Internal Control: Internal Control is a local responsibility in accordance with Internal Control Standard and Policy. Entities are expected to: ■ define and document their controls and control procedures covering all important risks and processes (First line responsibility); ■ regularly verify and challenge the eff ectiveness of the control environment (Second line responsibility); ■ implement a comprehensive monitoring and reporting on internal control deficiencies at a senior level of the organization to ensure that these are rectified in an adequate and timely manner.
Local Heads of Internal Control (or equivalent) are independent from operations and report preferably to their local Chief Risk
Plan must be developed at the end of each year for the following year. The local Compliance function must directly report on a regular basis to local senior management and the local Audit
Committee (or equivalent body), on significant compliance matters, including key compliance risks, major regulatory changes that have compliance implications, the Annual Compliance Plan, outstanding Compliance Support and Development Program action points and any other significant issues that require escalation.
These missions are performed for regular closings, forecasts and strategic plan exercises. PBRC works with local PBR units within the Finance departments of Group subsidiaries.
PBRC’s role encompasses the following principal activities: ■ development of both accounting and reporting standards; ■ managing process instructions with the subsidiaries for the various exercises; ■ managing the Group’s financial consolidation and reporting systems; ■ producing the Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) and analyzing key performance indicators; ■ developing and using management control tools; ■ managing and consolidating the European Embedded Value processes, related actuarial indicators and the economic balance sheet; ■ coordinating the production of the Group’s Annual Reports filed with the AMF; ■ coordinating the production of reports filed with the ACPR
Group accounting standards, which are consistent with accounting and regulatory principles, are set forth in the “AXA Group
(“IFC”), to ensure that the Group Chief Executive Off icer has a reasonable basis to conclude that AXA Group’s ICOFR is eff ective as of the end of each financial year.
It is designed to ensure consistency and quality in AXA Group’s financial reporting, and provide an overall framework for the annual IFC program precising the scope of application and governance.
program. The independent Internal Financial Control function, anchored within Risk Management for most entities, is in charge of testing the design and operational eff ectiveness of those key controls, and ensuring that identified control deficiencies are remediated.
Chief Risk Off icer stating their conclusion as to the eff ectiveness of the entity’s ICOFR.
Chief Financial Off icers and certain other senior executives are required to certify various matters covered in AXA’s Universal
This process is based on the following four pillars: 1. Chief Financial Off icer Sign-Off Certificates, which are required to be submitted by all local Chief Financial Off icers to PBRC, together with the required subsidiary financial reporting and consolidation information; 2. IFC Management reports are required to be submitted by the Chief Financial Off icer or another senior executive of every in-scope entity, as part of the IFC program dedicated to ICOFR; 3. Disclosure Controls & Procedures Certificates, which are required to be submitted by AXA’s Management Committee members, Chief Financial Off icers and certain other senior executives pursuant to which each of these executives is required to review the Group’s Universal Registration
(ii) the eff ectiveness of disclosure controls and procedures and ICOFR at companies under his/her responsibility (with specific disclosure of any significant deficiencies or material weaknesses). In addition, as part of this “sub-certification”
process, these executives are required to review and comment on a number of cross-sectional disclosures in the Universal
Financial Off icers with the contribution of the entities under their responsibility to the Consolidated Financial Statements in order to facilitate their certification on the accuracy and completeness of the information in the Universal Registration
For further information, please refer to Appendix I “Management’s annual evaluation of the internal control over financial reporting”
However, all internal control systems, no matter how well designed, have inherent limitations and cannot provide absolute certainty or guarantee against the materialization of risks and control failures. Even systems determined to be eff ective by the management may not prevent or detect all human errors, all system malfunctions, all fraud or all misstatements and can provide only reasonable assurance.
are each required to produce an ORSA report which is filed with the applicable national supervisor. At Group level, the Group
The ORSA policy defines minimum standards for assessing and reporting own risks and solvency to be applied across the
Committee of the Board of Directors, and finally to the Board of
Beyond the annual ORSA report, a quarterly assessment is performed to update the Group’s risk profile against Risk
ORSA encompasses processes to identify, assess, monitor, manage and report the short to medium term risks to which the Group is exposed and to ensure the adequacy of the level of own funds within the Group solvency targets, taking into account the Group’s risk profile, as well as approved risk appetite limits and business strategy. As an important component of the risk management system, it is intended to give a comprehensive and complete vision of the risks embedded in the businesses of the Group on a continuous basis.
ORSA mainly encompasses Risk Management and financial activities, which are organized around the following processes: ■ Solvency Capital Requirement (“SCR”) & Eligible Own Funds
(“EOF”) calculation; ■ liquidity risk reporting; ■ strategic planning and financial projections; ■ risk appetite process; ■ stress and scenario testing analysis and monitoring; and
The ORSA report provides an assessment on: ■ the overall solvency needs through the measurement of quantifiable risks considering risk mitigation actions implemented in current economic context and approved business strategy detailed in the 2018-2020 strategic plan and within approved risk appetite limits. Stress scenario analyses are performed to ensure adequacy of the economic capital assessed. This is supported by the Enterprise Risk
(ii) requirements regarding technical provisions. Stress scenario analyses are performed to ensure adequacy of the economic capital assessed. Also, the extensive use of the Internal Model outputs for key decision-making processes provides a feedback loop for improving the modelling according to the evolution of the risk profile; ■ the significance with which the risk profile of the AXA Group deviates from the assumptions underlying the SCR calculated on the basis of the Internal Model. Extensive validation tests are performed to assess the relevance of the Internal Model and the model error. Limitations of the Internal Model and evolution plan resulting from the validation activities are presented.
is used in its risk management systems and decision-making processes. The ACPR has approved the use by the Group of its Internal Model to calculate its SCR under Solvency II. The
Solvency capital requirement in respect of the entities that were part of the XL Group (“XL entities”) as at December 31, 2019 was calculated in accordance with the Solvency II standard formula, while December 31, 2018 was relying on the equivalence regime, based on the Bermudian Standard Formula SCR, plus a 5% addon required by the AXA’s lead supervisor (ACPR), as a transitional measure. Subject to prior approval of the ACPR, the Group intends as soon as December 31, 2020 to extend its Internal Model to
Internal Model would be subject to the prior approval of the ACPR, which may require adjustments to the level of SCR. In addition, the Group monitors EIOPA’s work program which, through its objectives, is also expected to continue to carry out consistency reviews of European insurers’ internal models. Such review may lead to further regulatory changes to increase convergence and to strengthen oversight of cross-border groups, as well as changes to internal models and Solvency II capital requirements.
based on its expertise, the Group can improve on the approach of the standard formula (which is naturally constrained by its general scope and which does not cover all measurable risks) and have models more appropriate to the scope of the
Company risk mapping is comprehensive and is followed in a consistent way across the Company and that eff icient procedures and reporting are in place so that roles and responsibilities are allocated to identify, measure, monitor, manage and report key risks.
The SCR, calculated on the basis of the Internal Model, represents the value at risk of Group EOF at the 99.5th percentile over a oneyear horizon. In other words, the Solvency Capital Requirement is the capital needed to sustain an extreme shock likely to occur with a 0.5% probability (i.e. a 1 in 200 years event). It aims at including all measurable risks (market, credit, insurance and operational)
In addition to the risks that impact the SCR through the Internal
Model calculation, the Group also monitors its liquidity risk, reputation risk, strategic risk and regulatory risks as well as emerging threats.
February 20, 2020 was estimated at 198% (2), compared to 193%
as of December 31, 2018 and remains within AXA’s target range of 170%-220%.
Group Chief Risk Off icer’s review and sign-off , a comprehensive independent review process has been defined and implemented to provide adequate comfort to AXA Group Management and
Board of Directors that the model and its outputs meet a “fit for purpose” standard.
The independent reviews are performed by the following two internal teams: ■ IFC teams, at local and Group level, responsible for assessing the eff ectiveness of internal control framework over Solvency II, on the basis of the testing of processes and controls over the
■ Internal Model Review (“IMR”) team, a Group team responsible for the in-depth actuarial review of the model under local teams’ responsibility, the conception and methodology when locally developed, and the local implementation of the Group principles where relevant. IMR controls are performed on a 3-year rolling basis, independently from closing agenda.
I Governance of investment strategy and asset & liability management (ALM)
Risk and Investment Off icer. His role includes aligning AXA’s investment strategy with the broader strategy of the Group, fostering closer cooperation amongst local entities, enhancing investment expertise and methodology, and steering investment decisions.
■ the Group Financial Risk Committee is co-chaired by the Group
Chief Financial Off icer and the Group Chief Risk and Investment
Off icer. The Group Chief Investment Off icer is also member of this Committee (please refer to the paragraph “Audit Risk and
These committees are responsible for, inter alia, defining the entity’s Strategic Asset Allocation, approving and monitoring investments, meeting local compliance obligations and reviewing the participation in investment proposals syndicated by the
Department. They use methodologies and modelling tools that develop deterministic and stochastic scenarios, embedding policyholders’ behavior considerations for the liabilities, financial market evolution for the assets and taking into account existing interaction between the two. This process aims at maximizing expected returns given a defined level of risk. Furthermore, a series of additional constraints are taken into account, such as
At the entity level, the strategic asset allocation issued from the
Process (“IAP”) in line with the third pillar of the Group Risk
Management principles which provides for a systematic second opinion on key processes. The IAP ensures key characteristics of the investment are analyzed, such as risk and return expectations, experience and expertise of the investment management teams, as well as accounting, tax, legal and reputational issues.
The IAP is completed at Group level for any significant investment, depending on the investment size and the number of entities participating in it. The successful completion of an IAP is done aft er the production of a second independent opinion by Group
Risk Management. The IAP is used and completed at local level to cover local regulatory characteristics (including tax and statutory accounting).
This segregation of duties aims in particular at avoiding conflicts of interest.
Legal risk is addressed by defining a standardized master agreement. The Group’s business units may trade derivatives only if they are covered by legal documentation which complies with the requirements set out in the Group standards. Any change to certain mandatory provisions defined in the Group standards must be approved by GRM.
“Consolidated Financial Statements” of this Annual Report. Only information referred to in Note 4 is covered by the report of the
The market risks to which Life & Savings (L&S) and Property &
Local operating units have the primary responsibility for managing their market-related risks, while abiding by the risk framework defined at Group-level, in terms of limits/thresholds and standards.
A wide variety of risk management techniques are used to control and mitigate the market risks to which the Group is exposed. These techniques, used primarily in all operating subsidiaries, include: ■ local risk appetite governance and processes, including functional limits on market risks defined locally and approved by the local Board or Executive Committee; ■ Asset & Liability Management (ALM), i.e. defining an optimal strategic asset allocation with respect to the liabilities’ structure in order to reduce the risk to a desired level; ■ a disciplined investment process, requiring for any sophisticated investment a formal thorough analysis by the Investment department, and a second opinion by Risk Management; ■ hedging of financial risks when they exceed the tolerance levels set by the Group. Operational management of derivatives is based on stringent rules and is mainly performed by AXA SA
(1) Only information contained in Section 4.2 “Internal Control and Risk Management” of this Annual Report and referred to in Note 4 “Financial and Insurance Risks Management” in Part 5 – “Consolidated Financial Statements” of this Annual Report is covered by the report of the Statutory Auditors on the Consolidated Financial Statements.
The following table presents the reconciliation between IFRS S hareholders’ equity to Group EOF: RECONCILIATION IFRS SHAREHOLDERS’ EQUITY TO GROUP EOF
Net unrealized capital gains not included in Shareholders’ e quity 5.6
The main elements of the reconciliation from the €69.9 billion of IFRS shareholders’ equity to the €36.5 billion of IFRS TNAV
are as follows: ■ addition of €5.6 billion of net unrealized gains and losses on assets not reflected in IFRS shareholders’ equity; ■ deduction of €6.7 billion of undated deeply subordinated notes and of undated subordinated notes included in IFRS
■ elimination of €32.3 billion of intangible assets net of unearned revenues and fee reserves, taxes and policyholder bonuses.
IFRS TNAV increased by €11.2 billion mainly driven by (i) higher
and the Group EOF Unrestricted Tier 1 are as follows: ■ deduction of €3.5 billion of foreseeable dividends to be paid to shareholders in 2020; ■ addition of €8.5 billion reflecting the Solvency II technical provision adjustments corresponding to the adjustment from
Value & Solvency II Own Funds Report 2019” which is available on AXA Group website www.axa.com.
or fee revenues, 2) future reinvestment rates for all asset classes, and 3) discount rates. The change is applied to the reference interest rates, including the volatility adjuster where applied in the base case. Inflation rates, the volatility on interest rates and the Ultimate Forward Rates are not changed; ■ downward shift of 50 basis points in reference rates is the same as above but with a shift downward; ■ 25% higher value of equity markets simulates a shock to the initial conditions for equities only. Listed equities and private equity values including the impact of equity hedges are shocked. This means changes to current market values of all these equities excluding hedge funds, with related possible changes to projected capital gains/losses and/or fee revenues; ■ 25% lower value of equity markets: same methodology as mentioned above assuming a decrease.
(% of P&C EOF) of -1% to upward 50 bps and 1% to downward 50 bps reflect mainly the impacts on fixed-income assets, off set by discount on liabilities.
Account exposures or from changing asset balances impacting future fee revenue on separate account business.
(% of P&C EOF) of 4% to 25% higher value and -3% to 25% lower value reflect the impacts on equities including derivatives on equities.
Group share: (in %) Shareholders’ equity Group share Underlying Earnings Group share
In Belgium, AXA held inv estments in foreign currency for €2,875 million in 2019 both directly and indirectly through physical assets. These investments are mainly in US Dollar for €1,953 million and in Pounds Sterling for €340 million. The exchange-rate exposure on Assets is hedged for €2,353 million using mainly foreign exchange forwards, Cross Currency Swaps and Collar options strategies.
December 31, 2019, AXA UK held investments denominated in foreign currencies for €4,209 million (€4,078 million in 2018)
Dollar €778 million (€760 million in 2018). Exchange-rate risk exposure is hedged for a notional amount of €846 million using mainly foreign exchange forwards, currency swaps and collars.
■ Asia: 12% of Group assets at the end of 2019 (8% in 2018): Japan
■ International: 6% of Group assets at the end of 2019 (5% in 2018): AXA entities held investments denominated in foreign currencies for €3,744 million in 2019 (€3,384 million in 2018) both directly and indirectly through investment funds which are mainly denominated in US Dollar €2,281 million (€2,071 million in 2018). In particular, Mexico has its exchange-rate risk exposure mostly under congruent coverage, matching assets and liabilities denominated in the same currency. Besides, Singapore and Colombia have their exchange-rate risk exposure hedged (through forwards, cross currency swaps, and forex options for Singapore, and through forwards for Colombia).
■ AXA XL: 8% Group assets at the end of 2019 (7% in 2018): XL Group
For the majority of XL Group’s business, assets and liabilities are denominated in US Dollar. For business written in currencies other than in US Dollar, the risk is managed primarily by matching assets and liabilities in each currency. Asset positions in certain currencies, in particular Canadian Dollar and Swiss Franc, are hedged back to US Dollars using foreign exchange forwards with a notional amount of €727 million at the end of 2019 (€796 million in 2018).
In the course of its business, AXA Corporate Solutions Assurance carries some insurance liabilities denominated in foreign currencies, particularly in US Dollar (€1,144 million at the end of 2019 versus €1,192 million in 2018) and, to a lesser extent,
Pound Sterling (€434 million at the end of 2019 versus €397 million in 2018). 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.
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 fluctuations, using derivatives instruments and foreign currency debt.
As at December 31, 2019, the main hedging positions of AXA SA were as follows: Foreign currency hedging
In addition to the foreign exchange rate management performed locally (hedged through Foreign Exchange forward and currency swaps), the Group Corporate Finance and Treasury department steers the global exposure to foreign exchange risk and reports the position five times a year to the Finance Committee of the Board of Directors.
Credit risk is defined as the risk that a third party in a transaction will default on its commitments. Given the nature of its core business activities, AXA Group monitors three major types of counterparties, using methods suitable to each type: ■ investment portfolios held by the Group’s insurance operations
■ credit and credit-sensitive exposures on third party obligors stemming from some Group insurance and assumed reinsurance businesses.
“Internal Control and Risk Management” of this Annual Report and is taken into account in AXA’s liquidity r isk m anagement framework (please refer to Section 4.5 “Liquidity risks” of this
Compliance with the limits is ensured by the Group through defined governance. The Group Credit Risk Committee handles, on a monthly basis, the issuer exposure breaches to the Group’s limits and determines coordinated actions for excessive credit concentrations. A Group Credit Team reporting to the Group
Chief Investment Off icer (Group CIO) provides credit analyses independently from Group asset managers, in addition to local
As at December 31, 2018, the breakdown of the debt security portfolio (€467 billion) by credit rating was: 20% in AAA, 27% in
derivatives through a specific Group-wide policy. This policy includes: ■ rules on derivative contracts (ISDA, CSA); ■ mandatory collateralization; ■ a list of authorized counterparties; ■ a limit framework and an exposure monitoring process.
Limits are set specifically for each authorized counterparty, based on an internal scoring system. This policy also includes daily collateralization for the majority of the Group’s exposure.
and decides on any action to be taken with the aim of limiting
The breakdown of all reserves ceded to reinsurers by reinsurer rating as of December 31, 2019 (€24.3 billion) was as follows: A
As at December 31, 2018, the breakdown of reserves ceded to reinsurers (€27.1 billion) by reinsurer rating was: 4% in AAA, 43% in
The decrease in reserves ceded to reinsurers is mainly driven by the deconsolidation of Equitable Holdings, Inc.
Each month, the Group Credit Risk Committee monitors the aggregate ultimate shareholder exposures vs. the risk appetite limits, as well as the contributions of the various credit risk sources including the split by lines of business, reviews potential breaches to the Group limits and remediation plans, and when necessary handles additional capacity requests and allocates capacity between investments and insurance & reinsurance businesses.
Group Credit team provides the Group Credit Risk Committee with credit assessments on the biggest exposures or on a case by case basis when required.
In addition, all types of credit exposures whether related to assets or liabilities, and for the latter including those arising from a huge number of very small individual exposures (ca. 16,000 obligors with an exposure at risk below USD 10 million), are captured through a credit risk per event approach. It measures the impact of defaults, including rating migration, in a 1 in 20 year credit crisis, and the contribution of each source of credit risk, in particular stemming from insurance and assumed reinsurance businesses. The results are shared with the Group Audit, Risk and
As such, AXA banks’ Risk Management policies are based on their stated risk appetite, with the following key principles: ■ dedicated counterparty and credit risk functions with appropriate Committees; ■ quality sovereign, international institutions and bank counterparties portfolio closely monitored; ■ adequacy to Group risk standards; and
Credit risk in the banks encompasses: ■ retail credit risk, resulting from the commercial activity – sales of mortgages and other type of loans to retail clients and small enterprises. Credit Risk Management is done through careful risk selection (e.g. in Belgium “Internal Rating Based” scoring models regularly monitored to ensure a risk selection consistent with each bank’s risk appetite) and a regular monitoring of portfolios by product management teams and Risk Management teams; ■ other than retail credit risk, resulting from investment activity.
The liquidity risk is the uncertainty, emanating from business operations, investments or financing activities, over whether
For each time horizon, the post-stress liquidity resources available and the post-stress liquidity needs (i.e. net outflows) to be paid are projected to measure the excess liquidity. The stressed conditions are calibrated so as to reflect extreme circumstances
Information in this section should be read in conjunction with the paragraph “Pricing and underwriting-related risks” in Section 4.1
The Group’s insurance subsidiaries are primarily responsible for managing their insurance risks linked to underwriting, pricing and reserving. They are also responsible for taking appropriate actions in response to changes in insurance cycles and to the political and economic environments in which they operate.
Health businesses operations as described in Section 1.3 “Business overview” of this Annual Report, the AXA Group is exposed to the following main insurance risks, which include: ■ premium risk resulting from fluctuations in the timing, frequency and severity of insured events, and relating to: • unexpired risks on existing contracts (insuff icient premium reserves),
• expense payments; ■ reserve risk resulting from fluctuations in the timing and amount of claim settlements and relating to the insuff iciency of claims reserves, which includes: • misestimating claims reserves (average payments), and
• fluctuation of payments around their statistical average; ■ catastrophe risks embedding both natural disasters such as climatic events (including windstorms, hurricanes, floods or hailstorms), tectonic ones (earthquakes, volcanoes) and manmade ones, such as nuclear, liability, cyber, conflagration, terrorist attacks.
In addition, AXA Group’s investment strategy, which is mainly driven by Asset & Liability Management, aims to meet the Group’s obligations and commitments to policyholders, and to protect the solvency of the Group and of its entities (please refer to paragraph “Governance of investment strategy and Asset & Liability
Insurance risks for Life & Savings, Health and Property & Casualty businesses are covered through 4 major processes, defined at
Group’s Internal Model, to ensure that new products undergo a thorough approval process before they are brought to market.
In Life & Savings, as well as Health, the Product Approval Process is managed at local level for all traditional products meeting
In Property & Casualty, 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. The aim is twofold: ■ for pre-launch business, the aim is to ensure that new risks underwritten by the Group have been scrutinized before proposing them to customers; ■ for post-launch business, appropriate profitability and risk control are performed to verify that the business remains in line with the Group’s risk framework.
has developed and deployed common models and metrics to consistently measure risks throughout the Group (in particular via its economic capital framework as detailed in Section 4.2
In the Life & Savings, Health businesses, these tools allow for mortality/longevity risks to be analyzed on a multi-country basis.
For the Life & Savings, Health and Property & Casualty operations, reinsurance programs are set up as follows: ■ Group’s operating entities reinsurance capacity are set in alignment with Group Standards and with their local risk appetite limits considering the risk assessment previously described; ■ their risks are modeled through in-depth actuarial analyses conducted on each portfolio; specifically, for Property & Casualty natural catastrophe modelling, via the Group economic capital model, GRM uses several models both internal and external for assessing the risk associated with the main natural perils
In Life & Savings and Health, reinsurance is mainly used to support local innovation policy for new risks or to cover mass risks (pandemic, earthquake or terrorism).
International Liability, Marine, Cyber, Motor Third Party Liability and Life) and various AXA XL-dedicated covers which contribute to further decrease the net retention of AXA XL and limit its own volatility (e.g. Aviation, US Liability, Political risks).
For Group covers, their structures are designed to adequately protect the Group in compliance with the Group risk appetite framework. In order to protect the Group, specific covers are arranged through either the traditional reinsurance market or the financial one through securitization (cat bonds and Insurance
Operational entities specifically monitor their reserve risks. Claims reserves are estimated and booked on a file by file basis by the claims handlers. Additional reserves are also booked by the local entities.
Actuaries in charge of assessing reserves use various statistical and actuarial methods. Their assumptions are made following discussions with claims managers, pricing actuaries, underwriters and other specialized departments.
handling, and reinsurance eff ects); ■ enough data is available (such as suff icient claims experience or granularity) and adequate to achieve the reserving exercise; ■ the technical assumptions and actuarial methodologies are in line with professional practices and sensitivity analyses are performed at least for most significant ones; ■ a roll-forward analysis of reserves including merit-rating
Management system, in particular with respect to the risk modelling underlying the calculation of the capital requirements.
The breakdown of the Group’s Property & Casualty technical reserves by line of business was as follows: ■ 26% at the end of 2019 (26% at the end of 2018) of the Group’s
Property & Casualty reserves cover Liability insurance business; ■ 7% at the end of 2019 (6% at the end of 2018) of the Group’s
Property & Casualty reserves cover Reinsurance business; ■ 36% at the end of 2016 (36% at the end of 2018) cover the other lines of business.
The breakdown of the Group’s Life & Savings technical insurance reserves by product type was as follows: ■ 18% at the end of 2019 (20% at the end of 2018) of the Group’s
Related risks are managed in the following ways: • products that are not surrender-sensitive are usually backed by fixed-income investments with maturities and interest rates generally suff icient to cover guaranteed benefits, so as to reduce as much as possible the reinvestment risk; • derivatives may be used to hedge the risk of a fall (floor) or a rise (cap) in interest rates; • other products are managed with the surplus required to cover guarantees.
contracts with long-term guarantees or coverage and/or surrender value) represented 94% of the Group’s Health technical reserves at the end of 2019 (stable compared to 2018).
Information in this section should be read in conjunction with the paragraph “Operational and business-related risks” in Section 4.1
AXA Group’s Operational risk framework provides for 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. Its implementation is not limited to insurance activities. It encompasses all AXA entities, including insurance companies, banking activities, AXA asset managers and internal service providers consistent with AXA
A key objective of the AXA Group’s operational risk economic capital model is to understand and reduce losses resulting from operational failures and to define an appropriate risk response strategy for major operational risk scenarios. Entities and Group
AXA Group’s Solvency Capital Requirement as detailed in the paragraph “Internal Model” in Section 4.2 “Internal Control and
Specific actions are identified at Group and local levels to mitigate these risks. Also, the implementation of the Internal Control framework will continue to contribute to better embed controls in activities and mitigate the risks.
To protect both business and customers, AXA has decided to reinforce its operational controls and its Risk Management framework of third parties: a dedicated Vendor Risk program was validated by the Operational Audit Risk Compliance Committee
Operational Resilience, Legal, Reputation and Internal Control), local stakeholders (Chief Risk Off icers, Chief Procurement Off icers and Insurance Procurement directors) and co-sponsored by Group
Given the nature of strategic risks, there is no capital charge assessment but a strong strategic Risk Management framework to anticipate and mitigate these risks. Group Risk Management is involved at early stage in major strategic projects (e.g. large M&A
Reputation risk is the risk that an event, internal or external, will negatively influence the stakeholders’ perception and trust of the Company or where there is a gap between stakeholders’
Given the nature of reputation risks, there is no capital charge assessment but the AXA Group has defined a global framework with a two-fold approach to reactively protect and proactively identify, monitor, manage and mitigate reputational issues to not only minimize value destruction, but also to build and maintain brand equity and trust among stakeholders.
The objectives of the Reputation Risk Management approach are in line with AXA’s overall Enterprise Risk Management approach aiming to develop a reputation risk culture and risk intelligence.
The implementation of the Reputation Risk Framework encompasses AXA Group activities including insurance, asset management, banking as well as internal service providers.
& political, economic & financial, medical and technological). Aft er prioritization of the monitored risks or aft er a warning from an entity, a working group is launched on a yearly basis by GRM to review a specific risk and its potential impact in terms of insurance.
Since 2015, an annual Emerging Risks Survey is conducted to collect the views of internal and external stakeholders on the most significant emerging risks for society at large.
By seeking to develop new solutions, acting as an advisor to Risk
For further information on the sustainability risks to which the AXA Group may be exposed, please refer to the paragraph “Sustainability
NOTE 29 Contingent assets and liabilities and unrecognized contractual commitments 358
Assets backing contracts where the financial risk is borne by policyholders (a) 72,660 160,176 9 Investments from insurance activities 590,726 706,452 9 Investments from banking and other activities 22,389 41,809 10 Investments accounted for using the equity method 2,437 2,929 14 Reinsurers’ share in insurance and investment contracts liabilities 22,970 25,751
(a) Includes assets backing contracts where the financial risk is borne by policyholders with Guaranteed Minimum features.
(b) As of December 31, 2019, amounts included the assets relating to AXA Bank Belgium, AXA Life Europe and the remaining Group Life portfolio in Switzerland, for which disposal processes were not finalized at year-end. Held for sale classification previously applied for the AXA Wealth Management (HK) Limited portfolio has been unwound.
Share capital and capital in excess of nominal value 26,126 26,044
Liabilities arising from insurance contracts where the financial risk is borne by
Liabilities arising from investment contracts with discretionary participating features 36,036 34,225
Liabilities arising from investment contracts with no discretionary participating features 67 4,837
Liabilities arising from investment contracts with discretionary participating features and where the financial risk is borne by policyholders 3,139 2,785
16 Provisions for risks and charges 9,742 11,363 19 Deferred tax liabilities 5,843 4,621
Other debt instruments issued, notes and bank overdraft s (a) 6,249 7,104
(b) Includes liabilities arising from contracts where the financial risk is borne by policyholders with Guaranteed Minimum features.
As of December 31, 2018, amounts included the assets relating to the Group Life portfolio in Switzerland, AXA Life Europe and the AXA Wealth Management (HK) Limited portfolio for which disposal processes were not finalized at year-end.
Fees and charges relating to investment contracts with no participating features 244 249
Change in unearned premiums net of unearned revenues and fees (1,543) (653)
Net realized gains and losses and change in fair value of investments at fair value through profit and loss (d) 18,475 (13,104)
of which change in fair value of assets with financial risk borne by policyholders (e) 18,286 (10,706)
Amortization of the value of purchased business in force (644) (470)
Income from operating activities before tax 5,840 1,805 10 Income (net of impairment) from investment accounted for using the equity method 504 286 24 Financing debts expenses (h) (720) (562)
(g) Include losses related to the disposal processes of AXA Bank Belgium and AXA Life Europe (see Note 5.3).
(i) Mainly related to the VBI impairment related to the Group Life portfolio in Switzerland classified as held for sale.
Items that may be reclassified subsequently to Profit or Loss 8,538 (3,031)
Items that will not be reclassified subsequently to Profit or Loss (697) 284
Amounts are presented net of tax, policyholders’ participation and other shadow accounting related movements. Tax, policyholder participation and related eff ects are further detailed in the Notes to the Consolidated Financial Statements.
Reserves relating to the change in fair value of financial instruments available for sale
Income (net of impairment) from investment accounted for using the equity method (497) (286)
Adjustment of non cash balances included in the operating income before tax 3,472 11,750
Investment income & expense recorded in profit or loss during the period (e) (10,117) (13,951)
(excluding interests on financing and undated subordinated debts, margin calls and others) (4,214) (4,130)
Net cash provided by other assets and liabilities (f) (114) (3,603)
Net cash impact of transactions with cash impact not included in the operating income before tax 12,813 12,617
Purchase of subsidiaries and aff iliated companies, net of cash acquired (242) (9,725)
Disposal of subsidiaries and aff iliated companies, net of cash ceded 293 71
Sales of equity instruments and non consolidated investment funds (f) (g) 18,498 20,072
Sales of investment properties held directly or not (f) 2,194 2,718
Sales and/or repayment of loans and other assets (f) (h) 20,307 26,105
Purchases of equity instruments and non consolidated investment funds (f) (g) (20,165 ) (19,250)
Purchases and/or issues of loans and other assets (g) (h) (19,660) (21,370)
Net cash impact of assets lending/borrowing collateral receivables and payables 4,831 3,962
Net interest margin of hedging derivatives on financing debt (9) 56
Impact of change in consolidation method and of reclassifications as held for sale (k) (943) (4,025)
(c) Includes impact of reinsurance and change in liabilities arising from contracts where the financial risk is borne by policyholders.
(h) Includes sales/purchases of assets backing insurance & investment contracts where the financial risk is borne by policyholders.
These consolidated financial statements including all Notes were set by the Board of Directors on March 13, 2020.
January 1, 2019. The Group does not use the “carve out” option allowing not to apply all hedge accounting principles required by IAS 39.
Within the Group, this new standard mainly impacts property leases for off ices. It increased assets by €2.3 billion and liabilities by €2.4 billion as of January 1, 2019. The diff erence with the amount of lease commitments given as of December 31, 2018
As at December 31, 2019, lease liability and lease asset (called
“right-of-use”) respectively amounted to €1.6 billion and €1.4 billion. The evolution compared to January 1, 2019 is mainly explained by the deconsolidation of Equitable Holdings, Inc.
issued a decision on the determination of the lease term for some contracts, in particular contracts of indefinite duration, or concluded for an initial term, and renewable by tacit agreement.
IFRIC 23 - Uncertainty over tax treatment published on June 7, 2017 clarifies how to account for income tax when it is unclear whether the tax authority will accept the tax treatment applied in
Moreover, IFRIC 23 requires Uncertain Tax Position (UTP) to be presented as current and deferred taxes. Therefore, the amount of UTP existing at January 1, 2019, (€862 million) was reclassified from provisions for risks and charges to current and deferred taxes. As at December 31, 2019, UTP amounted to €385 million; the evolution compared to January 1, 2019, is mainly explained by the deconsolidation of EQH.
These amendments provide temporary reliefs from applying specific hedge accounting requirements to hedging relationships directly aff ected by the IBOR reform and introduce corresponding disclosure requirements. The reliefs have the eff ect that IBOR
Euribor, libor USD, libor GBP, libor JPY, hibor HKD, libor CHF.
reform (i.e. interest rate derivatives and currencies derivatives involved in fair value hedge accounting relationships and cash flow hedge accounting relationships under IAS 39) are presented in Note 20.2.
In 2020, the IBOR project of the IASB enters into Phase 2 with the objective to provide useful information about the eff ects of the transition to alternative benchmark rates on an entity’s financial statements and support preparers in applying the requirements of the IFRS Standards during IBOR reform. AXA has initiated a group wide project that covers all areas impacted by the IBOR
The application of the amendments below as of January 1, 2019 had no material impact on the Group’s consolidated financial statements.
October 12, 2017 Clarification that a company applies IFRS 9 (IAS 39 for insurers having opted for IFRS 9 deferral approach) to long-term interests in an associate or joint venture to which the equity method is not applied but that in substance form part of the net investment in the associate or joint venture (long-term interests).
February 7, 2018 The amendments clarify the accounting when a plan amendment, curtailment or settlement occurs.
Moreover, contracts that are issued more than one year apart should not be in the same group.
IFRS 17 requires a current measurement model, where the general model is based on the following “building blocks”: ■ the fulfilment cash flows (FCF), which comprise: • probability-weighted estimates of future cash flows,
discounting) and the financial risks associated with those future cash flows,
• and a risk adjustment for non-financial risk; ■ the Contractual Service Margin (CSM).
■ the liability for incurred claims, which is measured as the FCF
This assessment of whether the contract meets these criteria is made at inception of the contract and not revised subsequently, except in case of substantial modification of the contract.
(corresponding to the insurance service provided over the period) and insurance service expenses (i.e. incurred claims and other incurred insurance service expense); and
In the beginning of March 2020, the Staff of the IASB proposed to defer the IFRS 17 eff ective date to annual reporting periods beginning on or aft er January 1, 2023.
The Staff also proposed to extend the expiry date of the temporary exemption from applying IFRS 9 off ered to qualifying insurers (see below) to annual periods beginning on or aft er
January 1, 2023. This would mean that qualifying insurers could apply both standards for the first time simultaneously.
These proposals remain subject to the IASB approval and should be confirmed through amendments.
The standard has to be applied retrospectively unless impracticable, in which case two options are possible: ■ either the modified retrospective approach: based on reasonable and supportable information available without undue cost and eff ort to the entity, certain modifications of requirements are applied to the extent their full retrospective application is not possible, but still with the objective to achieve the closest outcome to retrospective application possible; or
Union. The implementation of IFRS 17 and the assessment of its potential impact on the Group’s consolidated financial statements are in progress.
Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in profit or loss. Additionally, for financial liabilities that are measured as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the eff ects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss; ■ impairment: the impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition; ■ hedge accounting: IFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The new requirements apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”).
For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.
IFRS 9 - Financial Instruments with IFRS 4 - Insurance Contracts, published on September 12, 2016, changes the existing IFRS 4 to allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain eff ects of applying IFRS 9 before the IASB’s new insurance contract standard (IFRS 17) becomes eff ective. The amendments introduced two alternative options: (1 ) apply a temporary exemption from implementing IFRS 9 until the earlier of (i) the eff ective date of IFRS 17; or (ii)
annual reporting periods beginning on or after January 1, 2021. Additional disclosures related to financial assets are required during the deferral period. This option is only available to entities whose activities are predominately connected with insurance and that have not applied IFRS 9 previously; or
Conceptual Framework March 29, 2018 January 1, 2020 * The revised conceptual framework includes: ■ a new chapter on measurement; ■ guidance on reporting financial performance; ■ improved definitions of an asset and a liability, and guidance supporting these definitions; and
■ clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
October 31, 2018 January 1, 2020 * The amendments clarify the definition of “m aterial” and how it has to be applied by adding in the definition the clarifications that were included so far in other IFRS standards.
As recommended by IAS 1, assets and liabilities are generally classified globally on the balance sheet in increasing order of
Some companies in which AXA exercises control, a joint controlling influence or a significant influence are excluded from the scope of consolidation as they are not material with respect to the Group’s Consolidated Financial Statements. These are mainly investment funds.
In accordance with the option made available by IFRS 1 First-time adoption of IFRS, business combinations prior to 2004 were not restated with respect to French accounting principles in force at the time.
Investment contracts with no discretionary participating features do not benefit from the exemption permitted by IFRS 4 in Phase I
To the extent that these other intangible assets can be estimated separately, they can also be measured by looking at the purchased marketing resources that will allow to generate these future cash flows. The nature of the intangible assets recognized is consistent with the valuation methods used when purchasing the acquired entity.
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 identifiable net assets.
Goodwill is measured as the excess of (i) the aggregate of the consideration transferred, the amount of any minority interest in the acquiree and in a business combination achieved in stages, the acquisition-date fair value of the Group’s previously held equity interest in the acquiree over (ii) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
for a put granted aft er January 1, 2009, to the extent there is no immediate transfer of risks and rewards. Similarly, subsequent changes in the liability are recorded against goodwill for puts existing before January 1, 2009, and against equity (Group share)
The eff ect on net income of transactions between consolidated entities is always eliminated. However, in case of a loss, an impairment test is performed, in order to assess whether an impairment of the underlying item has to be booked.
participation recorded in connection to the transaction, which are maintained in the consolidated financial statements. These transfers also have an impact on Group shareholders’ equity
At the local entity level, foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at closing rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except where hedge accounting is applied as explained in paragraph 1.10.
Financial instruments are considered as being quoted in an active market when: ■ quotes that represent consensus are regularly provided by external pricing services with limited dispersion; and
A financial instrument is regarded as not quoted in an active market: ■ if there is little observation of transaction prices as an inherent characteristic of the instrument; ■ when there is a significant decline in the volume and level of trading activity; ■ in case of significant illiquidity; ■ if observable prices cannot be considered as representing fair value because of dislocated market conditions.
Characteristics of inactive markets can therefore be very diff erent in nature, inherent to the instrument or indicative of a change in the conditions prevailing in certain markets.
Fair values of assets and liabilities that are not traded in an active market are estimated using: ■ external and independent pricing services; or
The objective of valuation techniques is to arrive at the price at which an orderly transaction would take place between market participants (a willing buyer and a willing seller) at the measurement date. Valuation techniques include: • market approach: the consideration of recent prices and other relevant information generated by market transactions involving substantially similar assets or liabilities; • income approach: use of discounted cash flow analysis, option pricing models, and other present value techniques to convert future amounts to a single current (i.e. discounted)
Valuation techniques are subjective in nature and significant 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 valuation is based on cross checks using diff erent methodologies such as discounted cash flows 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 diff erent estimates of fair value. However, valuations are determined using generally accepted models (discounted cash flows, Black & Scholes models, etc.) based on quoted market prices for similar instruments or underlyings (index,
credit spread, etc.) whenever such directly observable data are available and valuations are adjusted for liquidity and credit risk.
The dislocation of certain markets may be evidenced by various factors, such as very large widening of bid ask spreads which may be helpful indicators in understanding whether market participants are willing to transact, wide dispersion in the prices of the small number of current transactions, varying prices over time or among market participants, inexistence of secondary markets, disappearance of primary markets, closing down of dedicated desks in financial institutions, distress and forced transactions motivated by strong needs of liquidity or other diff icult financial conditions implying the necessity to dispose of assets immediately with insuff icient time to market the assets to be sold, and large bulk sales to exit such markets at all costs that may involve side arrangements (such as sellers providing finance for a sale to a buyer).
Financial Statements reflects operating business segments. It is based on six geographies (France, Europe, Asia, AXA XL, the
United States and International) and the seventh segment comprises transversal entities as well as the Corporate Center and other central Holdings.
Goodwill is considered to have an indefinite useful life and is therefore not amortized but subject to a regular test for impairment. Impairment tests are performed at least annually.
AXA performs an impairment test of goodwill by cash generating unit, using valuation approaches that rely on parameters such as market indicators, market value of assets, market value of liabilities and future operating profits, derived on the basis of operational and economic assumptions in order to determine any significant adverse changes that might lead to the nonrecoverability of the goodwill. Compliant with IAS 36, within each cash generating unit, a comparison is made between net book value and the recoverable value (equal to the higher of fair value less costs to sell and value in use). Value in use consists of the net assets and the value placed on expected future earnings from existing and new business. For Life & Savings segment, the value of future expected earnings is estimated on the basis of embedded value models or similar calculations for other activities. Fair value less costs to sell is determined in compliance with IFRS 13 fair value as described in paragraph 1.5.
The value in use approach is built upon cash flow projections based on the business plans approved by AXA management covering up to five years and discounted using a risk adjusted rate. Cash flows beyond that period are extrapolated using a steady growth rate and a terminal value.
relating to insurance contracts and investment contracts with discretionary participating features –
rights to future management fees, also known as deferred origination costs
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, Deferred Acquisition Costs
(DAC). In Property & Casualty segment, DAC are amortized over the terms of the policies, as premium is earned. For Life & Savings segment, the asset is amortized based on the estimated gross profits emerging over the life of the contracts. This asset is tested for recoverability and any amount above future estimated gross profits is expensed. DAC are also tested through the liability adequacy test (see paragraph 1.14.2).
DAC and DOC are reported gross of unearned revenues and fees reserves. These unearned revenues and fees reserves are separately recognized as liabilities and are amortized over the contract term using the same amortization approach as the one used for DAC and DOC.
Other intangible assets include soft ware developed for internal use for which direct costs are capitalized and amortized on a straight-line basis over the assets’ estimated useful lives.
Investment in real estate properties (excluding investment in real estate properties totally or partially backing liabilities arising from contracts where the financial risk is borne by policyholders)
In case of unrealized loss over 15%, an impairment is recognized for the diff erence between the net book value of the investment property and the fair value of the asset based on an independent valuation. Furthermore, at the level of each reporting entity, if the cumulated amount of unrealized losses under 15% (without off setting with unrealized gains) represents more than 10% of the cumulated net cost of real estate assets, additional impairment is booked on a line-by-line approach until the 10% threshold is reached.
If, in subsequent periods, the appraisal value rises to at least 15% more than the net carrying value, previously recorded impairment is reversed to the extent of the diff erence between i) the net carrying value and ii) the lower of the appraisal value and the depreciated cost (before impairment).
Depending on the intention and ability to hold the invested assets, financial instruments are classified in the following categories: ■ assets held to maturity, accounted for at amortized cost; ■ assets held for trading and assets designated as at fair value with change in fair value through profit or loss; ■ available for sale assets accounted for at fair value with changes in fair value recognized through shareholders’ equity; ■ loans and receivables (including some debt instruments not quoted in an active market) accounted for at amortized cost.
At inception, the option to designate financial investments and liabilities at fair value with change in fair value recognized through income statement is mainly used by the Group for the following financial instruments: ■ financial investments when electing the fair value option allows the Group to solve accounting mismatch, and in particular: • assets backing liabilities arising from contracts where the financial risk is borne by policyholders,
In practice, assets held through consolidated investment funds are classified: ■ either as assets of the “Core Investment Portfolios” which include assets backing liabilities arising from insurance and investment contracts, managed according to AXA’s Assets and
Portfolios” are classified as available for sale with change in fair value through shareholders’ equity unless involved in a qualifying hedge relationship or more broadly when electing the fair value option reduces accounting mismatch. As specified above, the financial instruments held in the “Satellite Investment
AXA assesses at each balance sheet date whether a financial asset or a group of financial investments at (amortized) cost or designated as available for sale should be impaired. A financial asset or group of financial investments should be impaired when there is objective evidence of impairment as a result of one or more events and this event has an impact on the estimated future cash flows of the assets that can be reliably estimated.
For equity instruments classified as available for sale, a significant or prolonged decline in the fair value below its carrying value is considered as indication for potential impairment, such as equity instruments showing unrealized losses over a 6 months period or more (prior to the closing date), or unrealized losses in excess of 20% of the net carrying value at the closing date.
Impairment testing for loans available for sale is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate (down to the loan’s observable market price), or on the fair value of the collateral.
Methods for calculating the net book value of assets sold (average cost, first-in first-out, etc.) depend on local Assets and Liabilities
The Group is party to repurchase agreements and securities lending transactions under which financial assets are sold to a counterparty, subject to a simultaneous agreement to repurchase these financial assets at a certain later date, at an agreed price. Since substantially all of the risks and rewards of the financial assets remain with the Group over the entire lifetime of the transaction, the Group does not derecognize the financial assets. The proceeds of the sale are reported separately. Interest expense from repurchase and security lending transactions is accrued over the duration of the agreements.
Assets backing liabilities arising from insurance or investment contracts where the financial 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 financial institutions, since the risks are borne by policyholders, whatever the type of assets backing liabilities
Derivatives are initially recognized at fair value at purchase date and are subsequently re-measured at their fair value. Unrealized gains and losses are recognized in the statement of income unless they relate to a qualifying hedge relationship as described below.
is recognized). When a hedging instrument reaches its maturity date or is sold, or when a hedge no longer qualifies for hedge accounting, the cumulative gains or losses in shareholders’
Subsidiaries held for sale remain within the scope of consolidation until the date on which the Group loses eff ective control. The assets and activities (assets and liabilities)
Undated subordinated debt and any related interest charges are classified either in shareholders’ equity (in the “other reserves”
Treasury shares and any directly related costs are recorded as a deduction to consolidated shareholders’ equity. Where treasury shares are subsequently sold or reissued, any consideration
received is included in consolidated shareholders’ equity, net of any directly related costs and tax eff ects.
However, treasury shares held by controlled investment funds backing contracts where the financial risk is borne by policyholders are not deducted as all risks and income resulting from holding these shares are attributable to policyholders.
The Group classifies its insurance and investment contracts into six categories: ■ liabilities arising from insurance contracts; ■ liabilities arising from insurance contracts where the financial risk is borne by policyholders; ■ liabilities arising from investment contracts with discretionary participating features; ■ liabilities arising from investment contracts with no discretionary participating features; ■ liabilities arising from investment contracts with discretionary participating features where the financial risk is borne by policyholders; these relate to Unit-Linked contracts or multifunds contracts containing a non-Unit-Linked fund with discretionary participating features; and
■ liabilities arising from investment contracts with no discretionary participating features where the financial risk is borne by policyholders.
Unearned premiums reserves of non-life insurance contracts represent the prorata portion of written premiums that relates to unexpired risks at the closing date.
Future policy benefits reserves relating to investment contracts with discretionary participation features (previously called
Claims reserves include the claims incurred and reported, claims incurred but not reported (IBNR) as well as claims handling costs.
Claims reserves are based on historical claims data, current trends, actual payment patterns for all insurance business lines as well as expected changes in inflation, regulatory environment or anything else that could impact amounts to be paid.
Switzerland (for group insurance policies), Germany and France where the minimum is set to 90%, 90% and 85% respectively, of a basis which may include not only financial income but also other components. Participating business is less prevalent in Japan.
does not need to ensure the liability recognized for the whole contract is not less than the amount that would result from applying IAS 39 to the guaranteed element.
(for which change in fair value is taken to shareholders’ equity)
■ they determine the extent to which resulting gains/losses may be allocated/charged to policyholders, i.e. profit sharing between policyholders and shareholders.
These tests therefore measure the capacity to charge estimated future losses to policyholders on the basis of the assessment of the holding horizon and potential realization of losses among unrealized losses existing at closing date.
DAC and VBI. For non-life insurance contracts, an unexpired risk provision is recognized for contracts on which the premiums are expected to be insuff icient to cover expected future claims and claims expenses.
Embedded derivatives meeting the definition of an insurance contract are described in Note 14.11.
This category includes mainly Unit-Linked contracts that do not meet the definition of insurance or investment contracts with discretionary participating features. For these Unit-Linked contracts, the liabilities are valued at current unit value, i.e. on the basis of the fair value of the financial investments backing those contracts at the balance sheet date together with rights to future management fees, also known as Deferred Origination
amount of loss arising from claims events by reinsuring certain levels of risk assumed in various areas of exposure with other insurers or reinsurers.
Ceded unearned reinsurance premiums represent the portion of premiums ceded applicable to the unexpired term of policies in force. Reinstatement premiums ceded are recognized at the time a loss event occurs where coverage limits for the remaining life of the contract are reinstated under pre-defined contract terms and are fully expensed when recognized. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Provisions are made for estimated unrecoverable reinsurance.
Financing debt issued to finance the solvency requirements of operational entities or to acquire a portfolio of contracts is isolated in a specific aggregate of the statement of financial position and is accounted for at amortized cost.
Deferred tax assets and liabilities emerge from temporary diff erences between the accounting and fiscal values of assets and liabilities, and when applicable from tax loss carry forwards.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available to off set the temporary diff erences taking into account the existence of tax groups and any legal or regulatory requirements on the limits (in terms of amounts or timing) relating to the carry forwards of unused tax credits. The recoverability of deferred tax assets recognized in previous periods is re-assessed at each closing.
In particular, a deferred tax liability is recognized for any taxable temporary diff erence relating to the value of shares in a consolidated company held, unless the Group controls at what date the temporary diff erence will reverse and it is probable that the temporary diff erence will not reverse in the foreseeable future. If a Group company decides to sell its stake in another consolidated entity, the diff erence between the carrying value and the tax value of these shares for the company that holds them leads to the recognition of deferred tax (including as part of a business combination when the Group as the buyer intends to sell or carry out internal restructuring of the shares following the acquisition). The same approach applies to dividend payments that have been voted or deemed likely, to the extent that a tax on dividends will be due.
Obligation and the market value at the balance sheet date of the corresponding invested plan assets aft er adjustment for any minimum funding requirement or any asset ceiling eff ect. If the net result is positive, a provision is recorded under the provision for risks and charges heading. If the net result is negative, a prepaid pension asset is recorded in the balance sheet but not more than its recoverable amount (asset ceiling). Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in shareholders’ equity
(annually accruing employee benefit) and the net interest on the amount recorded in the opening balance sheet (unwinding of discount applied to the net liability/asset at start of the annual period, taking into account contributions and benefits payments during the period). Past service cost represents the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment to a defined benefit plan. It is recognized totally and immediately in the income statement when incurred. Gains and losses on the settlement of a defined benefit plan also have an impact in the income statement when the settlement occurs.
(Autorité des N ormes C omptables). The cost of the leveraged formula plan is valued by taking into account the five-year lockup period for the employees (as in the traditional plan) but adding the value of the advantage granted to the employees by enabling them to benefit from an institutional derivatives-based pricing instead of a retail pricing.
Provisions are not recognized for future operating losses. The same applies to contingent liabilities, except if identified at the time of a business combination (see paragraph 1.3.2).
For multi-year reinsurance treaties which are payable in annual installments, generally, only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy. The remaining annual installments are included as premiums written at each successive anniversary date within the multi-year term.
Amounts collected as premiums from investment contracts with no discretionary participating features are reported as deposits net of any loadings and policy fees. Revenues from these contracts consist of loadings and policy fees relating to underwriting, investment management, administration and surrender of the contracts during the period. Front-end fees collected corresponding to fees for future services are recognized over the estimated life of the contract (see “Unearned fees reserves” paragraph 1.14.3).
Revenue is recognized when the Group satisfies a performance obligation by transferring a service to a customer. In particular, as asset management entities of the Group deliver investment management services to their clients, revenue for providing this service may theoretically occur over-time, with a time-based measure of progress, which is relevant as the service is provided continuously over the contract period. However, according to
Net investment result includes: ■ investment income from investments other than from banking activities, net of depreciation expense on real estate investments (depreciation expense relating to owner occupied properties is included in “administrative expenses”); this item includes interest received calculated using the eff ective interest method for debt instruments and dividends received on equity instruments; ■ investment management expenses (excluding financing debt expenses); ■ realized investment gains and losses net of releases of impairment following sales; ■ the change in unrealized gains and losses on invested assets measured at fair value through profit or loss; and
Subsequent events relate to events that occur between the balance sheet date and the date when the financial statements are authorized for issue: ■ such events lead to an adjustment of the Consolidated
AXA Non Life Insurance Co. Ltd. Relution 100.00 98.70 100.00 98.69
As of December 31, 2019, investment funds represented a total of €128,129 million invested assets (€117,337 million at the end of 2018), corresponding to 287 investment funds mainly in France,
As regards main subsidiaries with minority interests (other than investment funds and real estate companies): ■ the financial information of Equitable Holdings, Inc. (no longer consolidated within AXA Group as of December 31, 2019) is available in Part II – Item 8. Financial Statements and
December 31, 2019, which is filed with the SEC; ■ summarized financial information of AXA MPS is as follows
AXA Investment Managers Asia Holdings Private Limited Dilution 49.00 47.81 49.00 47.89
As of December 31, 2019, real estate companies accounted for using the equity method amounted to €154 million invested assets (€157 million at the end of 2018) and investment funds accounted for using the equity method amounted to €7,782 million invested assets (€4,979 million at the end of 2018), mainly in the United Kingdom, Ireland, France, Belgium and Germany.
In addition, the Group holds interests in investment funds including real estate companies. Some of these funds are fully consolidated or accounted for using the equity method (see
Note 2.1.). Other funds are not consolidated because they are not controlled or under significant influence. By nature, and notably because of the power of decision usually given to the asset managers (internal or external to AXA), most of these funds are structured entities.
As investor, AXA’s interests in unconsolidated funds are limited to the investments held. These ones are fully recognized in the consolidated balance sheet. Depending on the nature of its investment, AXA receives interests or dividends and can realize capital gains or losses in case of sale. These investments are subject to impairment testing as any financial asset.
States contribution to the consolidated financial statements was reported: ■ as fully consolidated from January 1, 2019, to March 31, 2019; ■ in “income from investment accounted for using the equity method” from April 1, 2019, to November 13, 2019; ■ as financial investment available for sale from November 13, 2019, to December 31, 2019, following the loss of the significant influence of AXA over EQH.
It includes Life & Savings activities in the United States, Asset
Key transversal entities and Central Holdings are managed alongside these geographies.
United Kingdom & Ireland, Spain and Italy. The German bank and the holding companies in these countries are also included. The direct and traditional entities are reported within their respective countries.
Asia: The Asian market consists of Life & Savings activities in
China and the Philippines) as well as Property & Casualty activities in Hong Kong and Asia High Potentials (Thailand and
AXA XL: The AXA XL market mainly consists of Property & Casualty activities at XL Group, as well as AXA Corporate Solutions
Singapore, Malaysia and India. AXA Bank Belgium and holding companies in these countries are also included.
Transversal & Central Holdings: includes transversal entities namely AXA Investment Managers, AXA Assistance, AXA Liabilities
Managers, AXA Global Re, AXA Life Europe, as well as AXA SA and other Central Holdings.
Net realized gains and losses and change in fair value of other investments at fair value through of which change in fair value of assets with financial risk borne by policyholders 4,921 1,431 1,293 - 9,926 257 458 1 18,286 18,286
(a) Insurance covers the three insurance activities: Life & Savings, Property & Casualty and Health.
from investment accounted for using the equity method 11 - 210 (2) 174 89 22 - 504 425
(c) Include net realized and unrealized foreign exchange gains and losses relating to investments at cost and at fair value through shareholders’ equity.
Net realized gains and losses relating to investments at cost and at fair value through
Amortization of the value of purchased business in force - (23) (35) (408) (1) (3) - - (470) (470)
(c) Includes gains/losses from derivatives hedging variable annuities within the Life & Savings activity.
Please refer to pages 179 to 184 of Section 4.2 “Internal control and Risk Management” subsections “Risk management and
Please refer to pages 197 to 200 of Section 4.4 “Credit risk” subsections “Invested assets: A central monitoring of counterparty exposure”, “Credit derivatives”, “Counterparty risk arising from over-the-counter (OTC) derivatives”, “Receivables from reinsurers: rating processes and factors” and “Bank credit activities”.
Please refer to pages 83 to 88 of Section 2.4 “Liquidity and capital resources” subsections “Liquidity, sources and needs for Group operating subsidiaries”, “Liquidity position”, “Uses of funds”,
Consistent with IAS 36, each unit or group of units to which the goodwill is allocated represents the lowest level at which the goodwill is monitored for internal management purposes within the Group and is never larger than an operating segment as defined by IFRS 8 such as presented in Note 3.
(b) Related to AXA Bank Belgium disposal process (see Note 5.3.3).
Managers (“AXA IM”) the recoverability of the goodwill is based on a fair value derived from market information, such as the price to earnings ratio of peers, and the earnings expected for the year corresponding to the CGU’s scope. The fair value is then compared to the carrying amount to assess the goodwill recoverability.
In the case of AXA Belgium, the recoverable value has been derived using a Traditional Embedded Value (TEV) methodology equivalent to a real world approach where the risk allowance is implicit to the discount rate as the projected cash flows are not risk-adjusted. The discount rate used to determine the recoverable value of AXA Belgium was 4.5% as opposed to 5.3%
For all cash-generating units, to the extent that the valuation of securities and interest rate levels remain low for prolonged periods of time, or volatility and other market conditions stagnate or worsen, new business volumes and profitability together with the value of the in-force portfolio are likely be negatively aff ected.
For each CGU, sensitivity analyses were performed with regards to the discount rate: an increase of 0.5% in the discount rate would not lead to an impairment loss for any of the CGUs as the recoverable amount for each CGU would still exceed its carrying value.
On December 13, 2019, AXA completed the acquisition of the remaining 50% stake (1) in AXA Tianping Property & Casualty
Insurance Company Ltd. (“AXA Tianping”) from its domestic shareholders. Total cash consideration amounted to RMB
Therefore, the acquisition balance sheet was prepared on the basis of December 31, 2019 figures.
Additionally, the result of discontinuing the equity method participation was €+38 million, corresponding to the recycling of other comprehensive income and currency translation adjustment.
At the date of the acquisition, other intangible assets include €82 million representing the value of the commercial relationships built by AXA Tianping with non-exclusive agencies. This value is estimated based on the expected cash flows generated by the new customers by considering the average renewal rate of the existing commercial relationships of non-exclusive agencies and a market growth rate assumption based on the last 4 years.
AXA TIANPING IFRS REVENUES AND NET INCOME FOR 2019 2019 revenues and net income for the acquired AXA Tianping assuming the acquisition took place as at January 1, 2019 respectively was estimated to be €881 million and €-11 million, respectively.
On March 25, 2019, AXA completed a secondary public off ering of 40,000,000 shares (the “Off ering”), at a public off ering price of
Net proceeds (1) amounted to USD 1.5 billion or €1.3 billion (2), corresponding to the sale of 76,000,000 EQH shares in the
Off ering, the full exercise of the over-allotment option granted to the underwriters and the Share Buyback. Following this sale,
Employee benefits actuarial losses were reclassified from other comprehensive income to retained earnings for €-512 million.
At the date of the transaction, the retained stake in EQH was adjusted to its fair value. The table below presents the assets and liabilities on a 100% basis fair valued at this date, resulting in a carrying amount of the EQH under the equity method amounting to €4,330 million: (in Euro million) At the acquisition date
(3) Including the shares to be delivered on redemption of the bonds mandatorily exchangeable into EQH shares, issued by AXA in May 2018.
(4) EQH’s issued and outstanding common stock as of May 9, 2019, comprised 491,138,042 shares.
Intangible assets mainly relate to value of business inforce and are amortized over the life of the portfolio of contracts.
NET GAIN UPON DECONSOLIDATION 145 of which revaluation at fair value of retained stake (105)
On November 13, 2019, AXA completed the sale of 144,000,000 shares (1) of common stock of EQH to Goldman Sachs, as the sole underwriter in a registered public off ering of those shares
As part of the Offering, EQH repurchased 24,000,000 of the 144,000,000 shares of common stock from the underwriter at the per share purchase price paid by the underwriter to AXA in the Off ering.
The completion of the Off ering resulted in net proceeds to AXA
of USD 3.1 billion or €2.9 billion (2), corresponding to a net price (3)
At the date of the transaction, the retained stake of EQH was adjusted to its fair value and classified as equity instruments available for sale. This remaining stake is mainly related to the
(2) EUR 1 = USD 1.1011 as of November 12, 2019 (Source: Bloomberg).
On October 25, 2019, AXA entered into an agreement to sell its
Under the terms of the agreement, AXA will sell 100% of AXA
(valued at €80 million), the insurance company of Crelan, providing protection insurance linked to loans originated by
in Crelan NV (6) and AXA Bank Belgium, investing a total of €90 million, which will be fully funded by the purchase by Crelan, for €90 million, of the contingent convertible bonds previously issued by AXA Bank Belgium to AXA Group.
The major classes of assets and liabilities (net of intercompany balances with other AXA entities) presented as held for sale related to: ASSETS
As of December 31, 2019, the transaction is expected to result in a loss of €-590 million, some assets were impaired with the following allocation: goodwill for €-68 million, other intangible assets for €-17 million and investments for €-505 million. These impairments are included in the amounts above.
On April 10, 2018, AXA entered into an agreement with its main occupational benefits foundations (1) to convert their business model from a full-value insurance (2) model to a semiautonomous model (3) . As at December 31, 2018, the operations affected by these disposals were treated as held for sale in
Besides, during 2019, AXA Switzerland entered in agreement with additional small occupational benefit foundations to convert their business model from a full insurance value to a semi-autonomous model on July 1, 2019 and January 1, 2020.
(2) Contract covering the whole off er: guaranteed savings and annuity benefits, death and disability benefits, and administration services.
As of December 31, 2019, the other comprehensive income of invested assets in the scope of the transaction amounted to €+15 million.
As the transaction is expected to result in a loss of €-89 million, in addition to the €-18 million recognized as of December 31, 2018, other intangible assets were impaired.
(a) In 2018, amount mainly related to the VBI impairment related to the Group Life portfolio in Swizterland.
(a) In 2018, amount related to the acquisition of the XL Group.
Deferred Acquisition Costs and equivalent relating to Life & Savings 12,899 23,934
Deferred Acquisition Costs and equivalent relating to Property & Casualty 3,785 2,481
Changes in Deferred Acquisition Costs and equivalent were as follows: (in Euro million)
Amortization and impairment for the period of Life DAC (1,572) (92) (1,700) (140)
DAC net of unearned revenues and unearned fees reserves 14,209 264 23,327 367
Other intangible assets represented €4,872 million net value as of December 31, 2019, and mainly included: (in Euro million)
In 2018, mainly includes €1,656 million related to the acquisition of the XL Group.
Each investment item is presented net of the eff ect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges)
except derivatives related to macro-hedges which are shown separately. Detailed eff ects of derivatives are also provided in Note 20.3.
Investment in real estate properties at amortized cost (a) 31,395 21,679 3.67%
Investment in real estate properties designated as at fair value through profit or loss (b) 1,622 1,622 0.27%
Other assets designated as at fair value through profit or loss, held by consolidated investment funds 15,132 15,132 2.56%
Investments (excluding those backing contracts where the financial risk is borne by policyholders) 529,197 518,066 87.70%
Equity instruments designated as at fair value through profit or loss (b) 7,815 7,815 1.11%
Other assets designated as at fair value through profit or loss, held by consolidated investment funds 14,864 14,864 2.10%
Loans designated as at fair value through profit or loss (b) - - -
Change in impairment and amortization of investment in real estate properties at amortized cost (all activities), is as follows: (in Euro million)
Including the eff ect of derivatives, unrealized capital gains and losses on financial investments, when not already reflected in the income statement, are broken down as follows: INSURANCE
The table below sets out the debt instruments portfolio by issuer type, excluding macro-hedging derivatives but including the eff ect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges). Details of the eff ect of derivatives are also provided in
(a) Amounts do not include securities received as collateral to securities lending transactions if such collateral is not recognized under the terms of the agreement because the risks and rewards have not been transferred to the Group (detailed in Note 29).
The amortized cost of non-consolidated investment funds available for sale was as below: ■ funds mainly holding equity securities: €1,815 million in 2019 compared to €1,566 million in 2018; ■ funds mainly holding debt instruments: €2,986 million in 2019 compared to €2,702 million in 2018; ■ other funds: €3,033 million in 2019 compared to €2,603 million in 2018.
(a) Includes the impairment of the participation in non-consolidated subsidiaries for €245 million.
(b) Mainly relates to changes in the scope of consolidation and the impact of changes in exchange rates.
(a) Mainly relates to changes in the scope of consolidation and the impact of changes in exchange rates.
The breakdown by valuation method of investments recognized at fair value including derivatives (also detailed in Note 20.3 and
Note 20.5), but excluding the assets backing contracts where the financial risk is borne by policyholders is as follows: (in Euro million)
Other assets held by consolidated investment funds designated as at fair value through profit or loss 1,634 6,560 7,181 15,375 15,363 1,135 6,765 7,125 15,025 15,033
• are provided at the request of the Group by pricing services and which are not readily publicly available; ■ assets measured on the basis of valuation techniques including a varying degree of assumptions supported by market transactions and observable data.
Since the 2008 financial crisis, a significant volatility related to corporate spreads has been observed leading to transfers between level 1 and 2 with both yield and bid ask spreads widening and narrowing from one closing to another. Since 2010, this volatility has also been experienced on European government bonds with yields and bid ask spreads widening significantly leading to transfers from level 1 to level 2 and then also subsequent sustained improved market liquidity for certain government issuers resulting in transfers back to level 1 from level 2. As of December 31, 2018, Irish, Portuguese and Spanish government bonds were transferred from level 2 to level 1.
As of December 31, 2019, €6,431 million of invested assets were transferred from level 2 to level 1 and €8,192 million were transferred from level 1 to level 2, primarily in corporate bonds.
The identification of level 3 assets among assets not quoted in an active market involves a significant level of judgment. The following are considered as observable: inputs provided by external pricing services, information observable obtained from specialized data providers, rating agencies, external surveys.
The extent to which such data are external to the Group and not assessed by internal valuation teams is one of the main criteria applied in assessing whether data are observable or not. Should those data be significantly adjusted or would they be outdated because of the lack of newly available factors, such inputs would be deemed unobservable. Another area of judgment is the assessment of the significance of an input against the fair value measurement in its entirety. As a result, a diff erent cut between observable and unobservable data and variances in the weighting of the significance of each input against the fair value measurement in its entirety could produce a different categorization.
From January 1, 2019 to December 31, 2019, the amount of level 3 assets increased by €1.9 billion to €22.1 billion, representing 4.7%
Main movements related to level 3 assets to be noted were the following: ■ €4.1 billion of new investments; ■ €0.1 billion of change in unrealized gains and losses; ■ €0.8 billion of net asset transfers in and out of level 3 and foreign exchange fluctuation impact; ■ €-3.2 billion of asset sales, redemptions and settlements mainly of debt instruments, equity securities and nonconsolidated investment funds accounted as available for sale and of equity securities, non-consolidated investment funds, other assets held by controlled investment funds and debt instruments accounted as fair value through profit or loss.
A majority of assets classified in level 3 corresponds to private investments, in particular private equity assets.
Generally fair values of investments in real estate properties cannot be determined via reference to quotes of an active market from an exchange market or service provider and no property is therefore categorized in level 1. However, AXA’s investments in real estate properties are mostly physically located within liquid markets with identical or comparable asset sales. Given the regulatory environment, some real estate properties located in markets like France are valued by experts using very similar approaches leading to very limited dispersion in prices, with a majority of market inputs themselves homogeneous in terms of sources and values. Hence, the Group, consistently with the policy described in Note 1.5 which notably considers, for assets not quoted in an active market, the weight of observable inputs in the valuation, concludes that the fair value calculations, which are based on valuations performed by qualified property appraisers mainly based on market observable inputs, are considered as level 2 fair values. However, as described in
As mentioned in Note 1.2 “General accounting principles”, in the context of IFRS 9 implementation, the Group has determined that it is eligible for the temporary exemption option, introduced by the amendment to IFRS 4 Insurance contracts, until the earlier of annual reporting periods beginning on or aft er January 1, 2022.
To determine the appropriate classification of financial assets under IFRS 9, an entity would need to assess the contractual cash flows characteristics of any financial asset. Indeed, the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding i.e. cash flows that are consistent with a basic lending arrangement. In a basic lending arrangement, consideration for the time value of money and credit risk are typically the most significant elements of interest.
The tables below set out the result of the SPPI test for the assets not currently designated as at fair value through profit and loss, with a split between Insurance and Other activities.
Debt instruments available for sale 3,713 (7) 382,137 18,528 4,782 (179) 392,053 (9,051)
Equity instruments available for sale 20,997 3,290 - - 16,635 (2,337) - -
Gross Carrying Amount of debt instruments that pass the SPPI test
(1) These are external ratings corresponding to the average of the three main rating agencies, which are S&P, Fitch and Moody’s.
Credit risk information is provided on the basis of past due information Total
Below are detailed the gross carrying value and the fair value of loans that pass the SPPI test for which the credit risk is based on: A) RATING GRADES: Loans at cost
Total amount of loans that pass the SPPI test and for which the credit risk information is based on ratings 2,842 2,829 13,393 13,077
B) RANGES OF PROBABILITY OF DEFAULT (1-YEAR PD): Loans at cost
Fair Value of loans that pass the SPPI test 90 days and more past due 62 50 56 43
Total amount of loans that pass the SPPI test and for which credit risk is provided on the basis of past due
Philippine AXA Life Insurance Corporation 83 - 30 5 (3) 114
Bharti AXA General Insurance Company Limited 25 - 1 (0) 13 39
(c) Includes the initial recognition of the retained stake accounted for using the equity method for €+4,330 million and its deconsolidation for €-4,579 million embedding the residual retained stake reclassified as Avaivable for Sale instruments for €-934 million (see Note 5.3.2).
PT AXA Mandiri Financial Services 52 - 35 (0) (21) 67
As of December 31, 2019, the Group share of interest in Krungthai AXA Life Insurance Company Ltd. was 50.0%. Additionally, AXA
Tianping, which was previously held by AXA for 50.0%, is fully consolidated within AXA Group from December 31, 2019 (see Note 5.3.1).
Debt instruments available for sale - - 3,388 28 - - 2,047 213
Premiums earned not yet written 6,239 - 6,239 6,239 5,592 - 5,592 5,592
(b) Including €783 million deposits in the central banks in 2019 and €905 million in 2018.
The table below reconciles assets and liabilities cash and cash equivalent balances with the statement of consolidated cash flows: (in Euro million)
(a) Included in “Other debt instruments issued and bank overdraft s”.
Regarding the consolidated statement of cash flows presented in the primary financial statements, net cash provided by operating activities amounted to €+8,861 million in 2019, compared to €7,634 million in 2018.
Net cash relating to financing activities amounted to €+3,919 million in 2018, mainly driven by: ■ the sale of interests in subsidiaries without change in control
I Note 13 Shareholders’ equity and minority interests 13.1 IMPACT OF TRANSACTIONS
As of December 31, 2019, 1.4 million treasury shares backing contracts where financial risk is borne by policyholders held in consolidated investment funds were not deducted from shareholders’ equity. Their total estimated historical cost was €18 million and their market value €36 million at the end of
As of December 31, 2019, the carrying value of treasury shares and related derivatives amounted to €752 million. There was no
AXA shares held by consolidated Mutual funds other than those backing contracts where financial risk is borne by policyholders.
Undated notes – US$ 375 M, variables rates 375 334 375 328
During 2018, the following transactions had an impact on AXA’s share capital and capital in excess of nominal value: ■ a capital increase of €1,016 million from the merger of AXA
France Assurance took over by AXA SA; ■ a capital increase of €329 million from the employee share off ering of 15.4 million shares in December 2018; ■ a capital increase of €38 million due to the exercise of stock options; ■ share-based payments for €39 million; ■ a capital decrease of €429 million corresponding to 18.4 million shares in order to eliminate the dilutive eff ect of share-based compensation schemes (AXA SA’s stocks options, performance shares plans and share plan).
As of December 31, 2018, the Company and its subsidiaries owned 41.6 million AXA shares, representing 1.7% of the share capital, a decrease of 0.2 million shares compared to December 31, 2017.
On April 26, 2018, Shareholders’ Meeting, shareholders approved a dividend distribution of €1.26 per share corresponding to €2,998 million with respect to the 2017 financial year.
Shadow accounting on Value of purchased Business In force (167) (159)
Unrealized gains and losses net of tax (100%) – equity accounted companies 56 (32)
UNREALIZED GAINS AND LOSSES (NET OF TAX) – 100% – TOTAL 19,887 11,831
On December 31, 2019, most of the unrealized gains on assets available for sale were related to Life & Savings activities.
In jurisdictions where participating business represents an important portion of contracts in force and where required minimum local policyholders’ share in the entities’ results
(limited to investment result or not) are significant, the reconciliation between gross unrealized gains and losses on available for sale financial assets and the corresponding net reserve recognized in shareholders’ equity were as follows as of December 31, 2019: The change in reserves related to changes in fair value of available for sale financial instruments included in shareholders’ equity as of December 31, 2019 and December 31, 2018, broke down as follows: (in Euro million)
Unrealized gains and losses (net of tax) 100%, opening 11,831 16,194
Transfer in the income statement on the period (a) (187) (874)
(a) Transfer induced by disposal of financial assets, impairment write-back following reevaluation, or transfer of expenses following impairment charge during the period, and debt instruments discount premium impacts.
Unrealized gains and losses (net of tax) – assets available for sale 3,653 1,008 821 2,540
The total impact of foreign exchange rate movements was €+659 million (of which €+457 million from Group share and €+202 million from minority interests) as at December 31, 2019.
The change in Group share translation reserves €+457 million was mainly driven by Switzerland (€+391 million), the UK & Ireland
The total impact of employee benefits actuarial gains and losses amounted to €-684 million (of which Group share was €-679 million and minority interests were €-5 million) as of
The negative impact in equity arising from employee defined benefits obligation was mainly explained by an overall decrease in discount rate assumptions used to value liabilities in the
Eurozone but also in the United Kingdom and Switzerland partially offset by gains on plan assets backing the defined benefit obligation mainly in the United Kingdom and Switzerland.
The decrease of gross unrealized gains and losses on assets available for sale totaling €11,702 million, of which €8,971 million decrease in unrealized capital gains on debt securities, mainly driven by corporate spreads widening, and to a lower extent by interest rates increase in the United States.
The positive impact in equity arising from employee defined benefits obligation was mainly explained by: ■ an overall increase in discount rate assumptions used to value liabilities in diff erent countries (an increase in discount rate per reference to financial conditions entails a decrease in defined benefit obligation thus, a gain on liabilities); ■ an update of longevity assumptions in Switzerland (adoption of the latest Continuous Mortality Investigation Projection
• reserves relating to changes in fair value through shareholders’ equity for €+223 million,
• minority interests qualified as equity resulting from the consolidation of a new investment fund and capital addition to existing consolidated investment funds for €+191 million.
The €5,168 million increase in minority interests to €10,824 million was driven by transactions with minority interests’ holders and comprehensive income: ■ the comprehensive income for the period notably included the following: • net income attributable to minority interests for €-2,513 million,
• reserves relating to changes in fair value through shareholders’ equity for €-188 million,
• foreign exchange movements for €-317 million; ■ transactions with minority interests’ holders mainly included: • increase in minority interests following the IPO and the Second Offering of Equitable Holdings, Inc. for €+6,463 million,
In this Note, Health is not reported separately from Life & Savings and Property & Casualty lines of business.
Reinsurers’ share in claims reserves (a) 1,977 12,277 14,254 2,072 10,670 12,742
Reinsurers’ share in other reserves 702 10 712 633 (11) 622
Liabilities arising from investment contracts with discretionary participating features (A) 36,036 34,225 of which measured at current assumptions (b) - -
Reinsurers’ share in liabilities arising from investment contracts with discretionary participating features (E) 93 88
Reinsurers’ share in liabilities arising from investment contracts where the financial risk is borne by policyholders (G) 3 3
Change in scope of consolidation and change in accounting method 500 27,430
14.5 CHANGE IN LIABILITIES ARISING FROM INSURANCE AND INVESTMENT CONTRACTS –
The table below gives detailed information on change in liabilities arising from insurance and investment contracts in Life and Savings presented in Note 14.2 (C): (in Euro million)
Surrenders, maturities and other claims and benefits paid net of charges and penalties (-) (41,002) (5,936) (46,939) (52,390) (5,190) (57,581)
Impact of foreign currency fluctuation 5,891 207 6,098 13,121 321 13,442
In 2018, the effect of the change in scope of consolidation amounted to €19,717 million, mainly due to the classification in held for sale due to the planned sale of Group Life portfolio in Switzerland (€17,111 million) as well as AXA Life Europe
The table below gives detailed information on change in reinsurer’s share in liabilities arising from insurance and investment contracts in Life & Savings presented in Note 14.2 (F) and Note 14.3 (H).
Reinsurers’ share in collected premiums net of loadings on premiums (+) 1,740 12 1,752 1,110 25 1,135
Reinsurers’ share in surrenders, maturities and other claims and benefits paid net
(c) In 2019, mainly included the deconsolidation of Equitable Holdings, Inc.
Investment contracts with Discretionary Participation Features measured with current assumptions (b) - -
Investment contracts with no Discretionary Participation Features measured at current unit value (d) 13,306 11,747
(c) & (d) As Unit-Linked contracts reserves are measured on the basis of held asset units fair value (“current unit value”). Only the valuation of related assets is diff erent: ■ for Unit-Linked contracts with a discretionary participating feature (c), an asset representing the deferred acquisition costs is recognized in continuity with previous accounting policies; ■ for Unit-Linked contracts with no discretionary participating feature (d), an asset representing the rights to future management fees is recognized in accordance with
Euro as their functional currency) and assuming an identical scope of consolidation to that used for the last diagonal of the table.
shows, for a given column N, the cumulative amount of payments related to years of occurrence prior to and including N, made since December 31 of year N-1.
shows, for a given column N, an estimate of the final cost of liabilities carried as of December 31 of year N in respect of all years of occurrence prior to and including N, at each future period end. The final cost estimate varies year on year as information relating to losses still outstanding becomes more reliable.
Gross reserves for unpaid claims and claims expenses developed in 2019 adjusted for changes in exchange rates
(a) Following the disposal of Canadian operations, amounts in its respect were not reported for the current year while previously disclosed amounts were unchanged.
(d) It is not appropriate to extrapolate future redundancies or future deficiencies based on the loss reserves development presented in the table, as conditions and trends that have aff ected development of the liability in prior periods may not necessarily occur in the future periods. Redundancy or deficiency disclosed includes forex impact between one year and the next.
AXA actively conducts its exposure to asbestos claims by using its unit specialized in non-life run-off s: AXA Liabilities Managers.
At year-end 2019, key data relating to asbestos claims were as follows: (in Euro million)
decreased by 12% to €381 million at year-end 2019. This decrease was mainly driven by the re-estimation of the ultimate liability on
AXA XL Asbestos following settlement with a large claimant and a full review of claims with favorable court decisions.
mainly in relation to unrealized gains and losses on invested financial assets available for sale as described in Note 13.2.1, but also with regard to other temporary diff erences not necessarily linked to financial assets. Note 13.2.1 also contains a focus on jurisdictions with significant portions of participating business and where required minimum local policyholders’ share in the entities’ results are significant. This Note discloses for such jurisdictions unrealized gains and losses related to available for sale investments and related shadow accounting adjustments.
The increase in deferred policyholders’ participation liabilities mainly relates to an increase in unrealized gains on assets available for sale in France and Germany.
Linked contracts with performance guarantees. In addition, as far as liquidity risk is concerned, entities hold Unit-Linked assets backing the corresponding liabilities arising from these contracts.
The figures shown in the first line of the table below represent estimated undiscounted cash outflows in connection to death, incapacity and disability claims, surrenders, annuities, minimum guaranteed benefits for Unit-Linked contracts,
The table hereaft er and related comments exclude contracts where the financial risk is borne by policyholders (Unit-Linked contracts).
Life & Savings reserves (excluding Unit-Linked contracts) were discounted, of which 11 % were subject to a revision of the discount rate and 73 % retained the rate set at inception, subject to the liability adequacy test described in Note 1.
Non Life – Locked-in discount rate (a) 4,614 3.15% 4,924 3.16%
Liabilities arising from investment contracts with no discretionary participating features (as per Note 14.3) 67 4,837
Consolidated Financial Statements, quantitative sensitivities of the Group “AFR” (as defined in the Section 4.3. “Market risks”) to interest risk and equity price risk.
The estimated impact of the unlocking of discount rates relating to Life & Savings reserves was €274 million reserve increase in 2019 (compared to €634 million reserve increase in 2018) gross of policyholders’ participation, tax impacts and other shadow accounting impacts and was included in the income statement of the period. This decrease is mainly driven by the deconsolidation of Equitable holdings, Inc.
The tables in Note 21 set out the Group’s major insurance business areas and reflect the Group’s high degree of diversification.
■ many of the features would themselves qualify as insurance contracts under IFRS 4.
This Note describes the features that are embedded derivatives and meet the definition of an insurance contract on a standalone basis. The primary features can be divided into two main categories: Guaranteed Minimum Death Benefits (GMDB) or
December 2019, the AXA Group exposure to these liabilities was residual as a consequence of the loss of control on Equitable
GMDB features provide a guaranteed death benefit which may be higher than the contract account balances of the Unit-Linked contract, depending on performance of the Unit-Linked assets.
There can be no assurance that ultimate experience will not diff er
Guaranteed annuity purchase rates provide contract-holders with a guarantee that at a future date the accumulated balance on their contract will be suff icient to purchase a lifetime annuity at currently defined rates. The risk to AXA in these features is either that longevity will improve significantly so that contract-holders electing to exercise this benefit will live longer than assumed in the guaranteed purchase rates, or that investment returns during the payout period will be lower than assumed in the guaranteed purchase rates. Reserves are established for these features on the basis of actuarial assumptions related to projected benefits and related contract charges. The determination of this estimated liability is based on models which involved numerous estimates and subjective judgments, including those regarding expected rates of return and volatility, policyholders’
Macro-hedge derivatives and other derivatives relating to liabilities arising from banking activities (64) (64) (227) (227)
Provisions for risks and charges included the following items: (in Euro million)
(a) As of January 1, 2019, Uncertain Tax Positions amounted to €862 million were reclassified from “Other provisions for risks and charges” to “Payables-current tax” and “Deferred tax assets”.
As of December 31, 2019, the “Other provisions for risks and charges” amounted to €980 million, mainly driven by France
Changes in provisions for risks and charges (excluding employee benefits and share-based compensation) are set out below: (in Euro million) 2019 2018
Impact of change in scope of consolidation and other changes (a) (1,152) 106
Debt component of bonds mandatorily exchangeable into shares of Equitable Holdings, Inc. - 122
Bonds mandatorily exchangeable into shares of Equitable Holdings, Inc. 768 -
Deferred payment for the acquisition of Tianping, due 2020 (in CNY) 146 -
Derivatives relating to other financing debt instruments issued (a) - (1)
The table below sets out the reconciliation of financing debt and undated subordinated debt with the statement of cash flows
(a) Debt from the acquisition of the XL Group including €1,377 million subordinated debt, €1,576 million financing debt and €1,397 million preferred shares.
Derivatives on financing debt instruments issued (a) - - (1) (1)
(a) Debt related to the acquisition of Tianping amounted to €145 million (see Note 5.3.1).
(ii) AXA’s average spread by maturity and currency, distinguishing subordinated and senior debt, and (iii) options included in issued contracts, such as issuer redemption options.
The table below sets out the maturities based on contractual cash flows of financing debt (including the impact of derivatives detailed in Note 20.1). Eff ective maturities may diff er from those presented, mainly because some instruments include clauses allowing early redemption, with or without penalty.
Contractual cash flows of financing debt by contractual maturity as of December 31 12 months or less
Other debt instruments issued, notes and bank overdraft s 6,249 7,104
Debts relating to investments under total return swap agreement (“TRS”) 3,616 4,365
Collateral debts relating to investments under lending agreements and equivalent (b)
“Collateral debts relating to investments under lending agreements and equivalent” amounted to €37,920 million as of December 31, 2019, an increase of €5,106 million compared to December 31, 2018, mainly in France (€+3,069 million),
AXA Financial (Delayed draw term loan, 3 month LIBOR + 1.125%, due 2021 (US$) - 262
Other debt (other than financing debt) – owed to credit institutions 1,862 1,460
Such fair values are mainly based on observable market data input (see Note 1.5 for a description of observable data) and are therefore classified as level 2 instruments.
As of December 31, 2019, payables arising from direct outward reinsurance operations amounted to €11,588 million, an increase of €100 million compared to December 31, 2018 as the increase in insurance business was offset by Equitable Holdings, Inc.
Debts relating to investments under total return swap agreement (“TRS”) 347 2,490 780 3,616
Debts relating to investments under total return swap agreement (“TRS”) - 426 3,939 4,365
The reconciliation between the theoretical tax charge (pre-tax profit multiplied by the applicable tax rate in France for the period concerned) and the eff ective tax charge was as follows: (in Euro million)
Impact of rates diff erence on notional tax charges (487) 311
Impact of diff erences in tax rates and tax bases (555) 240
Deferred tax assets recognized on tax losses of prior years (65) (9)
Derocognition of deferred tax assets on tax losses of prior years (a) 21 4
Effective tax rate stood at 28% in 2019 versus 119% in 2018.
States (€6,328 million), the eff ective tax rate would have stood at 22% in 2018. The change relates to: ■ impact of rate differences on notional tax charges (€798 million) corresponding to the difference between the blended tax (expected tax calculated at each entity level with the applicable standard rate) and the tax calculated using the 34.43% French tax rate applicable to the Company. This tax rate is composed of a basic tax rate (33.33%) and a social contribution (1.1%). The blended standard rate was 25% in 2019 and 59% in 2018. Excluding the impact of the abovementioned exceptional goodwill impairment, the blended rate would have been 27% in 2018; ■ impact of permanent differences (€-571 million) mainly representing the impact in some countries of non-taxable dividends and realized capital gains on equity instruments, partly compensated by non-deductible impairment on financial assets and realized capital losses on equity instruments. In 2019, the impact was mainly driven by the losses following the deconsolidation of Equitable Holdings, Inc. and the negative impact of the AXA Bank Belgium reclassification in held for sale. In 2018, the impact was mainly driven by the goodwill impairment in Equitable Holdings, Inc.
In the table below, the net deferred tax position corresponds to the diff erence between Deferred Tax Assets (DTA) and Deferred
of which deferred tax through reserves relating to the change in fair value of financial instruments available for sale and financial liabilities measured at fair value through profit and loss that are attributable to changes in own credit risk 8,150 14,310 (6,160) (4,186)
(€4,028 million), Switzerland (€1,678 million), Belgium (€939 million), Japan (€655 million) and Italy (€645 million).
The change from net liability position €-3,706 million in 2018 to €-5,165 million in 2019 mainly came from the increase in unrealized capital gains on fixed-income assets and the deconsolidation of Equitable Holdings, Inc.
(ii) in the second part, the “expiration date” of the DTA, i.e. the latest date at which the Group could use them.
The €17,132 million DTA included €808 million of DTA on tax losses carried forward as of December 31, 2019, of which €410 million for the French Tax Group.
The amount of potential DTA, which has not been recorded in the accounts as of December 31, 2019 as considered unrecoverable, amounted to €635 million (€764 million in 2018) of which: ■ €505 million concerned unrecognized DTA on €2,392 million tax losses carried forward (€556 million DTA on €2,771 million tax losses carried forward in 2018). The major part of these losses occurred in countries where losses can be carried forward without time limit (€1,890 million in 2019 and €2,154 million in 2018); ■ €130 million related to other unrecognized deferred tax assets
The Uncertain Tax Positions was split as follows: (in Euro million)
As at December 31, 2018 the Uncertain Tax Positions reported in provisions for risks and charges (Note 16.1) amounted to €862 million. The main changes in 2019 resulted from the €111 million opening adjustment done in the context of the first application of IFRIC 23 and from the deconsolidation of Equitable
As of December 31, 2019, the Uncertain Tax Positions were mainly driven by Germany (€147 million) and AXA XL (€84 million).
“Satellite Investment Portfolio” (see Note 1.8.2) which are recognized at fair value in accordance with the IFRS hierarchy as described in Note 1.5, but excluding derivative instruments that meet the definition of shareholders’ equity instruments (see Note 13 for details).
Main reasons for the evolution in the use of derivatives (mostly interest rates, currencies and equity derivatives) are detailed in Note 20.2.
This table includes all derivatives (assets and liabilities) as described in Note 1.10, i.e. hedge, macro-hedge and other asset or liability positions.
December 31, 2019 (€+318 million at the end of 2018), comprised of the fair value of derivatives on invested assets (€-2,280 million and €-1,800 million at the end of 2018 – see Note 20.3) and the fair value of derivatives on liabilities (€-917 million and €-2,285 million at the end of 2018 – see Note 20.4).
AXA also uses derivatives as an alternative to gain exposure to certain asset classes through “synthetic positions”, for example, holding cash and equity futures instead of physical equities.
Another example is the combination of government bonds and credit default swaps (CDS) as a synthetic position and an alternative to the direct purchase of a corporate bond. These schemes do not add any specific risks compared with other investment assets.
The notional amount of derivatives which is used to express the volume of instruments outstanding and to provide a basis for comparison with other financial instruments most certainly overstates the level of activity and does not directly measure risk as it greatly exceeds the possible credit and market loss that could arise from such transactions. It does not represent the amounts that are eff ectively exchanged by the parties, and thus is not a measure of the Group’s exposure to derivative instruments.
Statement of Financial Position and unrecognized commitments received or given disclosed in Note 29.
Solvency II. The various policies that AXA applies with reference to the use of derivatives and hedging instruments, include a
close monitoring of its hedging strategy and associated risks as part of a Systemic Risk Management Plan (SRMP), approved by the Management Committee and the Board of Directors, in the context of the policy measures that apply to Global Systemically
For further detail on Asset Liability Management governance, please refer to page 188 of Section 4.2. “Internal control and Risk
Holdings, Inc.; ■ notional amount of currency derivatives decreased by €9.2 billion mainly explained as a result of the model transformation of the Swiss Group Life business, the deconsolidation of
■ notional amount of credit derivatives increased by €1.9 billion explained by the increase within investment funds of the
In the tables above, the column “Macro-hedges and other derivative instruments” includes derivatives that do not qualify for hedge accounting under IAS 39, but whose objective is nevertheless to provide economic hedging of a risk, with the exception notably of certain credit derivatives. They also include
As of December 31, 2019, the notional amount of hedging derivative instruments as defined by IAS 39 (fair value hedge, cash flow hedge and net investment hedge) of the Group was €79.8 billion versus €87.3 billion at the end of 2018. The net fair value recorded was €-742 million as of December 31, 2019, versus €-1,097 million at the end of 2018.
As of December 31, 2019, the notional amount of interest rate derivative instruments totalled €206.1 billion (€200.3 billion at the end of 2018). Their net fair value as of December 31, 2019 amounted to €412 million (€1,007 million at the end of 2018).
AXA mainly uses (i) interest rate swaps (62.8% of total notional amount of interest rate derivative instruments), (ii) interest rate options (18%), and (iii) futures and forwards (10%).
These instruments are mainly used to: ■ manage duration gap and/or hedge convexity risk between assets and liabilities on the General Account as a part of Asset
These instruments are mainly used to: ■ hedge the exposure to equity risk, mainly in the Company €6.1 billion in 2019 (€4.6 billion in 2018) to support Group
■ hedge the exposure to equity risk within the General Account assets, protecting policyholders’ investments and their guaranteed liability over time, mainly in Switzerland (notional amount of €4.2 billion in 2019 compared with €3.8 billion in 2018).
commitments are matched by assets denominated in the same currency, some entities may invest in foreign currency denominated assets to diversify their investments. This is the case mainly in (i) Switzerland using such contracts to hedge exchange rate risk arising from their investments in equities and debt instruments denominated in non-CHF currencies (mainly
Euro and US Dollar) with a total notional amount of €29.4 billion at the end of 2019 versus €48.0 billion at the end of 2018, and
Section 4.3 Market Risks with amounts of exposures to exchangerate risk and corresponding hedges.
In accordance with IAS 21 and IAS 39, the translation diff erence relating to these debt instruments used in operational entities is recognized in profit or loss and off sets most of the change in market value of associated derivative instruments, which is also recognized in profit or loss.
As of December 31, 2019, the notional amount of credit derivatives held by the Group was €18.1 billion compared to €16.2 billion at the end of 2018 (including the instruments held within investment funds of the “Satellite Investment Portfolio”
The impact of derivative instruments is presented in the consolidated statement of financial position within their related underlying financial assets (and liabilities see Note 20.4). The table below sets out the impact of derivative instruments on the related underlying assets.
Macro-hedge and other derivatives (172) 421 249 1 (111) (110) 0 139 139
Liabilities arising from insurance contracts 376,253 (982) 375,271 437,015 (812) 436,204
Liabilities arising from insurance contracts where the financial risk is borne by policyholders 56,709 - 56,709 146,058 (0) 146,058
Liabilities arising from banking activities 14,713 (64) 14,649 36,281 (227) 36,054
Derivatives on liabilities arising from banking activities and payables 3 36 - 39 3 (170) 1 (166)
Given the Group’s scale and diversity, none of its clients accounts for more than 10% of its business.
Administration services Assistance Other Total of which recognized over time 3,309 389 13 254 355 4,321 of which recognized at a point in time 782 653 102 79 283 1,899
(b) Net of intercompany eliminations and aft er deduction of the value related to the shares eliminated in consolidation.
(In Euro million) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 of which fees, commissions and other revenues 461 392 - 21. 4 NET REVENUES FROM BANKING ACTIVITIES
Non-consolidated investment funds available for sale 234 146 (16) (69) 294
Non-consolidated investment funds designated as at fair value through profit or loss 294 - 87 - 381
Non-consolidated investment funds held for trading 1 - 23 - 24
Other assets held by consolidated investment funds designated as at fair value through profit
Investment in real estate properties at amortized cost 888 574 0 (258) 1,204
Charges relating to owner occupied properties 543 193 (1) 736 740
mainly from the impact in 2019 of the consolidation of Roland
(a) Including redundancies and early retirement expenses (triggering event = set up of the plan), and profit sharing with employees in France.
The cost of the contributions paid was recognized as an expense in the income statement, and amounted to €236 million in 2019 (€183 million in 2018). The 2019 cost included €82 million of expenses for defined contribution plans in force at AXA XL
In the United Kingdom and Germany, pensions in payment are generally updated in line with the retail price index or inflation, as opposed to other countries where pensions do not necessarily receive inflationary increases once in payment.
Most of the defined benefit pension plans are funded through long-term employee benefit funds or covered by insurance policies or Mutual funds.
Benefit payments in the United Kingdom and Switzerland are from trustee-administered funds and plan assets held in trusts are governed by local regulations and practices. The Board of trustees, generally composed of representatives of the Company and plan participants in accordance with the respective plan’s regulations is responsible for governance of the plans including investment decisions and contribution schedules in order to meet the existing minimum funding requirement or funding regime objective.
As the result of the loss of control of AXA over Equitable Holdings,
The assumptions used to value defined benefit plans are consistent with the economic and financial conditions in the countries where they are located. The weighted-average financial assumptions used by AXA for pension plans in the main regions and countries were as follows: DECEMBER 2019 ASSUMPTIONS
Salary increase for future years 2.5% 1.7% N/A 6.3% 2.3% 3.5%
Significant demographic assumptions used by AXA are mortality tables in the measurement of the Group’s obligations under its defined benefit schemes. These assumptions are oft en set based on actuarial advice in accordance with published statistics and experience in each country. Translated into averages remaining life expectancy at retirement age (between 60 and 65 in average), the mortality assumptions would give: ■ 22.80 years for male and 25.39 years for female retiring at end of December 2019; ■ 23.63 years for male and 26.20 years for female retiring at end of December 2029 (i.e. 10 years aft er the reporting date).
Benefits paid by plan assets and by separate assets (511) (636) (1) (1) (512) (637)
Benefits directly paid by the employer (283) (300) (116) (44) (399) (344)
Net transfer In/(Out) (including acquisitions, disposals and reclassifications) (d) (2,605) 161 (447) 67 (3,052) 228
Fair value of plan assets at the beginning of year 12,139 12,420 5 5 12,145 12,425
Amounts paid in respect of settlements (1) (226) - - (1) (226)
Fair value of separate assets at the beginning of year 1,233 1,281 - - 1,233 1,281
Benefits paid by separate assets (105) (121) (1) (1) (106) (122)
Changes in the asset ceiling, excluding the interest cost 12 1 - - 12 1
Cumulative eff ect of asset ceiling at the end of the year 33 19 - - 33 19
Cumulative impact of asset ceiling (33) (19) - - (33) (19)
(a) In 2019, this amount included plan amendment eff ects in Switzerland and Germany, and a restructuring plan in France. In 2018, this amount mainly reflected a plan amendment in Belgium.
(c) In 2019, actuarial losses pertaining to changes in financial assumptions resulted mainly from the overall decrease in discount rate assumptions used to value liabilities.
(e) Amounts are mainly related to plan assets contributions in Switzerland, the United Kingdom and Ireland.
A surplus (including minimum funding requirement eff ect) is recognized to the extent that it is recoverable, either through future contribution reductions or a refund to which AXA has an unconditional right, including the ability to use the surplus to generate future benefits.
The annual expense for employee pension and other benefits recorded in the income statement (included in Note 26.1.), for the years ended December 31, 2019 and 2018 is presented below: Pension benefits Other benefits Total
Interest income on plan assets (193) (217) (0) (0) (193) (217)
Interest cost on asset ceiling 1 0 - - 1 0
The calculation of the periodic pension cost is based on a “spot rate approach” or “full yield approach” that involves the use of separate discount rates of the yield curve, to determine the related service cost, interest cost and interest income on assets associated to each discounted cashflow or segregated subsets of the plan’s obligation.
26.2.6 Change in the liability (net of plan assets but excluding separate assets and assets within the insurance
General Accounts backing employee benefits) recognized in the statement of financial position
Consistently with IAS 19, the statement of financial position liability reflects the funded status (liabilities net of plan assets and cumulative impact of asset ceiling), excluding Separate
Assets and Assets within the insurance General Accounts that are backing employee benefits.
Separate Assets amounted to €1,276 million as of December 31, 2019 (€1,233 million as of December 31, 2018) mainly in France and Belgium. This represents the fair value of assets backing
Defined Benefit Obligations covered by both (i) insurance policies written within the Group that provide direct rights to the employees, and (ii) insurance policies with related parties that are outside the scope of consolidation. Under these circumstances, these assets are not considered as Plan Assets that would be deducted from the pensions’ Defined Benefit Obligation (DBO), but represent reimbursement rights accounted for as Separate
Benefits Obligation between entities within the Group are effectively backed by General Account assets (available to general creditors in case of bankruptcy), they are not taken into consideration in the pension assets disclosures.
IAS 19 considers liabilities net of Plan Assets on the one hand and Separate Assets and a part of Swiss assets on the other hand separately, while economically, Separate Assets and a part of
Consistently with IAS 19 requirements, the roll-forward of the statement of financial position liability from January 1, 2019, to
Statement of financial position liability at the beginning of the year (7,633) (8,094) (617) (560) (8,250) (8,654)
Pension and other benefits expense (307) (332) (149) (46) (455) (378)
Adjustment due to separate assets (75) 14 - - (75) 14
Net balance sheet position at the end of the year (6,761) (6,400) (228) (617) (6,990) (7,017)
26.2.7 Sensitivity analysis of the Defined Benefit Obligation (DBO): gross of all assets
One year increase in the life expectancy (derived from adjusted mortality rates) would result in an increase of 3.6% of the Defined
The sensitivity analysis are performed plan by plan using the projected unit credit method (same than the method applied when calculating the defined benefit obligation recognized in the statement of financial position) and are based on a change in an assumption while all other assumptions remain constant.
(SFO) is met. The contributions for the recovery plan are based on the actuarial valuation performed every three years. However, the schedule of contributions may change more frequently if significant events occur in the year.
As pension liabilities have a long-term nature, a mix of equity instruments, debt instruments, investment funds and real estate investments is used in Plan Assets.
The management of the assets notably includes liquidity management, diversification of each asset type so that the failure of any specific investment does not present a material risk to the plans, and implementation of hedging programs.
A detail of each of the major plans and the associated cost is presented in Note 26.3.1 and Note 26.3.2.
Previously, executive officers and other key employees were granted options on AXA ordinary shares under employee stock option plans. These options were either subscription options involving newly issued AXA ordinary shares or purchase options involving AXA treasury shares. While the precise terms and conditions of each option grant may vary, options were
Since 2013, for all beneficiaries, the vesting of the final instalment has been subject to the fulfilment of the market performance conditions regarding the performance of the AXA shares compared to the STOXX Insurance Index (“SXIP”).
Black & Scholes option pricing model. The eff ect of expected early exercise was taken into account through the use of an expected life assumption based on historical data. AXA SA share price volatility is estimated on the basis of implied volatility, which was checked against an analysis of historical volatility to ensure consistency. The expected AXA SA dividend yield was based on the market consensus. The risk-free interest rate was based on the Euro Swap Rate curve for the appropriate term.
There was no grant in 2019. The option pricing assumptions and fair value at grant date for plans issued before 2019 are shown below: Assumptions
The total cost has been amortized over the vesting period and a nil estimated pre-vesting lapse rate was applied over the remaining vesting period. On that basis, the expense recognized in profit or loss for the year ended December 31, 2019 was €3.9 million (€3.7 million for the year ended December 31, 2018).
(FCPE) or through direct share ownership, depending on the country) with a discount of 20%. The shares are held within the Group Company Savings Plans and are restricted from sale during a period of approximately 5 years (except specific early exit cases allowed by applicable laws). Employees are subject to the share price evolution, up or down, as compared to the subscription price.
The leveraged plan allows employees to purchase, on the basis of 10 times their personal investment, AXA shares (either through Mutual funds (FCPE) or through direct share ownership, depending on the country) with a discount. The shares are held within the Group Company Savings Plans and are restricted from sale during a period of approximately 5 years (except specific early exit cases allowed by applicable laws). Employees’ personal investment is guaranteed by a bank, and employees also benefit from a portion of the share appreciation, calculated on the basis of the non-discounted reference price. At the end of the 5 years holding period, the employees can, depending on their residence country, do any one of the following: (i) receive the cash value of their investment, (ii) receive the value of their investment in the form of AXA shares, or (iii) transfer their assets invested in the leveraged plan into the traditional plan.
The cost of this plan is valued taking into account the five-year lock-up period, as recommended by the ANC (Autorité des
In 2019, AXA offered its employees to subscribe to a share off ering, at a price of €18.30 per share for the traditional plan
for the traditional plan and 4.98% for the leveraged plan (due to different discounts). In addition to the lock-up cost, the opportunity gain off ered to the employees under the leveraged plan was measured at 0.90%.
Amount subscribed by employee (in Euro million) 63.5 31.2 39.8 29.0
Total number of shares subscribed (in million shares) 3.5 14.3 2.1 13.3
TOTAL COST FOR AXA (in Euro million) 0.54 2.95 0.30 2.73
The total cost of Performance Shares recognized was €58.2 million as of December 31, 2019 (€45.8 million as of December 31, 2018).
Shares to executive off icers and other key employees mainly outside France.
The Performance Units plans, granted until 2012 outside the United States and until 2017 to the eligible employees of Equitable Holdings, Inc. were mainly cash-settled plans subjected to a non-market performance criteria.
Since 2013, AXA has established common terms and conditions for the attribution of “International Performance Shares” to eligible employees. Under the International Performance Shares
(PSi) plan, beneficiaries of Performance Shares have the right to receive at the settlement date, a certain number of AXA shares based on the achievement of performance criteria defined by
AXA and vesting period. The performance period is currently three years. The vesting period (service condition) is between three and four years. However, as opposed to Performance Units, under the International Performance Shares plan, the settlement will be made in shares rather than in cash (except where the settlement in shares is impossible for legal or other reasons).
Board of Directors is authorized to grant retirement performance shares to designated senior executives in France. Under this plan, beneficiaries of Performance Shares have the right to receive at the settlement date, a certain number of AXA shares based on the achievement of a performance condition related to the average
Managers shares or, more specifically rights to acquire shares upon completion of a specified vesting period depending on applicable local regulations, and subject to fulfilment of certain performance conditions. The performance condition is based on the achievement of Actual AXA Investment Managers Underlying earnings Group share versus budgeted and/or investment performance conditions.
AB grants restricted AB Holding units and options to acquire AB
AB also awarded restricted Holding units in connection with certain employee and separation agreements.
(€20.8 million in 2018), including fixed salary, bonuses, directors’ fees, benefits in kind and other short-term benefits; ■ share-based compensation: the expense recognized in 2019 in respect of share-based compensation granted by AXA SA
The decrease in salaried employees by 4,222 in 2019 was mainly driven by the United States (-7,959) from the deconsolidation of
Equitable Holdings, Inc. It was partially off set by China (+2,988)
BASIC NET INCOME PER ORDINARY SHARE C = A /B 1.51 0.79
FULLY DILUTED NET INCOME PER ORDINARY SHARE E = A/D 1.51 0.79
(b) As of December 31, 2019, it includes financial charges of €9 million related to Mandatory Exchangeable Bonds for only the first three months of 2019 and €51 million related to preferred shares.
As of December 31, 2018, it includes financial charges of €23 million related to Mandatory Exchangeable Bonds and €17 million related to preferred shares.
In 2019, the Company was party to the following transactions with related parties which may be deemed to have been material to AXA or the related party in question or unusual in their nature or conditions.
Assurances Vie Mutuelle, hereafter the “Mutuelles AXA”) are two mutual insurance companies engaged respectively in the
Property & Casualty insurance business and Life & Savings insurance business in France. On December 31, 2019, the
Mutuelles AXA collectively owned 14.45% of the Company’s outstanding ordinary shares representing 24.21% of the voting rights.
Each Mutuelle AXA is supervised by a b oard of d irectors elected by delegates representing policyholders. Certain members of the
The Mutuelles AXA and two of the Company’s French insurance subsidiaries engaged in the Property & Casualty insurance business and Life & Savings insurance business, AXA France IARD
The Property & Casualty insurance business generated in France by insurance brokers is mainly underwritten through co-insurance and reinsurance arrangements between AXA Assurances IARD
Mutuelle and AXA France IARD. Aggregate written premiums under these agreements amounted to €2,241 million in 2019 (of which €2,094 million was attributed to AXA France IARD).
(GIE AXA) for the benefit of AXA Group companies (e.g. finance, accounting and reporting, tax, legal, internal audit, human resources, procurement, information systems, r isk m anagement, cash management). Expenses invoiced by these GIEs to the
Company and its subsidiaries are generally invoiced at cost and are included in the consolidated expenses reflected in Note 25
“Expenses by type” to the Company’s consolidated financial statements. Expenses invoiced by the GIE AXA to its members in 2019 and 2018 amounted to respectively €265 million and €255 million.
The Company has given numerous commitments, including financing commitments, guarantees given to financial institutions and customers, pledged assets, collateralized commitments and letters of credit. For a description of these commitments and guarantees, see Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” to the Group’s Consolidated Financial Statements.
(e.g. to facilitate acquisitions, integration of acquired businesses, distribution arrangements, off -shoring arrangements, internal restructurings, sales or other disposals of assets or businesses, sales or renewals of products or services or similar transactions), to support their credit ratings, and/or to promote eff icient use of the Group’s capital resources. In this context, the Company may guarantee repayment of loans or other obligations of its subsidiaries to third parties, or provide other types of guarantees to support its subsidiaries’ obligations. The beneficiaries of these guarantees are generally required to compensate the
Company at a negotiated rate based on prevailing market rates for guarantees with similar conditions. In addition, from time to time, the Company may provide comfort letters or similar letters to rating agencies and/or regulators in support of its subsidiaries and aff iliates for various business purposes, including facilitating specific transactions, achieving target rating levels and, more generally, helping to develop the business of these subsidiaries.
The Company may enter into various types of transactions with its subsidiaries and aff iliates from time to time for various business purposes including (i) in connection with liquidity, solvency and capital management initiatives designed to promote eff icient use and fungibility of the Group’s capital resources or (ii) to finance their business operations and/or to promote the development of their business (e.g. to facilitate acquisitions, integration
of acquired businesses, distribution arrangements, internal restructurings, or similar transactions). These transactions may involve loans or other types of credit arrangements, capital contributions, acquisitions or sales of assets, securities or other financial instruments (including swaps or other types of derivatives), securitization transactions, and/or other types of arrangements or transactions to which the Company may be a direct party and/or guarantor. The Company may also from time to time borrow from its subsidiaries for various business purposes. These transactions are generally carried out on arms-length terms and conditions with loans bearing interest at floating rates that generally reflect prevailing market rates at the respective dates such loans were originated.
To the best of the Company’s knowledge, based on information reported to it: ■ on December 31, 2019, there were no loans outstanding from the Group to the Company’s two corporate off icers or to any member of the Company’s Board of Directors; ■ various members of the Company’s Board of Directors as well as various other executive off icers and directors of other AXA
Guarantee commitments received totaled €26,487 million at the end of 2019, (i) guarantees from customers related to mortgage loans €12,935 million received mainly at Switzerland
Pledged securities and collateralized commitments received totaled €10,759 million at the end of 2019: ■ security reverse repurchase agreements and similar operations totaled €4,988 million mainly in Germany (€2,340 million),
Turkey (€93 million) due to letter of credits related to reinsurance transactions.
Other commitments received totaled €3,020 million at the end of 2019, mainly related to mortgages received as guarantees to debt instruments received by Germany (€706 million), France
These commitments can be broken down as follows: Financing commitments given totaled €1,429 million at the end of 2019 and only consisted of financing loans commitments to customers granted at AXA Banque France (€970 million) and
Guarantee commitments given totaled €6,580 million at the end of 2019 and consisted of (i) other guarantees given to customers for €3,988 million mainly at Germany (€3,859 million), and (ii) guarantee commitments given to credit institutions related to loans for €1 ,976 million at AXA SA (€1,744 million).
Pledged securities and collateralized commitments given totaled €58,326 million at the end of 2019: ■ security repurchase agreements and similar operations totaled €46,963 million mainly in France (€21,455 million),
(€258 million); ■ other pledged assets/collaterals totaled €1,344 million mainly from AXA Banque France (€1,308 million).
Companies or funds). The potential amount of compensation relating to commitments covered by these obligations cannot be evaluated with any certainty.
Mrs. Bénédicte Vignon and Mr. Grégory Saugner, first appointed on February 28, 1989. The current appointment is for a term of 6 years, until the General Shareholders’ Meeting called to approve the financial statements for the fiscal year 2023.
Mr. Patrice Morot: 63, rue de Villiers – 92208 Neuilly-sur-Seine, first appointed on April 25, 2018. The current appointment is for a period of 6 years, until the Annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2023.
With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable, and the amount of the loss can be reasonably estimated, we establish a reserve and record an estimated loss for the expected outcome of the litigation.
shareholders brought proceedings in Germany alleging that the cash compensation off ered by AXA SA was not adequate.
Consequently, the precise financial impact of this matter cannot be estimated with any certainty at this time.
Genworth Financial Inc. (“Genworth”). Pursuant to the sale and purchase agreement (the “SPA”) Genworth agreed to indemnify
misselling losses under the SPA which has not been satisfied, in December 2017, AXA SA filed a lawsuit in the United Kingdom against Genworth for breach of contract. In December 2019, AXA
(both class action and individual), investigations, and other actions arising in the various jurisdictions where they do business, including the United States.
Some of these actions have resulted in the award of substantial judgements against insurers (including material amounts of punitive damages) or in substantial settlements. In certain jurisdictions, juries have broad discretion in awarding punitive damages. AXA’s United States subsidiaries are involved in these types of litigations as well as regulatory inquiries, investigations or actions with respect to these and a wide variety of other matters related to the ownership or management of real estate, asset or investment activities, corporate transactions, employee benefit disputes, alleged discrimination in employment practices, as well as other matters.
Some of the litigations described above have been brought on behalf of various alleged classes of claimants, and certain of the claimants in these actions seek significant or unspecified amounts of damages, including punitive damages.
French insurance association) on October 28, 2014 by a French consumer association, CLCV. This action alleges that AXA France and AGIPI breached their contractual obligation to maintain a 4.5% interest rate on certain life insurance contracts (CLER)
subscribed by policyholders prior to June 1995. The class action complaint cites seven individual cases and is brought on behalf of all similarly situated policyholders. AXA France believes that it has strong defenses to these claims and is defending this matter vigorously.
Appeal of Versailles referred the question as to the legality of the
Decrees to the European Court of Justice (“ECJ”) which rendered a decision in favor of the arguments raised in March 2017. In
March 2019, the French Supreme Court upheld the decision of the ECJ. Lower courts continue to dismiss cases based on the above rulings.
RBS has notified claims for coverage to AXA XL Division under general liability policies covering the years 2001-2004. AXA XL
(ii) the number of deemed separate incidents that would trigger coverage, and (iii) whether certain policy exclusions apply.
Transactions, AXA and its subsidiaries from time to time: ■ are involved in legal actions or other claims brought by purchasers, joint venture partners, shareholders or other transaction parties asserting claims for damages on various theories (including misrepresentation, failure to disclose material information, failure to perform contractual duties, breach of fiduciary duties), seeking contractual indemnification, or otherwise seeking to impose liability on
France and Belgium, have enacted legislation that permits corporate entities to be charged with criminal offences. The standard for attributing criminal conduct by corporate off icers and employees to corporate entities is not clearly defined in many of these jurisdictions and government prosecutors and judges have broad discretion in this area. In recent years, complaints against or indictments of corporate entities for alleged criminal off ences have become increasingly common and certain AXA
Group companies have been the subject of penal complaints and/or indictments from time to time including in Belgium and
Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” in Part 5 – “Consolidated Financial
Management believes that the ultimate resolutions of the matters described above are not likely to have a material adverse effect on the consolidated financial position of the
Group, taken as a whole. In addition, as of December 31, 2019, to the Company’s knowledge, there were no other governmental, judicial or arbitration proceedings, either pending or threatened, that may have, or have had a significant impact on the financial situation or profitability of the Company or the Group over the past 12 months. However, due to the nature of such lawsuits and investigations and the frequency of large damage awards and regulatory sanctions in certain jurisdictions (particularly the
United States) that bear little or no relation to actual economic damages incurred by plaintiffs or the underlying regulatory violations, Management cannot make an estimate of loss, if any, or predict whether these matters, individually or in the aggregate, will have a material adverse eff ect on the Group’s consolidated results of operations in any particular period.
No significant net income impact is expected for AXA Group from this transaction.
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to be finalized during the 4th quarter of 2020.
The spread of COVID-19 has resulted globally in governmental authorities imposing quarantines and travel restrictions of varying scope; has led to significant disruptions in the global travel and hospitality industries, and in global trade and supply chains more broadly; has resulted in decreased economic activity and lowered estimates for future economic growth; has created severe strains on local, national and supra-national medical and healthcare systems and institutions; and has caused global financial markets to experience significant volatility and the worst downturn since the 2008 financial crisis.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In compliance with the engagement entrusted to us by your Shareholders’ Meeting, we have audited the accompanying consolidated financial statements of AXA SA for the year ended December 31, 2019.
(EU) No. 537/2014 or in the French Code of Ethics (code de déontologie) for statutory auditors.
We draw attention to the following matter described in Note 1.2 to the consolidated financial statements relating to the impacts regarding the first application of the IFRS 16 “Leases” and IFRIC 23 “Uncertainty over Income Tax Treatments” standards. Our opinion is not modified with respect to this matter.
Measurement of Life & Savings future policy benefit reserves including deferred acquisition costs
■ Some of these reserves, in particular Protection and Health products, include contracts with surrender guarantees and, in some cases a guaranteed long-term rate or long-term guarantees.
■ For investment contracts with discretionary participation features, future policy benefits reserves are generally calculated using a prospective approach based on discount rates usually set at inception.
At each closing, the Company uses a Liability Adequacy Test to determine that technical reserves are suff icient, and that deferred acquisition costs are recoverable. Liability Adequacy Test is based on current best estimates of all future contractual cash flows that are valued using complex actuarial models and involve a significant degree of judgment.
Certain changes in these assumptions could result in material impact to the valuation of these liabilities and assets.
Our audit approach to the risk relating to the valuation of these liabilities and assets in the Life & Savings line of business was as follows: ■ We assessed the compliance of the methodology with current accounting standards.
■ We updated our knowledge of the methodologies for measuring future policy benefit reserves covering these contracts as well as the models used to calculate the reserves and evaluated their appropriateness.
■ We assessed the IT systems used to process the technical data and integrate that data into the accounting system.
■ We assessed the design of the control system and tested the eff ectiveness of the controls we deemed key to our audit.
■ We tested, on a sample basis and based on our risk assessment, the calculation models applied to estimate the future cash flows used to determine the future policy benefit reserves and for the liability adequacy tests.
■ We evaluated the reasonability of the assumptions used by management and the sensitivity of the models to the assumptions.
At December 31, 2019, the Group had recorded claim reserves of €81,689 million, as described in Note 14.2 to the consolidated financial statements.
These reserves are calculated using statistical and actuarial methods, on the basis of historical claims data and patterns, and use assumptions to estimate ultimate claims cost.
In addition, estimates of loss from natural catastrophe events and large man-made losses, including business written or reinsured through AXA XL, are more diff icult to project as they are less frequent but can be of higher severity.
■ We applied procedures to test the reliability and the completeness and accuracy of the underlying data.
■ We applied procedures (including monitoring the change in loss ratios) to analyse the significant changes that took place over the reporting period.
■ Our work also consisted in assessing the statistical methods and actuarial inputs applied, as well as of the assumptions used, with respect to the applicable regulations, market practices, and the economic and financial context of the AXA Group taking into account contrary and corroborating evidence.
■ Focusing on those classes of business where reserve estimates present a higher risk of uncertainty and judgement, we undertook an independent evaluation of the reserves for certain insurance risk categories with a view to providing a basis for our professional judgment and our assessment of the estimates used by the
At December 31, 2019, the Group’s statement of financial position showed goodwill with a net carrying amount of €17,776 million
(including €7,615 million related to the AXA XL cash generating unit
As stated in Note 5 to the consolidated financial statements, value in use calculations are based on the following main assumptions: ■ cash flow projections based on business plans
Our audit approach to the risk relating to recoverability of goodwill was as follows: ■ We assessed the compliance of the methodology applied by the
■ We performed sensitivity analysis around the key assumptions to ascertain that selected adverse changes to key assumptions would not cause the carrying amount of goodwill to exceed the recoverable amount.
We have no matters to report as to the fair presentation and the consistency with the consolidated financial statements, reminded that it is not our responsibility to conclude on the fair presentation and consistency with the financial statements of the solvency related information required by article L. 356-23 of the French Insurance Code (Code des assurances).
We were appointed as statutory auditors of AXA SA by the Shareholders’ Meetings held on February 28, 1989 (PricewaterhouseCoopers
Audit) and on June 8, 1994 (Mazars). As at December 31, 2019, PricewaterhouseCoopers Audit and Mazars were in the thirty-first and in the twenty-sixth consecutive year of total uninterrupted engagement, respectively.
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
The Audit Committee is responsible for monitoring the financial reporting process and the eff ectiveness of internal control and risk management systems and where applicable, its internal audit, regarding the accounting and financial reporting procedures.
Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore: ■ Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be suff icient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein.
■ Obtains suff icient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The statutory auditor is responsible for the direction, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements.
Our report to the Audit Committee includes the risks of material misstatements that, in our professional judgement, were of most significance in the audit of the consolidated financial statements of the current period and which are therefore key audit matters that we are required to describe in this report.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537-2014, confirming our independence within the meaning of the rules applicable in France such as they are set in particular by Articles L.822-10 to L.822-14 of the French Commercial Code (code de commerce) and in the French Code of Ethics (code de déontologie) for statutory auditors.
In France, AXA ordinary shares are included in the principal index published by Euronext Paris, the CAC 40 Index, which comprises the 40 most capitalized and actively traded shares on Euronext
Paris. AXA ordinary shares are also included in Euronext 100, the index representing Euronext’s blue chip companies based on market capitalization and liquidity and in EURO STOXX 50, the blue chip index comprised of the 50 most highly capitalized and most actively traded equities of the main industry sectors of the eurozone. In addition, AXA ordinary shares are also included in STOXX® Europe 600 Insurance, the insurance sector index for
European companies and in the EURO STOXX Sustainability 40, the index representing the largest sustainability leaders in the eurozone in terms of long-term environmental, social and governance criteria.
On December 31, 2019, AXA’s fully paid up and issued share capital amounted to €5,536,521,831.67 divided into 2,417,695,123 ordinary shares, each with a par value of €2.29 and eligible for dividends as of January 1, 2019.
Treasury shares held by Company subsidiaries (d) 240,194 0.01% [0.01%] (c)
(b) AXA Assurances IARD Mutuelle (11.57% of capital ownership and 19.33% of voting rights) and AXA Assurances Vie Mutuelle (2.88% of capital ownership and 4.88% of voting rights).
(c) These shares will be entitled to vote when they cease to be treasury shares (e.g. upon their sale or other transfer to an unaff iliated third party).
(the “Mutuelles AXA”) are parties to agreements pursuant to which they have stated their intention to collectively vote their shares in AXA. As part of these agreements, the Mutuelles AXA
– Voting rights” of this Annual Report. Of the Company’s 2,417,695,123 outstanding ordinary shares on December 31, 2019, 440,314,817 shares entitled their holders to double voting rights as of that date.
On December 31, 2019, to the best of the Company’s knowledge based on the information available to it, the Company had 11,466 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form).
Code (Code de commerce), (i) 26,420,747 AXA shares were repurchased (for the purposes of (a) hedging free grants of shares to employees of the Group or (b) cancelling them in order to neutralize the dilutive impact of shares issued in connection with equity compensation arrangements and employee share plan off erings) for an average weighted gross unit price per share of €22.53, and (ii) no AXA shares were sold between January 1 and
As a result, on December 31, 2019, the total number of AXA
treasury shares, all allocated for hedging or cancellation purposes, was 31,102,295 (or 1.29% of AXA’s share capital at that date). The booking value of these 31,102,295 treasury shares on December 31, 2019 is €725,811,332.64. These shares were acquired for an aggregate purchase price of €595,187,973.10
Meeting of April 24, 2019, the Board of Directors increased the
during a period of approximately 5 years (except specific early exit cases allowed by applicable law). Employees are subject to the share price evolution, up or down, as compared to the subscription price.
The leveraged plan in 2019 allowed employees to subscribe, on the basis of 10 times their personal investment, in AXA
shares (either through Mutual funds (FCPE) or through direct share ownership, depending on their countries of residence)
Company Savings Plans and are restricted from sale during a period of approximately 5 years (except specific early exit cases allowed by applicable law). Employees’ personal investment is guaranteed by a bank, and employees also benefit from a portion of the share appreciation, calculated on the basis of the nondiscounted reference price.
The Shareplan 2019 program was carried out through a capital increase that took place in November 2019. Approximately 26,000 employees took part in the Shareplan 2019 program, representing approximately 24% of eligible employees: ■ the total amount invested was over €375 million, as follows: • €64 million in the traditional plan, and
• €312 million in the leveraged plan; ■ a total of approximately 18 million new shares were issued, each with a par value of €2.29. These shares began earning dividends on January 1, 2019.
of the share capital and 6.09% of the voting rights. These shares are owned through Mutual funds (FCPE) or directly either in the form of ordinary shares or ADS.
On December 31, 2019, AXA’s share capital was comprised of 2,417,695,123 ordinary shares, each with a par value of €2.29. All these shares were fully paid up and non-assessable and began earning dividends on January 1, 2019.
The following table sets forth changes in the number of shares from January 1, 2017 to December 31, 2019: Date Transaction
Share capital reduction by cancellation of shares (9,804,700) (212,073,425) 2,413,467,484 5,526,840,538
(c) The aggregate nominal value of debt instruments associated with the issue of securities with or without preferential subscription rights may not exceed the global upper limit of €6 billion.
Maximum nominal amount of the capital increase (in Euro or in percentage of the share capital) Term Expiry date
Ordinary shares and other securities giving a claim to ordinary shares of the Company through subscription, conversion, exchange, redemption, presentation of a warrant or otherwise (a) 6 billion (b) 550 million 26 months June 24, 2021
Performance shares (actions de performance ) (d) (g) – 0.40% (e) 38 months June 24, 2022
(e) At the date on which performance shares are granted by the Board of Directors.
(f) At the date on which stock options are granted by the Board of Directors.
The following authorizations to issue shares or securities giving a claim to ordinary shares of the Company and will be submitted to the Shareholders’ Meeting on April 30, 2020: Issues without preferential subscription rights for shareholders
Ordinary shares or securities giving access to the capital, reserved for employees – 135 million (a) 18 months October 30, 2021
Ordinary shares reserved for a specific category of beneficiaries in connection with off erings for employees – 135 million (a) 18 months October 30, 2021
In 2019, by virtue of the authorizations granted by the shareholders at the Shareholders’ Meeting of April 24, shares and 571,909 performance shares dedicated to retirement plans were granted by the AXA Board of Directors.
AXA is a société anonyme (a public limited company) organized under the laws of France, and is the publicly traded parent company of the AXA Group. The Company’s registered off ice is located at 25, avenue Matignon, 75008 Paris, France and its telephone number is +33 (0) 1 40 75 57 00. AXA SA was incorporated in 1957 but the origin of its activities dates to 1852.
The Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059. The
Universal Registration Document, and (iii) AXA SA’s financial statements and Consolidated Financial Statements for each of the three financial years preceding the publication of this
about-us/governance-overview) and the documents referred to in (ii) and (iii) (
AXA Group is headquartered in Paris, France, this supervision is based to a significant extent on European Union directives and regulations and on the French regulatory system. AXA’s principal regulators in France are the AMF, which is the financial markets regulator, and the Autorité de contrôle prudentiel et de résolution (the “ACPR”), which is the insurance and financial services regulator.
(re)insurer. In addition, such legislation generally provides that any direct or indirect acquisition of “control” of our (re)insurance subsidiaries domiciled in a given jurisdiction will be subject to the prior approval of the insurance regulatory authorities in such jurisdiction; the definition of “control” for such purposes generally includes any direct or indirect acquisition of shares or other instruments representing more than a 9.9% voting interest, and would include the acquisition of shares of AXA SA
The Company’s (re)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 regulatory 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 financial markets. Regulatory capital requirements may increase, possibly significantly, during periods of declining financial markets and/or lower interest rates.
In recent years, the European Union has implemented a regulatory regime for European insurers which became eff ective on January 1, 2016, following the adoption of Directive 2009/138/EC of November 25, 2009 on the taking-up and pursuit of the business of insurance and reinsurance, as amended
Financial Condition Report (“SFCR”), to be made publicly available on an annual basis. Solvency II covers, among other matters, valuation of assets and liabilities, the treatment of insurance groups, the definition of capital and the overall level of required capital. A key aspect of Solvency II is that assessment of the Group’s risks and capital requirements is aligned more closely with economic capital methodologies and allows the use of either a standard model or an insurer’s own internal economic capital model (to permit a better understanding of the actual risks and Risk Management of the insurer) to calculate the Solvency Capital Requirement (“SCR”), subject in the latter case to the approval of the insurer’s lead regulator.
The ACPR has approved the use by AXA of its internal model
(the “Internal Model”) to calculate its SCR under Solvency II. The
Solvency II ratio of the Group as of December 31, 2019, published on February 20, 2020, was estimated at 198% (1), compared to 193% as of December 31, 2018, and remains within AXA’s target range of 170-220%. The Group maintained eligible own funds in excess of its SCR at all times during 2019.
SCR, Internal Model and other Solvency II disclosures, please refer to the AXA Group’s SFCR for the year ended December 31, 2018, available on AXA’s website (www.axa.com). AXA Group’s
In the event of a failure by a (re)insurance company or an insurance holding company to meet applicable regulatory capital requirements (including the MCR and the SCR, as applicable), insurance regulators generally have broad authority to require or take various regulatory actions, including limiting or prohibiting the issuance of new business, prohibiting payment of dividends or other shareholder distributions, and/or putting a company into rehabilitation or insolvency proceedings. In particular, under the French recovery and resolution framework for the insurance industry, set forth in Order no. 2017-1608 of November 27, 2017 and its various implementing measures (the “French Resolution
Group, are required to prepare and file with the ACPR a preemptive recovery plan (plan préventif de rétablissement) covering insurance holding companies, insurance and reinsurance
(1) The Solvency II ratio is estimated primarily based on the Internal Model calibrated based on an adverse 1/200 years shock. As in previous disclosures, all AXA US entities are taken into account assuming US equivalence. The Solvency II ratio will be finalized prior to the publication of the AXA Group’s SFCR currently expected to be published on May 14, 2020. As from January 1st, 2019, entities that were part of the XL Group (“XL entities”) have been fully consolidated for Solvency II purposes (as per the consolidation-based method set forth in the Solvency II Directive) and their contribution to the Group’s SCR has been calculated using the Solvency II standard formula. Subject to the prior approval of the ACPR, the Group intends as soon as year-end 2020 to extend its Internal Model to XL entities.
are currently developing guidance on eff ective recovery and resolution tools and strategies for the insurance industry, and the European Insurance and Occupational Pensions Authority
While EIOPA continues to issue regulations and guidelines under Solvency II, the European Commission and EIOPA are currently reviewing Solvency II, including regarding insurance group supervision and the consistency of European insurers’
Solvency II capital requirements. Most recently, on October 15, 2019, EIOPA published its third consultation paper on the review of the Solvency II framework, which covers nineteen topics, including group supervision, solvency capital requirements and the use of the volatility adjustment for the calculation of technical provisions. Comments on this paper were due by
Following approval by the European Parliament on March 1, 2018 and the European Council on March 20, 2018, the Covered
In addition, following the acquisition of the XL Group in 2018,
Limited, Syndicate 2003, one of Lloyd’s largest syndicates. As a result, AXA is exposed to a variety of Lloyd’s-related regulatory matters, such as the Council of Lloyd’s wide discretionary powers to regulate members of Lloyd’s, vary the method by which the capital solvency ratio is calculated, or impose additional or special levies on members.
(re)insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position” in Section 4.1 “Risk Factors” of this Annual
The IAIS has developed several sets of supervisory requirements and actions applicable to the insurance industry: (i) insurance core principles (“ICPs”), which are intended to apply to the supervision of all insurers and insurance groups, regardless of size or importance; (ii) the Common Framework (“ComFrame”), which builds and expands on the standards and guidance set forth in the ICPs to establish supervisory standards and guidance focusing on the eff ective group-wide supervision of IAIGs, as well as a globally comparable risk-based measure of capital adequacy of IAIGs, the Insurance Capital Standard (the “ICS”); and (iii) policy measures for global systemically important insurers (“GSIIs”)
On November 14, 2019, the IAIS adopted the ComFrame, which includes the version 2.0 of the ICS. As part of the IAIS
implementation schedule, ICS 2.0 is first subject to a five-year monitoring period, starting in January 2020, during which
The Holistic Framework comprises a set of enhanced supervisory measures and powers of intervention (e.g., ongoing supervisory requirements, applied to insurers, enhanced macroprudential surveillance, crisis management and recovery planning), which are embedded within certain ICPs and ComFrame materials, an annual global monitoring exercise by the IAIS (at individual insurer and sector-wide levels), as well as implementation assessment activities aimed at assessing and mitigating the potential build-up of systemic risk in the global insurance sector.
The Holistic Framework moves away from the previous binary approach, in which a set of pre-determined policy measures applied to only a small group of identified GSIIs, to an approach promoting a proportionate application of an enhanced set of supervisory policy measures and powers of intervention for macroprudential purposes to a broader portion of the insurance sector.
The IAIS will however continue to use risk factors similar to those used in the past to identify GSIIs, to assess potential systemic risk at individual insurers as part of its global monitoring exercise and systemic risk assessment. In addition, many of the enhanced supervisory measures reflected in the Holistic Framework are similar to and derived from the enhanced policy measures the
(re)insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position”, “As a holding company, we are dependent on our subsidiaries to cover our operating expenses and dividend payments” and “Our businesses are subject to extensive regulation and regulatory supervision in the various jurisdictions in which we operate” in Section 4.1 “Risk Factors” of this Annual
Fund Managers, and Directive 2009/65/EC of July 13, 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), and their various implementing regulations and transposition measures. In addition AXA’s investment management operations in the United States are subject to regulation by the SEC.
Dodd-Frank Act), as amended from time to time, set several requirements and prescriptive guidelines for derivatives which impact operations, liquidity and credit Risk Management for derivatives. AXA’s asset managers and banks, which manage derivatives on behalf of various AXA Group aff iliates (including on behalf of AXA), are currently operating in conformity with these rules, in line with the Group’s financial risk framework.
Regulation (EU) 2019/876 of May 20, 2019 (“CRR II”), which respectively amend CRD and CRR, entered into force. CRD II and
Most provisions of CRD II will have to be transposed into national law by EU Member states by December 28, 2020, while most CRR
The reforms introduced by the MiFID II Package significantly impacted EU securities and derivatives markets. The MiFID II
Package may also be revised in the future, including as a result of implementing regulations, transposition laws and regulatory guidance enacted or issued in connection therewith, and any such modification or revision may have an adverse impact on our business, results of operations and financial condition.
Furthermore, some AXA entities are directly or indirectly subject to Regulation (EU) No. 1286/2014 of November 26, 2014 on key information documents for packaged retail and insurance-based investment products (as amended, the “PRIIPs Regulation”)
While the PRIIPs Regulation already started impacting insurance undertakings, banks and asset managers, its revision is under consideration by the EU Commission in order to reach better convergence with other EU regulations.
For additional information, see the paragraph “Our businesses are subject to extensive regulation and regulatory supervision in the various jurisdictions in which we operate” in Section 4.1
The main principles of the GDPR include (i) the strengthening of citizens’ fundamental rights, giving them more control over their personal data and making it easier for them to access it,
For further information concerning data protection, please see the paragraph “The evolving and complex regulatory environment surrounding data protection and transfer in the
Safe Harbor Decision by the European Union Court of Justice, which allowed for the transfer of personal information for commercial purposes from companies in the European Union to companies in the United States which had signed up to the
transatlantic data flows between companies continued using other mechanisms, such as standard contractual clauses with
US companies and binding corporate rules for transfers within a multinational corporate group. While a new safe harbor, referred to as the “EU-US Privacy Shield,” was adopted in July 2016, banks and insurance companies are generally not currently eligible to register on the EU-US Privacy Shield list, and the AXA Group has
2015/35 of October 10, 2014 which promotes sound and eff ective
AXA has reviewed and formalized its existing Group remuneration policy, identified the individuals responsible for managing and having an impact on the Group’s overall risk profile, and defined a consistent approach to manage remuneration of individuals in charge of control functions. AXA’s Compensation
Management and certain employees (such as traders) who can have a potentially significant impact on the nature and duration of risks incurred, (ii) the Company and (iii) shareholders. The FSB’s principles were supplemented by additional guidance published by the FSB in 2018, which has been developed in the form of recommendations regarding improvements in compensation practices and tools that could be used to reduce misconduct risk and address misconduct incidents.
Policyholders’ liabilities are currently accounted for according to IFRS 4, which generally allows the use of a wide variety of accounting practices for insurance contracts, reflecting diff erent national accounting requirements, and the continuation of accounting policies applied prior to conversion to IFRS. On
(“IASB”) issued the IFRS 17 – Insurance Contracts, which will replace IFRS 4, finalizing a long-standing project of the IASB
In parallel with IFRS 17, the Group will apply the IFRS 9 –
In the beginning of March 2020, the staff of the IASB proposed to defer the IFRS 17 eff ective date to annual reporting periods beginning on or aft er January 1, 2023. The staff also proposed to extend the expiry date of the temporary exemption from applying IFRS 9 off ered to qualifying insurers to annual periods beginning on or aft er January 1, 2023. This would mean that qualifying insurers could apply both standards for the first time simultaneously. These proposals remain subject to the IASB
2019/2088 on sustainability-related disclosures in the financial services sector or Regulation (EU) 2019/2089 amending the
The Group’s (re)insurance, Asset Management and banking operations are subject to an increasing number of legislative and regulatory initiatives designed to increase consumer protection in the sector of financial services. In the European
Union, initiatives related to the financial sector include in particular the IDD, MiFID II and the PRIIPs Regulation. Similar initiatives are under review (or in the course of implementation)
in other jurisdictions where the Group operates and are likely to increase operational compliance costs to ensure point-of-sale compliance.
The main provisions of the IDD relate to enhanced professional requirements (e.g., continuing training and development for distributors), conduct of business rules, conflicts of interest
(relating to fees, commissions and bonuses), increased disclosure and transparency and extensive product governance requirements. It also includes additional requirements for the sale of insurance products with investment elements in order to ensure that policyholders receive a similar level of protection as buyers of retail investment products regulated under MiFID II
(e.g., when providing advice, distributors have to assess whether the insurance-based investment product is suitable for the customer).
The IDD entered into force on October 1, 2018, while MiFID II
French companies and corporate groups, such as the Group, including the establishment of internal procedures to prevent and detect acts of corruption and influence peddling committed in France and abroad. Sapin II also established a new French
In light of this and other initiatives in respect of compliance requirements, M anagement believes that the complexity and risks for international financial institutions like AXA in this area will likely continue to increase, and that compliance costs will also increase accordingly.
initiative. This proposed directive aims at enabling qualified entities to seek remedy through representative actions against infringements of provisions of EU law in a variety of areas
The taxes AXA pays are an important part of its wider economic and social impact and play a key role in the development of countries where it operates (1 ). AXA regards it as a critical element of its commitment to grow in a sustainable, responsible and socially inclusive way.
insurance policies and collected from our customers as part of the insurance and Asset Management revenues while others are remitted to the various state and federal administrations around the world.
The tax function is organized within the Group to ensure full compliance with all tax legislation in the countries where AXA
(1 ) The list of the Group’s main subsidiaries and participating interests is available in Appendix III “AXA parent company financial statements” of this Annual Report. The legal organizational chart of the Group is also published on the Company’s website (www.axa.com).
Group is subject to various tax regimes and regulations and takes into account any changes in tax law. AXA is specifically vigilant about the changes that could result in higher tax expenses and payments, higher compliance costs or that may aff ect the
AXA Group’s tax liability, return on investments and business operations. In particular, please see the paragraph “Changes in tax laws or uncertainties in the interpretation of certain tax laws may result in adverse consequences to our business and our results of operations” in Section 4.1 “Risk Factors” of this
When considering how AXA entities structure commercial arrangements, tax implications are analyzed in parallel with other consequences such as capital eff iciency and legal and regulatory aspects when deciding between potential alternative arrangements.
AXA has no licensed insurance or operating business activities in the countries specifically identified as non-cooperative jurisdictions (1 ) under French and European rules, except in
Panama and Oman. The presence in these two countries is purely driven by operational purposes.
In Oman, AXA has been acting locally for several years through one insurance operating branch of its Bahrain insurance subsidiary. It employs circa 130 people there to achieve this business. AXA holds two operating companies in Panama employing circa 150 people at the end of 2018. AXA has decided to close its subsidiary providing assistance services to local customers and/or travelers, but keeps a non-consolidated health claim processing center in the country. As a result, the number of employees locally has decreased to circa 45 people at the end of 2019.
Any presence in countries in which AXA operates with tax rates lower than France are driven by business operations. With the acquisition of the XL Group in September 2018, AXA now has a material presence and substance in Bermuda with nearly 200 employees working for AXA XL there. Despite the fact that
French and European Union laws. This presence is mainly driven by local capital management regulation enabling flexibility on the required capital for reinsurance activities and AXA supports the Economic Substance legislation recently enacted in this country. This situation will in no way change how the AXA Group is managed on the tax side. AXA will continue to tax its operations in the various countries where operational profits are made.
The Consolidated Financial Statements present the reconciliation between the theoretical tax charge and the eff ective tax charge under IFRS. All diff erences are fully explained (see Note 19 “Tax”
Report). It should be noted that in many jurisdictions where AXA
(1 ) The list of non-cooperative jurisdictions under French tax rules is given by a ministerial decree dated January 6, 2020 and is composed of the following countries: Anguilla, American Samoa, Bahamas, British Virgin Islands, Fiji, Guam, Oman, Panama, Samoa, Seychelles, Trinidad and Tobago, US Virgin Islands and Vanuatu. Pursuant to Article 238-0 A of the French Code général des impôts, this list includes the states and jurisdictions on the blacklist set out in Annex I to the conclusions adopted by the Council of the European Union on December 5, 2017, as updated from time to time (the most recent version of this list was published on November 14, 2019, and is composed of American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu).
Report where it discloses a lot of information around its tax footprint in its key geographies, as well as key principles of its tax policy. This Report is available on axa.com at the end of the
AXA Group Tax Policy page. AXA will update this Report annually and the next version will be available by July 2020.
A specific focus on transfer pricing is made in application of these standards, to ensure that the pricing of our intra-group activities is consistent with the OECD “arm’s length” principle as well as with local transfer pricing rules to pay adequate tax on profits where the value is created.
AXA products are not designed to allow or encourage tax evasion.
Group’s standards in terms of product features, pricing, assetliability management and aspects related to legal, compliance, regulatory, accounting and reputation.
Bylaws are summarized below. Copies of AXA’s Bylaws are available at the Paris Trade and Companies Register (Registre du commerce et des sociétés du Tribunal de commerce de Paris)
In addition to French law provisions, AXA’s Bylaws and the Board’s
Shareholders’ Meeting and apportioned by the Board of Directors among its members, pursuant to the rules set forth in the Terms of Reference of the Board of Directors. Notwithstanding the above, the Board’s Terms of Reference provide that no directors’
For further information, please see Part 3 – “Corporate governance” of this Annual Report.
Notwithstanding the term of off ice for which the Chairman of the
Board of Directors is appointed, his/her functions shall terminate, at the latest, at the end of the Ordinary Shareholders’ Meeting convened to approve the financial statements of the preceding fiscal year and held during the year the Chairman reaches the age of 70.
When the number of Board members aged 70 or older exceeds one-third of the directors in off ice, the oldest director is deemed to have resigned automatically unless any member of the Board of Directors aged 70 or older voluntarily resigns within three months.
In accordance with the Afep-Medef Code and regardless of any statutory obligation of holding shares, the directors, with the exception of directors representing employees, shall personally be shareholders of the Company and own a significant number of shares in the Company; if they do not own such shares at the time they are first appointed, they shall use their directors’ fees to acquire AXA shares. Accordingly, the Board of Directors has set for each Board member, whether an individual or a permanent representative of a legal entity to whom directors’ fees were paid, the objective of holding, within two years aft er first being appointed, a number of shares in the Company, the value of which, on the basis of the closing price of the AXA share on
Shareholders’ Meeting decided that each ordinary share fully paid up and held in registered form by the same person for at least two full fiscal years entitled its holder to double voting rights with respect to such share.
The rights of the holders of double voting rights may only be modified or cancelled upon the decision of an Extraordinary
Directors may distribute interim dividends to the extent of the distributable profit without prior approval of the shareholders.
Issuing additional shares without preferential subscription rights requires the approval of two-thirds of the shareholders attending or represented at an Extraordinary Shareholders’ Meeting.
If AXA is liquidated, the assets remaining aft er it pays its debts, liquidation expenses and all prior claims will be used to repay
Such an amendment generally requires the approval of two-thirds of the shareholders attending or represented at an Extraordinary Shareholders’ Meeting. However, no such
Extraordinary Shareholders’ Meetings may decide (i) to increase the liability of the shareholders in respect of the Company or a third party; or (ii) to reduce the individual rights vested in each shareholder (such as voting rights, right to distributable profits of the Company, right to sell one’s shares and right to sue the
Shareholders’ Meetings are detailed in Article 23 of AXA’s Bylaws, which is expressly incorporated by reference herein.
There are no French anti-takeover statutes similar to the antitakeover statutes enacted by certain states in the United States and other jurisdictions. However, a number of French law provisions, in particular those resulting from the Law No. 2014384 of March 29, 2014 (visant à reconquérir l’économie réelle) or from certain provisions of the European Directive of April 21, 2004
(which was implemented in France in 2006) concerning takeover bids, may have certain anti-takeover eff ects. In the case of AXA, the relevant provisions include, among other things, the existence of
Pursuant to Article 7 of AXA’s Bylaws, any person, acting alone or jointly, who comes to hold, directly or indirectly through companies it controls within the meaning of Article L.233-3 of the
of the Company’s share capital or voting rights, shall notify the
Report by one of the Statutory Auditors, appointed as an independent third party, on the non-financial information statement included in the management report 429 7.6 VIGILANCE PLAN 433
This chapter describes AXA Group’s Corporate Responsibility (CR) strategy. It includes an extra-financial performance statement that
AXA publishes in accordance with the provisions of the EU Directive 2014/95 related to extra-financial reporting (1) and French law (2).
Report”, in the online “Group Human Capital Report” (3) and on the AXA Group’s website (www.axa.com), in particular in the “Corporate
Operating at the intersection of the economy, finance and society as a whole, our businesses are vectors of innovation, wealth creation and sustainable growth. Indeed, the protection off ered by insurance encourages innovation, risk-taking and borrowing, which contributes not only to growth but also to the stability of economic cycles. In this way, AXA contributes to preserving the global financial system through sound risk management and investment proposals with robust and stable returns. Moreover, the collectivization and mutualization of risks and the social protection off ered by life insurance and micro insurance generate social cohesion. In doing so,
to reduce certain operational costs and risks, while providing market opportunities in emerging business segments or being factor of innovation by taking better account of social and environmental issues.
In 2019, our Corporate Responsibility strategy has been refocused around 3 priorities: ■ Climate Change and the environment: AXA reduces its own carbon footprint and leverages its core business of insurance and investment to better address climate risks, both in the fight against the causes of global warming and in adaptation to its consequences (mitigation and resilience); ■ Health risk and disease prevention: as a trusted partner of its clients, drawing on its Risk Management expertise, AXA keeps developing its health risk prevention eff orts to achieve positive outcomes for public health, particularly regarding tobacco and the dual epidemics of obesity and diabetes; ■ Social inequalities and inclusion: as an insurance company,
Our corporate responsibility is therefore now structured around these three thematic priorities, and in its implementation, AXA
I AXA’s contribution to the sustainable development goals of the united nations
In 2018, the Group developed a strategic thinking framework to identify its themes of commitment that take into account the 17 United Nations Sustainable Development Goals
(SDGs). The complete framework is described in the website: sustainabledevelopment.un.org. AXA’s approach consists of identifying the major potential causes of engagement based on the SDGs, supplemented by its in-house risk analysis expertise.
These potential commitments are then examined using a business filter that enables AXA to invest its eff orts on subjects where the Group can make a real impact through its activities.
This process enabled us to select biodiversity loss as an extension of the Group’s action against climate change: biodiversity loss is now being accelerated by global warming. In terms of Public
Health, the dual epidemics of obesity and diabetes has also been identified as a priority issue for AXA.
In 2019, the Group refined the vision of its contribution to the
SDGs, aligning its strategic objectives with the 8 SDGs on which the Group’s initiatives have an impact, and validating these orientations by Stakeholder Advisory Committee (see paragraph
AXA’s Responsible Corporate strategy thus contributes directly to 8 following SDGs: Climate and biodiversity