business volumes in GB. Non-Motor was up 4%: Property was up 5% to €536 million due to an increase in new business volumes.
Health was down 1% to €792 million due to the transfer of
■ the current year loss ratio increased by 2.3 points to 69.4%
Commercial Motor due to softening markets and increases in damage claims in the UK (overall impact +0.7 point)
were partly offset by a reduction in non Nat Cat costs, improvements in the mix of Travel business and a decrease in the Healthcare loss ratio; ■ the all accident year loss ratio increased by 1.2 points to 69.1% refl ecting the increase in current year loss ratio partly offset by higher positive prior year reserve developments.
As a result the enlarged expense ratio was down 1.2 points at 32.4%.
Income tax expenses decreased by €8 million (-13%) to €-56 million. On a constant exchange rate basis, income tax expenses decreased by €11 million (-16%) as higher pretax underlying earnings were more than offset by a more favourable corporate tax country mix and lower one-off tax charges (€+8 million).
Underlying earnings increased by €31 million (+15%) to €234 million. On a constant exchange rate basis, underlying earnings increased by €23 million (+12%).
Adjusted earnings increased by €19 million (+9%) to €231 million. On a constant exchange rate basis, adjusted earnings increased by €12 million (+5%) mainly driven by the increase in underlying earnings, partly offset by a decrease in net realised capital gains (€-12 million) mainly driven by an impairment of BMPS.
(a) Before intercompany eliminations. Gross Revenues amounted to € 3,779 million net of intercompany eliminations as of December 31, 2014.
Net income increased by €61 million (+22%) to €332 million due to the increase in adjusted earnings and the favorable change in the fair value of fi xed income funds due to decreasing interest rates and tightening of corporate spreads.
Net capital gains or losses attributable to shareholders net of income tax 43 6
(a) Before intercompany eliminations. Gross Revenues amounted to € 2,783 million net of intercompany eliminations as of December 31, 2014.
Net technical result increased by €24 million (+2%) to €996 million. On a constant exchange rate basis, net technical result increased by €13 million (+1%): ■ the current accident year loss ratio improved by 0.9 point to 68.3% mainly driven by lower charges from Nat Cat losses due to a lower frequency and severity of severe hail storms compared to 2013, partially offset by impacts from Odile hurricane in Mexico and Ela hailstorm including participation to the Group pool (€-16 million); ■ the all accident year loss ratio slightly increased by 0.2 point to 64.3% as the lower positive prior year reserve development was partly offset by the improvement in the current year loss ratio.
Expense ratio slightly improved by 0.1 point to 24.8%. The administration expense ratio was down 0.3 point while the acquisition expense ratio was up 0.2 point. Expense ratio improvement was driven by continuing cost management discipline, partly offset by the non-repeat of the positive oneoff impact in 2013 resulting from changes in the valuation of employee pension liabilities.
Income tax expenses increased by €2 million (+2%) to €100 million. On a constant exchange rate basis, income tax expenses increased by €1 million (+1%).
Adjusted earnings increased by €30 million (+7%) to €441 million. On a constant exchange rate basis, adjusted earnings increased by €25 million (+6%) mainly driven by higher net realized capital gains on equities and private equity investments, partly offset by lower underlying earnings.
Profi t or loss on fi nancial assets (under FV option) & derivatives (64) (10)
Compensation driven by tariff increases on small business enterprises and a more favorable economic environment; ■ Other lines (1% of gross revenues) were up €2 million to €30 million due to fronting business for the AXA Group.
Net technical result increased by €3 million to €759 million: ■ the current accident year loss ratio increased by 0.8 point to 67.7% driven by higher Nat Cat events (+3.5 points) mainly due to the Ela hailstorm (€-54 million) and Odile hurricane in Mexico (€-17 million) including participation to the Group pool, partially offset by an improvement of attritional claims
Expense ratio was up 0.3 point to 30.7% driven by higher overhead costs due to salary infl ation, partially offset by continued cost management actions.
Adjusted earnings decreased by €17 million (-7%) to €249 million due to lower underlying earnings, lower realized capital gains (€-6m) mainly as a result of a decrease in real estate gains due to the non-repeat of an exceptional sale in 2013, and higher impairments (€-5m) mainly on equities.
Net income decreased by €70 million (-30%) to €163 million mainly driven by lower adjusted earnings as well as an unfavorable change in the fair value of infl ation derivatives.
Net income decreased by €20 million to €-18 million. On a constant exchange rate basis, net income decreased by €24 million driven by a full write-off of the goodwill (€-18 million)
Underlying earnings increased by €6 million to €26 million. On a constant exchange rate basis, underlying earnings increased by €10 million mainly driven by lower expenses (€+5 million), higher net technical result (€+2 million) and higher investment income (€+2 million). As a result, the combined ratio was down 1.9 points to 97.0%.
Adjusted earnings increased by €10 million to €30 million. On a constant exchange rate basis, adjusted earnings increased by €14 million mainly driven by higher underlying earnings and higher net realized capital gains.
Net income from investments in affi liates and associates 3 2
Profi t or loss on fi nancial assets (under FV option) & derivatives 14 28
Morocco, Gulf region and Colombia are fully consolidated; (ii) Lebanon is consolidated under the equity method and contributes only to the underlying earnings, adjusted earnings and net income; (iii) Colombia was fully consolidated since
In the comments below, the comparable basis for gross revenues includes April to December 2013 contribution of
Gross revenues increased by €94 million (+1%) to €7,486 million. On a comparable basis, gross revenues decreased by €24 million (0%) due to a decline in mature markets (-3% or €-99 million), partly offset by high growth markets (+2% or €+75 million) principally in the Gulf region and the newly consolidated entity in Colombia: ■ Personal lines (56% of gross revenues) were down 1%
especially in the Gulf Region (€+72 million) mainly driven by a favorable renewal timing effect and volume effect and Mexico
Portugal with an increase of frequency in Motor and higher average cost in Workers’ Compensation; ■ the all accident year loss ratio increased by 1.2 point to 74.7 % with deteriorating prior year reserve development mainly due to Turkey refl ecting less reinsurance recoveries, partly offset by Spain refl ecting less unfavourable prior year reserve development.
Excluding Colombia, enlarged expense ratio was down by 0.3 point to 28.1%.
As a result, the combined ratio was up by 1.0 point to 100.1%.
Net investment result increased by €52 million (+13%) to €455 million. On a constant exchange rate basis, net investment result increased by €70 million (+17%) or €52 million excluding
Colombia, mainly driven by Turkey as a result of both higher interest rates and average asset base.
Underlying earnings decreased by €2 million (-1%) to €279 million. On a constant exchange rate basis, underlying earnings increased by €3 million (+1%).
Net income was stable at €246 million. On a constant exchange rate basis, net income increased by €5 million (+2%)
Net income from investments in affi liates and associates 8 - 8
(b) Before intercompany eliminations. Gross Revenues amounted to € 2,361 million net of intercompany eliminations as of December 31, 2014.
Expense ratio decreased by 0.8 point to 21.5% mainly driven by higher volumes.
As a result, the combined ratio was down by 1.4 points to 98.2%.
Net investment result increased by €15 million (+14%) to €115 million. On a constant exchange rate basis, net investment result increased by €12 million (+12%) mainly driven by a higher average asset base.
Net capital gains or losses attributable to shareholders net of income tax 2 (3)
Profi t or loss on fi nancial assets (under FV option) & derivatives (1) 0
Kong, Malaysia and Singapore, on a 100% share basis; (ii) for underlying earnings, adjusted earnings and net income: China,
India, Hong Kong, Malaysia, Singapore and Thailand, on a group share basis. Indonesia operations are not consolidated.
In the comments below, the comparable basis includes the restated 10-month (March-December) earnings in 2013 for
(+5%) to €416 million driven by (i) Motor (€+11 million) as a result of net infl ows notably refl ecting the increase in private car sales in Malaysia and by (ii) Non-Motor (€+8 million) due to a growth in the Health business in Hong Kong; ■ Commercial lines (52% of gross revenues) were up €38 million (+9%) to €447 million mainly driven by (i) Health
(€+12 million) resulting from volume increase in Malaysia and tariff increase in Singapore, (ii) Property (€+12 million)
Singapore and Malaysia, (iii) Motor (€+7 million) mainly driven by volume increase in Malaysia and (iv) Workers
Compensation (€+4 million) mainly from tariff and volume increases in Hong Kong.
Net technical result increased by €11 million (+4%) to €281 million. On a comparable basis, net technical result increased by €16 million (+6%): ■ the current accident year loss ratio deteriorated by 0.4 point to 68.4% mainly due to a higher Nat Cat charge in Hong
Mexico and Ela hailstorm (participation to Group pool), partly offset by improvements in attritional loss ratio in
Singapore and Malaysia and (iii) Commercial Motor from lower frequency in Malaysia; ■ the all accident year loss ratio deteriorated by 0.2 point to 66.2% mainly due to the deterioration of the current accident year loss ratio, partly offset by higher positive prior year reserve developments.
Enlarged expense ratio deteriorated by 0.7 point to 30.5% on a comparable basis.
Income tax expenses remained stable at €-13 million. On a comparable basis, income tax expenses remained stable, in line with pre-tax underlying earnings.
Tian Ping amounted to €7 million in 2014 on a group share basis.
Net realized capital gains or losses attributable to shareholders 35 25
Net capital gains or losses attributable to shareholders net of income tax 31 11
(a) Before intercompany eliminations. Gross Revenues amounted to € 2,118 million net of intercompany eliminations as of December 31, 2014.
Net technical result increased by €5 million (+1%) to €386 million. On a constant exchange rate basis, net technical result increased by €3 million (+1%): ■ the current accident year loss ratio increased by 0.6 point to 86.1% driven by higher large losses in Property and
Construction, partly offset by lower large losses in Liability; ■ the all accident year loss ratio decreased by 0.4 point to 81.4% mainly driven by higher positive prior year reserve developments in Property and Motor partly offset by a negative prior reserve development in Liability.
As a result, the combined ratio was up by 0.3 point to 97.9%.
Adjusted earnings increased by €17 million (+11%) to €178 million. On a constant exchange rate basis, adjusted earnings increased by €15 million (+10%) as the lower underlying earnings were more than offset by higher net realized capital gains mainly on equities.
Gross revenues increased by €90 million (+8%) to €1,155 million. On a comparable basis, primarily adjusted from the disposals of Cours Legendre and Domiserve and change of consolidation method for Mauritius & Algeria, gross revenues increased by €92 million (+10%) mainly driven by strong developments in Ecommerce Business, Motor, Home and Travel activities combined with growth of the in-force base.
Underlying earnings increased by €3 million (+15%) to €23 million mainly driven by strong growth of business and tight control of expenses in Europe.
Net income increased by €36 million to €17 million primarily refl ecting the non-repeat of 2013 exceptional capital losses following the disposal of above-mentioned France-based companies.
Underlying earnings increased by €22 million to €39 million. On a constant exchange rate basis, underlying earnings increased by €22 million mainly driven by favorable developments on runoff portfolios.
Profi t or loss on fi nancial assets (under FV option) & derivatives (2) 1
Gross revenues increased by €82 million (+4%) to €2,259 million. On a comparable basis, gross revenues increased by €86 million (+4%) primarily due to higher investment management fees (+6%) resulting from a 5%
(-4%) due to outfl ows leading to lower average AUM in Retail
On a constant exchange rate basis, net investment result decreased by €9 million.
AXA ownership of AllianceBernstein at December 31, 2014 was 62.7%, compared to 63.7% at December 31, 2013. The decrease was mainly due to the exercise of options.
Net capital gains or losses attributable to shareholders net of income tax 0 (1)
(a) Before intercompany eliminations. Gross Revenues amounted to € 1,151 million net of intercompany eliminations as of December 31, 2014.
In order to provide a consistent analysis following the sale of AXA
AXA PE net revenues and underlying earnings Group Share amounted to €187 million and €44 million respectively in 2013.
Assets under Management (“AUM”) increased by €76 billion from year-end 2013 to €623 billion at the end of
Gross revenues decreased by €176 million (-11%) to €1,462 million. On a comparable basis, net revenues increased by €70 million (+7%) to €1,113 million, mainly driven by higher management fees (€+85 million or +10%) as a result of higher average assets (+5%) and higher management fee bps
(+0.7 bp), owing to a better product and client mix, partly offset by lower performance fees (€-17 million or -23%) due to the non-repeat of a high level of performance fees in 2013.
General expenses decreased by €158 million (-12%) to €-1,123 million. On a comparable basis, general expenses increased by €29 million (+4%) mainly due to higher staff cost due to an increase in both average salary and average number of FTE.
The underlying cost income ratio increased by 0.8 point to 70.6%. On a comparable basis, the underlying cost income ratio improved by 2.0 points.
Underlying earnings decreased by €5 million (-2%) to €211 million. On a comparable basis, underlying earnings increased by €35 million (+20%).
(+26%) mainly driven by higher adjusted earnings as well as a more favorable change in the fair value of fi nancial assets.
(a) Of which AXA Bank Europe and its branches: €393 million.
Net banking revenues increased by €40 million (+13%) to €356 million. Operating net banking revenues (1) increased by €11 million (+3%) mainly due to increased interest margins and fee income (€+21 million), partially offset by lower reinvestment revenues and lower net realized capital gains (€-10 million).
Adjusted earnings increased by €18 million (+22%) to €99 million due to the increase in underlying earnings.
Net banking revenues decreased by €12 million (-9%) to €119 million.
Operating net banking revenues (1) remained stable at €130 million, with higher interest income on retail loans primarily on mortgages, as a consequence of growth of inforce business following the strong level of new credit production during the last two years, offset by higher commissions paid on new refi nancing operations.
Net income decreased by €5 million to €-4 million as the increase in adjusted earnings was more than offset by an unfavorable impact from the decrease in interest rates on hedging instruments not eligible for hedge accounting.
Net income decreased by €100 million to €-126 million. On a constant exchange rate basis, net income decreased by €105 million, mainly due to a one-off provision of €101 million as a result of the law voted on July 4th, 2014 which retroactively corrected the bid-ask spreads applied to retail loans in foreign currency and obliged all banks to compensate clients for past variable interest rate changes.
Net realized capital gains or losses attributable to shareholders (27) (31)
Underlying earnings decreased by €91 million to €-680 million mainly due to: ■ increased general expenses (€-59 million) in order to support advertising campaigns promoting the AXA Brand and invest in our digital capabilities; ■ lower dividends received from non-consolidated entities (€21 million); ■ an increase in the French 3% tax on dividends (€-13 million)
Adjusted earnings decreased by €108 million to €-703 million driven by lower underlying earnings and higher impairment on equities, mainly on BMPS.
Net income increased by €92 million to €-533 million. Excluding profi ts in respect of the deferred contingent consideration related to the sale of the Group’s Canadian operations (nil in 2014 vs. €+8 million in 2013), net income increased by €100 million mainly driven by: ■ €-108 million from lower adjusted earnings, more than offset by
■ €+220 million mainly from a change in the fair value of interest rate and foreign exchange economic derivatives not eligible for hedge accounting under IAS 39.
Underlying earnings increased by €3 million (+13%) to €-20 million mainly due to dividends received from a nonconsolidated entity (€+2 million).
Underlying earnings increased by €23 million (+14%) to €-144 million. On a constant exchange rate basis, underlying earnings increased by €22 million (+13%) mainly refl ecting the impact of lower share-based compensation expenses.
Net income increased by €12 million to €-8 million. On a constant exchange rate basis, net income increased by €12 million refl ecting the decrease in adjusted earnings more than offset by a favourable movement in the fair value of derivatives (€+9 million) due to foreign exchange rate impact on interest rate movements, together with lower restructuring costs and the release of a provision.
Net income decreased by €17 million to €-59 million mainly due to an unfavorable change in the fair value of hedging derivatives related to pensions not eligible for hedge accounting more than offsetting the increase in adjusted earnings.
The notion of Mature Market includes the following countries: the United States, the United Kingdom, Ireland, Benelux,
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
Life & Savings margin analysis is presented on an underlying basis.
Technical Margin”; ■ policyholders’ interest in participating contracts is refl ected as a change in insurance benefi ts in the Statement of
Margin”; ■ the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above)
as well as changes in specifi c reserves linked to invested assets’ returns and to exclude the fees on (or contractual charges included in) contracts with the fi nancial risk borne by policyholders, which are included in “Fees and Revenues”; ■ change in URR (Unearned Revenues Reserves – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
For investment contracts without DPF: ■ deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines “Fees & Revenues” and “Net Technical margin”; ■ change in UFR (Unearned Fees Reserves – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying
Reserve); ■ other fee revenues, e.g., fees received on fi nancial planning or sales of third party products.
Underlying Expenses are: ■ 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); ■ 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; ■ amortization of acquisition expenses on current year and prior year new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition
Managers and AllianceBernstein. AUM only includes funds and mandates which generate fees and exclude double counting.
AXA Group, coordinates funding and liquidity management and, in this role, participates in fi nancing the operations of certain subsidiaries. Certain of AXA’s subsidiaries, including
Mediterranean Holding SA, are also holding companies and, consequently, are dependent on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio.
Company” segment “Information – Life & Savings – Surrenders and lapses”) and mortality (pandemic risk).
As a result of close monitoring of surrender rates, Group subsidiaries are able to adjust their investment portfolios to refl ect such considerations and react in a targeted manner.
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 AXA’s consolidated fi nancial position. At year-end 2014, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
(2) 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.
(including derivative instruments) totalled €7,146 million as of December 31, 2014 after taking into account all intragroup eliminations and excluding undated subordinated debt
December 31, 2014 representing a carrying value of €1,622 million for its debt component in Note 17 of Part 4 –
At December 31, 2014, the number of ordinary shares issuable upon conversion of outstanding bonds was 29.2 million.
The decrease was €853 million at both current and constant exchange rate basis.
At December 31, 2014, other debt instruments issued totalled €1,164 million, up from €1,070 million at the end of 2013. The increase of €94 million mainly resulted from the increase of commercial paper.
At December 31, 2014, other debt owed to credit institutions totalled €691 million (including €418 million of bank overdrafts), a decrease of €650 million compared to €1,341 million at the end of 2013 (including €978 million of bank overdrafts).
For several years, the AXA Group has been offering to its employees in and outside France, the opportunity to subscribe for shares issued through a capital increase reserved for employees. In 2014, employees invested a total of €314 million that led to a total of approximately 19 million newly issued shares. Employee shareholders represented 6.7% of the outstanding share capital at December 31, 2014.
Dividends received by the Company from its subsidiaries amounted to €3,342 million in 2014 (€3,189 million in 2013), of which €775 million were in currencies other than the Euro
The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating expenses
(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/or equity instruments.
Additional supervision of credit institutions, investment companies and insurance companies belonging to “fi nancial conglomerates” was introduced by the European Parliament and Council Directive 2002/87/EC of December 16, 2002.
The Autorité de C ontrôle P rudentiel et de R ésolution
(“ACPR”) currently considers that AXA SA is not subject to requirements relating to fi nancial conglomerates. Consequently, in accordance with applicable regulations, as AXA is not subject to the additional supervision applicable to a fi nancial conglomerate, its solvency margin is reduced by the amount of its equity interests in credit institutions, investment companies or fi nancial institutions in which the Group holds more than 20% of the share capital.
In particular, the Company’s TSS include loss absorption mechanisms which provide thatunder certain circumstances relating to the consolidated solvency margin of the Group, the principal amount of each of the relevant TSS will be written down. In such a case, interest will become payable on the reduced principal amount. The principal can be reinstated in the future, following the Company’s return to fi nancial health as defi ned by the term of the TSS.
Company’s solvency margins, its own funds regulatory capital, or the Company’s fi nancial situation, which would justify taking specifi c measures related to the payment due under the notes.
Systemically Important Insurer (“GSII”). The framework policy measures for GSIIs include a number of requirements on GSIIs amongst which the notion of a specifi c capital regime for GSIIs, and the requirement to submit a Systemic Risk Management
Plan, a Liquidity Risk Management Plan and a Recovery Plan to their Group supervisor.
A dividend per share of €0.95 will be proposed at AXA’s Annual Shareholders’ Meeting that will be held on April 30, 2015. The dividend will be payable on May 13, 2015 with an ex-dividend date of May 11, 2015.
Employees 112 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 113
Special report of the Statutory Auditors on regulated agreements and commitments 145 2.4 THE OFFER AND LISTING 149
Implementing sound corporate governance principles has been a priority at AXA for many years. In this context, AXA
as its c orporate g overnance c ode of reference. The Board of
In April 2010, AXA’s S hareholders approved a change in the
(1) Mr. Henri de Castries as Chairman of the Board of Directors and Chief Executive Offi cer and (2) Mr. Denis Duverne as
Chairman & Chief Executive Offi cer in 2010, it implemented various measures designed to ensure an appropriate balance of powers consistent with best governance practices including adopting Bylaws, certain provisions of which go beyond regulatory requirements and market practices, providing that: ■ the Board must be composed of a majority of independent directors; ■ each of the three Committees of the Board must be chaired by an independent director; ■ certain Committees (the Audit Committee and the
■ a Vice-Chairman acting as Lead Independent Director must be appointed when the positions of Chairman of the Board of Directors and Chief Executive Offi cer are held by the same person (this is also provided in AXA’s Charter approved by the S hareholders).
Chief Executive Offi cer and the Deputy Chief Executive Offi cer
Executive Management, the agendas as well as the quality of information provided to the Board and its Committees. The
Executive Offi cer); ■ appoints and determines the compensation of the Chief
work as well as the internal control and risk management procedures set up by the Company; ■ convenes Shareholders’ Meetings; ■ grants stock options and/or performance shares to Group employees and corporate offi cers within the framework of the authorizations approved by Extraordinary Shareholders’
The Board of Directors is also required to approve certain types of material transactions including sales or acquisitions over €500 million; signifi cant fi nancing operations or other types of transactions that are not within the Company’s announced strategy.
Board members may also meet among themselves without the attendance of the Executive Management and these executive sessions are systematically scheduled at each
Group’s principal activities and issues. These sessions mainly focus on the Group’s fi nancial structure, strategy, governance, main activities and the evolution of the insurance regulatory context.
The Company’s Charter and Board of Directors’ Bylaws provide for the mandatory appointment of a Vice-Chairman acting as Lead Independent Director in the event that the positions of Chairman & Chief Executive Offi cer are held by a single individual. On April 23, 2014, the Board of Directors re-appointed Mr. Norbert Dentressangle as Lead Independent
Director. This Lead Independent Director has a number of specifi c powers including supervising the contribution of the independent directors to the Board’s work and acting as their spokesperson with the Executive Management to the extent necessary or appropriate. He is also consulted by the Chairman of the Board of Directors on the agenda and planning of Board meetings.
(regardless of whether he is a Committee member), to inform the Chairman and the Board of Directors of any potential confl ict of interests, to report to the Shareholders’ Meeting with respect to all corporate governance related matters, to require the Chairman & Chief Executive Offi cer to convene full meetings of the Board on a specifi c agenda at any time, to convene meetings of the non-executive directors at any time without the attendance of the Chairman & Chief Executive
Offi cer and the Deputy Chief Executive Offi cer. These executive sessions are chaired by the Vice-Chairman and may be held at any time at the Vice-Chairman’s discretion.
& Governance Committee. In particular, he was involved in the selection process of the future members of the
Committee regarding corporate governance related matters such as the functioning of the Board, the succession plans for Executive Management or the communication made to
The Lead Independent Director also reported his activities to the S hareholders during their meeting of April 23, 2014.
The time spent by the Lead Independent Director on his activities within the AXA Group represents approximately 47 full days of work.
& Governance Committee intends to propose additional women directors for consideration by S hareholders at future
As most of AXA’s revenues come from outside of France, the
Board believes that having an appropriate representation of international experience and profi les is essential. At this stage, the Board is comprised of 29 % of members who are nationals of countries other than France. This internationalization encourages open debates within the Board and brings a larger perspective to the discussions.
and Ramon de Oliveira. The proportion of independent directors within the Board of Directors was 79 % on December 31, 2014.
(1) Mr. Paul Hermelin is Chairman & Chief Executive Offi cer of Capgemini which provides services to the AXA Group in the course of its ordinary business. Considering (1) that the conditions of these services are negotiated at arm’s length and (2) that the revenues for Capgemini generated by the AXA Group do not exceed 0.5% of its consolidated total revenues, AXA’s Board of Directors considered that these business relationships are not signifi cant either for AXA or for Capgemini and therefore are not likely to question Mr. Hermelin’s independence as a member of AXA’s Board of
Norbert Dentressangle (60) Chairman of Dentressangle Initiatives (SAS) 30 bis, rue Sainte-Hélène - 69287 Lyon Cedex 02 - France French nationality
Jean-Martin Folz (67) Companies’ director AXA - 25, avenue Matignon - 75008 Paris - France French nationality
Mrs. Suet Fern Lee (56) Chairman & Senior Director of Stamford Law Corporation (Singapore) 10 Collyer Quay #27-00 Ocean Financial Centre - Singapore 049315 - Singapore Singaporean nationality
Stefan Lippe (59) Co-founder and Chairman of the Board of Directors of Paperless Inc. (Switzerland) and co-founder and Vice Chairman of the Board of Directors of Acqupart Holding AG (Switzerland) Baarerstrasse 8 - CH 6300 Zug - Switzerland German and Swiss nationalities
François Martineau (63) Attorney at Law Lussan/ Société d’avocats 282, boulevard Saint Germain - 75007 Paris - France French nationality
Mrs. Doina Palici-Chehab (57) Chief Executive Offi cer of AXA Singapore General Insurance (Singapore) 8 Shenton Way #27-01 AXA Tower – Singapore 068811 – Singapore German and French nationalities
Mrs. Dominique Reiniche (59) Companies’ director AXA - 25, avenue Matignon - 75008 Paris - France French nationality
The Shareholders’ Meeting to be held on April 30, 2015 will be asked to vote on the re-appointment of two members of the
Shareholders’ Meeting of April 30, 2015, of fourteen members including eleven members considered independent by the
Board of Directors in accordance with the criteria of the Afep-
Medef Code, i.e. a proportion of independent directors of 79 %.
Within the framework of its principal assignments such as described above, the Board focused, in particular, on the following matters during 2014: review of the Group’s strategy, examination of the 2013 fi nancial statements and the 2014 half-year fi nancial statements, review of the Board Committee’s reports, review of proposed signifi cant acquisitions and disposals, self-assessment of the Board of Directors and independence of the Board members, re-appointment of the executive offi cers and their succession plan.
Vice-President for the Group’s asset management, fi nancial and real-estate businesses in 1993. In 1997, Mr. de Castries was appointed Chairman of The Equitable Companies Incorporated
Dentressangle Group, a transportation and logistics services specialist, and served as Chairman & Chief Executive Offi cer until 1998. He is currently Chairman of the Supervisory Board.
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 and since
Martin Folz was Chairman of the Afep. From November 2011 to September 2013, Mr. Jean-Martin Folz was Chairman of the
(which he initiated), he became Deputy Chief Executive Offi cer of the Group and member of the Board of Directors. As of
Supérieure (ENS-Ulm), ingénieur du Corps des Mines and holds an aggregation in Physics. From 1997 to 1999, she was in charge of the budget of Telecommunication and Defense at the French Ministry of Economy. From 1999 to 2002, she was Advisor on Industrial Affairs of the French Prime Minister
Mrs. Isabelle Kocher was Chief Executive Offi cer of Lyonnaise des Eaux, in charge of the development of activities in Europe.
Senior Partner of Stamford Law Corporation (Singapore). She is Chairman of the Asian Civilisations Museum Board, and is also a member of the National Heritage Board, a member of the Executive Committee of the Singapore Academy of Law where she also chairs the Committee on Legal Education and
Director or member of the Management Committee: Sanofi *, Macquarie International Infrastructure Fund Ltd
In 2009, he was appointed Chief Executive Offi cer of Swiss Re and stayed in this function until January 2012. Mr. Stefan Lippe was named Reinsurance CEO of the year 2011 by the leading industry publication, Reaction, and he was recognized at the
Vice-Chairman of the Board of Directors, and Acqufi n AG. In
May 2013, he co-founded Paperless Inc. and serves currently as Chairman of the Board of Directors of this company. In
Mr. Stefan Lippe has been a member of the Supervisory Board of Commerzbank AG.
Paris I (Civil Procedure). In 1995, he was a Professor at the Paris
Mr. François Martineau has been a partner of the law fi rm
JP Morgan & Co. asked to join the Executive Committee of the new fi rm with operating responsibilities. Between 2002 and 2006, Mr. de Oliveira was an Adjunct Professor of
Mr. Ramon de Oliveira is the Managing Director of the consulting fi rm Investment Audit Practice, LLC, based in New York.
(UK RBB). In recognition of her importance to retail banking at
Europe Retail and Business Banking. At the end of 2011, she left Barclays. In 2012, Mrs. Deanna Oppenheimer has been founder of the advisory fi rm CameoWorks (United States).
Mrs. Dominique Reiniche is a graduate of the Essec. In 1978, she joined Procter & Gamble and in 1983 became Associate
Advertising Manager. In 1986, she joined Kraft Jacobs Suchard and was appointed Marketing & Strategy Manager. In 1992, she joined Coca-Cola Beverages as a Marketing & Responsible
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 (ii) their private interests and/ or other duties of these individuals.
To the best of the Company’s knowledge and based on the information reported to it, none of the members of its Board of Directors have been, during the last fi ve years (i) subject to any conviction in relation to fraudulent offences or to any 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.
The conclusions of this self-assessment are discussed annually during a meeting of the Board of Directors.
Lead Independent Director also interviewed each member of the Board of Directors individually to discuss their participation in and contributions to the Board’s work.
December 16, 2014 reviewed in detail the conclusions of this self-assessment and the principal areas identifi ed for improvement and made recommendations to the Board of
& Governance Committee are independent directors; ■ AXA’s E xecutive O ffi cers cannot be members of the
The scope of the Audit Committee’s responsibilities is set out in its Terms of Reference which are reviewed and approved each year by the Board of Directors.
The Committee also examines the compliance with the risk appetite limits .
Référence); ■ the half-year fi nancial statements for 2014; ■ internal control and risk management
■ to examine and issue an opinion on any plan that intends to set up sureties or grant guarantees, endorsements and warrantees in favor of third parties, when their value exceeds the authorizations granted to the Chairman & Chief Executive Offi cer by the Board of Directors; ■ to examine and issue an opinion on any of the following plans: • to issue securities giving a claim, whether directly or indirectly, to the Company’s share capital,
The Chairman of the Board of Directors, as well as the Vice-Chairman Lead Independent Director, although not members of the Committee, take part in its work and attend its meetings, except for the Chairman of the Board when his personal situation is at stake.
• the overall annual allocation of Company stock options or performance shares to be granted to employees of the AXA Group; ■ to issue proposals on the appointments of the Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the members of the Board of Directors and its Committees. The Committee is also informed of the appointments of the main executives of the Group, and in particular of the members of the Management Committee and the Executive Committee. The Committee examines the provisions considered by the Chief Executive Offi cer in order to prepare the renewal of the Executive Management ; ■ to examine in more depth certain Group human resources issues and to review each year the Company’s policy with respect to professional equality as well as equal pay; ■ to examine the Group’s strategy on corporate responsibility and related issues; ■ to examine in more depth certain governance matters relating to the operation and organization of the Board of Directors and the organization of the periodic selfassessment of the Board of Directors; ■ to review the AXA Group Compliance and Ethics Guide.
Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and to the members of the Management Committee and the Executive Committee; • the 2014 and 2015 equities’ allocation (stock options and performance shares) and their performance conditions; • the “say-on-pay” (advisory vote on the aggregate compensation elements related to the preceding fi scal year (due or paid) for the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer); and
Directors; • the share ownership requirements for members of the Board of Directors; • the Organization & Talent Review (OTR)
and succession plans; • the corporate responsibility; and • the Group diversity policy.
Executive Offi cer and require prior Board approval for certain signifi cant transactions (sales or acquisitions over €500 million; signifi cant fi nancing operations or other types of transactions that are not in line with the Company’s announced strategy…).
Offi cer by the Board of Directors of April 23, 2014, for the duration of his term of offi ce as director, i.e. four years.
His role is to second the Chairman & Chief Executive Offi cer.
The Management Committee also holds three annual meetings dedicated to the “Quarterly Business Reviews” (QBRs) during which its members welcome senior executives from the main entities of the Group. They present the performance of their operations and the progress status of their key projects using defi ned quantifi able standards of measurement which are common to all entities of the Group.
Peter Kraus Chairman & Chief Executive Offi cer of AllianceBernstein (United States)
(2) Mr. Jean-Louis Laurent Josi was appointed member of the Management Committee as of March 1st, 2015.
These meetings are also an opportunity to exchange ideas and best practices, including through the participation of external guests on topics of strategic interest.
Henri de Castries Chairman & Chief Executive Offi cer of AXA
Paul Evans Chief Executive Offi cer of AXA UK and Chairman of the Board of Directors of AXA Corporate Solutions Assurance
Jean-Louis Laurent Josi (2) Chief Executive Offi cer of AXA Asia
George Stansfi eld AXA Group General Counsel and Head of Group Human Resources
Jacques de Vaucleroy Chief Executive Offi cer for the Northern, Central and Eastern Europe business unit and Global Head of Life & Savings
(1) As of March 1st, 2015, Mr. Thomas Buberl, in addition to his position of Chief Executive Offi cer of AXA Konzern AG, became Chief Executive Offi cer of the global business line for the Health business.
(2) Mr. Jean-Louis Laurent Josi was appointed Chief Executive Offi cer of AXA Asia as of March 1st, 2015, replacing Mr. Michael Bishop who left the Group.
(c) In 2014, the increase by 111 in the United States mainly refl ected business growth partly offset by productivity initiatives.
(f) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the banking activities. Consequently, the split is not available. In 2014, the decrease by 295 in Belgium mainly refl ected effi ciency programs.
(g) In 2014, the increase by 2,600 in the Mediterranean and Latin American Region was mainly attributable to the acquisition of Colpatria in Colombia.
(h) In 2014, the decrease by 277 in Central and Eastern Europe was driven by the disposal of Hungary, the closure of offi ces in Ukraine, and the reduction of operations in Poland.
AXA’s executive compensation structure is based on an indepth analysis of market practices in France and abroad, within the fi nancial services sector (insurance companies, banks, asset managers, etc.) and compared to the compensation practices of other international groups.
AXA’s executive compensation is composed of a variable portion which represents a signifi cant portion of the aggregate remuneration. This is designed to align executive compensation more directly with the operational strategy of the Group and the interests of the shareholders while encouraging performance: ■ both on an individual and collective level; and
(1) The information in this section is presented in accordance with recommendation n°2009-16 of the AMF, as modifi ed on December 5, 2014, and with the recommendations of the Afep-Medef Code, as revised in June 2013.
Lead Independent Director (Mr. Norbert Dentressangle) is regularly involved in the Committee’s work and presents the compensation policy of the Company each year at the
Group Human Resources and Group Legal. The Committee is empowered to undertake or commission specifi c reviews and to use external consulting expertise to the extent deemed appropriate. Thus, during the last few years, the Committee worked several times with a compensation consulting fi rm in order to benefi t from an external expertise and an independent overview in order to compare AXA’s variable compensation practices with general market practices.
AXA’s executive compensation policy is designed to: ■ attract, develop, retain and motivate the best talents; ■ drive superior performance; and
Executive compensation at AXA is composed of a fi xed and a variable component .
and to measure the suitability of the global compensation policies. In this context, two markets are used as a reference: ■ a fi rst market composed of 12 companies in the French
CAC 40 index (companies selected to form the panel, which may vary from year-to-year, are comparable to AXA
Compensation & Governance Committee, decided to maintain unchanged in 2014 the total cash compensation target of the
The variable component of his compensation, unchanged since 2010, was €2,350,000 in 2014, i.e. 247% of his fi xed annual compensation.
The variable component of his compensation, unchanged since 2010, was €1,450,000 in 2014, i.e. 193% of his fi xed annual compensation.
In order to assess Mr. de Castries’ individual performance in 2014, the Board of Directors in particular considered the following achievements: (i) the acceleration of the digital transformation of the Group through the implementation of various strategic partnerships with worldwide leading actors in the digital industry; (ii) the ranking, for the 6th consecutive year, of the AXA brand as the number one insurance brand worldwide according to Interbrand; (iii) the evolution of the
Line for its Health insurance activities; (iv) the geographic expansion through external acquisitions (Tian Ping in China,
Mr. Henri de Castries since he was appointed Chairman of the Management Board in May 2000 are set forth below and demonstrate the demanding nature of his performance objectives and the Board’s performance assessments which have signifi cantly impacted his variable compensation payouts from year-to-year: Executive compensation and director’s fees Target Actual % Target
Variable compensation for the year 2012 paid in 2013 €2,350,000 €2,270,153 (a) 97%
(a) This amount includes the part of the variable compensation with respect to 2012, 2013 and 2014 which has been deferred in accordance with the mechanism described on page 118 The total amount paid will depend on performance conditions and may then vary.
■ their individual performance, evaluated considering predetermined objectives specifi cally deriving from strategic initiatives.
Executive Offi cer, is based for 30% on the Group performance, 20% on his functional area of responsibility and 50% on his individual performance.
The proportion allocated to individual performance refl ects the Board of Directors’ desire to place more weight on
The selected indicators to measure the Group performance refl ect objectives widely disclosed internally and externally with respect to growth, profi tability, capital management, brand strategy, operational effi ciency and productivity. Thus, these indicators, directly linked to the strategic orientations of the
In order to assess Mr. Duverne’s individual performance in 2014, the Board of Directors in particular considered the following achievements: (i) the acceleration of the Group’s digital transformation and the successful implementation of various strategic partnerships with leading actors of the digital industry as well as the successful launch of a “big data”
research project; (ii) the implementation of partnerships with the World Bank to expand the Group’s footprint in emerging markets; (iii) the achievement of the Group’s effi ciency/cost reduction targets; (iv) the ranking, for the 6th consecutive year, of the AXA brand as the number one insurance brand worldwide; (v) the steering of in-depth strategic reviews of certain Group companies and the implementation of targeted action plans; and (vi) the active promotion, through specifi c measures, of diversity and integration as a key element of the
Committee members who benefi t from a variable part (in 2014, Mrs. Véronique Weill, Messrs. Jean-Laurent Granier,
Nicolas Moreau, Mark Pearson and Jacques de Vaucleroy) is based for 20% on the Group performance, 30% on the results of their operational entity and/or functional area of responsibility, and 50% on their individual performance.
The assessment of the leadership skills is based on the dimensions of the AXA Leadership Framework which includes: ■ strategic vision; ■ customer focus; ■ change leadership; ■ results orientation; ■ building capability; ■ team leadership; ■ sharing to succeed; ■ living through AXA values.
(a) This amount includes the part of the variable compensation with respect to 2012, 2013 and 2014 which has been deferred in accordance with the mechanism described on page 118 . The total amount paid will depend on performance conditions and may then vary.
Governance Committee and the Board of Directors took into account the following measures: (i) an underlying earnings per share and (ii) a return on equity (adjusted Return on Equity-
The introduction of this variable cash compensation deferral mechanism subject to a clawback mechanism, while not required by the applicable regulations, further aligns AXA with the evolving regulatory environment on executive compensation in the fi nancial services’ sector both in France and abroad.
In February 2015, (i) the fi rst tranche of their differed variable compensation with respect to the fi scal year 2013 i.e. an amount of €447,481 for Mr. Henri de Castries and €275,087 for Mr. Denis Duverne and (ii) the second tranche of their differed variable compensation with respect to the fi scal year 2012 i.e. an amount of €414,540 for Mr. Henri de Castries and €261,000 for Mr. Denis Duverne, were paid to the Chairman &
Chief Executive Offi cer and the Deputy Chief Executive Offi cer.
These amounts are based on the evolution of the AXA share price. Considering that the AXA share performed well in 2014, these amounts were capped at 120% of half of the differed variable compensation granted in respect of the 2012 fi scal year and set at 117% of half of the differed variable compensation granted in respect of the 2013 fi scal year.
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 2014: 1 USD = 0.75086449 EUR; 1 SGD
SUMMARY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES/UNITS GRANTED TO MANAGEMENT COMMITTEE MEMBERS
of LTIs granted is set so that the executives are between the median and the 3rd quartile of market references considering the total amount of the variable part (comprised of one part in cash and one part in LTIs). The Compensation & Governance
(please refer to pages 123 as well as 131 and following) and therefore do not guarantee any grant or minimal gain for the benefi ciaries.
Compensation & Governance Committee, after taking into account the increase of the fair estimated value of the LTIs, which was strongly linked to the performance of the AXA
SUMMARY OF THE MANAGEMENT COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2014
(b) Director’s fees deducted up to 70% from the variable compensation.
Executive Offi cer, received compensation from the Company, with the exception of directors’ fees (jetons de présence). The amount of directors’ fees paid to each AXA Board member is indicated in the table below.
Shareholders’ Meeting of April 23, 2014 at €1,500,000, compared to a previous amount of €1,350,000. The purpose of this increase is for the level of directors’ fees allocated by the
No directors’ fees are paid by the Company to directors exercising executive functions at AXA (i.e. Chief Executive
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2014 an annual gross cash compensation of
Group, directors’ fees for a gross amount of EUR 11,231 for
Mrs. Suet Fern L ee, and USD 77,400 for Mr. Ramon de Oliveira.
Governance Committee which especially takes into consideration the aggregate elements of compensation of the executive as well as the market studies carried out by the
Usually, annual grants are made during the fi rst half of the year, generally 20 trading days after the date the annual earnings of the Group are published, in order to avoid that the choice of the grant date be perceived as creating a dead-weight effect for the benefi ciaries. In 2014, the annual consolidated earnings were published on February 21, 2014 and the option grant then took place on March 24, 2014. The strike price, equal to the average of the closing AXA share price during the 20 trading days before the grant date, was set at €18.68.
In 2014, 3,100,000 subscription or purchase options with a strike price of €18.68 were granted to 158 employees, representing 0.13% of the outstanding share capital as at
December 31, 2014 (disregarding the dilution related to the potential future exercise of these options). Given the nature of options and the evolution of market practices especially in
France, the Board of Directors decided to restrict the scope of option grants to Group senior executives, which reduces the number of benefi ciaries compared to prior years.
The portion of options granted in 2014 to the executive offi cers of the Company (Chairman & Chief Executive Offi cer and
Pursuant to this performance condition, the options become fully exercisable only if the AXA share price performs at least as well as the stock reference index of the insurance sector (1)
over a same period. No option submitted to such performance condition can be exercised as long as this criterion has not been reached. This external performance condition subjects the acquisition of the right to exercise the options to the achievement of a fully objective and public performance and allows to measure the relative performance of AXA compared to its main European competitors over a period of at least three years.
Grant date (Board of Directors or Management Board) 26/03/2004 14/04/2004 29/03/2005 29/03/2005 06/06/2005 27/06/2005 01/07/2005 21/09/2005 31/03/2006 31/03/2006
Total number of shares to be subscribed (a) 10,725,180 496,049 8,855,437 3,697,059 16,981 240,849 25,039 114,443 7,628,101 2,768,553 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 26/03/2006 14/04/2006 29/03/2007 29/03/2007 06/06/2007 27/06/2007 01/07/2007 21/09/2007 31/03/2008 31/03/2008
Grant date (Board of Directors or Management Board) 31/03/2006 25/09/2006 25/09/2006 13/11/2006 10/05/2007 10/05/2007 10/05/2007 24/09/2007 24/09/2007 19/11/2007
Expiry date of options 31/03/2016 25/09/2016 25/09/2016 13/11/2016 10/05/2017 10/05/2017 10/05/2017 24/09/2017 24/09/2017 19/11/2017
Subscription or purchase price of options (a) 27.93 28.03 28.03 29.59 32.95 33.78 33.78 29.72 29.72 28.53
Grant date (Board of Directors or Management Board) 19/11/2007 01/04/2008 01/04/2008 19/05/2008 19/05/2008 22/09/2008 22/09/2008 24/11/2008 20/03/2009 20/03/2009
Total number of shares to be subscribed (a) 8,205 8,056,370 1,240,890 6,004 12,360 19,127 46,929 19,047 4,870,844 407,692 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 19/11/2011 01/04/2010 01/04/2012 19/05/2010 19/05/2012 22/09/2010 22/09/2012 24/11/2012 20/03/2011 20/03/2013
Number of options exercised at 31/12/2014 0 0 0 0 0 0 0 8,791 1,785,359 89,682
Total number of shares to be subscribed (a) 114,324 22,291 2,137,462 53,237 3,134 20,890 7,671,540 278,986 22,846 10,619 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 02/04/2011 10/06/2013 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012 19/03/2014 18/08/2012 18/08/2014
Subscription or purchase price of options (a) 9.76 13.03 15.47 15.88 16.60 16.60 15.43 15.43 13.89 13.89
Expiry date of options 13/10/2020 13/10/2020 22/12/2020 18/03/2021 18/03/2021 04/04/2021 16/03/2022 13/06/2022 22/03/2023 24/03/2024
Number of options exercised at 31/12/2014 0 2,848 0 741,316 314 35,262 329,251 25,363 0 0
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 24/03/2014 subscription or purchase 24/03/2024 100% of options: SXIP index
Representative of employee shareholder s to the Board of Directors 24/03/2014 subscription or purchase 24/03/2024
The fair value of stock options is determined in accordance with IFRS standards. This is a historical value at the date of grant, calculated for accounting purposes as described in
STOCK OPTIONS GRANTED AND/OR EXERCISED BY THE TOP 10 BENEFICIARIES (OUTSIDE THE EXECUTIVE OFFICERS) DURING 2014
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 74,657 -
business unit as well as with the stock performance of the AXA
Criteria for Performance Units/Shares grants are similar to those used for stock options.
Board of Directors approves all Performance Share programs prior to their implementation.
Each year, the Board of Directors, acting upon recommendation of its Compensation & Governance Committee, approves a global Performance Share pool to be granted. The annual grants of Performance Shares are generally made simultaneously with the grants of stock options.
Compensation & Governance Committee, which takes into consideration the aggregate compensation elements of the executive offi cer as well as the market studies carried out by the
During the performance period, all Performance Units/Shares initially granted are integrally subject to performance conditions regardless of the benefi ciary’s status. These criteria measure both the fi nancial and operational performance of the AXA
Group support functions (including AXA executive offi cers) the considered operational entity is the AXA Group.
(“performance rate”) is used to determine the number of Units/ Shares which will be defi nitively acquired by the benefi ciaries at the end of the acquisition period, under the condition that the benefi ciary is still employed by the AXA
Group. The number of Units/Shares defi nitively granted shall therefore be equal to the number of Performance Units/Shares initially granted multiplied by the performance rate which may vary between 0% and 130%.
For each of these indicators, the cumulated performance over the fi scal years of the acquisition period is compared to the cumulated performance of such indicator over a reference period of identical duration preceding the Performance
Since 2014, should the performance be: ■ lower than 65% (for the Group) and 60% (for the benefi ciary’s performance perimeter) of the performance required to reach the target (the “fl oor”), no unit/share would be delivered to the benefi ciary at the end of the acquisition period; consequently the benefi ciaries are not guaranteed a minimal grant/gain; ■ equal to 65% of the performance required to reach the target, the number of units/shares defi nitively granted would be equal to 65% of the number initially granted; ■ equal to 100% of the performance required to reach the target, the number of units/shares defi nitively granted would be equal to 100% of the number initially granted; ■ equal to or higher than 130% of the performance required to reach the target, the number of units/shares defi nitively granted would be equal to 130% of the number initially granted. Such a performance would correspond to a weighted-compound annual growth rate of the indicators equal to or higher than 15%.
Company’s executive offi cers will be changed to increase the fl oor to 80%. Therefore, in the event of a performance below 80% of the performance required to reach the target, no performance shares would be defi nitively granted. In case of performance equal to 80% of the performance required to reach the target, 50% of the number of shares initially granted will be defi nitively granted. For example, should the achievement rate regarding the Group performance indicator
As far as Performance Shares are concerned: ■ since 2014, the Performance Share grants are conditioned to a minimal 3-year acquisition period allowing the measurement of the performance determining the defi nitive grant of the shares over a longer period, i.e. at least 3 years; ■ shares acquired, under the condition that the benefi ciary is still employed by the AXA Group, at the end of the acquisition period are restricted from sale during a 2-year period; ■ Performance Shares generally result in less shareholder dilution than stock options, due to the smaller volume of the grant and the possibility to deliver existing shares, this choice being the one made up to this date.
are concerned: ■ since 2014, the Performance Units are subject to a 3-year performance period followed by a 1-year differed acquisition period. The payment is made in shares (International
Performance Shares). Should this type of payment not be possible for legal, tax or any other reason, the payment could be made in cash; ■ the amounts corresponding to Performance Units
Grant date (Board of Directors or Management Board) 19/03/2010 18/03/2011 04/04/2011 16/03/2012 13/06/2012 22/03/2013 24/03/2014
Total number of Performance Units granted from which granted to Executive Directors: Acquisition date of the Performance Units 19/03/2012 18/03/2014 04/04/2014 16/03/2015 13/06/2013 22/03/2016 24/03/2017 (f)
Number of Performance Units cancelled 587,340 888,396 101,756 1,055,317 - 551,772 163,409
(d) 41,623 units of the March 16, 2012 plan acquired by anticipation.
Total number of Performance Shares granted from which granted to Executive Directors: Acquisition date of the shares 19/03/2012 18/03/2013 16/03/2014 22/03/2015 24/03/2016 (c)
Number of shares acquired at 31/12/2014 1,659,914 2,063,689 2,853,303 4,810 (a) 3,250 (b)
(a) The performance rate of 108% is composed of: 1/3 x 109% (Net income per share) + 2/3 x 108% (Underlying earnings and Net income).
Number of shares becoming unrestricted during the year Date of availability
Henri de Castries Chairman & Chief Executive Offi cer 19/03/2010 93,426 19/03/2014
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors earning - net income per share earning - net income per share
This demanding policy imposes each executive to hold, during the entire duration of his/her functions, a minimum number of AXA shares (the “Minimum Shareholding Requirement”)
Code (Code monétaire et financier). The notifi cations of such transactions state that they have been engaged in application of a discretionary management mandate in accordance with regulation 2010-07 of the AMF (Autorité des marchés financiers).
Alliance Bernstein shares * This amount includes the part of the variable compensation with respect to 2013 which has been deferred in accordance with the mechanism described on page 118 . The total amount paid will depend on performance conditions and may then vary.
December 31, 2014, the number of AXA shares or ADS indicated in the table below.
Henri de Castries – Chairman & Chief Executive Offi cer 1,492,806 -
Mrs. Dominique Reiniche 7,000 - * AXA shares which could be indirectly held through Mutual funds are not taken into account.
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 2014 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 General Regulations, are published on the Company’s website (www.axa.com) and on the AMF
Savings Plan of dividends attached to shares held in the Company Savings Plan
The executive offi cers of the Company (Messrs. Henri de Castries and Denis Duverne) participate, as all other executive employees (directeurs) of AXA Group entities in France, in a supplementary pension scheme with defi ned benefi ts.
Supervisory Board on October 7, 2009 (after having been presented for advice to all work councils and central work councils in France) and by the Shareholders’ Meeting of AXA
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 security, ARRCO, AGIRC…) and under any other retirement scheme to which the benefi ciary may have participated during his/her career, both within and/or outside the AXA Group.
Henri de Castries Chairman & CEO Beginning of mandate: April 29, 2010 Term of offi ce: 2018 – X X – X – – X
As a result, 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
The amount of severance benefi t to be paid to the benefi ciary would be adjusted in accordance with the level of achievement against these performance conditions: 100% of the severance benefi t will be paid if at least 2 of the 3 performance conditions are met; 40% of the severance benefi t will be paid if only 1 performance condition is met; and no severance benefi t shall be paid if none of the performance conditions are met.
AXA’s consolidated net income for the preceding fi scal year is negative.
Treasury shares held directly by the Company 49,719 0.00% [0.00%] (c)
(d) Treasury shares as indicated in Note 13 to the “Consolidated Financial Statements” included in Part 4 of this Annual Report.
As a result, on December 31, 2014, following the delivery of
AXA treasury shares to Group employees during 2014 in the context of performance share plans, the total number of AXA
Meeting of April 23, 2014, the Board of Directors increased the
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2014 program.
The S hareholders waived their preferential subscription rights so that this offering could be made exclusively to Group employees (SharePlan 2014).
In countries that met the legal, regulatory and tax requirements to participate in SharePlan, two investment options were offered to the Group employees in 2014: ■ the traditional plan, offered in 35 countries; ■ the leveraged plan, offered in 34 countries.
The traditional plan allowed employees to subscribe through a personal investment to AXA shares (either through Mutual funds (FCPE) or through direct share ownership, depending on countries) with a 20% discount. The shares are held within
the Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable law). Employees are subject to the share price evolution, up or down, as compared to the subscription price.
shares; or (3) transfer their assets invested in the leveraged plan into the traditional plan.
The leveraged plan in 2014 allowed employees to subscribe, on the basis of 10 times their personal investment, in AXA
with a 10.80% discount. The shares are held within the Group
The SharePlan 2014 program was carried out through a capital increase that took place in December 2014. More than 21,000 employees took part in SharePlan 2014, representing approximately 19% of eligible employees: ■ the total amount invested was approximately €314 million, as follows: • €23.7 million in the traditional plan, and
• €290.1 million in the leveraged plan; ■ a total of over 19 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on January 1st, 2014.
On December 31, 2014, AXA employees and agents held 6.66% of the share capital and 8.86% of the voting rights.
These shares are owned through Mutual funds or directly either in the form of ordinary shares or ADS.
ordinary shares (“AXA Miles”) were granted on March 16, 2012 to all AXA Group employees worldwide.
In 2014, the AXA Miles program resulted in the grant of over 2 million AXA shares to over 40,000 Group employees.
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was given to us, to inform you, the S hareholders, of the main features of those agreements of which we have been informed. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to Article R.225-31 of the French Commercial Code (Code de commerce), you are being asked to form an opinion on the relevance of such agreements for the purpose of approving them.
Consequently, the Supervisory Board took the following decisions: ■ The Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance.
The payment of the severance benefi t should be also subject to performance conditions. During its meeting held on February 20, 2014, upon the proposal of the Compensation & Governance Committee, the Board of Directors authorized the execution of a new agreement between the Company and Mr. Henri de Castries in order for the payment of the severance benefi ts to be subject, from now on, to the three following performance conditions: 1. achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target; 2. evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce; 3. average adjusted Return On Equity (adjusted ROE) over the three preceding consolidated fi scal years higher than or equal to 5%.
These commitments were already approved by your Shareholders’ Meeting of April 23, 2014.
Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Denis Duverne holds the position
■ T he 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 recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Denis Duverne as employee.
No severance benefit will be paid if the beneficiary is entitled to an additional pension scheme within the 6 months following his termination.
On October 7, 2009, the Supervisory Board confi rmed that Messrs. Henri de Castries, Denis Duverne and François Pierson, then members of the Management Board, were entitled to the supplementary pension scheme for Group directors in the same conditions that apply to director-level employees of the AXA Group in France.
During 2014, these commitments applied to Messrs. Henri de Castries and Denis Duverne (respectively Chairman & Chief Executive
Offi cer and Deputy Chief Executive Offi cer as of April 29, 2010).
Governance of Investment strategy and asset & liability management (ALM) 188
Given that the AXA Group is headquartered in Paris, France, this supervision is based to a significant extent on European
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 and impose product suitability and disclosure requirements. In general, insurers are required to fi le detailed annual fi nancial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or unexpected examinations of the insurers’ operations and accounts and request particular information from the insurer.
The Company’s insurance subsidiaries are subject to regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specific regulatory capital requirements (including the definition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly significantly, during periods of declining equity markets and/or lower interest rates.
At this stage, uncertainties with respect to the interpretation of certain of the implementing measures of Solvency II remain.
While AXA is actively participating in developing the fi nal interpretation of measures through its involvement in industry bodies and trade associations, there is a continuing risk that the effect of the final interpretation adopted could depart from the initial objective of the Directive (i.e. setting an economic framework) and end up more focused on prudence driven principles which could be adverse for the Group in many respects including potentially imposing a significant increase in the capital required to support existing business. In addition, the application of Solvency II to international groups is still unclear and there is a risk of inconsistent application throughout
AXA’s asset managers and banks, which manage derivatives on behalf of various AXA Group affi liates (including on behalf of
was fi rst proposed by the European Commission in 2011 and is expected to come into force by January 3, 2017. MIFID II, which is designed to better integrate the European Union’s fi nancial markets and increase cross-border investment, market transparency and investor protection, imposes a wide variety of new requirements including with respect to trading/clearing of certain derivatives on organized platforms, regular reporting with respect to derivatives positions and certain other types of fi nancial instruments, restrictions and/or prohibitions on certain types of compensation arrangements or other monetary inducements to fi rms providing independent investment advice and greater regulation of structured products and other complex fi nancial instruments.
The tax function is organized within the Group to ensure full compliance with all tax legislations in the countries where AXA
AXA has no licensed insurance or operating business activities in the countries specifi cally identifi ed as non-cooperative jurisdictions by the French tax authorities in accordance with the provisions of Article 238-0 A of the French tax code.
Accounting for income taxes recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of the entity’s assets and liabilities, as required by IAS 12 (see Note 1.17.1 of the same Section ).
All differences are fully explained (see Note 19 of Section 4.6).
AXA’s income tax expenses/benefi ts are extensively disclosed in the present report and are broken down by business segment and country. For each, a dedicated paragraph provides a comment about the line related to Tax Income (see
(“G-SIFIs”). At the same date, the FSB also published its initial list of nine GSIIs, which includes the AXA Group. The framework policy measures for GSIIs, also published by the IAIS on July 18, 2013 for implementation by the GSIIs, include (1) new capital requirements, including (i) a “basic”
Management expects the regulatory landscape with respect to insurance and fi nancial markets will continue to evolve in 2015 and beyond with further legislative and regulatory initiatives.
The Group’s insurance and asset management operations are subject to an increasing number of legislative and regulatory initiatives designed to increase transparency of products and distribution including practices with respect to compensation of intermediaries, disclosure of distribution costs, suitability, mis-selling and avoiding potential confl icts of interest. In
Mediation Directive (“IMD2”), MiFID II and the Regulation on key Information Documents for Packaged Retail and
Finally, fi nancial crime compliance programs of fi nancial institutions (anti-money laundering, anti-corruption and international sanctions compliance) continue to be a major focus of regulatory and law enforcement authorities with increasingly signifi cant sanctions imposed for compliance failures. Management believes that the complexity and risks for international fi nancial institutions like AXA in this area will likely continue to increase and that compliance costs will also continue to increase accordingly.
You should carefully consider the following risks. These risks could materially affect our business, results of operations or fi nancial condition, cause the trading price of our ordinary shares and/or ADS to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the
Many of the risks described below are inherent to the nature of our business and the economic, competitive and regulatory environment in which we operate. Given the multiple contingencies and the inherent uncertainties involved with many of these risks, management is not able to quantify the impact of many of these risks with any level of precision; however, it has put in place numerous risk management processes, procedures and controls to monitor and manage these risks on an on-going basis. These risk management processes, procedures and controls are described in detail in Section 3.3 of this Annual Report and this Section 3.2 should be read in conjunction with Section 3.3. In those cases where the risks described in this Section 3.2 have given rise to quantifi able and material fi nancial impacts and/or material contingent liabilities, those fi nancial impacts and/or contingent liabilities are refl ected in the Group’s consolidated fi nancial statements in accordance with applicable IFRS accounting standards.
RISKS RELATING TO THE FINANCIAL MARKETS, OUR FINANCIAL STRENGTH RATINGS AND FINANCIAL CONDITION, THE VALUATION OF OUR ASSETS AND RELATED MATTERS
(support measures) or central banks (decrease of prime rates or non limited government bond purchase program) in order to stabilize fi nancial markets could be suspended or interrupted which could, in an uncertain economic context, have an adverse effect on the global fi nancial industry. In addition, the world economy is currently facing a number of new challenges and geopolitical risks, including recent turmoil and/or hostilities in various regions, including Russia, Ukraine, Syria, Iraq and
were downgraded by credit rating agencies in light of the continuing uncertainty stemming from the European debt crisis and future of the Euro. In the event of a default or similar event by a sovereign issuer, some fi nancial institutions may suffer signifi cant losses for which they would require additional capital, which may not be available, and could also suffer further credit rating downgrades and/or solvency concerns which may, in turn, negatively impact public perceptions about the stability and creditworthiness of fi nancial institutions and the fi nancial sector generally and further dampen consumer confi dence levels and spending.
We need liquidity to pay our operating expenses (including claims and surrenders), interest on our debt, dividends on our capital stock and to refi nance certain maturing debts and other liabilities. In addition, we need liquidity in connection with certain derivatives transactions to which we are party which require us to post cash collateral and/or subject us to margin calls in certain circumstances. A lack of suffi cient liquidity and/ or access to fi nancing over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position. Our principal sources of liquidity are insurance premiums, annuity considerations, deposit funds, asset management fees, cash fl ows from our investment assets and cash/cash-equivalents on our balance sheet. Sources of liquidity in normal markets also include a variety of short and long-term instruments, including repurchase agreements, commercial paper, committed credit facilities, medium and long-term debt, subordinated debt securities, capital securities and shareholders’ equity.
In the event our current resources no longer satisfy our needs, we may have to seek additional fi nancing. The availability of additional fi nancing will depend on a variety of factors such as market conditions, the volume of trading activities, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. While management
Claims paying ability and credit strength ratings are important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. On May 9, 2014, Moody’s reaffirmed the Aa3 rating for counterparty credit and financial strength on
AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, revising the outlook to stable from negative. On October 15, 2014, Standard & P oor’s reaffi rmed the A+ financial strength rating on the core operating entities of the AXA Group and the A- long-term counterparty credit ratings on AXA SA and AXA Financial, Inc., revising the outlook to positive from stable. On November 4, 2014, Fitch reaffirmed the AA- financial strength ratings of AXA’s principal insurance subsidiaries and the A- rating for counterparty credit on the Company, maintaining a stable outlook.
A downgrade or the potential for a downgrade of our ratings could have a variety of negative impacts on us including
Assets” (including Note 1.7.1 “Goodwill and impairment of goodwill”) and an analysis of the goodwill asset refl ected on our consolidated balance sheet is set forth in Note 5 “Goodwill”
(DAC), Value of Business in Force (VBI) and other intangible assets amortization and the value of our deferred tax assets and deferred participation assets. The value of certain of our businesses including, in particular, our US Variable Life and
Variable Annuity businesses, is signifi cantly impacted by such factors as the state of the fi nancial markets and ongoing operating performance.
Third parties that owe us money, securities or other assets may not pay or perform under their obligations. These parties include private sector and government (or government-backed)
(including mortgage-backed, asset-backed, government bonds and other types of securities), borrowers under mortgages and other loans that we extend, reinsurers to which we have assigned insurance risks, customers, trading counterparties, counterparties under swap and other derivative contracts, other counterparties including brokers and dealers, commercial and investment banks, hedge funds, other investment funds, clearing agents, market exchanges, clearing houses and other
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, assigned 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.
Value” in the 2014 C onsolidated F inancial S tatements 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. Certain of our investment assets, for which there is no active trading market or other observable market data, are valued using models and methodologies that involve estimates, assumptions and signifi cant management judgment. During periods of market disruption of the type we have experienced over the past several years, a larger portion of our investment assets may be valued using these models and methodologies as a result of less frequent trading or less observable market data with respect to certain asset classes that were previously actively traded in liquid markets. There can be no assurance that our valuations on the basis of these models and methodologies represent the price for which a security may ultimately be sold or for which it could be sold at any specifi c point in time. Use of different models, methodologies and/or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse effect on our results of operations and fi nancial condition.
Our accounting principles and policy with respect to the determination of allowances and impairments on our investments are set forth in Note 1.8.2 “Financial instruments classifi cation” in the 2014 Consolidated Financial Statements included in this Annual Report. The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
In considering impairments, management considers a wide range of factors including those described in Note 1.8.2 and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, management’s evaluation involves a variety of assumptions and estimates about the operations of the issuer and its future earnings potential. Management updates its evaluations regularly and refl ects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that management has accurately assessed the level of impairments taken and allowances refl ected in our fi nancial statements and the need for additional impairments and/or allowances may have a material adverse effect on our consolidated results of operations and fi nancial position.
Ongoing volatility in interest rates and credit spreads, individually or in tandem with other factors (such as lack of market liquidity, declines in equity prices and the strengthening or weakening of foreign currencies against the Euro, and/or structural reforms or other changes made to the Euro, the Eurozone or the
AXA publishes its C onsolidated F inancial S tatements in Euro.
While AXA seeks to manage its exposure to foreign currency fl uctuations through hedging, fl uctuations in the exchange rates may have a signifi cant impact on AXA’s results of operations, cash fl ows, shareholders’ equity and solvency. For example, a strengthening or weakening of the Euro against the US Dollar and/or certain other currencies in 2015 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.
On the other hand, defl ation experienced in our principal markets may also adversely affect our fi nancial performance.
Eurozone has materialized. Defl ation may erode collateral values and diminish the quality of certain investment assets, and may negatively impact consumer behavior or otherwise negatively affect our business and results of operations.
Our insurance and fi nancial services operations are generally conducted through direct and indirect subsidiaries. As a holding company, our principal sources of funds are dividends from subsidiaries and funds that may be raised from time to time through the issuance of debt or equity securities or through bank or other borrowings.
Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from all our subsidiaries. In particular, our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affi liates. Moreover, our designation as a Global Systemically Important Insurer could impose similar or other restrictions on the transfer of funds, including intra-group fi nancing arrangements, which could negatively impact the fungibility of our capital. These factors may adversely impact the Company’s liquidity position and capacity to pay dividends. For further details, see Section 1.4
“Liquidity and capital resources” and Part 4 – Note 29.4 “Other items: Restriction on dividend payments to shareholders” of this
Our hedging programs and reinsurance arrangements may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition
We use derivatives (including amongst others, equity futures, treasury bond futures, interest rates swaps and swaptions, equity options and variance swaps) to hedge certain, but not all, risks under guarantees provided to our clients.
(“GMIB”) and/or Withdrawal for Life Benefi ts (“GMWB”), available in particular under certain of our v ariable a nnuity products (the “Accumulator Guarantees”).
These hedging techniques are designed to reduce the economic impact of unfavorable changes to certain of our exposures under the Accumulator G uarantees due to movements in the equity and fi xed income markets and other factors. In certain cases, however, we may not be able to apply these techniques to effectively hedge our risks as intended or expected or may choose not to hedge certain risks because the derivative market(s) in question may not be of suffi cient size or liquidity, the cost of hedging may be too expensive (as a result of adverse market conditions or otherwise), the nature of the risk itself may limit our ability to effectively hedge or for other reasons.
Certain risks under Accumulator G uarantees and under other contracts and policies issued by AXA Equitable are reinsured by AXA RE Arizona Company (“AXA RE Arizona”) an indirect wholly owned subsidiary of the Company, which hedges these risks using the techniques described above. This reinsurance provides important capital management benefi ts to AXA
Equitable’s ability to receive full statutory reserve credit for the reinsurance arrangements.
State Department of Financial Services (the “NYDFS”) have been scrutinizing insurance companies’ use of affi liated captive reinsurers or off-shore entities following a highly critical report issued by the NYDFS in June 2013, as part of an industry wide inquiry. The report recommended, among other things, enhanced disclosure, conduct of further regulatory inquiries and a national moratorium on new reserve fi nancing transactions involving captive reinsurers until these inquiries are complete. In June 2014, a report to an NAIC Task Force made various recommendations including placing limitations on the types of assets that may be used by captive reinsurers and other special purpose vehicles to fi nance reserves associated with certain term and universal life insurance policies, and in August 2014, the NAIC Executive Committee adopted the regulatory framework proposed in this report including recommendations to have various technical working groups of the NAIC propose regulations and guidelines to implement the new framework. Like many life insurance companies, AXA
(“AG 48”) that regulates the portion of the reserves that may be supported by specifi ed asset classes in connection with certain transactions involving captive reinsurance companies. The requirements in AG 48 became effective on January 1st, 2015 and apply in respect of certain term and universal life insurance policies written prior to, from and after January 1st, 2015 but not included in a captive reinsurer fi nancing arrangement as of
December 31, 2014. The NAIC and state regulators continue to consider additional changes in this area.
The profi tability of AXA’s v ariable a nnuity products with guarantees depends, among other factors, on AXA’s ability to effectively hedge the guarantees. The Company has implemented and continues to pursue a number of initiatives, including re-design and re-pricing of certain product features, designed to improve the profi tability of these products and limit future hedging losses on the Accumulator G uarantees.
We use numerous assumptions to determine the appropriate level of insurance reserves, D eferred A cquisition C osts (DAC), employee benefi ts reserves and to calculate certain widely used industry measures of value such as Life & Savings New Business Value (NBV) and European Embedded Value (EEV), which involve a signifi cant degree of management judgment and predictions about the future that are inherently uncertain; if these assumptions are not correct, they may have an adverse impact on our results of operations and/or performance indicators, such as NBV, that may adversely affect the price of our securities
EEV calculations, changes in assumptions used in calculating these measures may have a material adverse effect on the level of our NBV and/or EEV. For example, our NBV is sensitive
In our Life & Savings businesses, our earnings depend signifi cantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. AXA uses both its own experience and industry data to develop estimates of future policy benefi ts, including information used in pricing the insurance products and establishing the related actuarial liabilities. However, there can be no assurance that actual experience will match these estimates and emerging risks such as pandemic diseases could result in loss experience inconsistent with our pricing and reserve assumptions. To the extent that our actual benefi ts paid to policyholders are less favorable than the underlying assumptions used in initially establishing the future policy benefi t reserves, or events or trends cause us to change the underlying assumptions, we may be required to increase our liabilities, which may have a material adverse effect on our business, results of operations and fi nancial condition.
The increasing frequency and sophistication of hacking incidents directed at major fi nancial institutions and other corporations recently has made clear the signifi cance of these cyber-risks and the damage, both fi nancial and reputational, they can potentially infl ict. Management has put in place internal controls and procedures designed to protect client data as well as the Group’s proprietary information from hacking or other types of unauthorized intrusions into the Group’s information technology systems. There is no guarantee, however, that these measures will be effective and prevent all attempted intrusions into the Group’s information systems and any such intrusion could result in loss of sensitive client data and/or proprietary information.
These events can potentially result in fi nancial loss, impairment to our liquidity, a disruption of our businesses, regulatory sanctions or damage to our reputation. Management attempts to control these risks by maintaining a sound and well controlled environment in light of the characteristics of our business, markets and the regulatory environment in which we operate.
For additional information, see Part 4 – Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” and also Note 20 “Derivative instruments” of this Annual Report.
Supervisors (“IAIS”) published an initial assessment methodology for designating GSIIs, as part of the global initiative launched by the G20 with the assistance of the
Financial Stability Board (“FSB”) to identify global systemically important fi nancial institutions (“G-SIFIs”). The assessment methodology, which is endorsed by the FSB, 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. Also, on July 18, 2013, the
FSB published its initial list of nine GSIIs, which includes the
AXA Group. The framework policy measures for GSIIs, also published by the IAIS on July 18, 2013 for implementation by the GSIIs, include (1) new capital requirements, including
(“HLA”) capacities to be requested from GSIIs in relation to their
Group interdependencies including restrictions on intra-group fi nancing and other arrangements, and (4) in general, a greater level of regulatory scrutiny for GSIIs (including a requirement to establish a Systemic Risk Management Plan (“SRMP”) and a Recovery and Resolution Plan (“RRP”)) which may entail signifi cant new processes, reporting and compliance burdens
The contemplated policy measures include the constitution of a Crisis Management Group (“CMG”) by the Group-wide supervisor, the preparation of the above-mentioned SRMP and
Solvency II, will be reported on a confi dential basis to Group wide supervisors and be shared with the IAIS. Beginning in 2019, the GSIIs will be required to hold capital no lower than the BCR plus HLA.
While the manner in which the above-mentioned IAIS policy measures (and any other initiatives launched by the IAIS
such as the draft Common Framework for the Supervision of Internationally Active Insurance Groups, “IAIG”; and the
Framework which is now undergoing public consultation) will be implemented by legislation or regulation in each applicable jurisdiction is not yet clear, these measures, if implemented, could have far reaching regulatory and competitive implications for the AXA Group and adversely impact our capital requirements, profitability, the fungibility of our capital and ability to provide capital/financial support for Group companies, our ability to grow through future acquisitions, change the way we conduct business and our overall competitive position versus insurance groups that are not designated as GSIIs.
We face strong competition in all of our business segments and competition may intensify as a result of current global market conditions which could adversely impact our results of operations and fi nancial condition
( “FATCA”) withholding requirements and planned introduction of the Common Reporting Standard (“CRS”) across a multitude of jurisdictions where the Group does business, could result in higher tax expenses and payments and will result in higher compliance costs. Future interpretations or developments of tax regimes may also affect our tax liability, return on investments and business operations.
“Litigation” and Section 3.1 “Regulation” of this Annual Report for additional information on these matters.
We expect the scope and extent of applicable laws and regulations, as well as regulatory oversight, to continue to increase over the coming years. While management proactively manages these risks and has adopted policies and procedures designed to ensure compliance with applicable laws and regulations in the various jurisdictions where it does business, we cannot predict with any certainty the potential effects that a change in applicable laws or regulations, their interpretation or enforcement (or of the potential effects of any new regulation or legislation in the future) may have on the business, fi nancial condition or results of operations of our various businesses.
Any failure by AXA to remain in compliance with applicable regulations, as well as the regulations in the countries and markets in which it operates, could result in fi nes, penalties, injunctions or other similar restrictions, any of which could negatively impact AXA’s earnings and reputation. Please see
Potential changes to International Financial Reporting Standards as adopted by the European Union may adversely affect our consolidated results of operations
Interpretations Committee interpretations that were defi nitive and effective as of December 31, 2014 according to the adoption measures of the European Union (the “Standards”).
may adversely affect the market price of our ordinary shares, and our ADS, and dilute the positions of existing shareholders.
market. While the US OTC markets have become more sophisticated and liquid in recent years, no assurance can be given as to the liquidity of the OTC market for AXA ADS or that persons wanting to buy or sell AXA ADS will at all times be able to fi nd a willing seller or buyer at an acceptable price and volume.
The holders of AXA ADS may not be able to exercise their voting rights due to delays in notifi cation to and by the depositary.
for failing to carry out voting instructions or for the manner of carrying out voting instructions is limited by the Deposit
AXA SA is a société anonyme organized under the laws of
2. Shared risk appetite framework: Chief Risk Offi cers are responsible for ensuring that the top management reviews and approves the risks they carry in their company, understand the consequences of an adverse development of these risks, and have action plans that can be implemented in case of unfavourable developments.
GRM oversees the operating entities’ adherence to the framework, supported by the local risk management teams. It steers the Risk Management family and develops a risk culture throughout the Group.
The Risk Management function at Group level is also reinforced by AXA Global P&C, AXA Global Health and AXA Global L&S, which advise and support local entities in their reinsurance strategy (Property & Casualty; Health and Life & Savings), and centralize the Group’s purchasing of reinsurance.
The roles and responsibilities of local Risk Management teams are validated jointly by the Executive Committees of local entities and the Group Chief Risk Offi cer to ensure a better alignment of central and local interests.
A report on the Company’s performance against the key fi nancial indicators is presented on a regular basis to the
Local operating units have the primary responsibility for managing their fi nancial risks (market risk, credit risk, liquidity risk), while abiding by the risk framework defi ned at Group level, in terms of limits/thresholds and standards. This approach aims to allow operating units to react swiftly in an accurate and targeted manner to changes in fi nancial markets, political and economic environments in which they operate.
The main fi nancial risks for the AXA Group are as follows: ■ interest-rate, spread risk and equity risk related to the operating activities of Group subsidiaries; ■ exchange-rate risk related to the operating activities of
The AXA Group analyses sensitivity to movements in interest rates and equity markets looking at two different measures: ■ sensitivities of European Embedded Value (EEV) in the Life &
Savings business, as described below; ■ sensitivities of the adjusted net asset value for other-than-life businesses.
(Spain, Portugal, Italy, Mexico, Morocco, Turkey, the Gulf Region and Greece), Hong Kong and Japan. At December 31, 2014, these subsidiaries represented 99% of AXA’s consolidated invested assets within its insurance operations.
EV”. For the Life & Savings business, the EV is equal to the
EEV, while for other-than-life businesses, the EV is equal to the adjusted net asset value.
IFRS shareholders’ equity at December 31 50,388 14,831 65,219 42,306 10,617 52,923
Net unrealized capital gains/losses, not included in IFRS shareholders’ equity 1,085 3,114 4,199 956 2,515 3,471
Life & Savings Value of Inforce (VIF) 25,261 - 25,261 27,793 - 27,793
EEV, AXA has adopted a “market-consistent” approach to setting asset return assumptions. Each cash fl ow is discounted at an appropriate discount factor, so that starting with Euro 1 of bond or of equity, projecting expected cash fl ows and discounting them, will simply give Euro 1 of value. Mechanically, this can be described as assuming that, in the future, all assets will earn the risk-free rate (referred to as the “reference rate”
in the Embedded Value methodology) defi ned by the current market. 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 the fact that: ■ actuarial assumptions refl ect best estimates based on recent experience; ■ no productivity gains in the future are assumed, while a 2.0%
average infl ation rate was included in 2014 (2.0% in 2013)
(29.1% in 2013); ■ consistent with previous years, AXA used, at the end of 2014, reference rates which included, where applicable, liquidity premia over the swap curves for some of its entities. Some refi nements were made to the reference interest rate curve this year to refl ect the current development of Solvency II.
10% higher value of equity markets at start of projection 1,606 3% 366 1% 1,972 4% 1,458 3% 347 1% 1,805 4%
10% lower value of equity markets at start of projection (1,732) -4% (361) -1% (2,093) -4% (1,591) -4% (347) -1% (1,938) -5%
EEV became slightly more sensitive to a decrease in interest rates, due to lower interest rates causing General Account guarantees and Variable Annuity options to be more in the money.
■ 10% higher value of equity markets at the start of the projection which simulates a shock to the initial conditions just for equities. This means changes to current market values of equities, with related possible changes to projected capital gains/losses and/or fee revenues. Policyholder and management behaviors are adjusted to be consistent with these conditions. As noted in the defi nitions, these calculations refl ect a shock to the initial conditions for equities, but no changes in value for asset classes such as fi xed maturities or real estate are assumed to accompany the equity change. In reality, changes in value of other asset classes would probably lead to different results than shown here. It is also possible that a gradual movement in equity would produce different results than a sudden shock; ■ 10% lower value of equity markets at the start of the projection which is the same as above but testing a decrease.
The limited asymmetries refl ect the impact of guarantees and profi t-sharing rules, along with some hedging programs to limit potential losses. The impacts of equity market value changes can come from General Account exposures or from changing asset balances impacting future fee revenue on separate account business.
2014 equity market sensitivities (% of Group EV) for otherthan -life businesses of 1% to 10% higher value and -1% to 10% lower value (2013: 1% and -1%) refl ect the impacts on equities including derivatives on equities.
Group assets at December 31, 2014 (88% in 2013), assets and liabilities with foreign currency exposure are generally naturally matched or hedged.
■ Life & Savings business: 78% of Group assets at the end of 2014 (77% in 2013): In France, AXA was exposed to exchange-rate risk for a global amount of €13,546 million at the end of 2014 (€10,254 million in 2013) held both directly and indirectly through investment funds partly invested in foreign currencies (particularly US
This exposure allows AXA France to diversify its investments and enable policyholders to benefi t from the performance of international fi nancial markets. AXA France offsets its exposure to exchange-rate risk by using foreign exchange forwards and other derivatives (notional of €12,837 million in 2014 versus €10,200 million in 2013).
AXA Japan may invest when relevant outside the Japanese market in order to diversify and optimize investments and enhance returns. At the end of 2014, the total assets denominated in foreign currencies held both directly and indirectly through investment funds (mainly US Dollars)
represented an amount of €13,715 million (€12,971 million in 2013). Excluding assets backing Unit-Linked contracts, the corresponding exchange-rate risk was fully hedged through the use of derivatives.
AXA Germany held €5,853 million investments denominated in foreign currencies at the end of 2014 (€4,456 million in 2013)
both directly and indirectly through investment funds, with the aim of diversifying its investments and taking advantage of foreign markets’ performance. These investments were mainly denominated in US Dollars (€5,433 million versus €4,048 million in 2013) including the US Short Duration High
US Dollar) due to the on-going low interest rate environment in Switzerland and to limited investment possibilities in the
of total assets in 2013), of which €25,103 million were hedged
Savings companies do not have any signifi cant exposure to exchange-rate risk.
■ Property & Casualty business: 9% of Group assets at the end of 2014 (9% at the end of 2013): In France, AXA was exposed to exchange-rate risk for a global amount of €2,870 million at the end of 2014 (€1,833 million in 2013) held both directly and indirectly through investment funds partly invested in foreign currencies (US Dollar: €2,445 million versus €1,386 million in 2013, Pound Sterling: €384 million versus €240 million in 2013 and Japanese Yen: €32 million versus €57 million in 2013), in order to diversify its investments.
France offsets its exposure to exchange-rate risk by using foreign exchange forwards in these currencies (notional of €2,764 million versus €1,806 million in 2013).
AXA Germany held €1,675 million investments denominated in foreign currencies at the end of 2014 (€1,475 million in 2013)
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 €1,470 million (€1,179 million in 2013), of which €1,460 million
(mainly fi xed income) is hedged through foreign exchange forwards or cross currency swaps. Net exposure amounted to €10 million, mainly from investments in foreign equities and cash; ■ investments totaling €505 million (€520 million in 2013) in
CLO funds and other investment funds which hold foreigncurrency investments, of which €480 million are hedged through foreign exchange forwards, while the remaining €25 million offset the foreign exchange exposure in AXA PPP
liabilities. Net exposure is nil; ■ investments in Alternative Credit funds denominated in
These countries accounted for 93% at the end of 2014 (92% in 2013) of the Group’s Property & Casualty companies’ assets.
Sterling (€404 million at the end of 2014 versus. €616 million in 2013). AXA Corporate Solutions Assurance carries assets denominated in foreign currencies to ensure balance sheet congruence. The congruence between the Company’s foreign currency assets and liabilities is regularly adjusted.
■ Holding companies (6% of Group assets at the end of 2014, same as 2013): Since 2001, AXA SA has adopted a hedging policy on net investments denominated in foreign currencies, which aims at protecting the Group’s consolidated shareholders’ equity against currency fl uctuations, using derivatives instruments and foreign currency debt.
In addition to the foreign exchange rate management performed locally (hedged through Foreign Exchange forward and currency swaps), Group Corporate Finance and Treasury steers the global exposure to foreign exchange risk and reports the position every quarter to the Finance Committee of the Board of Directors.
Committee, are designed to permit a consistent measurement of the positions of each affi liate.
Compliance with the limits is ensured by the Group through defi ned governance. The Group Credit Risk Committee handles, on a monthly basis, the issuer exposure breaches to the Group’s limit tolerances and determines coordinated actions for excessive credit concentrations. A Group Credit
At December 31, 2014, the breakdown of the debt security portfolio (€421.3 billion) by credit rating category was as follows: BBB
in AA, 17% in A, 24% in BBB, 3% in BB and lower, and 7%
Credit risk diversifi cation and analysis policies, particularly using credit ratings, are implemented by Investment Departments and monitored by Risk Management teams.
The exposure to sovereign debt securities issued by Governments and related in Greece, Ireland, Italy, Portugal and Spain was as follows: Issuer (In Euro million)
Government and government related bonds accounted as available-for-sale or designated as at fair value through profi t or loss.
Increase in unrealized gains and losses was driven by interest rate decreases in all geographies, in particular in Italian and
No impairment charges were booked in respect of the Group exposure to sovereign debt securities issued by governments and related in Greece, Ireland, Italy, Portugal and Spain in 2014 and in 2013.
At December 31, 2013, the economic breakdown of the total value of ABS (€10.3 billion excluding assets held for sale, as well as CMOs and Agency pool ABS) was: 47% in CLO, 9% in
At December 31, 2014, the nominal amount of positions taken through credit derivatives was €21.5 billion (1) of CDS (cumulated notional amounts of €12.0 billion protections bought and of €9.5 billion protections sold), which can be broken down as follows: i. €8.5 billion of CDS protections bought to hedge credit risk with regard to certain investments, mostly in corporate bonds; ii. €3.4 billion of CDS protections bought used to lock the liquidity premium through purchasing bonds and CDS
At December 31, 2014, the breakdown of these CDS’s underlying debt securities gross exposure by rating was as follows: High Yield/NR
Committee is in charge of assessing reinsurers’ quality and acceptable commitments. The Committee is under joint authority of Group Risk Management and AXA Global P&C.
This risk is monitored to avoid any excessive exposure to any specifi c reinsurer. The Security Committee meets monthly –
The breakdown of all reserves ceded to reinsurers by reinsurer rating as of December 31, 2014 (€18.9 billion) was as follows: BBB/BB/B
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, liquidity requirements and stress testing results. The bank aims to meet all regulatory capital obligations and to remain suffi ciently capitalized in the light of AXA internal capital model.
that complement well-established underwriting rules; ■ optimization of reinsurance strategies to mitigate the risks in order to cap the Group’s peak exposures to protect our
Casualty as a regular technical & risk audit. Methods are adapted to the underwriting of risks, while maintaining the principle of local decision-making based on a documented approval procedure and using the output of the internal model.
In order to build adjusted and optimized protection, the Group’s various operating entities place their reinsurance treaties through AXA Global P&C. A variable part of the local treaties is placed on the domestic reinsurance market through AXA
For the breakdown of Property and Casualty and International insurance technical reserves please refer to Note 21 of the consolidated fi nancial statements included in Part 4 of this
The breakdown of the Group’s Life & Savings technical insurance reserves by product type was as follows: ■ 22% at the end of 2014 (22% at the end of 2013) of the
AXA’s risk exposure. On these products, the underlying fi nancial market performance is mostly passed on to the policyholders. This category also includes products that may provide a stand-alone guarantee on invested capital in the event of death. Overall, they present only a limited market risk for the Group through reduction of shareholders’ value; ■ 12% at the end of 2014 (11% at the end of 2013) of the
AXA has defi ned a single Group framework for identifying, quantifying and monitoring the main operational risks, involving the deployment of a common system, dedicated operational risk teams and a common operational risk typology classifying operational risks into seven risk categories: internal fraud, external fraud, employment practices and workplace safety, clients, products and business practices, damages to physical assets, business disruption and system failures and execution, delivery and process management.
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.
Outputs of the Operational Risk Internal model are considered when defi ning the Group Insurance Covers.
A strategic risk is the risk that a negative impact (current or prospective) on earnings or capital, material at the Group level, arises from a lack of responsiveness to industry changes or adverse business decisions regarding: ■ signifi cant changes in footprint, including through mergers and acquisitions; ■ product offering and client segmentation; ■ distribution model (channel mix including alliances/
AXA has defi ned a complete framework to protect its reputation, notably regarding communication to shareholders, customers, staff, and more broadly the fi nancial community, on its strength and fi nancial soundness through: ■ a tailored and daily basis communication at both internal and external levels (AXA’s intranet and specifi c hotline to answer questions of shareholders and staff, letters sent to customers and articles posted on AXA’s website); ■ a continuous monitoring of our online reputation (web and media monitoring system); ■ an extensive communication of our management team to international media.
In order to effi ciently coordinate local and global Investment processes, decisions within the investment community are taken by two main governance bodies: ■ the Group Investment Committee which is co-chaired by the Group Deputy CEO and the CEO of AXA France. This committee defi nes investment strategies, steers tactical asset allocation, evaluates new investment opportunities and monitors the Group’s investment performance; ■ the Asset Liability Management Supervisory Committee for which the Group Investment and ALM Management
Management Departments. They use methodologies and modelling tools that develop deterministic and stochastic scenarios, embedding policyholder behaviour considerations for the liabilities, fi nancial market evolution for the assets and taking into account existing interaction between the two. This process aims at maximizing expected returns given a set level of risk. Furthermore, a series of additional constraints are considered, such as Solvency II internal model considerations, earnings stability, protection of the solvency margin, preservation of liquidity, as well as local and consolidated capital adequacy and requirement.
At local entity level, the strategic asset allocation issued from the ALM study must be approved by local risk management, mainly with regards to predefi ned risk appetite limits, before being fully endorsed by the Local Investment and ALM
Investment opportunities, like non-standard investments, new strategies or new structures, are subject to an Investment
The IAP is used and completed at local level to cover local characteristics (tax, statutory accounting…).
4.1 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 192 4.2 CONSOLIDATED STATEMENT OF INCOME 194 4.3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 195 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 196 4.5 CONSOLIDATED STATEMENT OF CASH FLOWS 200 4.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 202
NOTE 29 Contingent assets and liabilities and unrecognized contractual commitments 327
NOTE 32 Subsequent events 335 4.7 REPORT OF THE STATUTORY AUDITORS ON THE CONSOLIDATED FINANCIAL STATEMENTS 336
6 Value of purchased business in force (d) 2,297 2,382 2,685 7 Deferred acquisition costs and equivalent 21,119 19,345 19,042
(c) Before 2013, AXA Japan closed its full year accounts at September 30. Given signifi cant movements in foreign exchange rates between September 30, 2012 and December 31, 2012, opening balance sheet items at January 1, 2013 were translated using December 31, 2012 exchange rate. Starting with 2013 annual accounts, AXA Life Japan aligned its closing date with the Group calendar year.
(e) Includes assets backing contracts where the fi nancial risk is borne by policyholders with Guaranteed Minimum features.
Share capital and capital in excess of nominal value 26,610 26,199 25,549
Liabilities arising from investment contracts with no discretionary participating features and where the fi nancial risk is borne by policyholders 35,246 32,682 29,983
14 LIABILITIES ARISING FROM INSURANCE AND INVESTMENT CONTRACTS 635,656 572,985 579,079 15 Liabilities arising from banking activities (e) 37,402 35,375 33,495 16 Provisions for risks and charges 12,656 10,393 11,951
Minority interests of consolidated investment funds and puttable instruments held by minority interest holders 10,241 7,795 4,005
Payables arising from direct insurance and inward reinsurance operations 8,831 8,305 8,937
(a)) Reso Garantia is accounted for using the equity method in the Group consolidated fi nancial statements on the basis of a closing at September 30. Given signifi cant movements in the Russian ruble exchange rate between September 30, 2014 and December 31, 2014, the balance sheet used as a basis of the equity method has been translated using December 31 exchange rate.
Change in unearned premiums net of unearned revenues and fees (298) (248)
Net realized gains and losses relating to investments at cost and at fair value through shareholders’ equity (e) 1,924 2,410
Income from operating activities before tax 7,710 6,727 10 Income (net of impairment) from investment accounted for using the equity method (73) 139
(b) AXA Life Japan aligned its closing date with the Group calendar year starting with 2013 annual accounts. Therefore, its contribution to the AXA consolidated result for the 2013 annual accounts exceptionally covered a period of fi fteen months.
(d) Net of investment management costs and including gains/losses from derivatives hedging variable annuities.
(f) Includes realized and unrealized forex gains and losses relating to investments at cost and at fair value through shareholders’ equity.
Items that will not be reclassifi ed subsequently to Profi t or Loss (1,239) 726
participation and related effects are further detailed in the notes to the fi nancial statements.
Capital in excess of nominal value - - - 309 -
Others (including impact on change in scope) (c) - - - - -
Note: amounts are presented net of impacts of shadow accounting and its effects on policyholders’ participation, deferred acquisition costs, and value of business in force.
CONSOLIDATED FINANCIAL STATEMENTS 4 4.4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In Euro million, except for number of shares and nominal value)
Change in fair value of investments at fair value through profi t or loss (14 ,097 ) (24,910)
Net change in liabilities arising from insurance and investment contracts (d) 20,265 14,130
Income (net of impairment) from investment accounted for using the equity method 73 (139)
Adjustment for reclassifi cation to investing or fi nancing activities 287 2,436
Dividends recorded in profi t or loss during the period (3,277) (3,451)
Investment expense (excluding interests on fi nancing and undated subordinated debts, margin calls and others) (3,286) (2,864)
Net cash impact of transactions with cash impact not included in the operating income before tax 16,522 18,786
Sales of investment properties held directly or not (g) 1,149 1,467
Net cash related to sales and repayments of investments (g) (h) (i) 100,065 106,020
Purchases of equity instruments and non consolidated investment funds (g) (h) (23,956) (24,650)
Purchases and/or issues of loans and other assets (h) (i) (29,319) (27,126)
Net cash related to purchases and issuance of investments (g) (h) (i) (108,920) (114,819)
Net cash related to sales and purchases of tangible and intangible assets (342) (334)
Impact of change in consolidation method and of reclassifi cations as held for sale (l) (24) (16)
Net impact of foreign exchange fl uctuations and reclassifi cation on cash and cash equivalents 700 (1,364)
(c) Includes impairment and amortization of intangible assets booked in the context of business combinations.
(e) Mainly includes change in provisions for risks & charges, for bad debts/doubtful receivables and change in impairment of assets held for sale.
AXA SA, a French Société Anonyme (the “Company” and together with its consolidated subsidiaries, “AXA” or the
AXA had a different reporting year end. In particular, AXA Life
Japan previously closed its full year accounts on September 30, however it aligned its closing date with the Group calendar year starting with the 2013 annual accounts. Therefore, the contribution of AXA Life Japan to the Group net consolidated income for the 2013 annual accounts exceptionally covered a period of fi fteen months.
The consolidated fi nancial statements are prepared in compliance with IFRS standards and interpretations of the IFRS
STANDARDS, AMENDMENTS AND INTERPRETATION PUBLISHED AND ADOPTED ON JANUARY 1, 2014
May 12, 2011 (followed by amendments for investment entities published on October 31, 2012) addressing the accounting for consolidation, involvement in joint arrangements and disclosure of involvement with other entities.
■ IFRS 11 – Joint Arrangements replaces IAS 31 – Interests in Joint Ventures. IFRS 11 eliminates the option to apply the proportional consolidation method when accounting for jointly controlled entities and focuses on the rights and obligations of the arrangement, rather than the legal form.
The retrospective application of these standards and amendments by AXA resulted in: ■ the change in the consolidation method of a limited number of investment funds and real estate companies (with the full consolidation of some entities previously accounted for under the equity method or not consolidated, and, in contrast, the deconsolidation of others); ■ the change from the proportionate consolidation method to the equity method for joint ventures, in particular Natio
The changes have no impact on the total of the profi t or loss for the current year and prior year and on shareholders’
equity – Group share reported. The retrospective effects on the aggregates of the consolidated statement of fi nancial position and the consolidated statement of income are as follows:
Investments accounted for using the equity method 1,387 1,428 41 1,312 1,347 35
Reinsurers’ share in insurance and investment contracts liabilities 17,727 17,808 80 10,558 10,620 63
Liabilities arising from insurance and investment contracts 573,058 572,985 (73) 579,165 579,079 (86)
Liabilities arising from banking activities 35,374 35,375 1 33,494 33,495 1
Provisions for risks and charges 10,393 10,393 - 11,952 11,951 -
Change in unearned premiums net of unearned revenues and fees (246) (248) (2)
■ IFRIC 21 – Levies, published on May 20, 2013, is an interpretation on the accounting for levies imposed by governments. The interpretation, early adopted by AXA, clarifi es that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.
January 1, 2018. The standard has not yet been endorsed by the European Union. The method of implementation of the future standard and its potential impact on the Group’s consolidated fi nancial statements are currently being examined within the Group. The new standard addresses the following items related to fi nancial instruments: ■ classifi cation and measurement: IFRS 9 uses a single approach to determine whether a fi nancial asset is measured at amortized cost, fair value through Other Comprehensive
Income or fair value through profi t or loss. A fi nancial asset is measured at amortized cost if both a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash fl ows and b) the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”). If both a)
SPPI, the fi nancial asset is measured at fair value through
Other Comprehensive Income and realized gains or losses would be recycled through profi t or loss upon sale. Assets not meeting either of these categories are measured at fair value through profi t or loss. Additionally, at initial recognition, an entity can use the option to designate a fi nancial asset at fair value through profi t or loss if doing so eliminates or signifi cantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in Other
IFRS 15 – Revenue from Contracts with Customers, published on May 28, 2014 provides a principles-based approach for revenue recognition and introduces the concept of recognizing revenue for obligations as they are satisfi ed. The standard will apply to all contracts with customers, except for: insurance contracts, lease contracts, fi nancial instruments and certain contractual rights or obligations, non-monetary exchanges between entities in the same line of business to facilitate sales to customers and certain guarantees. IFRS 15 is effective for annual periods beginning on or after January 1, 2017. The standard has not been endorsed by the European Union.
The potential impact of the new standard on the Group’s consolidated fi nancial statements is being assessed.
IAS 16 – Property, Plant, and Equipment and IAS 38 – Intangible Assets
May 12, 2014 January 1, 2016 * Clarifi cation of the principle for the basis of depreciation and amortization as being the expected pattern of consumption of the future economic benefi ts of an asset.
December 18, 2014 January 1, 2016 * Improvement of presentation and disclosure in fi nancial reports. The amendments are designed to encourage entities to apply professional judgment in determining what information to disclose in their fi nancial statements. For example, materiality should apply to the whole of fi nancial statements knowing that the inclusion of immaterial information can inhibit the usefulness of fi nancial disclosures.
AXA elected the option to reset to zero all past cumulative currency translation differences for all foreign operations as of
Unless otherwise stated, AXA’s accounting policies have been consistently applied to all the periods presented in its fi nancial statements, including policies relating to the classifi cation and measurement of insurance contracts, investment contracts and other fi nancial investments and liabilities including derivatives.
Under IFRS 11, companies over which AXA exercises a joint controlling infl uence alongside one or more third parties are joint ventures and are accounted for under the equity method.
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”.
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the
For business combinations on or after January 1, 2009, any change to the estimate of the contingent element between the acquisition date and the amount actually subsequently paid is recognized in the income statement.
Group is measured at fair value and the resulting adjustment is recognized through net income. Similarly, when an additional purchase changes the control from signifi cant infl uence or joint control to control, any investment pre-existing in a former associate/joint venture is re-measured to its fair value with the gain or loss through net income (consequently also resulting in a new goodwill).
According to a decision taken for each acquisition, any minority interest may be measured at fair value or at its proportionate interest in the acquiree’s identifi able net assets.
■ to the extent of AXA’s interest for entities consolidated by equity method.
Foreign exchange differences arising from monetary fi nancial investments available for sale are recognized as income or expense for the period in respect of the portion corresponding to amortized cost. The residual translation differences relating to fair value changes are recorded in shareholders’ equity, like for non-monetary items such as equity securities.
Fair values mainly not based on observable market data are disclosed as level 3 in the Notes.
Valuation techniques are subjective in nature and signifi cant judgment is involved in establishing fair values. 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. However, valuations are determined using generally accepted models (discounted cash fl ows,
Financial Statements refl ects operating business segments; it is based on fi ve business lines: Life & Savings, Property &
The incremental direct costs of acquiring a portfolio of insurance contracts and investment contracts with discretionary participating features, primarily related to the selling, underwriting and initiating the insurance contracts in a portfolio, are deferred by recognizing an asset. In Property and
Casualty, DAC are amortized over the terms of the policies, as premium is earned. For Life business, the asset is amortized based on the estimated gross profi ts emerging over the life of the contracts. This asset is tested for recoverability and any amount above future estimated gross profi ts is expensed.
Revenues received at contract inception to cover future services are deferred and recognized in the income statement using the same amortization pattern as the one used for deferred acquisition costs.
Group; ■ portfolios of managed fi nancial investments whose profi tability is valued on a fair value basis: mainly securities held by consolidated investment funds, managed according to the Group risk management policy (“Satellite Investment
If such evidence exists for an available for sale fi nancial asset, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment on that fi nancial asset already booked in the income statement –
is removed from shareholders’ equity and an impairment is recognized through the income statement. Equity instruments impairment recognized in the income statement cannot be reversed through the income statement until the asset is sold or derecognized.
Additionally, the Group is party to total return swaps under which fi nancial assets are sold to a counterparty with a corresponding agreement. Cash fl ows equal to those of the underlying assets will be remitted to the Group in exchange for specifi ed payments taking into account any increase or decline in the fair value of the assets . This results in substantially all of the risks and rewards of the fi nancial assets remaining with the
Group. As such, the Group does not derecognize the fi nancial assets.
1.9. ASSETS BACKING LIABILITIES ARISING FROM CONTRACTS WHERE THE FINANCIAL RISK IS BORNE BY POLICYHOLDERS
Assets backing liabilities arising from insurance or investment contracts where the fi nancial risk is borne by policyholders are presented in a separate aggregate of the balance sheet so that they are shown in a symmetrical manner to the corresponding liabilities. This presentation is considered more relevant for the users and consistent with the liquidity order recommended by IAS 1 for fi nancial institutions, since the risks are borne by policyholders, whatever the type of assets backing liabilities (investment in real estate properties, debt instruments or equity instruments, etc.).
is classifi ed separately on the liability side of the balance sheet with the equity component reported in Group shareholders’
In some insurance or investment contracts, the fi nancial risk is borne by policyholders. Such contracts are usually Unit-Linked contracts.
For traditional life insurance contracts (that is, contracts with signifi cant mortality or morbidity risk), the future policy benefi ts reserves are calculated on a prospective basis according to each country’s regulation provided methods used are consistent with the Group’s policies and using assumptions on investment yields, morbidity/mortality and expenses.
Changes in reserves are booked if there are impacts caused by a change in the mortality table.
Future policy benefi ts reserves relating to investment contracts with discretionary participation features (previously called
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 contract portfolios covered by the risk management program at that date. Any additional contract 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.
The purpose of claims reserves is to cover the ultimate cost of settling an insurance claim. Claims reserves are generally not discounted, except in cases such as disability annuities.
For example, for contracts with discretionary participating features, when unrealized gains or losses are recognized, a deferred participating liability (DPL) or asset (DPA) is recorded.